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YOUR MONEY

The Future of Money; What to Expect in Current Job Market; From Fired to Hired

Aired August 8, 2009 - 13:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


ALI VELSHI, CNN HOST (voice-over): Up ahead, the future of "YOUR MONEY." In six months, a year, five years, what you can expect from the economy.

Why health care reform could force President Obama to renege on one of the biggest promises of the campaign.

In a rough-and-tumble job market, how to go from fired to hired. Just like that.

Settle in. It's time to talk "YOUR MONEY."

(on camera): Welcome to "YOUR MONEY," I'm Ali Velshi. Christine Romans is off today.

The jobless rate in the United States improved for the first time in more than a year. The unemployment now stands at 9.4 percent, down from 9.5 percent in June. While the report was better than we expected, we are still losing jobs in this country, lots of jobs. 247,000 jobs were lost in July. That is the smallest job loss in a month since August of '08. 6.7 million people have been laid off since the beginning of this recession, which started in December of '07, but January of '08, that first square there, that's the first month in which we lost jobs.

Take a look at that trend. For the first seven months of 2008, it was fairly steady. Then the recession worsened. We know that. We felt it. That's when the credit crisis hit. Look at how job started to be lost in the United States, going down in January by 741,000. That's how many jobs were lost in January.

But since then, we started to see a reversal in that trend. Fewer jobs lost on a monthly basis. In June, we hit a bit of a snag there. It went -- it got worse from May. Take a look at July. This is the smallest since last August, 247,000 jobs lost.

How does that affect where you live? I told you that the national average, the national unemployment rate is now 9.4 percent, down from where it was last year.

Let's take a look how this works out across the country. In red are the states with an unemployment rate that is two percentage points higher than the national average or more. If the national average is 9.4 percent, we are looking at states with 11.4 percent or higher unemployment in red. You can see some states there in the west. You can see Iowa. You can see Michigan, which has the highest unemployment rate in the country, of more than 15 percent. Really, it's hard to see, but up in the corner there you can see Rhode Island and South Carolina.

In gray are those states where the unemployment rate is within 2 percent either way of the national unemployment rate, somewhere between 7.4 percent and 11.4 percent.

In green -- this is a pattern we've seen for a long time -- those states which have an unemployment rate two percentage points or lower than the national average, 7.4 percent or lower. Those middle states, those mountain states, and we've seen this for a while. Virginia also enjoying that trend.

What does this mean for you if you are a job seeker, if you are an investor, if you are looking to make decisions about how to spend your money or go to school in this economy?

Lakshman Achuthan is a managing director of the Economic Cycle Research Institute. He's a great friend of our show.

You have been saying for some time, the larger picture here is that this recession is ending right under us right now probably.

LAKSHMAN ACHUTHAN, MANAGING DIRECTOR, THE ECONOMIC CYCLE RESEARCH IINSTITUTE: Absolutely. The information we are seeing this week on jobs is completely consistent. It's confirming that. Back in April, looking at forward-looking indicators, it became clear the recession ends this summer. Some time between Memorial Day and Labor Day. We won't get the exact date for another year.

VELSHI: And the exact date won't matter to most people.

ACHUTHAN: That's history by then. Here, it's like what is going on? Is it getting worse or better? Definitely, that trend you just went over is showing us it is getting better.

That doesn't mean it feels good or the recession is definitely over at this moment. We are still losing jobs. That is a key determinant. You have to grow jobs to say you are in an expansion.

VELSHI: You have a great map. You have a different map -- I talked about unemployment rate. Yours is different. This talks about job gains or losses. Let's take a look at this map and tell us what's going on. If I look at this map I think this looks terrible. The whole country is in decline but for four states.

ACHUTHAN: Yes, yes. The red tells you the trend has been down. You are losing jobs. The good news is that map used to be all red. You had no color. Just a solid swath of red. Now we are starting to see yellow where things are changing direction from losing to gaining. There is one blue state where you are actually gaining...

VELSHI: North Dakota.

ACHUTHAN: You're actually adding jobs in this state. This will slowly change color. It will slowly turn yellow and blue for the rest of this year into next year as the recovery becomes evident to everybody and we start to get actual jobs being added.

VELSHI: That is one way to break this down. I think it's important to break it down a few different ways. There's still great disparity in demographics, in people unemployed, who has more jobs than others.

ACHUTHAN: Absolutely.

VELSHI: It is still a tough world for minorities in America.

ACHUTHAN: Absolutely. What you are having -- first, before you get to the demographics, there's one big theme here. Manufacturing has been taking it on the chin for decades. Every recession we have in that period accelerates. It gets very much harder.

VELSHI: You start to see that in the numbers. You see the adult male unemployment rate is higher than adult women.

ACHUTHAN: This is why.

VELSHI: Because adult males populate the manufacturing industry more than women.

ACHUTHAN: Exactly. Michigan, for example, has the highest unemployment rate in the nation. That is the same reason. Women tend to work more in services, which tend to be a bit smoother. We are seeing in the latest numbers that the job loss is expected in services were much weaker than expected. That engine is starting up again in this country.

VELSHI: We have seen the numbers go down, meaning a higher percentage amongst Hispanics. Other than that, we've seen blacks do a little bit better. Other groups do a little bit better. It's marginal. This bottom line is it's still...

ACHUTHAN: This is marginal. I would expect basically, if you are in the rust belt, if you are exposed to manufacturing, you may get a little bit of a reprieve here as the global industrial engine is restarting, but it's not -- the end of the recession will not cure the problems there. That is something that is going to make the jobs numbers weaker than they otherwise would have been at the end of this year into next year, the so-called jobless recovery.

VELSHI: Let's talk about what you just mentioned, where the jobs have most been lost. This is not about this recession. This is about the last decade. Manufacturing jobs have been at the top of the list of jobs being lost.

In this particular report, what was interesting is construction was higher than manufacturing. More jobs were lost in construction than manufacturing. Retail jobs were also lost. Where you look at where there were net gains once again, the only one of significance was health care. This has continued to be the story the last few years.

ACHUTHAN: Right. Health care because it is not so discretionary. If you have to go to the doctor, you have to go to the doctor. Also, education tends to be somewhat stable.

VELSHI: That's right. That tends to be a second, right after health care.

ACHUTHAN: Construction, what we are having is some shift. You are getting residential home activity. It's not enough to make up for the losses out of the commercial real estate activity, which has ground to a standstill.

VELCHI: We share a view of all the measures of the economy -- you accord a lot of weight to them, but I think you've got to fix this jobs situation to feel a recovery.

ACHUTHAN: Right.

VELSHI: When is it fixed? When do we start to gain more jobs on a monthly basis than we lose?

ACHUTHAN: Net-net, it probably doesn't happen until year end. Underneath that, you'll see the nonmanufacturing sector begin to add jobs first. The key is it has to add more jobs than what you are losing in manufacturing for this net number to start going forward to start rising.

VELSHI: You think we might see that in 2010?

ACHUTHAN: Maybe by the end of this year. It depends how fast the service sector starts to pick up speed. It will. It did at the end of the last recession. We had services adding jobs right away in early 2002. Yet, manufacturing went on to lose another 3,000 jobs.

VELSHI: Wow. Lakshman, always good to talk to you. Thanks so much.

Lakshman Achuthan, managing director of the Economic Cycle Research Institute.

Coming up, how to go from being fired to getting hired in no time at all. And we'll talk once and for all, whether the Obama plan to fix the economy is working.

(COMMERCIAL BREAK)

VELSHI: People ask me this all the time.

(AUDIO GAP)

VELSHI: ... with the markets. That's always one that is ahead of what's going on.

Take a look at Election Day back in November. The Dow was around 9,100. We are using the Dow to illustrate this. You can look at other markets, as well. This market was choppy all the way down to about March 9th, which some people say is going end up having been the bottom of this market, in the 6,500 range on the Dow. Then look. There was a gradual uptick all the way to now, where we are right back to where we were on Election Day. It forms a perfect "V," which is how a lot of people describe my upper body.

Now let's take a look at the housing industry. That's what got us into the mess in the first place. Let's look at the Case-Shiller report which looks at 20 metropolitan areas. I'll remind you there are lots of ways to skin this cat. There are lots of ways to look at these numbers and many people will look at them different. But according to this report, we are seeing a minute increase in the price (AUDIO GAP).

(COMMERCIAL BREAK)

VELSHI: He certainly made some speeches that suggest his administration and his policies deserve some of the credit for it. According to a CNN opinion research poll, more than half of you think the president's plans made the economy better or at least will make things better in the future. 40 percent say his policies won't improve the economy.

Ken Rogoff is a professor of Public Policy and economics at Harvard University, Stephen Moore an editorial writer with "Wall Street Journal," and Douglas Holtz-Eakin is the president of DHE Consulting and a former economic advisor to John McCain. Who better to talk about this than these three gentlemen?

Thank you all for being with us.

Stephen, let's start with you. Because you are generally not that bearish about things, but you don't think this economy -- you don't think we should have a discussion about who should take credit. you don't think it's all that good.

STEPHEN MOORE, EDITORIAL WRITER, WALL STREET JOURNAL: We certainly lowered our standards when we say a loss of 250,000 jobs is good news. We still have 15 million unemployed Americans. Our unemployment rate is as high as it's been in practically 50 years. There are some signs of a modest expansion, but I'm still worried about this. And I don't think the worst is necessarily over.

Douglas Holtz-Eakin, what do you think is going on?

DOUGLAS HOLTZ-EAKIN, PRESIDENT, DHE CONSULTING & FORMER JOHN MCCAIN ECONOMIC ADVISOR: Steve's got an element of truth there. This jobs report is not as strong as it might appear first blush. Most of the decline in the unemployment rates comes from the labor force participation rate going down. People being discouraged and leaving the labor market. I think, going forward, households are sufficiently weak and there's a weak enough foundation under them in the labor market. We shouldn't expect much in the second half of 2009. It's going to be 2010 before we see real growth.

VELSHI: So you do see -- you see something going on in the future. You just don't think it's happening right now.

Ken Rogoff, what is your view of what's going on right now and whether anybody should take credit for it? KEN ROGOFF, PROFESSOR OF PUBLIC POLICY & ECONOMICS, HARVARD UNIVERSITY: I think the recession is losing steam. There is no question about it. We're not in galloping growth yet. I think we'll have a bit of growth second part of this year. I don't see strong growth until next year yet. Jobs should be going up. We can't just cheer that they are not going down as fast.

VELSHI: Let's talk about -- the reason is it not just a political discussion who should get credit for it, but it's important to understand this from an economic perspective. We need to know, after the trillions of dollars thrown into this economy in the last year, what works and what didn't work? What's your view of what has worked so far?

MOORE: One thing a lot of Americans aren't focusing on, we talked a lot on your show about the fiscal stimulus, about $100 billion of that has been spent. I don't think that made one wit of difference. The big stimulus has come from the Federal Reserve. We talked about this a few weeks ago. The Fed is shoveling money into this economy at a record pace. We've seen an increase in the money supply.

VELSHI: Let's be specific about this. The Fed is what got our credit freeze to open up because it allows companies to borrow money. It put money into the mortgage agencies which kept mortgage rates low. So that's been the stimulus and it's working.

MOORE: That's right. The direction, if you look at the graph of the money supply, it was relatively stable for about seven years. Starting about November it went straight up. That is now -- when you put that much money in an economy, that stimulates.

VELSHI: OK.

But, Ken, there are dangers putting that much money into the economy. What Stephen is talking about is the printing money that we all talk about. There are dangers down the road to that.

ROGOFF: Yeah, there are dangers down the road. We were in danger of falling off a cliff. They put in the fiscal stimulus. They weren't sure if we needed it. They put in all this monetary stimulus. It has worked. I do think the fed and administration deserve credit that we are not falling off a cliff.

On the other hand, nobody should kid themselves. The debt is soaring. There is all this money to pull out of the system. It's not easy going forward.

MOORE: That's right.

VELSHI: Douglas, you were an advisor to John McCain. You are the kind of person political people would want to hear from. What is what it to go about this now? We all agree there will be some improvement, further improvement to the economy, maybe later this year or next year. What should the administration be doing now to have the greatest effect to help Americans? HOLTZ-EAKIN: The administration should look forward and recognize that households are in weak positions. They came into the recession highly indebted. They lost a lot of money in their houses and their portfolios. They are unlikely to be a source of growth. So you have to put in a foundation under those places that will be a source of growth, our businesses with capital expansion, our exporters and our international competitiveness. Let's bet on the places that could drive this economy forward. They should be focusing on that.

VELSHI: The only good news here is if we are not in panic mode about the economy, we could have those discussions about what else could happen. But we brought you hear for a reason, so don't go away.

We are looking ahead to what you, the viewer, want to know, the future of "YOUR MONEY," your economy in six months, in two years and five years. We are going to break it down specifically with this panel next.

(COMMERCIAL BREAK)

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