susie gharib. firing on all cylinders, the economy bounced back last quarter growing at a 4% annual rate, but how long will the good times last? >> rates debate. it's heating up but did the federal reserve offer any hint as to when and by how much it might start hiking. super size decision, a legal finding at the national relations board triggers a fire storm between big business and big labor and at the center of it all, mcdonalds that and more tonight for "nightly business report" for wednesday, july 30th. and good evening, everyone. welcome. i'm tyler mathisen. >> i'm sue herrera, filling in tonight for susie gharib. the day started out with a pleasant surprise. the economy grew at a 4% annual rate last quarter bouncing back

nicely from the sharp winter contraction but it put market watchers on edge. could a strengthening economy force the federal reserve to act sooner rather than later. the prospect of higher interest rates sent stocks lower and few direct hints were given. fed's fatigue set in and that sent traders to the sidelines. by the close the dow fell 32 points to 16,880, the nasdaq helped by strong twitter results, rose 20 points to 44.6 and s&p 500 had a fraction l gain. steve liesman has more on today's fed meeting and wt may come next. >> the federal reserve tapered by expected $10 billion and brght bond down to 20 billion, it was 80 billion in december and there was a hawkish tilt to the statements brought about by some better economic mnumbers w got. the philadelphia fed said he

thought the current statement did not reflect the improvement in the economic numbers. the fed said the likelihood of below 2% inflation diminished somewhat assigned that the ped was less concerned about deflation. the fed upgraded the charterization saying it improved. the inclusion of the notion that there remains significant labor slack in the economy. >> there is attention in here. i think the real question is, is this real slack? are these workers going to bring into the labor market or employment without raising wages? time will tell. the story is running against janet yellen. the economy is doing better but the labor market is tightening faster than she said it would. >> second quarter gdp, the first quarter revised to minus 2.9% and adp, the company that predicts the jobs report came in

at 218,000, a tad below consensus by still strong, the fourth month above 200,000. the estimate for friday is 230,000. >> i think we're seeing five years after hard work playing out. it's more than head winds here. this is genuine growth and an element of fiscal discipline. still there is more work to do and patience is key. >> the jobs report and quarter data is significant. a repeat like the second koucou prompt the fed. otherwise, look for the fed to not raise rates until mid 2015 if we stay on the current course. for "nightly business report", i'm steve liesman. >> here with perspective on what the fed said and what it may do and when is alan blinder. he's former vice chair of the federal reserve.

before we get to the fed, i would like to get your reaction to the gdp report, a 4% growth rate in the second quarter. do you think that is sustainable, one, and was it, two, really boosted by a sort of snap back factor from the very weak first quarter? >> i don't think it is sustainable. i don't want to sound and you just mentioned tyler and the you look into the details and accounting for most of the forecasters errors, by the way, was inventory accumulation and firms don't just keep on piling in and piling in. >> so what type of growth are you looking for in the near term, professor? the 4% is not sustainable, what would be sustainable and what would indicate to you that the economy is on a steady growth rate? >> i think the two answers are the same in this case, at least

for awhile, which is the rest of the year sort of looks three to three and a half, that kind of a number. that is sustainable for awhile, assuming as steve mentioned in the setup piece that we have slack in the economy and i think we do. it's not sustainable, of course, in the long run. there is a lot of controversy right now about the long-run rate of growth of the u.s. economy but nobody thinks it's 3.25. >> let's talk about the fed. you heard steve liesman say that the going consensus is that interest rates won't rise until mid 2015. do you share that view, and in what would you say to the descending voice on the fed today, mr. plaucer of philadelphia who wants rates to move a little quicker? >> so i think that steve easiest

mi -- steve's estimate is long. the likelihood if plays thing out is in the second quarter of next year. a little different. if charlie placcer was here, if it increases 2% and if the economy grows at 4%, and i don't think either of those will happen, but if they do, i'll switch to your side and think the fed should be moving faster. >> professor, it's widely expected the fed will announce the end of the taper, two questions for you, one do you agree with that? is that part of your consensus and two, how much of that is factored into the market, if any, at all? >> i think it's 100% factored into the market and i'll be shocked if it doesn't happen. something unusual, the fed has gone as close as it can to promising that it ends in october. it doesn't quite promise, but it would feel it was reneging on a near promise if it didn't end it

in october. so i'm pretty confident it will end in october. that's the announcement that the end will come at the october meeting and i think that's completely factored into the markets. >> two quick questions for you, are you worried about inflation, number one, number two, we've been debating this week whether the feds exit from the stimulus policies can or necessarily will end badly, or will it end well? do you think? >> i think it will end well, but there is no total guarantee on that. it is true, as critics say, that the fed is about to enter uncharted -- well, you can say uncharted waters now but it will really enter uncharted waters. it has a sensible plan for exit. it has the ability to execute that plan. i personally don't think the job is all that tough, although, a lot of people think it's tougher than i do. so i expect it to be largely

successful. now, that doesn't mean perfection will be achieved. >> if inflation -- >> i was going to say, they want 2% inflation and 5.6 or so percent unemployment. will they hit those exact numbers? i doubt it. >> right. >> that's just asking for too much. inflation could come out a little higher in the end, it could come out lower, also, but there is a possibility inflation comes out a bit higher at the end. >> professor, thank you, as always for being with us. alan blinder. >> you're welcome. the national labor relations board served up a victory for fast food workers fighting for better working conditions at mcdonalds but the restaurant chain says it's fighting back. both sides agree if the findings stands it could change the balance of power in an industry that employs one in every ten american workers. scott cohn has the story.

>> reporter: fast food workers say they are over worked and under paid and they have been protesting. mcdonalds says it doesn't set wages and hours, it's franchises do, and they are independent but the national labors relations board says that's not exactly the case. in a two paragraph statement, the general counsel office says it's a joint employer, potentially liable in dozens of allegations of unfair labor practices. labor advocates say it's a step toward a much bigger goal. >> the ultimate goal is for fast food workers in the u.s. to get $15 an hour and have the right to form a union without retaliation from their employer. >> reporter: but who is their empl employer? they operated on the idea it's the franchise. they argue corporate headquarters controls every aspect of the business, including wages they pay.

mcdonalds says it will fight says the decision changes the rules for thousands of small businesses. the national restaurant association agrees and says the ruling will give franchises less control and cost jobs, not just in the restaurant business. >> we're talking hotels, health care, we're talking a number of other industries, as well. >> any business that uses the decades old franchise model. one reason this decision could ultimately wind up in court. scott cohn, "nightly business report", new jersey. we have two different points of views on this subject tonight. steven is the president and ceo of the international franchise association and michael ruben is an attorney who is also a lawyer for the mcdonalds class action plaintiffs in california. mr. ruben, i'm going to start with you. this is a big win for your side, is it not? >> this is huge win. it's important not only for the workers involved in these nbr cases but will impact mcdonalds

workers and fast food workers throughout the country. >> i don't think i'm going to have to strike the match more than once here. i think you disagree with mr. ruben, my question for you, though, is why wouldn't franchises want to share some of the liability with their potentially more financially strong and well-lawyered parent companies? >> tyler, there is a reason the franchise industry is out pacing the growth through the u.s. economy because there is a proven time tested model. it's a way for inspiring entrepreneurs to be in business for themself but not by themself because they get certain support from the franchise which they pay franchise fees and royalty fees. and so given the fact that we create jobs and business, small business ownership opportunities

for all folks diverse folks, all americans is a great story. we represent 3.5 of gdp, and that's pretty significant. to hold mcdonalds accountable for the alleged labor violations of their franchises, we believe is, you know, it wouldn't be true. >> what about that, mr. ruben? many say this would hurt franchis franchises, not just mcdonalds, that i would could make it prohibitly expensive for people to buy franchises. >> no, the problem here isn't the use of the franchise model. it's the abuse of the franchise model. mcdonalds exercises an extraordinarily detailed control over every aspect of the

franchises and their crew members. it has on going realtime computer monitoring that lets it know at every moment how many workers are working, what they are being paid, whether they are entitled to over time and instructs franchises if the labor costs exceed a certain fixed ratio to the income that franchise is receiving, then the labor costs have to be cut. mcdonalds is not a typical franchise in that respect. it has people going into each restaurant, interviewing workers, telling them what to do. it's employing the workers. >> if i'm a shareholder of mcdonalds, i might look at the practices and say you know what? that's good corporate governance. you keep an eye on the cost and know what your franchises are doing and have quality control over the product, et cetera. what's your response to those criticisms? >> when a company is in the degree of control and micro

management that mcdonalds exercises, it's an employer under state law and federal wage law. these are not new principles of the board general counsel is pursuing in the complaints that were announced yesterday. these are well-stated, well-established standards that fully apply to mcdonalds baseden a record the general counsel is carefully examined. >> address that. mr. ruben is saying in fact, in practice, mcdonalds in this case is in every material way an employer just in the same way as the franchise because mcdonalds is controlling the labor practice. what do you say to that? >> i would argue the fact the franchises responsibility is to ensure brand standards are met and protect good operators and ensure consistent quality of the products and services that they provide, and i think it's important to state that these

franchises, again, out growing and out pacing the growth of the u.s. economy the last five years, are independent operators and put up their own savings. they take out loans. in some cases, they do both. they have the ability to hire, fire, set wages. they process their own payroll. they are given an employer identification number by the internal revenue service, and to hold them accountable would push back decades long president that defines them as independent operators and all we have to do is look at the small business administration, how they define franchises, the internal revenue service, as i just ntioned, federal and state courts and the nlrb for that matter. what this is in my respectful opinion is a way to put more money in the union. it's easier to organize when all

the franchises are lumped together as opposed to one mom and pop shop. i think that's what this is about. >> gentlemen, we'll follow this closely. thank you for joining us. >> thank you. >> ty? still ahead, could auto sales up big this year be nearing the peak? argentina's credit rating was cut by s&p as debt talks continue. the country failed to meet a

technical payment. the economic minister is in new york trying to solve the dispute between argentina and hedge funds. >> bank of america is ordered to pay $1.3 billion after a federal jury found it liable for fraud over defective mortgages. they found bank of america for frauding fannie mae and freddie mac through the sale of loans that emphasized quantity over quality. they are reviewing the ruling and considering an appeal. >> shares of humana drop. the profit matched estimates and revenue came in above expected ranges, as the company saw strong membership growth in part because of the public health exchanges. but second quarter profit was down from a year ago because of higher costs, which the insurer attributed to medical spending from those new enroll lees on

the public exchanges. the stock fell 5.5% to $120.34. those worries weighed on well point, even though they trumped estimates and better than expected revenue. profit fell in the quarter, which itlso said was because of higher cost stemming from the health care reform law. the insurer raised the profit expectations for the year, but nonetheless, shares finished slightly lower at $112.47. sprint posted a surprise profit in the second quarter, but it lost subscribers, which put a damper on the earnings report. the company was able to expand the high-speed coverage and make progress competing the overhaul to stop calls from dropping out. still, shares fell 3% to $7.76. the insurance giant metlife saw the quarterly profit more than double helped by gain s and the chile business. despite that, earnings came in lower than what analysts looked for. shares dropped after that report

during the regular session. the stock was up a fraction. whole foods market saw the thirty quarter earnings rise but lowered the projections. the supermarket chain also said same store sales were up but not as much as analysts had expected. on that, shares plunged initially in after hours trading. look at them fell. right off the cliff there. during the regular session, the stock was up almost 4% to $39.11. in kraft's second quarter sales, profits fell more than 40% in a quarter since a slight increase in revenue couldn't offset the extraordinary gain it had last year. shares didn't move initially after hours. during the regular trading session, the stock was slightly lower at $57.24. >> toyota is number one in global vehicle sales six months into the year. the japanese auto maker is

followed by volume ks wavolks w. sales totalled nearly 5 million, up more than 4%. sales grew in the home market as well as the rest of asia, the u.s. and europe. later this week, auto makers will report july sales and numbers are expected to be quite strong but on wall street, some auto analysts wonder whether the current cycle of sales is nearing a top. phil lebeau as more. >> reporter: this is a hot summer in downtown chicago. >> right now i'm saying we don't have enough inventory. we need more cars. >> reporter: it's familiar at dealerships around the country. over the last five years, annual auto sales have surged from just over $10 million to more than $16 million and with it has come a surge in auto production. third shifts have been added to assembly lines and all new plants are being built. that is adding so much supply of

new vehicles, analysts are worried the industry is driving toward a wreck. >> we think we're adds back about 120 to 130% of the capacity from the downturn. >> reporter: that means more vehicles headed for showrooms. for now, there is enough buyers looking to replace an older car or truck, but as the supply of vehicles grows, some wonder if auto makers and dealers will start pushing sales by offering more generous leases and long-term loans. >> we think we're going from consumer attitude of i need to replace my car to i really just want to replace my car or i can't afford to give up this great deal given by various financial institutions. so that is starting to concern us a bit. >> reporter: wall street may be worried but at dealerships, this boom market shows no signs of slowing down. in a business like the auto industry, peak sales have historically led auto makers to

build too many cars and trucks. auto executives are aware of that history and will not make that mistake this time around and they will cut production if inventories start to build. phil lebeau, "nightly business report", chicago. >> coming up, the media industry, which has been undergoing a major transformation begins reporting earnings tomorrow and there are a few key things to watch for in those reports. that's next.

cell phone users have likely paid hundreds of millions of dollars in unauthorized charges crammed onto the bill according to the report by the subcommittee. it often starts with small companies that provide ring tones or similar services but the money is then collected by the major providers like at&t, t-mobile and verizon. media companies like timewarner cable and direct tv will report second quarter earnings tomorrow. as they undergo a transformation, julia boorstin looks at what investors can expect from the results. >> with comcast, timewarner cable and at&t's acquisition, the focus will be on the two companies being acquired. they report results thursday morning. the deals consolidating distribution shine a spotlight on a big and pressing question. >> everybody is very focused on this obvious question of are we

starting to see the beginning of a real cord cutting trend? it's a steady and slow drip, drip, drip, but everybody lives on the edge of their seat wondering and fearing that it might get a little faster. >> for timewarner cable and smaller cable company charter, which reports earnings thursday morning, the question is how they are able to gain share in broad band to compensate for tv subscriber decline. against the backdrop of regulatory scrutiny, it's complicated. growing broad band market share is a good thing but the company doesn't want to add so many subscribs, it draws attention to the combined company's power. for direct tv that doesn't benefit from the offering, the results will be important to show where at&t ownership can yield cost savings and put the spotlight on one potential target reporting tomorrow, discovery. a cable company with huge

international exposure. >> we're seeing media companies saying if we have to sit down across the table from the likes of comcast or at&t, direct tv, we're going to have to get bigger. so you're starting to see the media company strategy about different combinations. >> as well as on going international growth. next wednesday, we'll hear from 21st century fox and the media giant it wants to buy, timewarner, as well as some other media players. for "nightly business report", i'm julia boorstin in los angeles. forbes is out with the seventh annual ranking of what it calls america's 100 top colleg colleges. number five, mit, number four, prince stto princeton, number two stanford, number one, williams college. the rankings are based on factors like educational outcomes, teaching quality,

student satisfaction, graduation rate, i can really read, folks, i did graduate, and debt levels. >> okay. there are about $60,000. >> $60,000 and up. >> most of the private ones. >> that doesn't include room, board, books. i'm going to have three in college at the same time. we're in trouble here. that does it for "nightly business report" tonight. i'm sue herrera in for susie gharib. >> i'm tyler mathisen. thanks from me, as well. we'll see you tomorrow. er

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