tv Nightly Business Report PBS July 10, 2017 5:00pm-5:31pm PDT
this is "nightly business report" with tyler mathisen and sue herera. >> no clear path. lawmakers return to washington and the focus is on health care. but the focus is fuzzy with more questions than answers. oil producer. is the u.s. potentially even more powerful than opec? economic puzzle. why hiring is picking up but wages for american workers are not. "nightly business report" for monday july 10th. good evening, everyone, and welcome. health care is the focus in washington and on wall street. lawmakers returned to capitol hill and senate republicans appeared determined to move forward with a reform bill. there were reports that a revised plan could be released
later this week, and a vote held next week. but the legislation faces an uncertain future. over the weekend, senator john mccain said the bill was likely, quote, dead. others have talked about working with democrats to pass a short-term bill to help stabilize the individual insurance market. and some conservative members of the republican party want to see a full repeal of the affordable care act. john harwood is following the story for us from washington tonight. john, good to see you. so, what's the status of the senate health care bill? >> reporter: it's not quite dead, but it is in very difficult condition right now, sue. the republicans found themselves before the break, they initially hoped to pass it by the fourth of july. they found themselves at least ten votes short. you've got critics both on the left and the right. there are ways that they can tweak the bill that mitch mcconnell laid out the week before the fourth of july, but going in either direction risks losing senators at the other end of the ideological spectrum.
>> so what are those changes that republicans or the leadership, at least, are considering? >> for moderates, they're talking about more money. that money would go to kick fewer people off of medicaid. also, to increase funding for treatment of opioid addiction, which is a huge problem many of those republican senators. for the right, they're talking about cutting regulations further. the problem there is that if you cut some of the regulations, that endangers the protection of people with pre-existing conditions, which is one of the things that everyone agrees that they have to take. so it's a very difficult needle that mitch mcconnell is trying to thread. >> and what if they can't thread it, what if they can't get the votes needed? >> he was actually explicit about that over the break, sue. mitch mcconnell said if we can't get the votes for our bill, and one of his soeshs told me that the chances are about one in five, he said we're going to have to make a deal with democrats. now, that's not what republicans have wanted. they said they were going to
repeal and replace obamacare, but interestingly, it might be something that would improve the popularity of republicans in congress and president trump, because the senate bill right now is extremely unpopular if you look at the polls. >> all right. thank you, john, as always. >> you bet. >> john harwood in washington. on wall street, there were small moves today. the health care sector fell slightly, while technology shares inched higher and investors looked ahead to the start of earnings season. the dow jones industrial average fell five points to 21408. nasdaq was up 23. the s&p 500 added two. price of oil today rose slightly after last week's sharp losses on concerns over a supply glut. and the ceo of saudi aramco has a different take on the world market. he said the world might be heading for a shortage of oil because of steep drops in investments and lack of conventional discoveries. he made the comments at the world petroleum congress in
istanbul where energy industry leaders are leading and that's where steve sedgwick is for us tonight. >> reporter: here at the world petroleum congress in istanbul, very different from the meeting in rusa in 2014, then we had oil prices around $108 a barrel. all was fine for producers. now we have concerns about oversupply and low profitability for both the nocs and international oil companies with prices in the mid 40s. with what are they going to do about it? of course, you have this big opec/non-opec strategy going on to take 1.8 million barrels a day off the teenagable and i mio said if necessary, he and his allies in opec would possibly go longer on cuts and go deeper as well but not specifying as and when they would take such a drastic step. i also spoke to the ceo of saudi aramco telling me, yes, the
partial ipo which would value the company as much as $2 trillion was sti for 2018. and, of course, some in the market had cast doubts on that given the fact we're trading up much lower oil prices, and, of course, the saudi state would like to see the selling off of part of one of its key assets. this is steve sedgwick for "nightly business report" at the world petroleum congress in istanbul. other wildcard for the energy market is u.s. oil production which has been increasing adding to supply and pressuring prices. as jackie de-angeles reports, the trend could very well continue. >> reporter: now that the 4th or the peak of the summer driving season has come and gone, the expectations is oil prices will start to fall. that swelling u.s. are production will increase oil supply. not just moves from big oil but the trump administration that are likely to increase drilling. late last week, the u.s. interior secretary signed an order to halt more lease sales
and to speed up permitting for oil and gas exploration on federal lands. it's estimated that there's a backlog, more than 2,000 permit applications submitted under the obama administration. and the trump administration wants to clear the way. the critics are saying trump is basically giving away the nation's public lands to benefit the oil and gas industry. since lease agreements from the government are estimated to be cheaper than on private lands. the administration would argue it's streamlining an antiquated process in the interest of the america-first energy plan outlined at the beginning of the president's term. either way, it's emblematic of more oil coming online, and the trump administration isn't daily fluctuation of crude prices. in fact, it's furthering the strategy that puts business first, promotes a survival of the fittest mentality, and basically gets the u.s. to compete on the global playing field in the energy industry. analysts who were once bullish
are now changing their tune. some seeing another leg lower for oil. >> the problem comes with the fall. you run refineries less, you're going to have more of the oil that's coming on and the premium from the recount increases in the wintertime and there's a real p. we think that oil will be lower in the first quarter of 2018 compared to the third quarter here in 2017. >> reporter: if oil does head back into the 30s, it's significant. it confirms that the u.s. is the swing producer in this market, and its moves are more powerful, potentially, than even opec. for "nightly business report," i'm jackie deangeles. american consumers increased their borrowing in may at the fastest pace in six months. according to the federal reserve, total consumer borrowing rose by $18 billion in may, much reflected a greater use of credit cards. consumer borrowing is closely watched because it can offer insights into consumer spending patterns, a key component of economic activity. the job market is also a critical part of the economy.
needless to say. and as we reported friday, hiring has accelerated but wage growth stalled out. now many americans want to know why. steve liesman went in search of answers. >> reporter: it's been an enduring economic mystery. job growth is booming but wage growth, when labor's scarce, employers usually have to pay up to keep their workers and attract new ones. wages are only rising a little more than 2% on a yearly basis, well below the 3.5% to 4% you could expect with such a tight labor market. look at who is making the most gains in the job market could solve the mystery. the unemployment rate for all americans without a high school degree has fallen shortly. also been a big jump for those with just high school degrees. add to that a sharp decline in teen unemployment to an almost 17-year low and it's clear that those with less skills and education are a big part of the new hires. and education matters a lot for wages. less educated and younger workers make less than the overall workforce. >> what we're seeing is that the vast majority of the modest wage
growth that we are seeing is very segmented in the economy. meaning these are particular areas that are looking for specific skills so skills that are in high demand and very low supply. we're talking about engineering skills, accounting skills, i.t. skills. and in this case, employers are willing to bid up wages in order to entice employees. >> reporter: in addition, the unemployment rate for african-americans and hispanics also have both dropped in the past six months. these two groups typically have lower education levels than whites but also earn less than whites regard less of their education level. according to sev studies. that could also be keeping a lid on wage growth. but the situation may not last long. bigger wage increases for americans could be around the corner. >> the weight of evidence is that wages are starting to accelerate. average early earnings doesn't capture everything, and, i mean, i would say even hourly average earnings will show more signs of acceleration. >> reporter: mystery solved at least partially, lower skilled,
less educated, minority workers are the new hires in today's tight markets, that would tend drive down overall wages. for "nightly business report," i'm steve liesman. more about stalled wage growth and what he sees ahead on that sector, he is chief u.s. economist at jp morgan. great to see you, michael, thanks to be here. >> you heard steve's piece. do you generally agree with what we put forward and do you think that we will see some upward pressure on wages? >> so i agree with a lot of what steve said. i think it can be summarized simply by the fact that all those things put together mean we have very slow productivity growth. without a lot of labor productivity growth, it becomes harder for firms to increase wages in a way that doesn't push up their entire cost structure that they have to pass on to consumers. so, until we see productivity growth accelerate in a big way, that's going to keep a lid on overall wage growth. now that being said, let me just add that even if an environment of slow productivity growth, if
we have a cyclicly very tight labor market, that should, over time, put upward pressure on wages. now, you know, we're not really sees that at least in a broad-based way across some of the measures you mentioned, but we really only got to a tight labor market within the past year and i think if we continue to have a tight labor market and it'd get even tighter, i do think that we could see wages start to accelerate even more than they have. >> this could be a 20 -- a five-second question, maybe a 20-minute answer. i know you'll do it quicker than that. for people who aren't familiar, what is productivity, and why has it remained so peskily low in the united states over the last decade or so? what is it, why so low? >> right. productivity is how much stuff we produce. we generally measure it in terms of productivity per hour, output per hour. so, generally when we're producing more for the same amount of work, that means that you can pay people more for the same amount of work. now, why it has been low i think is a huge and hotly debated
question in economics. i think we all agree that it partly stems back to the fact that capital spending has been slower than it had been in the 2000s and the '90s. beyond that, i think there are a lot of remaining mysteries as to why productivity growth has slowed down. >> you made a very good point that we've only gotten to a tight job market probably in the past year or so, but does this -- any of this really matter to the fed? do you think that it changes their approach toward their tightening cycle at all or not? >> well, the fact that wages haven't accelerated in a, you know, really rapid way gives them the freedom to move interest rates up at a pretty gradual lackadaisical manner as they have over the past year or two. so, that gives them a little scope to be gentle here in terms of normalizing policy. you know, we kind of bemoan slow wage growth but i think if we saw that pick up in the next few months, you might see -- that's a good thing, don't get me
wrong, but you might see the fed have to really tight -- you know, quicken up the pace as which they're increasing interest rates as well. >> so, wage growth had actually slowed a little bit over the last year. it's like 2.6%. i may be wrong on that. >> yeah. >> where do you see it for the rest of this year? >> i would -- you know, look, going into the end of last year, and we're talking about the average hourly earning measure got up to 2.9%. almost 3%. i could see that returning to somewhere like that by the end of this year. and let's keep in mind as another one of your guests pointed out, there are a number of measures of wages. each have the strength and weaknesses. i think if you kind of average them all out, they are all drifting higher but not at a rapid pa. some of the benefits not captured in average hourly earnings are increasing but i don't think anyone would say it's a rapid acceleration and total compensation. >> okay. michael, we'll leave it there. thank you so much for joining us. >> my pleasure. >> michael faroli with jp morgan. still ahead, we're going to where investors are putting
financial companies can no longer block customers from joining together to sue over wrongdoing. the consumer financial protection bureau released a rule that would bar some firms from acquiring that customers agree to settle any disputes in arbitration as a condition of opening an account. the agency said arbitration clauses and contracts make it nearly impossible for people to take companies to court when things go wrong. wells fargo customers who had unauthorized accounts opened in their names are one step closer now to receiving compensation. a california judge has granted approval of the bank's roughly
$140 million settlement. the deal expected to compensate customers nationwide who were hit with fees and had their credit scores hurt by those fake accounts. auto imports from mexico are climbing. this despite threats from the president to penalize automakers who import cars and trucks from that country. new data from the mexican automobile industry association show the country exported more than 1 million vehicles to the u.s. in the first half of this year. an increase of roughly 15% from a year ago. abercrombie & fitch is no longer for sale, that's where we begin tonight's "market focus." after announcing in may it was in talks with several suitors regarding a potential buyout, the apparel chain said today it has ended all discussions, instead the company says it's going to take sound, aggressive action to deliver improved results and long-term shareholder value. wall street wasn't buying it. sending shares down 21% to $9.59. the golf and country club
operator, clubcorp, will be bought by a private equity firm, apollo global management, for more than a billion. apollo which is gaining a membership base now of more than 400,000 people said it will use its resources to continue growing the business. investors celebrated like they hit a hole in one sending shares up 30% to 1705. cincinnati bell will buy hawaiian telecom for $650 million. as the company looks to expand its fiber network in preparation for a 5g network. under the deal, cincinnati bell said it will get access to the hawaiian market with opportunities to expand beyond that. cincinnati bell shares fell 7% to $18 even. shares of hawaiian telecom up 18%. valeant pharmaceuticals paid down senior loans using net proceeds from the sale of another unit keeping it on tracks with its goals to reduce
debt. valeant cut more than $4 billion in debt since the beginning of 2016. the shares rose nearly 3% to 1666. new product launches and strong demand overseas helped consumer goods maker helen of troy grow its sales. the owners of brands such as honeywell and revlon topped revenue and profit expectations. helen of troy shares were up just about half a percent to 9460. an ongoing drought in the u.s. raised concerns about corn production. corn is used to make fertilizer and prices hit a 13-month high today. that move helped lift shares of several fert lizer makers which would benefit from more expensive corn prices. shares of cf industries,, were all higher. no secret money has flooded into stock index mutual funds and exchange traded funds in recent years. meanwhile actively managed stock funds faced chronic and enormous withdrawals.
the fact gives rise to a serious question, is there a systemic risk when so much money goes into one top of investment product? here to discuss is brian reid, chief economist at the investment company institute. brian, welcome, good to have you with us. simply put, brian, some people fear that by the very fact that so much equity index and etf money is getting put into the stock market, that the stock market, overall, is higher than it deserves to be and certainly that individual companies are higher than they deserve to be simply because that index money has to get put to work. should i be worried about this? is my whole premise true or false? >> i think what is being missed is that as you mentioned before, as much money that's going into etfs, we're seeing that much money coming out of regular mutual funds, actively managed. and so they almost completely offset those flows this year. and so the net amount going into the stock market hasn't been
very great. i think on top of that, we have to keep in mind, those index products are so varied and have such different objectives that they're basically buying the same stocks that those actively managed funds are selling. >> so the net effect is probably negligible. >> probably very negligible. that's right. most of the assets are still in actively managed funds. either mutual funds or some other type of product that's out there. most of the money is still actively managed out there. >> where is it going? where's the money going these days? is it going back into mutual funds? where are you tracking it? >> it's going into etfs and index funds. large part of it particularly for the domestic market, but we're also seeing a lot of money going into stock funds that invest overseas. both etfs and for mutual funds. we're seeing a lot of money. nearly $190 billion has gone into bond funds this year. >> can you identify who's doing the buying and selling or not? >> well, in many ways it's
really financial advisers who re help if you're in a 401(k) like a target date fund, it's automatically putting that money to work for you. and so it's -- there's -- it's not the individual investor running after these trends so much as someone helping create a portfolio and directing that money. >> not so much the individuals who are jumping in at what later may turn out to be a top. you just let something drop in there that's very interesting. bond funds, lots of inflows. >> right. >> why is that at a time when interest rates seem to be going up, is it that same sort of mechanistic investing, the target date fund that says, okay, 40% has to go into a bond fund? >> there's some of that but there's also a lot of money that's rolling out of 401(k)s on the part of baby boomers who are retiring. maybe changing jobs. they're going into a financial adviser who's creating this strategy for them and some of that is going to be put into bond funds because they want income and they want stability. part of this is just demographics. >> last time we had you on, the
hot debate was the fiduciary rule and what was going to happen to that fiduciary rule given the fact we had an election coming. what is the status? what's changed or maybe what has not changed? >> the fiduciary rule has gone into effect, your first phase of it. the financial adviser helping you with your individual retirnr retirnlt phase that kicks in in january. the department of labor has put out three comment requests looking for input to help possibly revise this rule. so i think a lot is in flux. we're ultimately going to have some kind of standard where your financial adviser has to work in your best interest so the question is the details around that. >> all right. brian, great as always to see you. >> thank you for having me on. >> brian reid with the investment company institute. coming up, ready for takeoff. >> reporter: i'm morgan brennan in seattle, washington. in just a few short hours, more than 25,000 packages like these will be loaded onto this boeing
767 cargo plane. meet amazon prime air. we're going to tell you all about it on "nightly business report." the newspaper industry is banding together to take on google and facebook. the "washington post," the "wall street journal," "the new york times" among others will appeal to federal lawmakers to let them negotiate collectively against the tech companies which currently command more than 70% of the digital ad industry in the u.s. current antitrust laws traditionally prevent companies from forming such an alliance. that mighty river called amazon is looming now once again over best buy. shares of the electronics retailer fell on reports that amazon plans to launch its own
geeks. its own service to help customers set up and troubleshoot gadgets. that would be similar to best buy's popular geek squad service. according to recode, amazon is willing to send an army of inhouse geeks, an army of them, to offer free alexa consultations as well as product installations for a free -- for a fee. not free. >> not free. >> the shares of best buy, down 6%. amazon up. >> amazon fears are also hanging over costco. the company was downgraded by bmo capital markets even after posting strong sales figures last week. but the analyst says strong fundamentals like that don't matter because of amazon's growing grocery business. shares of costco fell 2% today and since amazon's purchase of whole foods was announced in mid-june, the stock is off more than 15%. continuing with our am nightly report, amazon kicks off its third annual prime day
tonight at 9:00 eastern. last year the event marked the e-commerce company's biggest sales day ever, even more than the christmas holidays. this year amazon also using it to mark the debut of its new fleet of cargo planes. morgan brennan in seattle. >> reporter: as amazon gears up for its third annual prime day, it's adding a new piece to the shipping puzzle. airplanes. for the first time, amazon's prime air fleet will help move eco devices, televisions and other goods that must be delivered within a 48-hour timeframe. the latest step in the e-commerce giant's strategy to build its own transportation network. one that includes thousands of tractor trailers, container shipping, dozens of automated warehouses and of course drones. steve clark, amazon's head of worldwide operations and transportation, says the billions of dollars in inve investments are necessary to keep pace with prime membership growth. >> first and foremost, it's innovation for customers. whether it be planes enabling us
to do later cutoffs for two-day deliveries or flex which enables to do one-hour delivery, things like our prime now business, creating new delivery services for customers is a big deal for us. >> reporter: but amazon is also losing money on shipping. and adding its own services is expected to help drive down those costs. there will be 40 of the freight-outfitted boeing 767s by next year leased from air transport services group and atlas air worldwide. clark says amazon needs planes like this one in addition to u.p.s., fedex and the u.s. postal service to move goods cross-country without the need to stop at cargo hubs along the way. meaning flights can take off later in the night and still save on fuel and time. shaving upwards of 12 hours off of a package's journey. analysts expect the onslaught of prime day deals to benefit all the shippers even as many suspect the amazon fleet will eventually grow. >> we have long-term contracts with most of those partners. and i think those things are still going well. our delivery networks are all
about supplementing the capacity and allowing us to do more innovation in that space and we feel good about our current arrangement. >> reporter: but planes won't be the only way amazon will take to the skies to enable delivery. after conducting the first public test on u.s. soil earlier this year, amazon's also working with regulators to develop its drones. a delivery method clark expects to become reality within the coming years. for "nightly business report," i'm morgan brennan in seattle. >> and that is "nightly business po i'm sue herera. >> i'm tyler mathisen. thanks for joining us. we'll see you tomorrow. bbc wor.
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