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Evaluating the US Economy; Counting New York's Pedestrians; Children's Movies Rule
Aired May 31, 2014 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: There's no one thermometer for the U.S. economy. Only you can take its temperature. I'm Christine Romans. This is "YOUR MONEY." For those with jobs or the recently unemployed, the clouds are parting and the economy feeling pretty warm. Jobs are coming back. Investments like stocks and housing are rising.
But for the long-term unemployed the economy is still cold. Jobless benefits are running out, employers aren't giving them a chance, and many are out of savings. Five years after the worst recession since the Great Depression, the divide between the rich and the rest is still deep. Can there be a real economic recovery if everyone can't say it's 78 and sunny?
Stephen Moore is chief economist of the Heritage Foundation and also the co-author of a new book, "An Inquiry into the Nature and Causes of the Wealth of States." Austan Goolsbee is an economics professor at the University of Chicago Booth School of Business. Gentlemen, thanks for joining us this weekend.
We learned this week that the economy actually shrank in the first three months of the year, a one percent contraction, the first time that's happened in three years. Blame it on the weather, kept shoppers out of stores and house hunters out of homes. But looking backwards. Looking forward, some estimates have growth as high as four percent this quarter. Stephen, does this look like an economy that is recovering to you?
STEPHEN MOORE, HERITAGE FOUNDATION: For the last couple of years, Christine, this has been this kind of bipolar personality economy. You get some months where you get a nice buildup in the economy, and we've had three percent or four percent growth, and then it tumbles again. That's been really the pattern really throughout this five- year recovery. I would say for most Americans they're still very worried. Americans -- there's still way too much unemployment. And by the way, Christine, the real anxiety out there is among middle class people who have jobs, the 90 percent of the Americans who have jobbed that are very worried about losing them.
ROMANS: I would argue 90 percent of Americans don't have jobs. It's actually less.
MOORE: You may be right. That might be charitable. ROMANS: Let's not tear apart economic statistics, because everyone will turn the channel. Let me ask you this, Austan. I worry about this sort of caution. You have stocks hitting fresh record highs this week. But you look at the bond market, bond traders are talking about the caution that they're seeing. The 10-year treasury bell below 2.5 percent. That's a sign of weakness. What's happening here? Why can't we get confident about the economy?
AUSTAN GOOLSBEE, FORMER CHAIRMAN, PRESIDENT'S COUNCIL OF ECONOMIC ADVISERS: You know, I agree with you. We should be worried about that. I think the main thing that has led this recovery to -- it is recovering, but it doesn't feel that great, and I think Steve is right that people remain worried. I think it's that we had a bubble. The bubble popped. The economy can't go back to doing what it was doing before. And that's a slow process. It means people have to move states, we've got to change industries. We've got to do a bunch of transformational things that are relatively slow.
Now, I think the decline of GDP and then the forecast rebound, a lot of that, you say, has to do with the weather. Overall has shown modest growth, no better than modest, but no worse than modest either.
ROMANS: Austin, how do you get to that part of the economy that's doing well, where there's fights, battles for talent, where people are making money? People are making money in stocks, where companies are starting to build out and buy equipment again. How did you make sure you're in that part of the economy and not the part that's not doing anything?
GOOLSBEE: If you're a person, I think the data screams out at you it's about skills and education and training. And we've got to find a way to get people retrained. One of the biggest problems here facing in the long-term unemployed is they're not coming from industries that are growing and they don't have the skills to move into those industries.
MOORE: But, you know, Christine, I would add something to this. There was a front page story in the "Wall Street Journal" on Friday that talked about the regional, the difference in terms of the growth in regions. And I'll save a promotion. This is what my book is about. The fact that you're seeing real growth in the southern states and some of the mountain states, you know. My son is graduating from college, as you know. He can't find a job. I said, look, Justin, if you want a job, move to Texas. You can get a job in five minutes in Texas.
So there a lot of states where the economy is booming. I do think it has to do with the policy differentials. And by the way, the region that's really get creamed right now is the northeast, where you live. New York has lost more jobs than any other state.
ROMANS: Yes, and home prices in the most recent case, home prices actually fell in New York, one of the few regions.
Let me ask you this. Two key reports on CEO pay. Average CEO made $11.4 million last year. We ran the numbers, guys. It would take 756 years of full-time work at minimum wage to make what the average CEO makes in one year. Or you can cut it this way. The combined income of 224 families making the median household income to reach what the average CEO make, median CEO pay. Is this a sign of strong corporate performance, Austan, or this sort of another, I don't know, another line in the growing income inequality story?
GOOLSBEE: It's probably both of those. You know, corporations have returned record profitability. So you can see why the shareholders are saying, reward the guy. He's making us a lot of money. That's why the stock market is going up. At the same time it is a sign of a vastly diverging economy where a few people are doing amazingly well, and there are a lot of people who are really struggling to get by.
ROMANS: Thanks, guys. Have a great day.
All right, how to improve to make sure it's 78 degrees and sunny in your economy? The single best way is education. I agree with Austan Goolsbee on that. Is college worth it? It's a trendy debate and it is usually had by people who have college degrees. But the answer, is college worth it, is clearly yes. Last year the average college grad made more than $29 an hour. The average high school grad made about $16 an hour. MIT economist David Otter actually found not going to college will cost you $500,000 in lifetime earnings, it will cost you. The unemployment rate for college grads is always much lower. Right now it's 3.3 percent for college graduates age 25 and higher. For high school grads, it's above six percent.
The numbers clearly say college is worth it. But here's another number. The cost of college, up 544 percent since 1985. Seven in 10 college seniors graduate with student loan debt. Why is it so expensive? Tech billionaire and Dallas Mavericks owner Mark Cuban recently told me what he thinks.
(BEGIN VIDEO CLIP)
MARK CUBAN, DALLAS MAVERICK'S OWNER: If you want to talk about a bubble, there is an absolute bubble for tuition, and the bubble that's going to burst is when someone smart comes along, finally, some politician and proposed we're going to limit the amount of guarantees in student loans to $10,000 a year.
(END VIDEO CLIP)
ROMANS: I've heard that theory before. Former education secretary Bill Bennett made the same point right on the show.
(BEGIN VIDEO CLIP)
BILL BENNETT, FORMER EDUCATION SECRETARY: The availability of federal funds has continued to drive up prices.
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ROMANS: The question isn't whether college it worth it. Clearly it is. The question is whether it's time to rethink how we pay for it. Coming up, Brad Pitt may have gotten all the attention after being attacked at the "Maleficent" premiere, but Angelina Jolie is the real star of the movie. How Hollywood's highest paid actress makes and spends her money, next.
ROMANS: Once again the unimaginable horror of mass killing making headlines. Santa Barbara mourning six victims, three shot to death, three stabbed. The constitution gives us a right to bear arms, and that gives business owners the right to sell them. Kevin White sold guns to the shooter in Santa Barbara.
(BEGIN VIDEO CLIP)
KEVIN WHITE, SOLD GUNS TO SANTA BARBARA SHOOTER: It happens from time to time, but what about the guy sold him the knives or the swords that he used, or about what about the guy that sold him the car he was driving around hitting people? I mean, do they feel bad or knew he was going to do something bad with it?
(END VIDEO CLIP)
ROMANS: We'll leave the gun debate to politicians and social media, but gun makers aren't seeing any pressure on sales of handguns. In fact, just the opposite. Smith & Wesson posted a 30 percent jump in sales the most recent quarter. Its stock is up nearly 17 percent so far this year. Colt plans increase production, it's a private company, but obviously increased production is a sign of increased demand. And gun sales did dip earlier this year, probably because of increased background checks and slowing demand for assault rifles. But Americans love guns. Business is good. No matter how you feel about them, they're big business, around $4 billion in annual sales of guns, handguns, firearms and ammunition each year.
For more stories that matter for YOUR MONEY, give me 60 seconds on the clock. It's "Money Time."
(BEGIN VIDEO CLIP)
ROMANS: The Google logo may be rainbow colors, but the company's workforce doesn't look that way. An internal diversity report reveals that 70 percent of the staff is male, 61 percent white. Google put the numbers out and says it wants to do better.
Rent at One World Trade Center just got cheaper. Owners cut the price from $75 to $69 per square foot. And 44 percent of office space still vacant.
Wall Street's newest wager, the World Cup. Goldman Sachs has created a model for predicting the winner of the international soccer tournament. The bank's favorite for the cup, Brazil, partly because of the team's home field advantage.
Did Apple just pay $3 billion for these guys? Apple's Beats buy gets hip-hop legend Dr. Dre and music executive Jimmy Iovine. They would give Apple a big leg up in tech's new frontier, making wearable's cool. And Beats is known for its headphones.
ROMANS: Children's movies are a big business. Disney's "Frozen" recently became the fifth highest grossing film ever. It has made $1.2 billion worldwide. And with "Maleficent" out this weekend, Disney is hoping for another hit. The movie's star Angelina Jolie is known for action roles, but here biggest blockbusters have actually been animated. "Kung Fu Panda" and "Kung Fu Panda 2" are her two highest grossing films, and "Shark Tale" also makes her top four. Here's how the world's most beautiful woman makes and spends her money.
(BEGIN VIDEO CLIP)
ANGELINA JOLIE, ACTRESS: Well, well.
ROMANS: Angelina Jolie is starring in "Maleficent." Her character might be bad, but her business is definitely good.
A big screen presence for decades. From a girl interrupted.
JOLIE: Let's go.
ROMANS: To action heroine.
JOLIE: Still alive, baby?
ROMANS: To animated animal.
JOLIE: We need to get to that tower without being spotted by those wolves.
ROMANS: Altogether her movies have brought in almost $5 billion at the global box office.
UNIDENTIFIED MALE: I like it.
ROMANS: Now she's taking on another children's movie that's sure to a hit and bringing home an estimated $15 million paycheck.
JOLIE: Is it true?
ROMANS: She was the highest paid actress in Hollywood last year without even appearing on the big screen, and she was also the only woman to crack the top ten highest paid actors lists, making about $33 million.
JOLIE: Yes. Well, I have a stupid income for what I do for a living.
ROMANS: A lot of that cash came from high-profile endorsements, like her $10 million deal with Louis Vuitton. But she also has her own wine with Brad Pitt and her own jewelry line. Now known more for what she gives back than what she makes.
JOLIE: It's a very heavy experience. ROMANS: Jolie says she donates about a third of her income to charity. She has given time and money to the U.N. refugee agency for more than a decade, visiting dozens of countries.
JOLIE: I personally just love spending time with refugees because they are such a great reminder to me of how we should all view life.
ROMANS: She spends millions funding schools and clinics around the world and has been outspoken on Capitol Hill and abroad about children's immigration issues, preventing sexual violence, and more. Brangelina even sold the first pictures of their twins for $14 million, the most expensive celebrity photos ever taken, to benefit their foundation.
JOLIE: There are other families in the world that aren't as fortunate as ours.
ROMANS: Actress, activist, philanthropist, the business of being Angelina Jolie is all about taking action, and giving back.
JOLIE: I can't do anything but be grateful for what I have.
ROMANS: Angelina isn't the only Jolie in "Maleficent." Her daughter Vivian is also in the movie making a reported $3,000 a week. Not a bad paycheck for a four-year-old.
Up next, the surveillance economy, one New York City star is asking residents to track each other. What they're looking for, next.
ROMANS: New York City is home to more than 8 million, trying to count every person on its streets. The city is working with a start-up using existing surveillance system to track where people are, what stores they're in, and even what they're carrying in their hands. Rachel Crane has the story.
RACHEL CRANE, CNN DIGITAL CORRESPONDENT: Americans spend roughly 37 billion hours a year waiting in lines -- at the grocery store, for a hamburger, at their favorite restaurants. Imagine if you didn't have to? That may soon become a reality in New York where they're embracing new recognition technology that will count every pedestrian in the city.
NICOLAS O'BRIEN: Every neighborhood in the city walks. We really need to have an understanding of what that activity looks like to serve New Yorkers better.
CRANE: Over 60 percent of commuters in New York City travel by foot or public transit. For a city of 8.4 million, that's a lot of people to count. FLORENT PEYRE: The department of transportation counts pedestrians around the city, and they send a few people to go twice a year, and they just sit there with umpire pitch counters. It doesn't really give a view what it's like day in, day out, through different seasons.
CRANE: A start-up called place Meter is trying to change that by providing a real-time picture of New York's pedestrian traffic using hundreds of existing video feeds around the city.
ALEX WINTER: We layer in computer vision algorithms that actually make it possible to detect and count people.
CRANE: Using online traffic video feeds, Place Meter currently counts about 10 million people a day. They can count occupy people are inside a building. The city's already using the data, providing pedestrian counts to small businesses in the city's online business atlas. And there's promising potential for data integration with consumer apps.
PEYRE: If instead of Yelp or Google Maps you could set up alerts telling you that restaurant you always wanted to try but it always packed, right now is the right time to go.
CRANE: Today the company only covers about 25 percent of the city. To help count the rest, Place Meter is offering to pay residents to stream video from their own windows using an old smartphone.
WINTER: Today we count different kinds of vehicles on pedestrians. Tomorrow we are going to start detecting and classifying gender, then age. Then we are going to start detecting people with strollers or with bags and things like that.
CRANE: With detection technology rapidly improving, an obvious concern is whether their systems will be able to track the details of our daily lives.
WINTER: What we do is turn video feeds into data. Video feeds by nature, they are creepy, until somebody looks at them. In our case, a computer looks at them. So whenever one frame goes to our system, we process it, turn it into some data, and then we delete it.
I think there's a lot more things we can do if we have better understanding of the pedestrian activity in the city. When we have to go schedule trash pickups, how many police we need to deploy to a particular area, the better information you have on a place, the better you're going to be able to manage it.
ROMANS: Not waiting in line? That would be something in New York City.
Coming up, Steve Ballmer is ready for courtside. From selling computers to buying an NBA team, the man and the antics behind the $2 billion deal, that's next.
ROMANS: Right now you know all the dirty secrets of the Sterling family, but what do you know about the guy who is likely to buy their NBA franchise? Steve Ballmer made his name as a software salesman, rising to the top of Microsoft when Microsoft ruled the tech sector. But judging from his past antics, he'll fit right in as the newest NBA owner.
ROMANS: He always seemed ready for courtside. Former Microsoft CEO Steve Ballmer was famous for energizing his employees.
STEVE BALLMER, FORMER MICROSOFT CEO: I have four words for you -- I love this company!
ROMANS: Ballmer started working at Microsoft in its early days. In 1980 he became the company's 24th employee. And his oversized personality became known fast through videos like this, promoting windows 1.0 in 1985.
BALLMER: Watch as windows loads Lotus with "Miami Vice."
ROMANS: And with Bill Gates in "A Night at the Roxbury" spoof to this '90s club hit.
UNIDENTIFIED MALE: Steve Ballmer.
ROMANS: In 1998, Ballmer rose to president, then CEO in 2000, taking the company through hits like Xbox and Kinect, and flops like Windows Vista.
BALLMER: Our job, our job, is to make sure that not only is PC not dead but we're constantly innovating it, reimaging it.
ROMANS: He stepped down as CEO of Microsoft just three months ago but remains on the board of directors and is a bigger shareholder than Bill Gates. He's worth more than $20 billion, according to the "Forbes," and sits at number 35 on the magazine's annual billionaires list.
Ballmer grew up near Detroit where his father was a manager at Ford Motor Company. He went to Harvard and briefly attended Stanford School of Business, and he is no stranger to the business of sports. His name has been tied to a possible deal for the Sacramento Kings, but that fell through. Now he's poised to make the biggest NBA deal ever going from high-tech billionaire to courtside baller.
ROMANS: He's got four words - I'll write the check. If the deal goes through of $2 billion that gives the Sterling family trust a whopping 16,566 percent return on their investment. Donald Sterling bought the Clippers in 1981 for $12 million.
From one tech mogul to another, Square CEO and Twitter founder Jack Dorsey wants to give small businesses quick access to cash. It's an alternative to the traditional loan. Our own Laurie Segall sat down with Dorsey. What is he trying to do for small business?
LAURIE SEGALL, CNN TECHNOLOGY CORRESPONDENT: He wants to help small businesses grow. This has always been Jack's thing. First Square was essentially, let's help small businesses accept credit card payments. Now he's saying let's give them an alternative to a loan, a cash advancement if they want them. Let's not charge interest. Let's let them pay percentage by day. I asked him the details behind that. Listen to what he said.
(BEGIN VIDEO CLIP)
JACK DORSEY, CREATOR OF TWITTER: We have this deep, deep understanding of our merchants. Because they're running their own business on the register, we can actually advance them working capital. And we made it very, very easy for them to pay it back in the course of doing their business as well.
(END VIDEO CLIP)
SEGALL: I think "data" is the key word here, because now a lot of small businesses are using Square register, and every time someone swipes their card, score takes a little data about the company, what hours are people buying coffee quite a bit? Now they're able to look at it and say, hey, we can tell if you need a little bit money, we can advance this. And that's the thinking behind it. It's a little bit of a pivot for the company, which to date has been focused solely on mobile payments.
ROMANS: Let's talk about him a second. He's a Twitter founder, now Square. He uses a really interesting term to describe himself.
SEGALL: He does. Let me preface this with the fact he used to have blue hair. Has a tattoo on this forearm. He had a nose ring, ear piercing, and he calls himself a punk. Listen to this.
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DORSEY: I'm still a punk. I always -- what was amazing to me about the punk scene and why I got into it is because there was a confidence of I'm not going to go off and be shy about learning.
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SEGALL: You know, he's always, has a fight in him, this scrappy fight, because at the beginning of Twitter, everyone said this is not going to work, and a lot of people said that with square. And one interesting tidbit from the interview, I asked him, how does he deal with the stress? He says he takes an hour and a half walk to work every day. He starts, wakes up at 7:00, gets to work add 8:30. He says he doesn't look at e-mail, text messages. He listens to music and it really helps him be centered and thinks about things. And he takes a different route every day because he says there's something very magical about surprise about deviation from routine.
ROMANS: That Jack is a punk.
ROMANS: Thank you so much. Have a good weekend.
Thank you for starting your Saturday smart with us. Follow me on twit Twitter @Christineromans. You can also find me on Facebook. Have a great weekend, everybody.