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American Morning

Interview With Terry Savage

Aired November 02, 2001 - 10:46   ET

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: Back to the jobs numbers now. A five- year high -- the biggest one-month jump in about 21 years. Let's talk more about it with Terry Savage up in Chicago.

Terry -- you may recognize her quite well, the financial analyst and business columnist for the "Chicago Sun-Times."

Terry, good morning to you.

TERRY SAVAGE, INVESTMENT ADVISER: Good morning, Bill.

HEMMER: We were looking for 5.2, we got 5.4. How big of a shot could that or could that not be?

SAVAGE: Well, we were expecting bad numbers, but the numbers -- some of the numbers we got this morning were, I would say, unexpectedly bad. it's not just the jump to 5.4, but the fact that 415,000 jobs were lost.

And there will be -- let's get the bad news out -- this is not the end of the bad unemployment numbers. The airlines only lost about 45,000 jobs. So they've already announced more layoffs. There will be higher unemployment numbers in the future. But put in perspective, this is not as bad as we've lived through.

HEMMER: Yes Terry, I know it's difficult to say, but you say "higher." How much higher could it go?

SAVAGE: I think it's quite possible that we'll see unemployment numbers go over 6 percent. But remember, this is lagging indicator, No. 1. The job numbers losses always come out late in an economic slowdown. No. 2, it was just three years ago that a lot of economist, including the Fed, were saying uh-oh, I don't know if we can get unemployment down below 6 percent, and if we do, will it trigger inflation?

Well, we lived for a year and a half or so with 4 percent-range unemployment numbers. And, again, we're nowhere near what we saw in the early '80s. We have one big month of job losses; but we had double-digit unemployment in the severe recession of early '80s.

HEMMER: So then how do we synchronize that? How do we understand that, then? If it is tough for now, the perspective you're discussing doesn't apparently seem that it's that negative. SAVAGE: Well, as I say, it's negative if it's someone in your family that's lost a job, if it's you're company that's laying off and you're worried about, maybe you'll be next. That's very negative for the economy. It destroys consumer confidence. It destroys the willingness of those who have jobs to go out and spend and buy houses or cars.

We've examined the cloud, let's take a look at the silver lining to this, though. No. 1, it's quite certain that the Fed will cut interest rates, maybe more than the 1/4 percent they've been thinking about -- maybe 1/2 a percent. That's bringing mortgage rates down, which is good for home buyers. They're going to pass a stimulus package of some sort. This unemployment -- bad unemployment number will encourage that.

So -- and we already have lower interest rates, lower energy prices, the Fed creating a lot of money. So they have anticipated some of this bad news and acted in the past, and will continue to act.

HEMMER: And we'll continue to look for the silver lining, will we not?

SAVAGE: Absolutely.

HEMMER: Terry, thanks; Terry Savage live in Chicago. Many thanks to you.

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