Special Guests: Chad Morganlander - Stifel Nicolaus Portfolio Manager

NEIL CAVUTO, HOST: To money manager Chad Morganlander who says if these strong numbers do keep up, the president may well have Republicans in deep, deep, trouble.

What do you make so far of this trend?

CHAD MORGANLANDER, STIFEL NICOLAUS PORTFOLIO MANAGER: Well, the trend is a glacial trend in the right direction and it's an improvement within the employment force as well as on the manufacturing front. Albeit we're still coming down from very, very horrible levels and that could switch and move the pendulum slightly in his favor. But keep in mind, he's got a long way to go over the next ten months to get to the finish line.

CAVUTO: I was talking to some economists who were saying - I don't know whether you're in this camp, Chad - but we're not - it is not inconceivable we could actually get the unemployment rate lower other than it was when he took office. That was a big drop we had (INAUDIBLE) the last month. You continue (INAUDIBLE) like that, you could get there. I think that's a leap myself but the administration has a back pocket theory that if people are seeing nine, ten months of a steady job growth on top of the 20 months or something we've seen thus far, it doesn't have to be heady. It just has to be heading in the right direction. What do you say?

MORGANLANDER: Well, I think voters are going to give this a Bronx cheer - this economic vitality story that the White House is putting forth. Keep in mind, the underemployment rate is 15.3 percent. The unemployment rate, yes, is 8.6 percent. But when you look at the numbers, you had roughly 700,000 people drop out of the labor force--.

CAVUTO: So you think regardless, things are toast, it's bad?

MORGANLANDER: Well, you have ten months left, OK, and they have to make up 1.5 million of private sector jobs in ten months. That is what--.

CAVUTO: No, I don't think they'll do that but you know what? I agree with you. I don't think they have to do that. My latest crackpot theory, just my own, Chad - and you're the expert, remember, I play one on TV - is that they're going to try to say, "Look at us, look at what we've cut back from. Do you remember this? It's certainly not great now but it's better than that?"

MORGANLANDER: Well, the underemployment rate being at 15.3 percent, and, look, the numbers and the math works out.


MORGANLANDER: So I don't think that you can trick the voter into believing that. Now it is the pendulum on the economy has shifted. Private sector has started to pick up a bit here. Credit creation on the small business and large business side is happening but you're still having a GDP number in our expectations of one to two percent for next year, or actually this year, 2012. You would really need to see GDP accelerate to four to six percent for him to really get elected.

CAVUTO: Well, remember the cut-off time is June, right? I mean, (INAUDIBLE) people's memory backwards, right. They're thinking whenever they vote in November, they're actually in the mindset of June or something like that, right?

MORGANLANDER: Correct and exactly. So the time is running out here. But with that said, you could see that the rhetoric will pick up that look, the employment numbers are improving. But those numbers are still a lot higher than they need to be. So continuing claims numbers have to be at 300,000, not 375,000 and the initial claims numbers also have to come down considerably.

CAVUTO: All right. We'll watch and monitor carefully. Chad, thank you. Good seeing you again.


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