Transcripts For CNBC Squawk On The Street 20170901

To be. In fact a very good week overall. The ten year note yield hanging in there not really that much of a reaction to those jobs numbers despite the fact that it does appear to be coming down that being a percentage for continued fed tightening as you see wti and brent crude gasoline prices are a big thing this morning growth slowed more than expected stock futures still pointing to the higher open. Plus a retail bright spot shares of lululemon jumping 6 strong same store sales and strong online sales. And Hurricane Harvey infrastructure hit ports are closed refineries and gas stations are flooded. Also new warnings from a flood damaged Chemical Plant were going to start with the u. S. Economy which added 156,000 jobs in the month of august. That was less than expected as the recovery did appear to slow a bit. The Unemployment Rate ticked up to 4. 4 . All three major averages in the stock markets at least coming off their first across the board august gain since 2014 and futures are indicating modest gains at the open for this the first trading day in september always tough to say how a market is going to trade off a jobs number this did come in below. This was a lousy number the revisions taking back jobs for july and june, 42,000 total was a bit disappointing for those saying that the trend is good the reaction in the market was interesting because the knee jerk reaction was to buy treasuries we saw the ten year move down to 210. The lowest point of the year the dollar got slammed some of that is coming back a little bit and theres something for those that say the economy is doing fine and its great and august is seasonally week. The three month average is still in the 180s in terms of Jobs Construction and manufacturing are high payingquality jobs bu theres something on the economy too there and thats retail and leisure and hospitality barely added and wages barely budged and some of the momentum in the job growth is slowing. I do think theres an expected disappointment. This was probably it 6 of the last 20 years has been belocon census and theyre often revised up and the market sable to look through it for that reason but also because the market got here before the number down. Ten year is down from 23 to close to 21. They already discounted the likelihood of a december rate increase from the fed so the markets were behaving as if we were in a slight sort of moderating economy if not a real slow down so i think thats why this number, it doesnt necessarily come as a big shock. A little bit of an up tick in the Unemployment Rate. Also maybe because of an adjustment so i think that its close enough the average miss over the last ten years in august is almost 50,000 jobs. So this is what was expected. Seasonal pattern there. Unemployment rate up to 4. 4 still historically very low and maybe you find that more people are looking which raises the question of this labor shortage. Are companies and sectors finding the skill and jobs that they need. 2. 5 year over year. That continues to be where we have been almost month after month. 2. 5 which is not exactly what people were looking for at least pointing to any real science of inflation, right no, for sure. Its not going to end this debate over how much of it is structural and how much of it is higher paid. All the work is leaving the work force being replaced by lower paid younger ones so thats an issue. Its total average Hourly Earnings were at 25 to 30 odds of a december hike. Theyll have to Start Talking up the prospect of a hike in the next few months. As far as signs of inflation thats been what has been missing in a broader labor Market Recovery which we can say is still on track even though that number missed speaking of movers take a look at shares of lululemon moving higher following better than expected Second Quarter results last night beating on the top and bottom line same store sales were 7 well ahead of estimates. Online sales soared 30 well talk to the ceo about this quarter which really stands out after weak miss from finish line, foot locker, dicks, nike, underarmo underarmo und under armour they say we have a different distribution model they do wholesale and we do direct and were not necessarily tied to those sort of athletic trends and this is a quarter where they really proved that. Thats a very high price point. I dont spend that because im not that athletic but apparently its a game changer. Apparently youre saving some money. I put the leisure in athleisure. How can they charge 100 for a sports bra they do theyre proud of tin novation and the fabric changes and theyre seeing growth which say counter trend to nike and under armour the mens business, they continue to diverse identify fabrics and launch new campaigns. This comes at the end of the week where at the beginning we saw the numbers from finish line it is not a big company but it had a great effect in fact on its suppliers namely nike and under armour which stock has been terrible this year. So on a differ note when it comes to this broad category although sarah would point out they are different. They think theyre differ. And lulu making the case for the people that stood by the stock that theyre on the right side of that commoditization curve. Also they dont have a lot of stora stores its not as if theyre in shrink mode and they have an area theyre getting bigger in. And grands are what people want. International as well as you mentioned very low penetration. They are just starting to really come into places like hong kong and london and some flagship stores. If you just do the math on their penetration in canada per capita they still have a tremendous amount of head room thats something that you could make the case for they have a lot of room to expand here as well. 100, huh 100. For a bra. Have you tried the pants . No, i havent my main exercise is swimming it doesnt require a great deal. Theyre work pants theyre for a more sensitive man. Thank you i appreciate that. Laurent potdevin come on, you go back. No, the islanders, sure. Lets get down to texas and get an update on the recovery effort thats underway in the wake of Hurricane Harvey scott is with us from bay town and he has an update as well on the refineries of course in that part of the country. This is the exxon mobil bay town refinery behind me and when you come in before sunrise in the morning you see all kinds of flares like the one above my shoulder here and thats the refineries flaring off excess gas and trying to get back up and running and shaking off the storm and there is a lot of that going on a lot of those flares going. Thats a good sign but still as of yesterday we had about a quarter of the nations Refining Capacity for gasoline off line but then theres also chemicals that are refined here and also just chemicals that are manufactured here. If you take a look at just the kind of chemicals just around houston, Something Like 2,500 plants thats the plant where the refrigeration failed and they lost their power and tried to load these into refrigerated container trucks those failed and one has caught fire and burned itself out theyre expecting hah the that e remaining 8 will do that its only a matter of time epa was doing air quality testing and supposedly everything is fine but they are keeping residents and everybody else a mile and a half away from the site of that Chemical Plant and thats creating a lot of questions about what the danger still is there 300 or so people that are still evacuated that live around there within that mile and a half radius and today at 11 00 eastern time the company is supposed to answer more questions in a Conference Call for reporters which well be listening in on and we will bring you the update but its just one of many issues and kind of highlights the amount of chemicals that are produced and stored in and around houston, guys its 10 cents above what it was before Hurricane Harvey and Analysts Expect that to go higher but the pressure on oil does continue and that was the reaction selling oil prices on the idea that the refinery shutdowns would lead to less demand were coming off of a month, august, where oil was down less than 6 and Energy Stocks were the worst performer. When we come back well break down todays jobs report gary cohn will be our guest. We are headed higher this morning continuing whats been a recent trend this week more squawk on the street live from post 9. At the nyse. Clients . Well jd power did just rank them highest in Investor Satisfaction with full Service Brokerage firms. Again. And online equity trades are only 4. 95. I mean you cant have low cost and be full service. Its impossible. Its like having your cake and eating it too. Ask your broker if they offer awardwinning full service and low costs. How am i going to explain this . If you dont like their answer, ask again at schwab. Schwab, a modern approach to wealth management. Did you know slow internet can actually hold your business back . Say goodbye to slow downloads, slow backups, slow everything. Comcast business offers blazing fast and reliable internet thats up to 16 times faster than slow internet from the phone company. Say hello to faster downloads with internet speeds up to 250 megabits per second. Get fast internet and add phone and tv now for only 34. 90 more per month. Call today. Comcast business. Built for business. The ford numbers a little better than expected still down for the month of august down 2. 1 . Expectation was for a decline of 2. 4 so not as bad as many were expecting. A lot of people will be focused on the inventory numbers thats been the focus over the last couple of months and ford ends the month with higher inventory than the end of july 81 day supply versus 77 in july. Trucks up 9. 3 but suvs which is increasingly a focus of where ford needs to improve its sales down 11. 3 well get numbers shortly. Guys back to you. Well come back to you for that the u. S. Economy adding 156,000 jobs in the month of august while revising jub and july numbers both down. Were joined now by john siliva as well as chief investment strategist welcome to you both. John does this slow down any of the very strong momentum we have been seeing in the labor market . No, it doesnt actually its been pretty solid the last three months what i particularly liked was broad based gains in jobs as well as really solid gains in construction and manufacturing so for the overall economy it still is Something Like 2. 5 Economic Growth in the Third Quarter and as you know this is all preharvey so the next couple of months well take a little off the table and then one final point before we turn it over to brian just the fact that now it really looks more and more given harvey less and less of a chance of a fed move in december. Thats wearing off a little bit. What feels like the appropriate reaction to you . Well people want to be more bearish. You hear about the 5 corrections in the market. The dollar was weak earlier in the week as you said gold was rallying so i think any time you see a job report above 100,000 in our view its pretty positive if you go back and look at the august numbers since 1990 the average nonfarm payrolls is 79,000 and we saw that the numbers in june and july were pretty positive. Yeah they have been revised lower but thats just math so i think the employment reports and numbers that were seeing from the u. S. Economy are very strong so they now defaulted to be more bearish and thats trying to be too shortterm and yes we are going to van effehave an effectr harvey and the market at the end of the day is starting to be too negative here. John, you know we keep askin the question with unemployment down below 4. 5 why were not seeing an acceleration in wage dproeth but sti growth does that tell you theres more slack in the labor market than we have been giving credit for and does this fall into the line of the argument theres that slack there and it continues to moderate wages and i like the point you made that wage gains are still above the pace of inflation so theres real wage gains for those that are currently working. Yeah, 12 month change, 2. 5 though only up. 1 from the month before gentlemen, well leave it there, thank you very much. John silva. Thank you well, dow dupont completed its merger. We have the details as it gets ready to trade for the first time here at the nyse and whats going on behind the scenes take a look at futures as we told you ten minutes from now well be higher. More squawk on the street straight ahead this morning it will trade as one company and there was complexity involved in the deal itself creating three companies under the dow dupont banner including a leading material science company. The key part was in the Agricultural Company that brings together dupont pioneer, dupont Crop Protection and Dow Agro Sciences among other businesses and also a leading specialty Trucks Company consisting of a lot of different businesses but if you recall theres been a lot of pressure from shareholders including activist firm trian, third point as well as glenn view all of whom have been pushing the company to reconsider the allocation of the businesses into that portfolio. Particularly when it applies to the specialty product company. We will see the product of the review in the not too distant future but they want it attributed to specialty which is seen as the faster grower. And want it run by the ceo of ta the overall but theyre hoping it will be reallocated and its going to even out coming from materials versus specialty which right now is almost double materials being run by him thats another point of contention of course among these investors and had Larry Robbins on a month or so ago saying they want him out investors like this group but well see how it shapes out. Its fast moving and complicated. The plan is to spin off all of these businesses into their own Companies Leading with agriculture although some are saying why are you leading with that one we may hear something in the next few weeks in terms of their responding to this pressure from investors. Whats the time frame for the split . 18 months. Yeah, 18 months something along those lines. When we come back well have white house chief economic adviser joining us and hell be talk about todays jobs report and well get to a bit about tax reform as llwe the opening bell just a few minutes away we dont just want to watch games cable gives us. We want all the teams, no matter where we live with directv nfl sunday ticket. We want falcons in new york. Jets in la. Bears in new orleans. Or buccaneers in a quaint, little new england bed and breakfast. Can you please pass the marmalade, charlie . I sure can, crazy pirate. Switch to directv and get every game, every sunday with nfl sunday ticket. Call 1800directv. And ive never seen a better time to refinance your home, than this summer. Why . Because right now were seeing our average customer save 20,000. But with the fed already talking about raising rates, this window will not last for long. Lendingtree is the only place to compare up to 5 real refinance offers against your current mortgage for free. Are you sure you have the best rate . Take 3 minutes and find out right now. Because at lendingtree, when banks compete, you win. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Were live from the Financial Capital of the world the opening bell is going to ring in a minute and a half from now. Of course markets digesting august jobs number that being a key doesnt seem to be having that much of an impact. No, its been less of a market mover for awhile since we have been steady in this trend and the bond market already priced in a slow and steady picture the past month or so. Welcome to september which is traditionally the worst month of the year for stocks but they said that about august too which was the second worst month and turns out we got a gain for all three of the major averages in august just barely for the s p but the nasdaq had another strong run. Was going to ask you about bio tech thats breaking out and driving the nasdaq. This market keeps seeking new engines to keep it supported and get to the next level. Final trading day of the week and the first trading day for the month of september celebrating. Over at the nasdaq. One fact thats interesting this week is that turns out Fund Managers actually put in 30 million into u. S. Equity funds for this last week and it was notable because it was the first week of inflows in the last 11 weeks. Not that much and a lot of it went into utility sector as we understand it but as we continue to watch this market in september what was it look like . Theres a lot of risk factors in september. But particularly as it went on and the devastation of harvey was so evident that this idea of connecting debt ceiling raise withed a f with aid for harvey may have helped stocks. That was a factor this week as we rebounded toward the highs. Theres an overlay of caution. There was a wobble for a couple of weeks in august but you havent had a 3 pull back even in the s p all year. You almost got it in august. You did come back now i think its probably worth keeping in mind were about at the closing highs for the s p. 24. 80 is the closing high from a few weeks ago. So basically you rd what you lost in mid august it was really not a significant pull back. The seasonal factors have not really been a great guide for awhile now and yes september is bad, october can be noisy but when the market is already up 10 or so year to date those things ray little bit less scary historically well see if that continues. Much better than expected Sales Numbers for the month of august and increase in sales of 7. 5 General Motors picked up a half point of market share a couple of interesting notes here first of all their inventory has come down substantially. They ended july with an inventory of 104 day supply. They end august with inventory down to 88 day supply. A big cut in inventory as for the Industry Sales pace for the month of august, General Motors will come in at 16. 4 Million Units but General Motors increasing sales 7. 5 well above an increase of just under 2 . Guys back to you. Do you get the sense that auto sales have bottomed now after a few rough months no, i wouldnt say theyre bottomed i think were in the gradual slow, not a decline, a plateau were not going to see everybody up and everybody down. Were now into that period where its plateauing a little bit lower. Thank you, phil on the auto sales. Of course the story of the morning is the jobs number Labor Department reporting 156,000 jobs were added in august the Unemployment Rate did tick up its now 4. 4 . Joining us with the first reaction from the white house is National Economic Council Director gary cohn always nice to have you. Some are disappointed by the number it did come in descently below expectations are you disappointed with 156,000 jobs first of all, thainks for having me and i want to extend our thoughts and prayers to all of those in louisiana and texas dealing with r harvey. Look if i told you on Inauguration Day that i would be standing here on Labor Day Weekend and wed have 4. 4 unemployment and 3 gdp growth you and i would be having an interesting argument youd probably be telling me those are hard numbers to achieve are you sure you can get there well guess what im standing hereand ill sure we can get there because we are there. Were not disappointed with the numbers and were not disappointed at all. These numbers arent just numbers that come out every month were looking at the trend overall and job growth and job creation and we see a lot of very good momentum in the numbers. The numbers that went down were government we always said government is going to get smaller the private sector is getting bigger we see job creation in the sectors we want to see job creation in. I want to hear a lot about that 3 gdp number particularly because President Trump discusses it in relation to tax reform ill point out as you well know the final numbers on Second Quarter 16 gdp were 2. 9 and the full year is still not anticipated to be near 3 . Lets get to tax reform if we can. You bumped into aman javers and you said youre optimistic what does it mean when you say reasonable shot . I am optimistic and we have a more than reasonable shot because we need to get tax reform done. If you listen to what President Trump said in missouri he layed out what we need to do in this country. We need to be competitive. We need to get a business tax system that makes us competitive to the rest of the world we need job creation we need to compete with the rest of the world its way too complex for the average american to do their taxes today. We want to go back to where americans sit down at their Kitchen Table and do their taxes on a single sheet of paper thats what we should have in america. Its not fair that people cant do their taxes that they have to go out and hire a tax preparer and buy software we spend millions of hours doing taxes and spend so much money doing our taxes it should be simple i want to be ten years younger and six inches taller but that doesnt always come true simplification does not mean cuts for the higher end of the bracket. Those deductions effect the high bracket player so when you simplify youre effecting the high taxpayers the most so we would not agree with that statement. I know thats the conventional wisdom out there but in reality we spent an enormous amount of time looking at this and modeling this as you simplify the tax system you reduce taxes on middle class income payers and average americans and youre actually taxing the high end at a higher rate. It had some ideas out there. But can you give us any more details about what is being passed through congress at this point that makes you so optimistic that its going to go through committee by the end of the year i think you know as he said yesterday he and i along with congressional leadership in the house and senate have been working quite diligently and rigorously for the last four or five months. Really we have been working since december on a tax plan we have been meeting often we have really agreed on a skeleton and frame work for what taxes need to look like and we have complete buy in from the six of us on what the frame work for taxes should look like were now looking with both the Senate Finance committee and house ways and Means Committee to build out the skeleton and deliver a tax plan which we think we can do because we have buy in from the six of us as well as the president. How difficult is it to sell the notion that putting a Corporate Tax cut, Corporate Tax simplification at the centerpiece is going to translate into jobs . The research isnt all that great. You have after tax profits of u. S. Companies already running near record highs and we have the job growth and wage growth that we have. We dont have wage growth think of the situation today where we have a tax system that charges 15 or 20 higher than a european competitor. You start with a 20 disadvantage in taxes so if youre a european competitor you can charge less for your product, you can pay your labor more and you can be more profitable we strongly believe that if we lower business tax rates it will translate into higher wages across the board. Last time we had a repatriation you remember that. The beneficiaries were investors. It resulted in buy backs and higher dividends it remains unclear that the beneficiary is going to be your middle classworking person from cutting corporations taxes i get they may not move any longer and certainly we do need more competition ive heard it from ceos for years. But the idea that it benefits the worker how are you so confide confident . How does it not the big owners are the public Pension Funds the biggest owners of equities in the world you can talk to guests you have on your show talk to larry fink and fidelity and they will tell you that the big owners of equities today are all the big public Pension Funds. Theyre the policemen and firemen and teachers and Civil Servants of America Today that have their money in public Pension Funds being managed in the u. S. Equity market so yes were helping americans by delivering returns back to them. Why dont you move on to another project youre working on is it true the president calls you a globalist . Is that something investors should worry about tariffs can be growth killing . We had a very open and robust discussion on trade and the economy and Economic Growth and jobs we have a very Good Relationship and were always talking about ways to grow the u. S. Economy and put workers back to work and increase wages thats his mission thats my mission. And finally, the Washington Post today, you clearly stated your opposition to the comments made involving the unrest in charlottesville. Do you still feel that the president has confidence in the job youre doing are you concerned that your job at the white house is going to come to an end i have a great relationship with the president were working well together. We spent an enormous amount of time this week working on taxes. We were out in missouri talking about taxes. We spent time talking about taxes. Well be out next week traveling and talking about taxes. He and i are spending time working together on all of the big Economic Issues that are going to drive Economic Growth and drive wages in this country. Thats what he cares about thats what i care about all right and a lot of that has to do with taxes and its going to be an issue that we care a great deal about because of our audience. Thank you for your time. Look forward to catching up again as soon as possible. Gary cohn from the white house. Thank you. Optimistic on tax reform. But clearly not disappointed with the numbers feels the economy is going smoothly and well see what happens. And saying its not going to be tax breaks for the upper end. The math shard to reconcile. It is especially if a lot of pass throughs benefit a pass through with everybody establishing an llc. A lot of questions still to come including how this will go in the house and the senate for now the bond pitts check in on how fixed incomes are reacting to the jobs number this morning rick, what do you think . Ill tell you what, you brought up some good points with mr. Cohn maybe what investors should worry about is how big of a bag to put the money in that their equity positions are making. Equities love the mediocre number i dont love it. Treasuries they love that weak data should put yields down but the love affair is short if you look at it whats going on on the short end a lot of volatility definitely rates went down but if you trim off that wild little part there its right over at 2136789 if you look at the dollar index now youre getting into the real issue. Most traders watching the dollar index. It also broke rather dramatically and granted its now up a little bit on the day but its very significant to look all the way back in the end of 2014 to see even though were not on the lows were certainly not getting a good bounce. If you want to see if we can get a bounce maybe you should look at the euro versus the dollar on the next chart it came very close to 120. 120 is the point, perceforms one brow of the ecb. It hit 120 and thats when the ecb hit the air waves. One week of the dollar index we dont look at it enough. The dollar might be having a tough time against the euro but its making progress on the dollar yen and overtaken 110 handle back to you. Thank you very much we do animation. Two weeks and two days. Lululemon reporting earnings and well speak exclusively with the company ceo. Stay with us as we talk about this move higher to 22,000 like you guys pointed out has been a couple of week span here but some of the traders taking a more positive attitude and reclaiming that level. Meanwhile it has been an outperformer as of late and real estate weighing things down a little bit but generally speaking a fairly positive day to start here. As opposed to like i mentioned before september some traders are still talking about this idea that we have season a seasonably weak two month stretch for august and september. We didnt get that with august but its a positive trade just 50 of the time well see if those momentum gains can carry into september a lot of the catalyst on to the horse rie horizon including tax reform and the Interest Rate meeting and one more trade to highlight you mentioned about the drivers of the market where is the money trying to seek where the next opportunity will be. So far it has been in the growth oriented stocks. If you look at the chart between the russell 1,000 growth eta versus the value etf its a big performance. 15 in terms of growth outperforming value. That could be something to watch here so all of that the valely important. Th we didnt gechb get to e so much to come there. Thank you. Squawk on the street will be right back dont go away. Whats with the dogsized horse . Im crazy stressed trying to figure out this complex trade so i brought in my comfort pony, warren, to help me deal. Isnt that right warren . Well, you could get support from thinkorswims inapp chat. It lets you chat and share your screen directly with a live person right from the app, so you dont need a comfort pony. Oh, so what about my motivational meerkat . Inapp chat on thinkorswim. Only at td ameritrade. For years, at t has been promising fast internet to small businesses. But for many businesses, its out of reach. Why promise something you cant deliver . Comcast business is different. We deliver superfast internet with speeds of 150 megabits per second across our entire network, to more companies, in more locations, than at t. We do business where you do business. An exclusive interview with lululemon on earnings. Also a look at stocks. Having another strong day after one of the best performances over the last six months and the last year. The whole group has been strong ma m macau is the story here. A month of straight gains for the business they love the story because it has the international exposure. There you see wynn tremendous come back from a couple of years ago. High rollers there. Pretty broad based rally out of the gate just looking at the individual movers materials, financials and Consumer Discretionary is the best interesting to see the reversal in the jobs market reaction. Both in the bond market and currency market as stocks remain higher. There was some talk that there was month end rebalancing in favor of stocks going into today, going into yesterdays close so its obviously carried over today. One of the weaker sectors is pharmaceuticals. Theyre not not dramatically at all. Of course announcing that deal on monday and its finally taking a breather. As i said well have that interview. Though the going to want to miss that well also of course continue to update you on thoughts about the jobs number, the fed, oh and a lot of other things. Sarah hasnt even talked about the dollar yet and an hour has gone by. Yes i he. I dont remember. Hockey players. Well be right back. Over 100 yee the first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . Carl has the morning off. Lets take a look at where we stand in the markets disappointing job number doesnt seem to be shaking stocks too much the dow is higher piano a quarter of a percent we have important Economic Data crossing the tape. Lets get to rick with the numbers. I tell you what, ism manufacturing expecting a number around 56. 5. This san august read of course 58. 8 thats a pretty surprise 58. 8 that really takes me back. 58. 8 im going back, back to the wayback machine and looks like i have to go all the way back to 2011 yes, 2011 to find a higher number Employment Index is important. University of Michigan Sentiment survey, august, final read what do we have on this number 96. 8 96. 8 what interesting here is sit takes the mid month read at 97. 6 doesnt look as good of course so thats a bit of a retrace and when you look at 96. 8 thats the weakest number since july so it doesnt look too bad but do remember beginning of the year we had 98. 5. Were expecting a positive number and we positively didnt get it minus 1. 4. Construction spending having a hard time this year. This is the 1, 2, 3rd negative month over month change this year we need to do something to improve that a bit david its all yours. Ill take it. Thank you rick markets mixed right now. The s p is up. The nasdaq is down actually. Weakness in tech this following the weaker than expected jobs report we got this morning. We did speak with the National Economic Council Director that spoke about those numbers. Take a listen. Look if i told you on Inauguration Day that i would be standing here on Labor Day Weekend and wed have 4. 4 unemployment and 3 gdp growth you and i would be having an interesting argument so no were not disappointed with those numbers or disappointed at all. He is the former deputy labor secretary under president obama. David let me start with you on the broader markets this morning. Any change in our overall opinions given this number continued lack of wage growth at 2. 5 and Unemployment Rate of 4. 4 no, no big change here. I think the economy completely in second gear here. The economy is doing well. We think we could do another 3 growth in the Third Quarter and the rest of the world is doing really well. All the pmi numbers came in around the world and theyre very strong and the Global Economy is doing well. We think we will get a tax cut and we will get we think another fed rate hike in december. Chris, whats your assessment of the underlying strength in the labor market whether theres structural things restraining wage growth and fouling up the traditional models where do you stand on that its an okay jobs report. Its not a great number. Theres underlying things but again this lingering issue of wage Growth Continues to bedevil everyone that tries to address it simply a tightening labor market is probably not enough to lift up wages at this point so it speaks more broadly to the need for other macroeconomic policies or its a longterm infrastructure goal. You didnt mention tax reform according to the administration the Corporate Tax rate down to 15 or 20 optimistically does that boost wages what happens with the wage number theres a reason i raise tax reform because im not sure whats in that plan right now. A sensible tax reform package that provides relief to lower working class middle classworkers i think would have a powerful effect but one that really gained people that pay the estate tax im not sure it would have an impact at all. Id rather see the efforts of this administration be put into infrastructure. On that overall question we asked gary cohen about why they see middle class wage earners benefitting from Corporate Tax reform and he said theyll benefit because their pensions will go up because stocks may move positively when you bring a lower tax rate and have higher earnings do you think thats the answer im just curious as to where you come down on that. Because the administration keeps offering different answers as to why Corporate Tax reform is going to benefit wage earners. I think that theres two separate questions we do need to reduce u. S. Corporate taxes because that could increase investment spending and push up productive and that could either push up wages or profits both of which are a good thing but theres a second issue here which is really the growing imbalance of power between management and labor we live in this uber society here in this sort of airbnb society where labor is getting itemized youre selling labor by the hour trade unions in the private sector is getting decimated. Thats leaving workers powerless. We need more productive growth and Economic Growth and what is it making people harder to get wages even out of a growing economy. Youre right. Only a very sharp acceleration in activity would be capable of lifting wage growth. So what does a very sharp acceleration look like we have to be realistic about this getting to 2. 5 growth and sustaining would be a major win. 3 growth is going to be difficult but also we need to think about immigration laws as well as tax laws we have a labor force problem. Thats part of what is slowing it down here we dont have enough people available and ready to work so we need to make sure that we have strong growth in Legal Immigration to help our labor force grow if we want to get to stronger Economic Growth. Gentlemen, thank you both thank you. We do want to get back down to texas for an update on the hurricane recovery effort. Scott as we keep an eye on this, our Chemical Plant that sparked the fire and the warnings yesterday. What can you tell us this is one of the many st r stories in the wake of harvey. Im standing in the middle of a four lane highway. This is u. S. 90 thats one of the main routes from houston to beaumont its closed not because of blooding but the Chemical Plant. You can see its blocked off here the plant is about a mile up that way as they wait for these chemicals to burn themselves out as of last night one of the nine large containers full of these chemicals had burned out it was the one that caught fire and it was popping or exploding or however you want to term it yesterday. That one burned out and its only a matter of time before the other ones do. We havent heard any updates as of this morning but theyre still keeping everybody a mile and a half away. A lot of people want to know why that is. They have been out doing testing for air quality. Supposedly everything is fine but residents around here are impatient to say the least. Its a big deal to us because we just went through a pretty serious deal with the storm and this Company Needs to, they need to leave our community we dont need this crap. Well if you live anywhere on the gulf coast or anywhere around it youre going to be dealing with chemicals take a look at a map of just the Chemical Plants just in and around houston some of this is because theyre petro chemicals. They come from the same crude oil that makes gasoline and in that regard, 69 or 2thirds in the country production is off line right now its the basis for about every compound out there so thats a big deal in the overall chemical sense but also the issue here about safety and what does this mean, did arkema the company that owns this plant take all the right precautions theyre going to have a News Conference and theres lots of questions here about this disruption and about whether they were properly prepared. Guys. Adding a whole new layer of risk Washington Post says 1,300 Chemical Plants in the state of texas. When we come back, shares of lululemon moving higher on the Earnings Report last night the ceo will join us eluvexcsi tloi ta ly to talk about the quarter squawk on the street will be right back oh no. Schwab, again . Index investing for that low . Thats three times less than fidelity. And four times less than vanguard. Whats next, no minimums . No minimums. Schwab has lowered the cost of investing again. Introducing the lowest cost index funds in the industry with no minimums. I bet theyre calling about the schwab news. Schwab. A modern approach to wealth management. Im val. The orange money retirement squirrel from voya. I represent the money you save for the future. Whos he . Hes the green money you can spend now. Whats up . Gonna pay some bills, maybe buy a new tennis racket. Hes got a killer backhand. When its time to get organized for retirement, its time to get voya. Did you know slow internet can actually hold your business back . Say goodbye to slow downloads, slow backups, slow everything. Comcast business offers blazing fast and reliable internet thats up to 16 times faster than slow internet from the phone company. Say hello to faster downloads with internet speeds up to 250 megabits per second. Get fast internet and add phone and tv now for only 34. 90 more per month. Call today. Comcast business. Built for business. Welcome back, nice to see you. Thank you thanks for having me. Joining us from vancouver with a bit of a delay. So tell us with all of these beats what did you see in the business this quarter that so many of your competitors across retail and sportswear in particular did not its seeing our Growth Strategy and it paying off and meeting the market at the high end and in the premium segment and being lead by innovation in a world of increasingly commoditized transaction we really differentiate ourselves with innovation didnt understand how you could get away with selling a 98 bra and get agoway with it in a time that theres a slow down in the industry. The overall wallet might t not change but people are really intentional with their purchase, with the brand that theyre attached to. They want brands that have purpose. In our mens business we see a big redefinition of what masculinity means for guys not being the strongest, toughest or the fastest but bringing a mindful component to who the guy is and our ability to deliver incredible Human Connection and innovation resinates with guests new and existing around the world. Just another one about the category because we saw such poorly received results from finish line and foot locker and under armour, nike this quarter. Some of the analysts are writing about an athleisure recession or slow down in the category. Is that a misnomer its a misinterpretation of whats going on and how people want to live their life. We see more and more people wanting to live an athletic and mindful life style i have seen that in shanghai so i think that trend is actually very timeless. Its true for mens and womens. Its true across generations and its true globally so i think were very well positioned and again, our vertical model really allows us to control and deliver amazing experience for our guests which is really unique when you look at the rest of the athletic field. Yeah, that wholesale model especially for nike. The other trend right now among retailers and sports ware companies is going straight to amazon just bowing to the pressure of the relentless growth of ecommerce and amazon. You managed to grow your website away from amazon do you view them as a threat or a partner . How do you view them as a picture of the overall Digital Retail landscape that youre growing . Theres part of the world increasingly commoditized. Were in a very different playground differentiated by innovation and premium product. Were solving problems for for athletes so were not in the world of commodity at all and that gives us a unique point of view. What about physical stores . Mike made the point earlier that you dont have as many as many of the other retail brands are you opening more talk us how tlu how you think about the store of the future in what overall has been a tough retail environment specifically for traffic at a time when Many Department stores and other big chains are closing stores. Im actually really excited about our physical footprint i see tremendous upside with our physical footprint im so proud of what the team has been able to deliver in being incredibly nimble and agile in opening different formats from local 1,000 square foot store in oregon its been incredible to see how we can adapt to different market and provide digital in places that were not. You mention the growth youre seeing in the mens business in particular which is something that you highlighted many times on the call. Interesting also because nike and under armour are chasing the womens part of the business why is mens such a huge growth area for you and what are you seeing in terms of who is buying it and how theyre responding to the innovations . Especially around the abc pants which seem to be the highlight of the mens business. Again we see a real evolution to what guys aspire to be. The evolution of no longer being the toughest or the fastest or the strongest but looking at their life in a more wholistic way and combining mindfulness and athleticism. So they want to be ready for anything that comes their way but theres another dimension thats more vulnerable and courageous and really makes them a better athlete and better father, better leader, better friend and thats really in the sweet spot of who we are. Whats your sense of an overall level of Consumer Confidence especially in north koramerica s we head into the back to school and Holiday Season its been tough to get aread from other retail and the macro Economic Data. Im optimistic. Especially when i think about whether its our assortment of jackets and outer ware we have a lot of really interesting things coming between now and the end of the year so im optimistic. Finally what are you doing on sneakers we have been seeing a little bit being released from lululemon. This is a tough market dominated by adidas and nike we have seen under armour trying to get into it as well whats the plan here its a brand that has a lot of categories. And its just a really good way to see how we kept expanding different categories were learning and we will be continuing to look at new categories because again i feel like lululemon has a lot of position to play in the active mindful lifestyle. Thank you for joining us to talk through some of the business and the growth opportunity. The ceo of lululemon joining us from a store in vancouver canada where the company is based. The stock up more than 8 right now. When we come back well be joined by the ceo of Gulf Coast Electric company how hes getting texas up and running again in the wake of Hurricane Harvey plus jan hatzius weighs in on todays job report squawk on the street will be right back helping keep shoppe. This is a financial Transaction Secure from hacks and threats others cant see. This is a skyscraper whose elevators use iot data and ai to help thousands get to work safely and efficiently. This is not the cloud you know. This is the ibm cloud. The ibm cloud is the cloud for enterprise. Yours. The ibm cloud is the cloud for enterprise. Its expected to delay power restoration for the rest of the week the ceo of the louisiana based company that serves 20 texas counts including Harris County where they now have 60,000 customers still without power. Thank you for joining us this morning. Good afternoon. Characterized the scale of the restoration process right now. Not just in Harris County but also your Coverage Area north and east of there as well. Correct actually were in the outskirts of houston in the woodlands, beaumont, port arthur texas and you have seen the flooding in those areas but first of all our thoughts and prayers go out to all the people effected. These are tragic events and were all working and pulling together to not only restore power but to restore communities. As this storm has marched through hitting the texas coast and then up through louisiana and mississippi and arkansas we really had to chase it as far as storm restoration. We still have 70,000 without power. 7,000 couldnt get power even if we wanted to make it available to them because of the flooding. Flooding has been the major problem. With the flooding we cant get in and even if we did get in to assess what the damage was and electricity and water dont mix so we have to be careful about making sure that the safety of the public is insured by making sure not only from the flooding standpoint but the homes itself. Sure. Is there a way to handicap when you might have access to some of those areas . How happy lid is the water receding in some of these areas . Well, its still rising in some areas typically everybody would be back on and we have seen in louisiana where we have seen a lot less flooding. But this will probably be a lot of weeks as we wait for the water to recede but theres a process we have to go through. The homes that flooded to make sure that the home is safe to take electricity because if theres water in the home or Something Like that it could still be dangerous. You mention you had to chase the storm. As it made its way up through the other areas. Whats the scale of this over the course of your career. How does it look at this point if you cans a s asset maybe the Financial Impact for your company. Its going to be significant. Unfortunately theres a little deja vu watching some of the flooded areas. Thats 12 years ago to the day and 26 days later we were hit by rita in this storm, at the moment, we would anticipate that at the most we had about 300,000 customers or so without power. Katrina was 1. 1 million customers damaged throughout our Service Territory and rita follows that up with 800,000 along the texas and louisiana coast so its a big storm and extremely tragic but within some of the things we have seen for us, its going to be manageable. So it will be significant. Im not trying to trivialize it in anyway. Is there any damage you know of to bigger production . You mention substations but aside from getting access to neighborhoods with downed power lines and things like that do you have any capacity compromised . We do not we have continued to operate well we have one power plant where they have access in terms of the roads into the power plant but we have been able to manage our crews there and make sure that they stay supplied. Thank you for your time and good luck. Thank you very much appreciate it. All right lets send it over now to sue herrera with a news update for us at this hour. I do, david thank you. Good morning, everyone heres whats happening at this Hour Congress is working to send at least 5. 5 billion to the areas hit by Hurricane Harvey. That aid package would be the first down payment to ensure Recovery Efforts are adequately funded texas residents standing in long lines for bottled water. It comes after harvey wiped out the water system in beaumont a town of 120,000 people they will be without water until after flood waters recede and officials can assess the damage. Another confederate statue is gone this time in san antonio, texas. Crews taking down the soldiers statue overnight this removal was peaceful. And unleaded gasoline prices hitting two year highs aaa reporting the average National Price is now 2. 51 a gallon thats a 7 jump in just the past week. Prices are surging of course due to those refinery shutdowns triggered bihar have major fuel pipelines feeding the northeast and the midwest have been closed or severely reduced which that is causing the shortages in many many areas well keep you posted on that. Thats the news update at this hour david back downtown to you. Okay. Thank you, sue when we come back well have more on todays august jobs report Goldman Sacks chief economist will join us ua on the street will be right back th served in the navy. I do outrank my husband, not just being in the military, but at home. She thinks shes the boss. She only had me by one grade. We bought our first home together in 2010. His family had used another insurance product but i was like well ive had usaa for a while, why dont we call and check the rates . It was an instant savings and i shouldve changed a long time ago. Theres no point in looking elsewhere really. Were the tenneys and were usaa members for life. Usaa. Get your insurance quote today. That was the locon census estimate joining us now is the Goldman Sachs chief economist a regular here on jobs day welcome back. Nice to see you. We should note you had a pretty accurate forecast 160,000 jobs i gleuess the question is does this weaker number signal a real slowing in the labor market or just seasonality its mainly seasonality and calendar effects august had a fairly long standing tendency to be on the weaker side and it probably broke the number the same is true for the average earnings number and theres also calendar issues to do with the timing during the month. The one thing that was more genuinely weaker was bond rate edged up so i would say, you know, its moderately softer but overall its doing well. What about the break down the fact that barely any jobs were added in retail and slez sure and hospitality which are big job creators doesnt that concern you pay back for a big inkreez t increase retail was softer. So a couple of sectors sending a positive message overall i dont think theres anything to get too concerned about here. People keep pointing to signs that theres still cadillac in the may lei boar market. On the other businesses are saying hard to find people to fill positions are we at a point where workers scarcity is going to restrain the job growth on a monthly basis now . I dont think those effects are strong i do think that were out employment if i look broadly across indicators. But if you look at history it can get through and i do think well probably get through and the Unemployment Rate is going to resume the decline our expectation is that were going to get below 4 in 2018 but i think that also means that you have overheating. We seem stuck at this number. Its been weak this year thats true. Prior to 2017 we had seen a nice acceleration 2017 has been a disappointment i wouldnt be too worked up about it though because if you look at some of the wage surveys they are still saying that workers are seeing good wage increases and still some trend acceleration so my expectation would be that over the next six months or so well get a rebound in the wage numbers moving toward 3 which i think is actually consistent with full employment if we get there. Implications for the Federal Reserve . Does the fact that there is very little wage growth or inflation growth at all keep them on hold in december . Why is that were about 55 if you want to be overly precise about it for december increase basically because the real economy, the Unemployment Rate is trending downwards. Gdp growth was 3 in q2 tracking close to 3 in q3. Our priortary indicator, all the higher frequency indicators. So seems to me that were still growing above trend and maybe full employment and i dont think the fed will want to abandon the process. Still early obviously to gauge any effect from this storm. And beyond figuring out if it has a temporary lull in Economic Activity i wonder if its just going to get a pass to a lot of the data over the next couple of months whether its jobless or otherwise and how that might feed into the fed intentions this is effect if we have weakness in the economy because of harvey. Wres i think for the next month or maybe two months there will be a number of distortions. Its very early to know how big theyre going to be but i do think that youll probably want to take a lot of that with a grain of salt. From the feds perspective im not sure that it matters that much because it seems like a september announcement of Balance Sheet run off is, you know, not a done deal at least highly likely and by the time the december meeting rolls arnds when you have to make a decision i think the data will be cleaner at that point. As we move into the fall the discussion of tax reform is going to probably pick up. We have already been starting to have it. One of the key proponents, one of the reasons the administration is behind lowering the Corporate Tax rate is saying they think it will result in wage growth. I do think that if you would get a slightly more stim eula tif physical policy at the margin thats going to support growth and the labor market and ultimately of course that also has implications for wages and its more indirectly through those channels. You see overall pretty optimistic on the growth picture of the United States given the fact that were heading into september where we have a few key event risks that could throw us off kilter. The debt ceiling, the risk of a Government Shutdown. The fact that its going to be all through congress we dont know in the details of the plan yet the saber rattling we saw it launch a missile over japan this week. Do any of these things worry you . Theres been plenty of events i think some of them have perhaps gone down a little bittel rj a little bit. The risk of a Government Shutdown and Serious Problems along the debt ceiling look lower. They havent gone away but they look lower than they did but geopolitical issues are still very much out there and thats definitely at the risk of turmoil that has not changed pretty uncertain there. Always good to check in with you. The chief economist at Goldman Sachs. The president making his pitch to congress for them to be ready to act on reforming the tax code. This is our once in a Generation Opportunity and i am fully committed to working with congress to get this job done and i dont want to be disappointed by congress, do you understand me do you understand me why our next guest says for lessons on Tax Reform Congress doesnt need to look far gym stewart is going to join us on the desk next [vo] quickbooks introduces jeanette and her new mobile wedding business. At first, getting paid was tough. Until she got quickbooks. Now she sends invoices, sees when theyve been viewed andtadahpaid twice as fast for free. Visit quickbooksdotcom. Gary cohen telling us last hour that he is optimistic for tax reform being done by the end of this year take a listen. Were now working with both the Senate Finance committee and the house ways and Means Committee to build out the skeleton and put the muscles on and skin on it and deliver a tax plan that we think we can do because we have buy in from the six of us as well as the president. Our next guest says if Congress Needs a tax reform road map it should look no further than its own backyard joining us now here at post nine, New York Times columnist jim stewart. The district of columbia. First of all, every time they talk about tax reform theres a core of success thats impossible you think health care is hard. Its so much worse its never going to happen so i picked the district of columbia because if the district of columbia that maybe the most left leaning country can do it then the federal government can do it. Its going to go into effect fully in the next year they cut rates and closed loopholes and spurred growth they didnt blow up the budget they have more of a surplus now than they ever had before. Its a textbook case on how to do it. They also benefitted from tovr all growth in the economy. Its been very positive there and again like always its a chicken and egg thing. Did the tax reform help this did it hurt . Did it not get in the way . Its hard to know and you dont get the deep studies of the small, you know, economic entities like this obviously the flip side of this is kansas which did the tax cuts and its been a disaster one of the worst economically performing states in the country. Whats the difference between the two if there is something that you could look at. Well, the cut part of washington d. C. Was offset by substantial loophole closing so it wasnt a huge reduction it was modest reduction in taxes which byty way i think the federal government could also afford a modest reduction if you assume reasonable growth reasonable growth. Not crazy growth kansas blew open the budget and made optimistic assumptions about it the governor said this is a shot of adrenaline into the heart of kansas cieconomy and i said tha nearly killed the patient. They to roll that back and raise taxes and theres crazy tax reform and has not been suppo supported. They did not have to deal with the more complicated and politically thorny issue like mortgage Interest Rate deduction and state and local taxes. What do you think will be the biggest sticking points as we head toward this debate. Youre right. If you get down to the details a local government and State Government has very different parameters than the federal government but the broad principle here which is you provide, first of all you have to have a carrot and the carrot is lower rates for everybody or just about everybody the stick is you take away the incentives and breaks for certain people they came pretty close to succeeding they managed to tamp that down now the federal equivalent of this as you look, especially at upper income taxpayers you can say over its a big tax cut for the rich, well, you can lower rates on the rich if you take away their breaks and their biggest breaks are Interest Deduction, mortgage Interest Deduction and charitable contributions were probably not going to touch the state and local taxes which probably will go those are big breaks for them. You take those away you start to add some real revenue in order to lower the things. The other big issue im going to address this in a future column, you know what to do on the individual level but the biggest loophole is the very low Capital Gains tax rate and you can certainly make the case that if youre going to lower Corporate Taxes substantially then its fair to tax shareholders that will benefit from that and get a wind fall and tax them a bill bit more. The last time we went for tax reform, it was to the extent, its described now as a result of years of planning of discussion on the bipartisan basis whether it was bob packwood and bill bradley on opposite sides of the aisle or the reagan admission with tip oneill now we have a completely republican congress. Now these things are difficult. They are difficult. And last big successful one was reagan in 1986 i was pleased to see that trum thp week was envoeking the spirit of reagan and going into this i think people dont remember that initially the Reagan Administration just kind of cut. And that didnt do much. It didnt spur the economy and so they came back to the drawing board and they did what became the more comprehensive reform in 86. They significantly lowered rates for everybody and got rid of a lot of loopholes most of the loopholes have crept right back in. And, of course, one of the biggest loopholes is for real estate and Real Estate Industry and we have a Real Estate Developer in the white house every once in a while hell funny way kind of say well maybe i shouldnt be doing this. I dont think its going help me but lets see. Some of the biggest breaks will be taking loopholes away that he benefits from. He went on the record hating the 86 format because it did cost him again, if youre going to close loopholes, you have going to hurt the Real Estate Industry which has one of the most powerful bodies in the country they did in 86. Frankly, to come up with additional revenue, they have to do it again this time. We look forward to future columns on this very important subject. Jim, thanks. Jim stewart joining us. Lets send it over to jon fortt, right take a look at what is coming up on squawk alley. Lets talk high end toys. Yes, i do mean that new iphone that we expect to see in a week and a half also, some new toys from spiro arnnected to star ws. Thats happening this year too you know who likes to be in control . This guy. Check it out selfappendectomy oh, thats really attached. Thats why i rent from national. Where i get the control to choose any car in the aisle i want, not some car they choose for me. Which makes me one smooth operator. Ah still a little tender. vo go national. Go like a pro. Its time for the biggest sale of the year with the new sleep number 360 smart bed. It senses your every move and automatically adjusts on both sides to keep you effortlessly comfortable. And snoring. Does your bed do that . The new 360 smart bed is part of our biggest sale of the year where all beds are on sale. And right now save 50 on the labor Day Limited Edition bed, plus 36 month financing. Ends monday fixodent plus adhesives. Theres a denture adhesive that holds strong until evening. Just one application gives you superior hold even at the end of the day fixodent. Strong more like natural teeth. Take a look at shares of Procter Gamble theyre push ago head of the Shareholder Meeting against the major investor from nelson peltz getting a board seat he gave an interview to the enchoir irand making news in that interview by saying this is according to the company, that peltz says he wants to move business out of the headquarters and jobs out of the headquarters of cincinnati. As you know, cincinnati and p g are basically synonymous i think it is strategic that taylor talked to the local cincinnati paper ahead of this vote cincinnati people are shareholders of p g and workers at p g sort of appealing to his side. As this fight continues to heat up and we continue to follow the back and forth proxy fight letters between trian and between p g, both of them pretty much have strong arguments looking at different time frames of the stock and performance of the company ahead of the vote on october 10th where they will determine shareholders whether peltz gets a seat on the board. 40 of the shares are owned by retail. That may be the case here. They may have the work cut out were expected to hear or get a white paper, the larger sort of compilation of the thoughts. This goes against the points that p g is making that trian doesnt have any ideas to fix the business this is certainly one big idea when it odometecomes to taking s out of cincinnati. I find it so hard to believe it will be such a major disappointment for the city and nobody in management is talking about that or on the board the stock price is benefitting from all the track and forth when we come back, Apple Official confirming the event on september 12th as the stock hits new highs. Well talk to Apple Employee number 66, what he sees coming down the pike. Better than a manual, and my hygienist says it does. But. Theyre not all the same. Turns out, theyre really. Different. Who knew . I had no idea. So, she said look for. One thats shaped like a dental tool with a round. Brush head. Go pro with oralb. Oralbs rounded brush head surrounds each tooth to. Gently remove more plaque and. Oralb crossaction is clinically proven to. Remove more plaque than sonicare diamondclean. My mouth feels so clean. Ill only use an oralb the 1 brand used by dentists worldwide. Oralb. Brush like a pro. [he has a new business teaching lessons. Rodney wanted to know how his business was doing. So he got quickbooks. It organizes all his accounts, so he can see his bottom line. Ahhh. Thats a profit. Know where you stand instantly. Visit quickbooksdotcom. Welcome back to squawk on the street. The dow trades back above 22,000, financials leading the way with Goldman Sachs and jp morgan the top performers. Financials the best performing s p 500 sector as well led higher by Citizens National and Huntington Bank shares even property and casualty insurers are in the green. All state, chubb and aig damages are expected to run into the tens of millions of dollars. They expect ensured losses to be lower since flooding will account for much of the damage now i send it downtown for the start of squawk alley. Guys thank you good morning it is 8 00 a. M. At lululemon headquarters in vancouver, canad canada squawk alley is live