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U.S. Economy Adds 288,000 Jobs in April; Ford CEO Stepping Down; Airplane Tracking Technology Examined
Aired May 3, 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: A decisive turn in the job market. I'm Christine Romans. This is YOUR MONEY.
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(voice-over) Like the movie, the US economy was frozen in the first quarter, the polar vortex shrinking growth .
UNIDENTIFIED FEMALE: Let it go, let it go.
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ROMANS: There is a spring thaw and jobs are popping up like tulips. And 288,000 jobs created in April, unemployment 6.3 percent, the lowest level in five-and-a-half years. Broad-based gains with strong growth in professional and business services, retail, food service, construction, broad-based. For some Americans, this economy is back. There are even talent wars in some fields.
But many Americans are still left out in the cold. The number of long-term unemployed remains too high -- 3.5 million people. And those jobs are added, they are not the ones that propped up America's middle class for so long. A new report find 44 percent of the jobs created over the past four years, low wage jobs. In fact, low wage industries employ nearly 2 million more workers than at the start of the recession. That's fueling even more income and equality. In 1981, America's top one percent earned eight percent of all pre-tax income. And 30 years later, 20 percent. It's one America with two economies. Which one do you live in?
Mohamed El-Erian is the chief economic adviser to the German insurer Allianz, Carly Fiorina is the former CEO of Hewlett Packard. Today she chairs the charitable organization Good360. She also advised John McCain and Mitt Romney during their presidential run. Mohamed, bottom line, has the jobs market turned yet?
MOHAMED EL-ERIAN, CHIEF ECONOMIC ADVISER, ALLIANZ: It is turning. This was a very strong employment report for the reasons you cited, created lots of jobs, long term unemployment, while still too high, is coming down, and teenage unemployment is coming down. Two exceptions -- one is wages are stagnant, and secondly, the labor participation rate is down at levels we haven't seen since 1978. So on the whole a strong report, but there are still some more progress that needs to be made. ROMANS: Yes, that labor force participation has been a real problem because you feed more people involved in the recovery to really make it broad-based. Carly, 288,000 jobs created last month, that is a good number on its face. But a new ABC-"Washington Post" poll shows President Obama's approval rating sit there at 41 percent, a new low. Again, that number, that poll was before this jobs report, but it doesn't seem like the president is getting any credit for jobs coming back. Does he deserve more credit?
CARLY FIORINA, CHAIRMAN, GOOD360: Well, I think the truth is all of us hold our breasts every month to see what the jobs report is. And then we heave a sigh of relief when the jobs report is good as it was this morning. And I think the reason we're all holding our breath and President Obama isn't getting much credit from the American people is because people don't feel as though this is a very robust recovery.
And as you pointed out, the recovery is leaving a lot of people behind. So you have a middle class that continues to be hollowed out. You have more small businesses failing and fewer starting than in any time in 40 years. You have a labor participation rate we haven't seen since 1978, as was pointed out. In other words, there are still real problems in this economy despite a good report this month.
ROMANS: And the White House has also made this year the year of really talking about income inequality. Mohamed, that is the story right now, income equality. If this book almost 700 page, they can't keep it if stock, Amazon. It's called "Capital in the 21st Century." It's a French economist, Thomas Piketty. He argues capitalism, Mohamed is fueling a growing gap between top earners and everyone else. And listen to what he says. He says the answer is a wealth tax.
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UNIDENTIFIED MALE: In a country where the wealth as compared to income is going to increase, it's a very reasonable evolution.
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ROMANS: So tax the rich. Mohamed, is that answer?
EL-ERIAN: First, it's amazing to see a book like that selling out. It tells you that inequality is on the minds of lots of people.
Second, it's good to see a book like that because it is data driven, and it puts into a global context and historical context what has been happening to inequality.
There are two things I think people cannot disagree on. There is one big thing that people disagree on. People cannot disagree that inequality has been going up in this country. And two, people cannot disagree that beyond a certain level, inequality is no longer a driver of entrepreneurship but becomes bad for a society as a whole, including the rich.
What we disagree on is what is that level? And no one knows for sure. In terms of what Mr. Piketty said, the wealth tax, as attractive as it may sound, is a non-starter. It's just not going to happen.
ROMANS: He says the same thing. He says it's what you'd like to see, but he doesn't think you would ever get consensus on that. Carly, speaking of consensus, this week, Senate Republicans blocked raising the minimum wage. President Obama says this is a very simple issue. Listen.
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BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: Either are you in favor of raising wages for hardworking Americans or you are not. Either you want to grow the economy from the middle out and the bottom up so that prosperity is broad-based, or you think that top down economics is the way to go.
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ROMANS: Carly, what about the minimum wage? Raise the minimum wage, why not?
FIORINA: Here's the truth about the minimum wage. It will help some people who already have a job. It will hurt people who do not have jobs. And so the issue is, do we not need to lift more people out of poverty and create more jobs? And do we not also need to drive ahead on industries that will create way above minimum wage jobs like energy, like approving the Keystone pipeline?
ROMANS: Mohamed, raise minimum wage?
EL-ERIAN: Yes. First of all, it's very hard to find conclusive studies that suggest that a higher minimum wage creates more unemployment. Second, this economy needs demand, needs aggregate demand. Businesses are looking for demand, and these people, does this segment of the population have the highest marginal propensity to consume?
Thirdly, it's the right thing to do. So yes, we should raise it.
ROMANS: Two different views, the CEO, the economist, we'll leave it there. We'll be talking about it more this year. Carly Fiorina, Mohamed El-Erian, thank you both for your thoughtful comments.
Daughters now earn nearly three times what their mothers did in the late 1960s and early 70s according to Pew. But daughters still earn less than their dad did and less than their brothers. For more stories about your money, give me 60 seconds on the clock. It's "Money Time."
ROMANS: When it comes to underpaying workers, Subway is fast food's biggest offender. Since 2000, Subway franchises have racked up 17,000 fair labor act violations. They paid workers $3.8 million in reimbursements.
So much for the American dream of homeownership. Not since 1995 when "Braveheart" was in theaters was the homeownership rate so low. Only 64.8 percent of Americans own their home.
Target aiming to be hack proof. It's spending $100 million to switch to the more secure chip and pin based credit card. Last year hackers stole credit card information from 40 million customers.
This year, Microsoft will start selling X-Box One in China. The world's most populous country recently lifted a 14-year ban on gaming consoles. China's government feared video games could lead to violence and moral decay.
Watch auto Netflix, Yahoo, AOL, and X-Box will al debut original online program in the year. AOL has already signed on James Franco, Katie Holmes, and Steve Buschemi. Yahoo! is giving Katie Couric her own show.
ROMANS: Coming up, Donald Sterling may go to court to fight for ownership of his NBA team. But can the court of public opinion and his fellow owners legally force him out? The business of behavior next.
ROMANS: No matter how reviled Donald Sterling is, know this. He is a very wealthy man. He stands to make a boatload of money if he sells the L.A. Clippers. He bought the team in 1981 for $12 million. It is now valued north of $575 million by some estimates with some expecting the team to sell more than that. Wealthy celebrities are voicing their interest in buying the team, including Oracle founder Larry Ellison, the TV mogul Oprah Winfrey, even boxers Floyd Mayweather, Oscar De La Hoya.
But when Donald Sterling bought the team he signed on that this, the constitution and bylaws of the National Basketball Association. This was kept secret, these bylaws, until this week when the league released it. Now, it give the NBA commissioner broad powers to protect the business interests of the NBA, and it binds owners to comply with the rules of the leak. Does Donald Sterling have a legal case against the NBA for forcing him to sell his business.
Sunny Hostin is a CNN legal analyst. Legally, is Donald Sterling bound by the pages of this constitution, these bylaws?
SUNNY HOSTIN, CNN LEGAL ANALYST: He certainly signed onto it. In order to be a franchise owner you have to sign onto it. I certainly believe he has to abide by those rules. But the bottom line is, and we all have a copy of that now, everyone who was private for such a long time. And I've combed through it as I'm sure you have as well, I don't know that they can force him to sell this team under those rules. I think it's a bit murky. It's never been done before for this reason, you know, for racist remarks.
HOSTIN: And I also think that he is litigious by nature. He uses lawsuits as sport.
ROMANS: He built his empire first by suing.
HOSTIN: Absolutely. There is no way in my mind he is going to sue. I think he could have an anti-trust game. They are all getting together for him to sell. I was an anti-trust lawyer with the Department of Justice for some time, and certainly I think he has ma kind of claim. Bottom line, this is held by a family trust. That means Shelley Sterling, I have been saying it all along, she is a real player here. He is not going down quietly without a fight.
ROMANS: Some have said if the NBA owners tried to vote out current ownership, that would be that trust and include Shelly, but his wife. But who knows how this is going to look. It could get legally ugly.
Then there is this other wrinkle, more than a wrinkle. Was this recorded illegally? Suddenly, are they trying to force him to sell under these bylaws based on something that was illegally obtained?
HOSTIN: We don't know if it was illegally taped. California is a two party consent state, and that means that basically everyone on that conversation, both parties, have to have consented. Now she is saying she was his archivist, whatever that means, which means she said she had consent, his consent to archive their conversation. I don't really think, I think people are mixing apples and oranges when they saying it's an legal tape, and so that means you can't use it as a grounds for getting the team away from him. I don't really think that's true. Does he have perhaps a cause of action against V. Stiviano, or whatever her name is? Absolutely.
ROMANS: I'm sure this is just the very beginning of the book that is against NBA v. Sterling, no question. Sunny, thank you.
Coming up, two very different roads for two very different auto makers. GM hoping it is shielded from liability for that ignition switch problem. At the same time the CEO of Ford headed off into the sunset. We have a very close look at two very important U.S. automakers.
ROMANS: Two of the big three automakers are in very different places right now. Ford is rolling. CEO Alan Mulally is stepping down July 1. He leaves after turning around that company. His number two Mark Fields will replace him. Fields was put in charge of changing Ford's corporate culture. Mulally will leave with a $300 million nest-egg for turnaround.
Over at General Motors things are much different. GM was back in court this week to ask a bankruptcy judge to fend off class action lawsuits. Those stem from defective ignition switches that killed 13 people. GM is hoping it is protected from liability after filing for bankruptcy in 2009.
Peter Valdes-Dapena is a senior writer at CNN Money. He is the authority on the auto industry around here in the Newsroom. I want to talk to our car guy about car guys. Our Richard Quest sat down with Alan Mulally this week. And Mulally is the guy who said the most important decision Ford ever made was not to take bailout money.
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ALAN MULALLY, CEO, FORD: We decided to actually testify on behalf of our competitors that were bankrupt, and we did that, which is very strange in itself, but we did that because of the importance of the industry to the U.S. economy, but also the U.S. economy and the world economy. And we knew if they went into free fall that we could have taken the United States into a depression.
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ROMANS: General Motors became "Government Motors." They did take that massive bailout. But Ford didn't have to. This guy was the turnaround guy. He came in and he literally saved this country and didn't need a taxpayer to do it. The company, I should say.
PETER VALDES-DAPENA, SENIOR ONLINE WRITER, CNN MONEY: Well, if you listen to what he just said, that was an important part in saving this country's economy. People don't realize what trouble we would have been in if Ford and other automakers had gone under. Yes, he turned around his company with better, not just better financing. He also helped streamlined the product portfolio. He shed a lot of extra luxury brands that he thought they didn't need so they could focus on what he called the "blue oval," the Ford brand itself.
ROMANS: He's a legend there, a real turnaround guy. But corporate succession, they've done very well I would say over at Ford. You think about Tim Cook's unlikely rise at Apple. Those have been relatively smooth so far. Look back when Jack Welch left General Electric. It was basically a game of thrones after his departure, the company struggling to find a leader that fit. And then you look at Mark Fields. He has taken over with Ford. Is he benefiting from those legendary big shoes to fill? Or is that going to make it harder for him?
VALDES-DAPENA: He's got a much easier company to run now that Alan Mulally has been there for a while. One challenge I see for him is that Alan Mulally put together a culture change at Ford. Ford historically going all the way back to Henry Ford himself has been a company of sharp elbows, internal competition. Alan Mulally acted like oil on the waters to smooth everything out. Everybody at Ford likes him a lot, and he has done a lot to change that culture. Can Mark Fields come in, a long time Ford guy come in and maintain that culture change and bring the company back even more?
ROMANS: Let's talk about GM, because it's in trouble over its ignition switch problem. Bottom line, 13 people died. And the company has a new CEO who will have to guide through all of this. At the same, it has a legal department making sure it has protection from any kind of liability because of its bankruptcy. GM, how much trouble is the ignition problem going to be? It will stay in the headlines, negative headlines for some time, I would think. VALDES-DAPENA: It is. But if you look at GM's sales, actually, people have not stopped buying General Motors cars. Yes, it doesn't look good for the company, but people seem to be look at their products more than the headlines right now. Now, will that continue? I tend to think it probably will. GM is, you are right, in a tough spot. This is why lawyers make lousy PR people, because they've got to, on the one hand, tell people we are here, we are taking responsibility for this, we understand. But on the other hand, their lawyers have to go in and say, hey, that was the old GM. That was beyond the bankruptcy. You can't hold us responsible.
ROMANS: I would say the new CEO has struck a pretty good tone here. She has been a very kind of levelheaded speaker and representative of the company at this point.
VALDES-DAPENA: Given the spot she's in, a brand-new CEO, getting hit over the head with this almost the day she walks in the door, I think she has actually done a very good job.
ROMANS: I would agree with that. All right, Peter, nice to see you, thanks, Peter.
Coming up next, we don't though where flight 370 ended up, but we could have. A new report says that a simple safety measure should be on every flight. So why won't that upgrade be on the next plane you fly? That's next.
ROMANS: Confusion, misleading information, and unanswered questions, the missing Malaysia jet is still a mystery. I want to bring in our Laurie Segall. Laurie, you have been looking into the technology that could have answered many of these questions. What did you find?
LAURIE SEGALL, CNN TECHNOLOGY CORRESPONDENT: Hey, Christine. If you piece together what happened to flight 370, there is one bit of technology that experts say could make flying safer. Take a look.
SEGALL: Malaysia's Transportation Ministry still faces a lot of questions. But the one safety recommendation they are offering, real- time tracking of aircraft, that technology already exists.
RICHARD HAYDEN, DIRECTOR, FLYHT AEROSPACE SOLUTIONS: It's a service. It's economical. The question now is how to get more widespread use of it.
SEGALL: Canadian company FLYHT makes live-streaming data recorders that send in information in real-time. It's a part of a slight-based system that monitors a plane's exact location, engine conditions, and more.
HAYDEN: The system transmits say every five to 10 minutes on a normal flight.
SEGALL: If something goes wrong, the system will stream live second by second data.
MARY SCHIAVO, CNN AVIATION ANALYST: That kind of information is not only lifesaving, but it adds a tremendous measure of security for our country.
SEGALL: There are several other mechanisms on the market that transmit a plane's data. But the technology behind FLYHT is more extensive, sharing a tremendous amount of information, so much information critics say it could be difficult to monitor and analyze if widely adopted.
Right now, FLYHT's technologies is only installed in 350 planes run by 40 operators. Each installation costs about $100,000. Normal data transmission costs carriers between a few dollars to $15 per flight hour and goes up for continuous streaming in a rare emergency.
SCHIAVO: They're very cost sensitive and they simply will not add additional safety measures unless mandated by the federal government.
SEGALL: As the mystery of flight 370 lingers, Hayden says officials could have had the answers all along.
HAYDEN: We would know where the aircraft has gone, where it is, and we would have information on what happened in the meantime.
SEGALL: And, Christine, it's worth noting real-time tracking was the same safety recommendation thank you was made after the Air France flight 447 disaster in 2009. But nothing has changed since.
ROMANS: All right, Laurie Segall, thanks for that report.
Finally, comedian Louis C.K., known for his rifts on men, women, bodily functions, getting fat.
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LOUIS C.K., COMEDIAN: I don't stop eating when I'm full. The meal is not over when I'm full. The meal is over when I hate myself. That's when I stop.
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ROMANS: But this week, he ranted on a different subject, education policy, something that's usually not very funny. He took to Twitter railing against new Common Core standards and the tests and the homework that goes with it. He says his kids used to love math. Now it makes them cry. He tweeted pictures of his daughter's homework questions and mocked their confusing wording. And as you know from watching this show week after week, Louis C.K. is hardly alone. And 44 states have adopted Common Core standards in English and math. Now, they are supposed to raise expectations to better prepare students for college and a career. We need it, right? But across the country, parents are freaking out.
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UNIDENTIFIED FEMALE: We feel like the pressure is too much.
UNIDENTIFIED FEMALE: It puts too much stress on the students.
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ROMANS: Higher standards are sadly becoming a punch line. We need higher standards. By one measure the World Bank says China will overtake the U.S. economy as early as this year. But how we implement these higher standard really matters. How schools communicate to students and parents really matters. Taking time to get homework and testing right, all of that matters. If the Common Core rollout is so bungled the kids start hating school, we'll have an American education system that's worse, not better. Stay tuned. We'll deal with more of that next week, too.
Thanks for spending Saturday smart with us. Take a second and set your DVR to auto record "YOUR MONEY" right now and you're never going to miss the money news that matter most to you. Set us up on your DVR. See you right back here next week.