>> susie: with both the mid-term election and a fed move on the horizon, the latest word on economic growth is better, but still not good. >> we are experiencing growth. but we're not experiencing growth at a pace that is going to make up for the huge loses in economic well being that we experienced during the recession fast enough to satisfy us. >> tom: we look at what it will take to satisfy voters and investors. you're watching "nightly business report" for friday, october 29. this is "nightly business report" with susie gharib and tom hudson. "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. "sluggish," "anemic" and "weak." those were the words used today to describe the pace of growth in the u.s. economy over the past three months. tom, the government said the economy grew only 2% in the third quarter. >> tom: susie, that's a tad better than the 1.7% recorded for the second quarter, but still not enough growth to bring down the unemployment rate.

>> susie: that number will likely impact the way americans cast their votes on election day next week and what decisions fed policymakers make when they meet next week in washington. scott gurvey reports. >> reporter: this g.d.p. report is the last major bit of economic news to arrive before next week's election and next week's meeting of the federal open market committee. and the experts say it won't change a thing. neal soss of credit suisse has the bottom line. >> the economy is doing better. but it's not doing well. we are experiencing growth. but we're not experiencing growth at a pace that is going to make up for the huge loses in economic well being that we experienced during the recession fast enough to satisfy us. >> reporter: which means it is time again for chairman ben bernanke and the federal reserve to ride to the rescue. for weeks, the fed has been talking about pumping more cash into the economy by buying treasuries.

michelle meyer of bank of america merrill lynch says the time to act is now. >> the fed should act in this environment because they're not meeting their mandate. unemployment is high and could actually increase further from here. and inflation is low and slowing even further. the data we saw today for the core c.p.i. price index showed that inflation is only increasing point eight percent on the quarter annualized. that's a very, very slow pace of inflation and dangerously close to that zero level. >> reporter: one bright spot in today's report, an increase in consumer spending. but the rate of spending is still way below the rate which followed the last deep recession in the early '80s. the expected fed action is designed to get consumers back in the stores. >> if you want them at the margin to take some of it out of their pocket and go spend it. spend it on investment by business. spend it on consumer items. by households buying a new car and so forth and so on. if they want to hold more cash you have to feed that demand so to speak.

you have to satisfy it and then over satisfy just a bit and that's your stimulus. >> reporter: the move will come just as the important holiday shopping season gets underway. but the predictions for that are still not good with most americans still worried about jobs and declines in home prices. >> i don't think the christmas season will be all that bad. i think you will see consumer spending but again the theme will be consumers looking for discounts and consumers spending cautiously. >> reporter: fed watchers say today's g.d.p. report should silence the inflation hawks for a while. they do not expect to see interest rates rise until at least 2012. scott gurvey, "nightly business report," new york. >> tom: here are the stories in tonight's n.b.r. newswheel: stocks end the day more or less where they began, despite a global security scare. the dow rose four points, the nasdaq barely budged and the s&p 500 was off half a point. volume hit the highest level of the week on both the big board and the nasdaq.

president obama today said the nation is stepping up security after two suspicious packages were found on cargo planes bound for the u.s. >> at this stage, the american people should know that the counterterrorism professionals are taking this threat very seriously. and are taking all necessary and prudent steps to ensure our security. >> tom: those packages originated and yemen. weeks of strikes at france's oil refineries and major ports will soon be over. french trade unions today said they'll end the walkouts that crippled transportation and commerce. workers were protesting plans to raise france's retirement age to 62. pfizer today widen a recall of its popular cholesterol drug lipitor on reports of musty or moldy odors coming from the pills. the latest recall covers 38,000 bottles of 40-milligram tablets. in recent weeks pfizer has pulled over 300,000 lipitor bottles off the u.s. market.

>> tom: still ahead, it's not full now. but soon this plant will be humming with workers. we look at how electric cars are helping one michigan town recharge its economy. >> susie: election day will help determine everything from how much you pay in taxes to whether legislation to control climate change takes effect. those issues are key to many congressional races. and they are also the subject of state and local ballot initiatives across the country. tonight as we continue our special coverage "midterm 2010: it's the economy." darren gersh looks at the bottom line impact on state ballots. >> reporter: in washington state, it is the battle of the billionaires. on one side, bill gates senior and his son pushing an initiative to establish a state income tax on those making more than $200,000, while cutting property taxes and taxes on small business. on the other side, microsoft c.e.o. steve ballmer and amazon's jeff bezos arguing the

measure will hurt their ability to attract high skilled workers. this will be one ballot battle that is watched closely across the country says u.s.c. law professor john matsusako. >> it is the same sort of argument that we are seeing come into play at the federal level about extension of the bush tax cuts. should we have a specific tax expectation that the wealthy pay even more than they are paying now or should we do across the board taxes. so i think it's a very interesting microcosm of what's going to go on at the federal level. >> reporter: while washington state is considering raising taxes, voters in colorado will decide whether to cut income taxes and other fees and cap revenue growth. colorado and seven other states are considering property tax exemptions for veterans, senior citizens or others. california voters will be weighing in on the state's never-ending fiscal crisis with a proposition to require a majority vote in the legislature to pass a budget. the law now requires a two thirds vote. tracy gordon studies state

finances and says voters often tinker with budget process reforms when the economy turns sour. >> oftentimes, voters try to influence the budget process because they feel like they're not sure how they got into this situation. >> reporter: to make sure they don't get into another budget bind, five states are considering setting up or expanding rainy day funds for emergencies. but gordon says ballot measures that set the rules of the budget debate are different than the actual decisions on what and where to cut. >> sometimes these kinds of measures can just distract attention from the hard choices that need to be made. >> reporter: climate change is a hard choice on the california ballot. proposition 23 which would prevent the state's climate change law from taking effect now appears to be losing. energy analyst kevin book says that's because big oil companies are sitting out this fight, opting to live with the new regulation. >> it is the integrated oils that can afford to make small changes that have big global results. the small companies, they're the ones whose ox is getting gored.

>> reporter: voters in arizona, colorado and oklahoma will consider whether to amend their state constitutions. at issue, whether individuals and businesses can be forced to buy insurance as required by president obama's health care reform. analysts consider those votes largely symbolic. darren gersh, "nightly business report," washington. >> tom: we wind up this friday

pretty much where we were a week ago when it comes to the major stock indices. the dow shed 14 points compared to last friday that's one-tenth of a percent lower. the nasdaq added 1% this week in a narrow trading range. and the s&p 500 gained exactly 18 100s of a point, barely nudging the needle on our weekly change. despite the news of the third quarter g.d.p. and the security concerns over international packages, today's markets ended flat. but october saw another month of gains for the big indices. for the month, the dow industrials added 3%. the nasdaq was up almost twice that. and the s&p 500 gained 3.7% this month. what fueled the gains-- the materials sector was the best performing, up 6.6% with a

number of commodities rallying. info technology jumped six and a half percent. and the biggest gainer last quarter, telecom services, was the market laggard this month, dropping a tenth of a percent. today's small gain for the dow was held in check by an earnings miss and a revenue disappointment. this earnings miss first. that came from chevron. while it enjoyed strong oil prices and better refinery margins like other big oil companies, higher costs and the weak dollar hurt these results. that led to shares falling 2% on heavier than usual volume. it was the leading loser among dow industrial components. earlier this week, shares hit a new 52 week high. meantime, drug maker merck fell almost 2% on strong volume. this is a six week low for the stock. while earnings beat estimates, revenues came in lighter than anticipated due to pricing pressure on its medicines in europe.

merck also set aside $950 million for an expected end to a government investigation of vioxx. that's the pain drug that was pulled off the market in 20004 after it was linked to other health problems. a couple of big movers off of their earnings today included make-up and money. the make-up company estee lauder looking good, beat estimates by 20 cents per share. and raised its outlook. it said business in america has picked up with, quote, the luxury consumer shopping again, end quote. shares responded-- jumping more than 10% on five times it usual volume. the rally easily took out the stock's previous high in april to hit a new 52 week high. from make-up to money, life insurer genworth saw huge volume on this 10% drop. shares remain above their august lows though. earnings were a fraction of what was expected thanks to weak life and mortgage insurance five new stocks hit the market this week, including two more based in china.

pacific biosciences is the first the two chinese-based i.p.o.s.-- and that's tonight's "market focus." >> susie: amtrak's efforts to modernize its fleet has paid off big time for siemens.

the german conglomerate builds locomotive engines in sacramento california. today, it won a half-billion dollar order to build 70 of amtrak's next-generation electric trains. the new engines will replace older locomotives in use at amtrak for more than 20 years. siemens industry c.e.o. says the company hopes to cash in on federal plans to upgrade the nation's railroad infrastructure. >> well, the united states has to continue to invest in this infrastructure to be competitive. the northeast corridor is one of the most important commercial corridors for the united states, with businesses all up and down that sector of the country. for here in united states, siemens is very important player in helping america build its infrastructure. this particular order will also add 250 jobs. right here in sacramento. >> susie: speaking of trains, caterpillar announced that it will soon start building diesel- electric locomotives in indiana.

the plant allows caterpillar to compete for light-rail contracts. typically they require locomotives and other train components to be made on u.s. soil. >> tom: the auto industry is counting on the coming wave of electric and electric hybrid cars to drive a u-turn in its business. that has the state of michigan working to attract makers of the batteries needed to power those cars. diane eastabrook takes us to holland, michigan-- a city hoping to be in the driver's seat when it comes to battery makers. >> reporter: at this johnson controls plant in holland, michigan workers are putting lithium ion cells-- made in france-- into huge battery packs that will power electric and hybrid vehicles. today, this facility has fewer than 50 employees. next summer, it will have twice that number. a few feet away construction workers are renovating the rest of this 130,000 square foot building, so johnson controls can also make battery cells here. ray shemanski heads johnson controls hybrid battery unit. he says the plant is designed to crank out 150,000 batteries a

year and employ up to 300 people. >> we have orders right now that would fill about half of the demand in this plant. and, so i would expect in the next couple of years to book orders that we could fill this plant. >> reporter: michigan is hoping electric vehicles can re-charge its flagging economy which has shed more than 400,000 manufacturing jobs in the past decade. and, holland could be a huge beneficiary of the technology. johnson controls will be providing batteries for ford's electric transit connect and a hybrid truck from azure dynamics. across town the korean firm l.g. chem is building a sprawling plant that will make batteries for the chevy volt and electric version of the ford focus. together, these plants could provide jobs for up to a thousand people and make batteries for a variety of other vehicles. that's promising to a region where the jobless rate tops

where the jobless rate tops 11%. kristi villemure had been out of work for nearly a year before getting a supervisor job at johnson controls. >> there weren't many jobs and there were so many qualified people who were looking jobs who were unemployed at the time. >> reporter: but getting companies to build batteries and provide jobs comes at a cost. both the state of michigan and the department of energy ponied up more than $700 million in grants and tax breaks for the plants. but bruce adair-- from the region's economic develoment council-- says subsidies are a must if michigan and the u.s. want to lead this industry. >> we're competing globally. the companies that we have drawn here at this state and the companies we will continue to draw could go any place in the world and those countries are going to give them incentives. >> adair thinks in another decade electric vehicles could bring another 10,000 jobs to the holland area alone and help michigan rebuild its image as a global auto leader. diane eastabrook, "nightly business report," holland, michigan. >> susie: here's what we're watching for next week.

several major events: the midterm election is tuesday. wednesday, the federal reserve wraps up a two-day meeting. it's widely expected to announce a new plan to stimulate the economy. and friday, the october employment report is released. monday, as we await the fed's decision, we look at whether this so-called quantitative easing has worked before. >> susie: the lone star state is the lone holdout when it comes to meeting new federal rules on greenhouse gas emissions. texas has yet to comply with new environmental protection agency standards that go into effect in january. every other state has gotten federal approval to begin issuing greenhouse gas permits or said they will allow the e.p.a. to issue permits for them. the new rules call for the nation's largest industries to meet stricter greenhouse gas emission standards. >> tom: a split decision today for former media tycoon conrad black. he lost an attempt to overturn all of his convictions for fraud and obstruction of justice.

but, a u.s. appeals court in chicago did reverse two fraud convictions. a recent supreme court ruling gave black grounds for appeal and he was released from prison pending today's ruling. black has served two years of a six and a half year sentence and could be headed back to jail. he once controlled the "chicago sun times" and london's "daily telegraph.

>> tom: while stocks have been choppy for more than a week, they're still sitting at six month highs. and tonight's "market monitor" thinks new post-recession highs are on their way before the end of the year. he's james paulsen, chief investment strategist at wells capital management. he joins us tonight from minneapolis. >> tom: jim, welcome back to "nightly business report." nice to see you again. >> good to be here, tom. >> tom: new highs before the end of the year, fueled by what, maybe the federal reserve action expected next week? >> i think the primary catalyst that has been driving the market higher is the soft patch in the economy in the summer. we've had a lot the good reports in the last several weeks, including a big decline in uninsurance claims, a pick up in retail sales, and a wonderful earning season here in the third quarter. >> tom: so you're not necessarily in the camp of slow, inemic growth and

those no break outs to highs? >> no. i think we're growing 3% growth in real g.d.p. i think we'll grow 3.5% next year. and i think 100,000 jobs a month to 200,000 jobs next year. it is very decent growth, and i think plenty enough to elevate stock prices, particularly when they're completeing against a 2.5% 10-year treasure. >> tom: what's changed to get above these levels, do you think? >> i think three things. the last time we had a lot of optimism, indeed, we can talking about what was the fed's exit strategy was going to be. today we have a lot more pes mesm, and i think means we're climbing a wall of worry.

secondly, the evaluations were much more expensive, back then, almost 18 times trailing earnings, today we're trading at 15 times trailing earnings. much more reasonable. and thirdly, there was a lot of head winds at the april high. we just had a big rise in long-term yields. the 10-year treasure was at 4%. oil prices were at $90. and we had a tightening in the value of the dollar. today all of those things have been reversed, and a lot of the policy wins are at the equity vote. i think it could push us up to 1300. >> tom: pretty bullish. and the wall of worry has been articulated in gold prices at 1300 an ounce. the federal reserve is printing money. are you buyer here for protection? >> gold was a hugely successful play during the crisis from late '08 into march of '09. since then it has continued to be good, but

not better than other commodity prices. i would prefer to have a diversified comed commodity prices than just gold. >> tom: when looking at the stock market, one of your choices are industrial stocks, x. l.i., the exchange traded fund, rallying up to the funds. what is the catalyst? >> i think the catalyst -- this is the second global economy recovery led by the emerging world. and that world tends to be tobermori characterized by industrial and basic world processes which u.s. manufacturers will be a beneficiary. i think industrials will continue to do well. i think their evaluations are reasonable as people still have a discount in them for the chance of a double dip recession. if that fear fades away next year, their evaluations could be augmented. >> tom: you're not giving up on the consumer

at all. looking at x. l.y., the ticker symbol, a nice rally up to the springtime highs. hopes on the job recovery you see in 2011? >> yeah. i think people are underestimating the comebaccomeback potential of the u.s. consumer. the debt burden of the u.s. consumer is now back to average. the income trends are up 2% year-to-date. i think they'll accelerate a little more next year as job creation resumes. i think we'll be surprised at how well retail sales will do in 2011. >> tom: let's get a 15 second update on your april 30th picks. emerging markets and financial splitting their performance. one up 10%, the other down 10%. would you put new money to work? >> i like emerging markets long-term. i'd be a little cautious. financials, if you're going to buy those, it las be to a value play. >> tom: any disclosures for these four?

>> no, i don't have. >> tom: james paul sens. chief financial analyst. >> susie: tom, we'll see if investors react to jim's call. we'll have a fed decision and the market decision and we'll see how it all plays out. >> tom: and a week from today, the employment numbers are due in. that's "nightly business report" for this friday evening. have a happy halloween, everybody, you, too, susan. >> susie: i hope you have a great halloween with you and your boys. good night, everyone. hope to see all of you again on monday neither. "nightly business report" is made possible by: this program was made possible by contributions to your pbs

station from viewers like you. thank you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org