tv Nightly Business Report PBS October 2, 2009 7:00pm-7:30pm EDT
now, concerns are growing that the economic recovery could be delayed. >> susie: with inflation barely rising, the nation's seniors won't be getting any extra cash in their social security checks this year. but some lawmakers want to change that. >> paul: with the fed pledging to keep rates low, tonight's "market monitor" guest thinks bonds will stay attractive. he's eric takaha, portfolio manager of franklin templeton's strategic income fund. >> susie: then, so much for chicago. the 2016 olympics go to rio! it becomes the first south american city to host the international sporting event. >> paul: i'm paul kangas. >> susie: and i'm susie gharib. this is "nightly business report" for friday, october 2. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. thank you. captioning sponsored by wpbt >> susie: good evening, everyone. the job market news today-- not good. the unemployment rate is now at 9.8% after american businesses cut 263,000 jobs in september, more than economists expected. when you do the math on layoffs, more than seven million people have lost their jobs since the recession began in december 2007. today's gloomy report raises fresh concerns about the outlook for consumer spending and the economic recovery. scott gurvey reports. >> reporter: there is no sugar coating the september employment report.
job losses were greater than expected, greater than in august, and the unemployment rate is now greater than it has been since 1983. payrolls declined in construction, in manufacturing, in government, and in retail, where consumer buying continues to be weak. economist dominic konstam at credit suisse says, until consumers return to the stores, we can expect more bleak news in the months ahead. >> i would think unemployment will continue to creep up towards 11% or 12%, something like that. i don't see any particular reason that is going to turn around. companies are not going to go on some investment binge, and therefore they're not going to need to rehire all these people that they're getting rid of. >> reporter: fed watchers say today's news should quiet speculation the central bank is preparing to raise interest rates. julia coronado of bnp paribas says the fed might even encourage an extension of the new homeowner's tax credit, now scheduled to expire at the end of november. >> i think the fed is going to look at the landscape and say that this is not the time to
start pulling back their programs, and they're going to keep the accommodative policy in place for a pretty extended period. they've said that. the fed has always been more skeptical of the green shoots than maybe the financial markets have been. >> reporter: still, most experts believe the economy grew in the third quarter and will continue to grow in the quarters ahead. but they say it is unlikely the job market will recover until well into next year. >> what we're doing is we're getting used to the new kind of outlook for growth that's pretty anemic and it's very slow progress and, you know, financial assets are going to have to kind of price accordingly. >> reporter: one more sobering note-- a lot of people gave up on their job search last month. if you consider the people so discouraged they've stopped looking and those who want to work full time but can only find part-time jobs, the unemployment rate would be 17%. scott gurvey, "nightly business report," new york. >> susie: but not every company is cutting jobs. many businesses are still hiring
and, ironically, some are having trouble finding qualified job candidates. as diane eastabrook reports, some companies are finding the best job candidates are already working for the competition. >> reporter: erin scharf is looking for a few good men and women. >> are you still interested in the claim's specialist position? >> reporter: scharf and other recruiters at chicago-based aon service corporation are trying to fill 500 job openings at aon offices across the u.s. the reinsurance and risk management firm needs everyone from administrative assistants to consultants. recruiter scott st. clair is trolling social networking sites for candidates currently working at aon competitors. >> even if they might not be a fit, they may know someone who is a fit. >> reporter: neela seenandan, aon's vice president of global talent management, says, in any economy, the company prefers candidates who are working over those who aren't. >> i think there is a perception
that tends to be that people who are still employed tend to be the stronger employees. we have hired both, but we tend to hire more people who are currently employed. >> reporter: with millions of americans out of work, this should be a buyer's market for employers. but many companies that are hiring say the jobless candidates they're seeing don't necessarily have the skill sets they want. cision is a public relations and software service company. it monitors the media for p.r. firms, so they can help their clients better market themselves. the company is now looking for a dozen sales and research professionals. cision recruiter meredith schaumburg says the companywanta experience and specific sales skills. >> we also want people who have experience in sales, selling different types of software, also intellectual property, perhaps. >> it's probably selling to similar clients that you're reaching out to now. >> reporter: professional head
hunters are also having a tough time matching job candidates with companies. creative sourcing often gets up to 600 resumes for one job opening, but typically only a fraction of the candidates are right for the position. recruiting manager demetri georgiadis says, if a candidate already has a job, he or she may not want to make a move. >> to go to a new corporation, now you're the new person. you may be the first in and the first one to go. so, when you're ingrained in a company, it's hard to take that jump. >> reporter: many companies are also reluctant to hire over- qualified candidates, fearing those employees will look for better opportunities when the economy does improve. diane eastabrook, "nightly business report," chicago. >> paul: although yesterday's steep sell-off on wall street may have been caused by the expectation of today's worse- than-feared jobs report, stocks continued to fall today, with the dow off 68 points a half hour into trading, with the nasdaq down 10 points. bargain hunters got the market
into slightly positive ground in early afternoon, but persistent concerns that the market has gone too far too fast quashed the rally attempt, resulting in modest closing losses across the board. the dow industrial average ended down 21.61 at 9,487.67. it rose only once this week, and fell 177.52 points overall. the nasdaq fell 9.37 to 2,048.11 today, and it also gained only once this week and lost 42.81 points overall. the s&p 500 dropped 4.64 to 1,025.21 today, and for the week, dropped 19.17 points. in the bond market, the ten-year note fell 11/32 to 103 13/32, putting the yield at 3.22%.
>> susie: why didn't regulators spot bernard madoff's massive ponzi scheme and allen stanford's alleged $7 billion fraud? answer-- a lack of training by the brokerage industry's main regulator. so says the financial industry regulatory authority or "finra". the report released today also says there were no procedures in place for employees to bring fraud claims to managers. it makes several recommendations to revamp internal policies, including a new department which will focus on fraud detection. meantime, four members of bernard madoff's family were sued today for nearly $200 million. madoff's brother, sons and a niece worked at madoff investment securities for years as senior executives. the suit claims they should have known what was going on under their own noses and done something to stop it. the family members say they knew nothing about the ponzi scheme
and the allegations are baseless. >> paul: october 15 is an important date for the nation's seniors. it's the day the next reading on consumer prices comes out. that is the final piece of information the government uses to calculate the cost of living adjustment or "cola" for social security. as darren gersh reports, this year's adjustment will almost certainly be zero. >> reporter: a funny thing happened while so much of wall street was worrying about inflation: consumer prices actually fell over the last 12 months. for social security beneficiaries, that means there will most likely be no annual cost of living adjustment or "cola." lawmakers like vermont's bernie sanders say that's unfair, because seniors pay a higher percentage of their income for health care, and those costs are rising. >> it would be wrong, it would
be immoral, in the midst of this economic crisis to turn our backs on senior citizens. >> reporter: so sanders and others want to increase social security payroll taxes on those making between a quarter of a million and $350,000 a year. oregon's peter defazio wants to use that money to make up for the lack of a cola increase. >> this modest $250 one-time payment to seniors would be basically equivalent to a 2% cost of living adjustment. it would help them meet some of those bare-necessity costs. >> reporter: but even with their higher spending on health care, overall, the cost of living is falling for seniors, too. the government calculates an experimental index of inflation for the elderly. from august of last year to august of this year, the cpi-e has actually fallen 1.3%. analyst david john says no cola is no crisis. >> so you could make the argument that benefits should be
cut rather than go up at this time. >> reporter: of course, social security benefits are not cut when prices fall, though medicare premiums-- which are also tied to inflation-- will not be increasing. add it all up and john says a one-time social security payment will do more harm than good. >> what's going to happen with that $250 is that it's coming out of social security, which, a year ago, we expected to have an $80 billion cash surplus, and now it's got a $10 billion cash deficit. >> reporter: falling prices will also affect the payroll taxes some workers pay. the cap on wages subject to social security taxes is indexed to price changes, and is expected to remain unchanged next year at just under $107,000 dollars. darren gersh, "nightly business report," washington.
>> susie: c.i.t. group could finally have a plan in place to rescue its struggling business. the 101-year-old commercial lender has came up with two options for its creditors: plan a-- issuing unsecured debt holders new debt and nearly all the equity in the company. plan b-- a pre-packaged bankruptcy. c.i.t. says the goal is to get bondholders to help slash its $31 billion debt load by nearly $6 billion. the deal could save c.i.t. from bankruptcy if it works out, paul. >> susie: susie, c.i.t. shares were among the most actives. we'll see them in just a moment as we take a look at our stocks in the news tonight.
>> susie: paul, rio de janeiro is celebrating tonight. in a surprising decision, the city was chosen to host the 2016 summer olympics. in rio, a wave of euphoria swept a crowd of more than 50,000 people as they learned the news. it will be the first ever olympic games in south america. rio beat madrid in the last round of voting. in a huge upset, chicago was eliminated in the first round of voting by the international olympic committee despite a last plea by president obama. monday, dallas federal reserve bank president richard fisher joins us live to talk about employment, interest rates and an exit strategy for the fed. >> susie: private equity firm
blackstone group is reportedly closing in on a deal to buy anheuser busch in-bev's theme parks. those parks include seaworld and busch gardens. "the wall street journal" reports the deal could be worth as much as $3 billion. neither company is commenting. blackstone is already in the amusement business-- it owns both madame tussaud's wax museum and lego-land. >> paul: chrysler is temporarily shutting down production of its popular jeep wrangler s.u.v. the auto maker doesn't have the parts to make it, due to a shortage from one of its suppliers. chrysler's toledo, ohio, plant will close for a week, leaving 535 hourly employees out of work. the wrangler is one of the few vehicles to avoid a steep sales decline this year.
>> susie: here's a look at what's happening next week: our friday "market monitor" guest is dr. hans black, chairman of interinvest. on the economic calendar: wednesday, consumer credit for august, and the weekly report on crude oil and gasoline inventories, and alcoa kicks off third quarter earnings season; thursday, it's september chain store sales, august wholesale trade and weekly jobless claims; and friday, the august trade balance.
>> paul: my guest market monitor this week is eric takaha, portfolio manager of the franklin strategic income fund, and welcome back to "nightly business report", eric. >> thanks for having me again. >> paul: on your last visit with us in february, the bond markets which are your specialty, were doing very well, while stocks, as we know, were in terrible shape. has the sharp rebound in stocks since then undermined bond prices and taken buyers elsewhere? >> it really hasn't. overall, aws know, short-term interest rate rez main very low because of the federal reserve's policy so people have been looking for yield. when you look across the fixed markets, emerging market bonds, they've all had a very strong run. some of those markets, such as high-yield bonds, are up over the 45%. it's been a very good run, even with equities moving higher over the past several months. >> paul: well, the fed, of course, has said it wants to keep interest rates low for some time to come or at least until
the recovery gains traction and then raise rates aggressively. how do you as a bond fund manager prepare for a strategy for that scenario? >> the good news seven though the fed has to come out with that statement to make sure they are very vigilant with inflation in general the overall economy still has a lot of slack. unemployment, as you know is still very high. so we don't see a lot of inflationary pressures over the near term. when it does return, we have a lot of other areas to invest in, so we're not just investing in government bonds. we're investing in non-u.s. securities. we're investing in some of the corporate sectors which offer yield above treasury securities. even if you see a rise in rates over the next several years, we have places to invest where we think we can add value even with that type of scenario with interest rates moving higher. >> paul: do you deal much with convertible bonds? >> we have a little bit of exposure to convertible but our
portfolios is traditional fixed income security. >> paul: of the three types of bonds, corporate, tax-free, and government, what percentages do they make up in your fund? >> right now, corporate is the majority of the portfolio. over half of the fund is in corporate tax securities, whether high-yield, investment grarkd or bank loan. we have a small percentage in tax-free securities. and then in general government bonds represent the remainder, although many of the government bonds are outside the u.s. they're not just u.s. government securities but other foreign countries. >> paul: so a lot of diversification there >> that's right. it's really a multisector funds trying to provide a lot of exposure across the globe to fixed income securities. >> paul: let's have a look at a one-year chart of your strategic income fund and as woe can see, it's done very well, especially since february. give us some statistics on it. >> certainly. the total return, including dividends, since that period of
time is up about 20 percentage points. the yield, although it does float on a monthly basis, provide basis 4%, 4.5% yields to investors. it is a fund that's benefitted from the significant rally we've seeb, particularly in the corporate sector, and that's driven to performance over the past several months. >> paul: it's certainly deeg well, and i expect it will continue that way. let's hope so. do you personally own snartz funds or have other disclosures to make about it? >> i do own shares in this fund. >> paul: very good, indeed. i'm afraid time has run out for us. but i want to thank you for being with us once again and sharing your thoughts >> thanks, again, i appreciate it. >> paul: my guest eric takaha of the franklin strategic income fund. >> susie: tonight's commentator weighs in on the need for financial regulatory reform. columbia university's graduate school of business and former chairman of the council of economic advisors under
president george w. bush. >> earlier this month, president obama delivered tough words in new york's federal hall on the need for financial regulatory reform. the president is right that washington and wall street are complacent about changes that are needed to safeguard our financial system and protect taxpayers. and we need change. when a systemically important institution is in danger of failure, and its failure could trigger a chain reaction of other failures, there may be no alternative other than to inject public funds. but the needed amount of these injections has been significantly increased by weaknesses in our current regulatory system. capital requirements are our principal bulwark against bank failure, a key trigger of systemic risk, but they can be improved. larger banks should have higher capital ratios, and more information should be provided to investors. we also need a better process than bankruptcy for resolving the insolvency of financial institutions. our framework for banks needs to
be extended to other financial institutions and their holding companies. this process, unlike bankruptcy, puts the resolution of institutions in the hands of regulators rather than bankruptcy judges, and permits more flexible approaches to keeping systemically important institutions afloat. the president's own proposals would increase regulatory complexity and keep high the risk of financial crisis, but he is right to call for thoughtful action. lets hope washington and wall street were listening. i'm glenn hubbard. >> susie: that's "nightly business report" for friday, october 2. i'm susie gharib. good night, everyone, and have a great weekend. you, too, paul. >> paul: good night, susie. i'm paul kangas, wishing all of you the best of good buys. "nightly business report" is made possible by:
connecting marylanders to their government since 1981, this is "state circle" >> good evening, i'm jeff salkin, welcome to "state circle". dozens of new laws took effect this week. among the acts approved, new restrictions on drivers and new powers for judges to seize weapons in domestic violence cases. joining us for the political roundtable, delegate adrienne jones and delegate james king, thank you both for being with us. where would you say the citizens should be pleased or displeased with the product of the legislature this year? >> in terms of the bills passed october 1st, i think they should be pleased that those who are environmental buffs in terms of what we have done