>> susie: thousands of americans get jobs in december and the unemployment rate drops to a three-year low. >> it is suggesting that momentum in the economy is picking up toward the end of the year. i think it provides an encouraging signal on the recovery for 2012. >> tom: mohamed el-erian of the world's largest bond mutual fund joins us to make sense of the employment data and gives us his outlook for the markets. it's "nightly business report" for friday, january this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:

captioning sponsored by wpbt >> susie: good evening, everyone. the u.s. job market kicks off the new year with new vigor. tom, not only are there more jobs for americans, but the unemployment rate dropped again, a sign that american businesses may be more willing to hire. >> tom: susie, the december jobs report underscores an economy that is picking up and faster hiring means consumers could have more money to spend. u.s. companies added 200,000 jobs to their payrolls last month more than expected and the fourth biggest monthly gain of 2011. the biggest surprise: the unemployment rate fell to 8.5% from an upwardly revised 8.7% in november.

investors shrugged off the good economic news. the dow lost 56 points. the nasdaq added four and the s&p lost three points. suzanne pratt takes a closer look at that december jobs report and the outlook for hiring in 2012. >> reporter: 8.5%. that's an unemployment rate the u.s. hasn't seen in nearly three years. and, it is something to celebrate. nearly every major industry created jobs in december, from retail to manufacturing. only the government sector trimmed its payrolls last month. some economists were also happy to learn that the length of the average workweek expanded to nearly more than 34 and a half hours. >> as the length of the workweek increases it puts upward pressure on future demand for labor and it also creates a lot more income for households which in turn will use that spend money and that simulates labor market demand. >> reporter: in the past year,

the economy has added 1.6 million jobs. while that's the best year in the past five, there are still 13 million unemployed americans. and, there are another 6.5 million that have dropped out of the workforce, but would rather have a job. that may be hard to sense on manhattan's vibrant 42nd street. but in cities and towns across the country, unemployment is a fact of life. the thing is many people who stopped looking for work are now likely to re-join the labor force. that's as they feel their prospects for work improve. economist conrad de quadros says with more people pounding the pavement, the unemployment rate will likely tick higher. >> even as employment growth in 2012 is likely to be stronger than what we've seen on average in 2011. if participation rises, we're probably not going to see as rapid a decline in the unemployment rate as we've seen in the last three months. >> reporter: that means the jobless rate at 8.5% could be as good as it gets in 2012.

still, more people feeling more positive about getting a job is a good problem to have, especially for a recovery that desperately needs to gain some momentum. joanie ruge is an analyst for the world's second largest staffing firm and says the unemployed have reason to be hopeful. >> i think companies are really starting to look at 2012 and they're making plans to hire. so there is a good sign here, we're seeing a lot of optimism around hiring, adding to their permanent staff payrolls. they're talking about some big numbers as well. >> reporter: to be sure, most economists do not think the u.s. will be able to add more than 150,000 to 200,000 new jobs a month this year. but, every new paycheck clearly is a step in a right direction. suzanne pratt, "nightly business report." >> susie: right direction, but our guest tonight says job growth is not fast enough. he's mohamed el-erian c.e.o. of pimco, the world's biggest bond fund.

>> happy new year, susie. >> susie: so you say the numbers were good today but not good enough. what do you need to see happen for you to be more positive about the outlook for the economy? >> first, we should welcome these numbers. these were good numbers. we create 200,000 jobs and hourly earnings and hours worked went up. that's a really good set of developments but it's not good enough. that's what the market told us today. and understandably so because of the headwinds and the three particular head winds the markets are worried about. first the growth we've will over the last few months have been fueled by lower savings rates lowered the amounts they saved an and that's not sustainable

and in europe factory output declined by the most in germany in a number of years and in addition italian interest rates went up 7% and finally the global system continues to delever. good news is welcome but it has to be really really good news in order to reach what we call escape velocity and overcome all the headwinds. >> susie: let's pick up what you were saying about europe. we know the heads of france and germany are meeting on monday. is 2012 going fob the year that europe finally gets a handle on its financial problems? what's your outlook for europe? >> i sure hope so. we call 2012 the moment of truth for europe. either they will lose control completely of their economic and financial destiny which means it

will fragment or regain control. to regain control they need to first have a vision of what the year looks like. in my own. the current one is not sustainable. they have to go for a smaller and less perfect zone and secondly they have to combine growth and debt containment and thirdly they have to improve the banks and finally they have to speak with one voice. all that is possible but only if france and germany in particular move quickly and get other coutries to buy in. >> susie: we'll, we know how challenging that's going to be and given that environment what's going on in europe and what you were saying about consumers and businesses in the u.s. , what's your investment strategy. where should investors put their money for 2012? should they be more in bonds, stocks? something else? >> i go back to what chairman

bernanke said which is the world is uncertain and the only thing certain about 2012 is unpredictability and it's an unusual environment and two things stand out, prudence and patience. be prudent. do not take too much risk. concentrate on areas where you have optionality and companies supported by strong balance sheets and cash flows and the highest quality municipals and then be patient. there will be lots of opportunities throughout this year. there's no need to rush into too early. wait for things to play out and wait for europe starts to show better progress before you commit too much capital in these markets. >> susie: we have half a minute left. you've been saying it's a make or break year for the u.s. and

the world what do you mean by that and how's it going to play out? >> we need to see things happen to get to a better place. it's what you call bi-modal distribution. think of the back of a two-humped camel. the middle is no longer tenable. you cannot kick the can down the road and end up in a good equilibrium and hopefully we'll end up in a good one but every investor has to recognize it's a bi-modal world and no longer predictable world. >> susie: we'll keep checking in throughout the year and get your assessment of where things are going. thanks so much, mohamed. >> thank you. >> susie: we've been speaking with the the ceo of pimco. >> tom: still ahead, more on the jobs situation, we meet terrence barrington from being unemployed

to teaching the unemployed. his story in tonight's "you're hired." >> susie: some federal workers could get a raise next year. the washington post is reporting the obama administration will propose a one-half of one percent pay hike for civilian federal employees as part of its 2013 budget. federal pay has been frozen since late 2010. the white house's budget proposal is expected early next month. >> tom: jobs reports are expected to play a key role in the november elections and december's numbers got plenty of attention from the president and his potential contenders today. darren gersh has the story. >> reporter: is better good enough? when it comes to jobs, president obama's re-election hopes ride on the answer, one reason he was talking up today's report. >> it is important for the american people to recognize that we have now added 3.2 million new private sector over the last 22 months. nearly two million new jobs last

year alone. so we're making progress. we're moving in the right direction. >> reporter: but there is a long way to go. an analysis by the hamilton project shows more than half of the unemployed in nevada, illinois, new jersey and florida -- states key to the president's re-election-- have been out of work for more than six months. and republicans are quick to point out the jobs recovery is still weak. >> working with ronald reagan in the early 80's, we had a very simple formula. sound money, lower taxes, less red tape, more american energy, and actually praise people who create jobs. that formula, led by august of 1983, to a million three hundred thousand jobs being created in one month. >> reporter: actually 640,000 of those jobs were at&t workers who ended a two week strike. still, political analysts say as long as the jobs numbers keep improving, voters are more likely to let the president keep

his job next november. darren gersh, "nightly business report," washington. >> susie: alcoa said today it is cutting its global smelting capacity by 12% responding to the fall in aluminum prices. the aluminum giant is also permanently closing a smelter in alcoa, tennesee-- a smoky mountain town named after the company. the moves will cut fourth quarter earnings by 15 to 16 cents a share.

those numbers are due out after the market close on monday. and right after that earnings release, alcoa c.e.o. klaus kleinfeld will join us live to talk about the company's outlook and the state of the global economy. >> tom: for the third session in a row, u.s. stock averages made only small moves. but we are higher on the year so far. it was a holiday shortened trading week with the markets closed on monday. over the past four session, the dow industrials is up 1.2% thanks to that big rally on tuesday. much the same for the nasdaq. this week, the index is up 2.7% with three sessions of gains. and the s&p 500 closed out 2011 flat, but began 2012 with a first week gain of 1.6%. as for today's action, over all, the market had a slight negative

bent to it. telecom services led the losers, down one and a half percent. consumer staples and utilities fell about a half percent each. leading telecom down was sprint nextel. shares fell only a nickel, but that's more than 2% with the stock just above $2 per share. the company has struggled to compete against a.t.&t. and verizon. it restructured its organization to merge its business and consumers units into one combining sales and marketing efforts. financial stocks have been trending higher since thanksgiving. we saw a little dip today as some analysts cut their outlooks for investment banking. morgan stanley and bank of american shed more than 2% each. goldman sachs fell more than 1%. analysts site difficult markets in december for cutting earnings estimates. the big banks may also have been hurt by concerns regarding european government bond auctions next week and the fear

of higher interest rates. the european concern is certainly nothing new. and while today's trading activity didn't have much of a reaction to the drop in the unemployment rate, we did see a bigger reaction in the market's fear gauge. the chicago board options exchange volatility index measures options prices. if this index rises, stock prices tend to fall. if it drops, stocks tend to rally. today, this measurement fell about 4% and it's down about 12% this week. market fear has been trending lower since august. one area of strength today was consumer discretionary stocks and some retailers like best buy. while december same store sales were down, analyst think the company picked up market share. that was enough to push shares of best buy up more than 3%. it helped that the company repeated its profit guidance for the year even though december sales fell. technology stocks as a group did very well this week. we noticed today some heavy volume trade with some heavyweight tech stocks. software giants microsoft and

oracle both saw twice their usual volume today and both rose more than 1%. among the leading tech stocks today was netflix up almost 9%. it's up 25% since the first of the year. netflix is coming off a horrible year with shares losing three quarters of their value. and that's tonight's market focus. >> susie: here's something new to watch for this year: apple stores popping up in new places. according to a leading apple blog, your local target store could soon look like this. "apple insider" reports apple will test a store-within-a-store concept with target this year. right now, apple has mini-stores in over 600 best buy locations, selling its popular ipads, iphones and mac computers. the blog says the apple shops effort will start off small with a test run at just 25 target stores in the u.s.

>> tom: here's what we're watching for next week: our friday market monitor guest is elaine garzarelli of garzarelli capital. on the economic calendar: wholesale trade, and the federal reserve's beige book survey of regional economies. tuesday, it's the new hampshire presidential primary. and monday, we're in detroit with the latest from auto industry at the north american international auto show. >> susie: no longer "tea for two" between coca cola and nestea, at least in the united states. the two companies said today they are winding down their ready-to-drink tea business by the end of 2012, terminating a ten-year partnership. but they will continue to work together in the european and canadian markets. beverage digest reports that u.s. sales of coke's nestea are well below rival pepsi, which sells lipton brand tea. >> tom: another international firm is taking a big stake in american shale energy. japan's marubeni corporation is the buyer, paying $1.3 billion for a stake in a texas-based

shale oil project from hunt oil. the deal makes marubeni japan's biggest holder of shale oil reserves. we saw two separate u.s. shale purchases earlier this week from french and chinese firms. both of those deals carried price tags north of $2 billion.

>> tom: we saw the lowest unemployment rate in more than two years and the most jobs created in two years and still it's a slushy economy back. tonight with us interest the nasdaq. you must being in the season, hasn't snowed yet and that you call it vigorous. is it constructive for investors. >> i think it is, tom. we're building a formation of a warming domestic economic climate and that's important when you come out of a great recession now ten quarters removed and not seeing the vigor we'd like it see but seeing sequential improvement and positive developments on the moment front at this time it's important giving some event could be exported from europe or a slow-down in china that could be a speed bump to the

u.s. economy when we least need the strengthening of our economics are important to ward off that event. >> tom: look for dividends to kick up the stock returns. it that too crowded of a trade though? >> that's gotten attention and worked well in 2011. believe it or not we continue to believe that will be an important area in which to fish for 2012 as well because if we are starting to see a slow down in global growth in a low-growth world income is going to matter in terms of its total contribution to return investors might experience and high dividend paying stocks make sense and consumer staples may have become crowd and richly valued and turn to sectors like health care, technology and energy. >> tom: you have an pick for us,

chevron and cvx a yield at 3%. what do you expect? >> a stock trading eight times earnings. we expect oil prices to remain elevated as supply constraints continue to wreak havoc and geopolitical concerns and a merging market demand isn't deminnishing it should be a profitable and you get a nice coupon from chevron while you wait. >> tom: and the swiss drug giant. give us 30 seconds on this. >> a swiss-based company. we like them in terms of the demographics and think many of the companies in the pharmaceutica pharmaceuticafarm suit

pharmaceutical company give you better protection and a handsome dividend yield. >> tom: one more pick the new one, financials. your dipping your toe into the much maligned financials here. not much of a yield play for this one is it? >> not much of a yield and we know it's been a problem for some financial institution has it asked the government to raise or begin a dividend yield and there's little lob on the part of other strategists on wall street and many companies are selling at 30 to 70% of book value. if we see any rreassumption we thing in price to book values should be enough to offer for patient investors significant upside potential. >> tom: 30 seconds left and want to get to four picks, july 29th you were here and liked microsoft and wal-mart.

both shares are higher today than when you were last with us. would you put new money to work? >> we would. both still continue to look cheap and high franchises, high quality and mote bal balances. >> tom: you liked con ako phillips and gold having sold off at the end of the year did finish the year over basis up ten percent and like it under the interest rates and continued money supply interests. >> tom: do you and your complaints have positions in everything you mentioned. >> we do we this exception of ubartis. >> tom: the market manager with >> susie: as we reported, over 13 million americans are still out of work, but as we continue our look at people finding jobs, we talk with terrence barrington. in tonight's "you're hired": he tells us how he went from the unemployment line to school and

then head of the class as an instructor. >> all right class. here we go. here we go. here we go. i'm terrence barrington and i'm an instructor at sullivan & cogloani. i teach all medical classes. i teach coding, billing and insurance. when i fist started, i was a student here. students asked me to tutor them, and when i went there are started tutoring them, they all she said, "i want you to be one of our instructors." and i said, "sure, why not?" when she was about to go on pregnancy leave, they let her go. two-weeks later, we had our daughter. so now you have two unemployed parents in this time period. rent was due in two days. we had no food. i'm the husband. i'm supposed to know exactly what to do.

you're looking at your family and you can't do anything. but two days after that, i got a call. she was with workforce. i come in here and see all these when i come here, they say, good morning, mr. b. i have a place and that right there is everything to me. this is my home. my home away from home. i love it. >> susie: and finally tonight, the securities and exchange commission is dropping a practice that drives some of our viewers nuts. the agency today quietly ended its policy of allowing some companies and individuals to neither admit nor deny wrongdoing in some settlements. a federal judge slammed the another flagrant example: bernie madoff. when he pleaded guilty to a multi-billion dollar ponzi scheme in 2009, he neither

admitted nor denied the allegations in settling with the s.e.c. >> tom: that's "nightly business report" for friday, january 6. i'm tom hudson. goodnight everyone and have a great weekend. you, too, susie. >> susie: good night, tom. i'm susie gharib goodnight everyone. we hope to see all of you again on monday. "nightly businreport" captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org