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YOUR MONEY

Employment Numbers Down Again; Fed Cuts Rates Again; Explaining Gas Prices; Rising Food Prices

Aired May 4, 2008 - 15:00   ET

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


(NEWSBREAK)
ALI VELSHI, CNN HOST: Welcome to YOUR MONEY where we look at the news of the week affects your wallet. I'm Ali Velshi. Coming up on today's program, fewer jobs were cut out of the economy last month than Wall Street expected. What does that mean to your job security? We will look at that.

Plus switching to summer and we will tell you how much a seasonal gas transition is going to cost you at the pump and how long it will last.

And sky high food prices and Congress wants to know why it is so expensive to shop for groceries and we have some answers and we will look at whether there is an end in sight.

But first your jobs and investments and what you pay for things, all of that has been making headlines this week. We have lost more than 250,000 jobs so far this year, but the month of April well the pace of job loses has slowed. Wall Street was happy about that along with other promising economic news out this week and maybe you should be, too, despite the continued concerns about the housing market and the run-up of prices at the gas pump and at the grocery store. You might be sitting prettier than you think.

Have you checked the 401(k) yet? It might be up, but that is just part of the economic picture, for a closer look at the jobs and the overall economy, we are joined from Washington by Peter Morici, professor at the University of Maryland School of Business and here on set by Lakshman Achuthan managing director of the Economic Cycle Research Institute. Gentlemen welcome to both of you, thank you for being with us.

Peter, this week has been very interesting, we have seen a Dow and market as high as they have been all year. We have seen the price of oil coming down at one point to almost $110 which is a bargain and commodity prices coming down and the U.S. dollar has strengthened and then this jobs report which showed fewer job losses than everybody expected. Are we in the clear?

PETER MORICI, UNIV. OF MARYLAND OF BUSINESS: No, I don't think we are in the clear. Over the last four months we lost an average of 65,000 jobs and it is erratic and we lost jobs in durable manufacturing and many jobs in construction and surprisingly the financial sector stayed flat, but it seems that the banks stayed flat in terms of employment and they are basically laying off loan officers and hiring people to work out the foreclosures and the there was growth in government employment.

The GDP numbers they did hold up better than we expected, but a lot of that was inventory build and people making things to be put on the shelves that will be sold next quarter that could drag down growth in the second quarter to negative territory. It was good news for Wall Street, because they were expecting the worst. Economists were forecasting the worse. So over all the week came out fairly decently, and we seem to be headed for a shallow recession and a period of malaise, but not a tragedy.

VELSHI: Do you think so Lak? Does that jive with what you are seeing?

LAKSHMAN ACHUTHAN, ECONOMIC CYCLE RESEARCH INST: Well, good parts of it do. First off, we have these production reports, the GDP reports and first off, please, there is a caution label on these things. They will get revised a lot. Number two and this is probably the part that people don't realize that much is that these are at best coincident measures of the economy.

VELSHI: Meaning?

ACHUTHAN: Meaning they are not telling you anything about the future, they are telling you about what you just passed by. It is essentially like we are looking in the rear-view mirror if you are looking at these indicators as some sign of recovery, you are looking in the rear view mirror and proclaiming that you see a light at the end of the tunnel and I don't know how you can do that.

VELSHI: Well, look at the jobs data, we have a graph to show you, but you know these numbers very well, and we have created a lot of jobs back in October than in November about 60,000, 41,000 in DE LA December and then in January we lost about 76,000 then and then 83,000 in February or something like that and 81,000 in March or 80,000.

ACHUTHAN: Some of the revisions were to the downside.

VELSHI: Yes, and now we lost 20,000, Peter in April, and I guess they will be revised, but that breaks a trend, doesn't it?

MORICI: I don't believe it breaks a trend.

VELSHI: Right.

MORICI: You got to remember the monthly data is highly erratic determining, depending on which day you score a layoff and which day you score a hiring. The fact that the March data was revised upward even as we got a good, a better, a better April number would tend to indicate it is more monthly fluctuations and you need two to three months to come up with a trend, but this is not good news, it just means that we are not as sick as we thought we were. We have the flu and not a fever.

VELSHI: I want these guys to explain something to me that we have been talking about a lot and I don't know that our viewers fully comprehend yet, there is some talk because the Fed had been cutting interest rates it had the reverse effects of helping out people at the lower end of the income scale, because it caused a lot of inflation that we are facing right now and now there is some sense that because the Fed might be done cutting interest rates, we might see the dollar strengthen and we might see inflation actually contained. Does that make sense to you, Peter? Am I making drawing the right lines between the right dots?

MORICI: Well, I think that you made some sense with regard to interest rates though we have not really fully absorbed the higher price of oil either in the import numbers where we have been paying about $85 a barrel on import side and the spot rate is $110 because of the long term contracts and we haven't seen the full impact through the supply chain which takes some months so we will see more impact from oil and commodity prices before we are through.

Food prices are expected to rise in the high fours to five percent a year over the next year by the agricultural department. So there are pluses and minuses just like there is with the jobs report.

ACHUTHAN: Right, I mean the Fed is in a tough spot and they were active this week as well. After the quarter point rate cut they added liquidity at the end of the week. They are still active, they don't think we are out of the woods yet by any means and you are not getting the signal from them. And some of that is flowing through overall inflation, but specifically to food and energy which is the nondiscretionary part which takes away --

VELSHI: That is the stuff that most of our viewers don't have the choice about, they have to buy it.

ACHUTHAN: And you have to buy it frequently.

VELSHI: Yes.

ACHUTHAN: And it affects you, because you are always putting your hand in the pocket. Really with these numbers, right, with we are not seeing the economy cut off at the knees, but you are getting a Chinese water torture, drip, drip, drip.

VELSHI: And you are two of the smartest guys we know and we appreciate you coming in and making it clearer for us, because we can tend to get euphoric when we see the things starting to go a different direction. Lakshman Achuthan the managing director of the Economic Cycle Research Inst. And Peter Morici, professor of the University of Maryland School of Business. Thank you to both of you.

We are going to take a quick break and when we come back on YOUR MONEY, pain at the pump, when will gas prices start going down? We have seen the price of oil some days going down and also gas saving myths. We are going to sort out fact from fiction. You are watching YOUR MONEY on CNN, we are coming right back.

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VELSHI: Well, this time of year it is not unusual to see higher than normal gas prices when you go to fill up the car, although I don't know what anybody thinks is normal anymore, but that is because spring is when the oil refineries apparently shift from winter grade fuels to more expensive but less polluting summer gas and supplies tend to decline while the refineries are busy doing this. But there are additional issues pushing gas to record highs and Steven Schork, the publisher of "The Schork Report" is here to explain. Steven good to see you. I read your report every morning.

STEVEN SCHORK, PUBLISHER, "THE SCHORK REPORT:" Great.

VELSHI: It is a good indicator of where the oil prices are going to go on a daily basis and you give a very good context and analysis of it and you are often right for that day, but can you be right for a lot more time and lot longer and tell our viewers exactly what is going to happen with oil prices and subsequently for gas prices?

SCHORK: Well, you can get into the ballpark there, Ali. And what is nice essentially about the commodities is that they follow a distinct seasonal pattern. At certain points of the year, we generally know when the prices are going to rise and when they are going to fall. The trick is trying to figure out just how high they are going to go or how low they will fall.

Right now, as you just alluded to, we are now if I could go back to our high school calculus for a moment, we are high dy over a dx moment and at the seasonal transmission phase where as you said the refiners have to shut down their units, a good deal of them to retool and be in position to manufacture the summer grade gasoline and the more environmentally friendly gasoline that we need for the summer. So at this point, late winter and early spring into the Memorial Day holiday, we always see a seasonal up tick in gasoline prices at the pump. It is unavoidable and it happens every year and you can virtually bank on it.

Now, what is happening this year is two other factors that are really helping to compound this seasonal impact of the prices. First and foremost is the U.S. refining industry. It is in sick condition. We had last year as we saw our refineries were running at 400 to 500 basis points below normal and what that means, Ali is during the peak driving season, June, July, August, our refiners prior to last summer would run at 94 or 95 or 96 percent of their capacity, and last year we couldn't even break 90 percent for more than two weeks in a row.

VELSHI: And we haven't been up above 90 percent a lot this year. And you know, I have been sort of thinking about this, and one of the things that I have always thought about is that I don't know that the proposals to tax the oil industry more than needs to be is where the answer is or take off 18 cent a gallon federal tax is anything but a short term solution, but why can't, would it be a bad idea for the government to say to the refiners, for the privilege of refining gasoline in this country, you have to keep your refiners going at 98 percent capacity all of the time or report to us within 24 hours what the problem is?

SCHORK: Well, there are provisions to report and file with state agencies with regard to when you go down for a quote, unquote scheduled outage or power supply or unit fire or what have you, and the scheduled maintenance periods are on board. But you just can't snap your fingers. I mean, this is an industry that has suffered through two generations, and you know, call it three generations from the mid '70s up until a few years ago lack of investment in plant and equipment. So whereas demand has been growing unabated now for 30-plus years, our ability to supply that demand has virtually stagnated.

VELSHI: We are going to show our viewers how the cost of a gallon of gas, we calculated it out at $3.68 a gallon how it breaks out. Refining costs about 25 cents and transportation and crude oil taxes, Steve, I want to ask you, would it make sense if I were a refiner and I knew that to build a new refinery might cost me a few billion dollars and it might take a few years and all I ever hear about in America from top to bottom is how gas prices are too high.

So we have entire culture that is designed to bring the price of the product that I am going to sell down, but I am going to invest billions of dollars and build this new refinery. Is there any reason why anybody would build a refinery in this country and go through the permitting issues that they have? Why do we think there are more refineries built in America?

SCHORK: We shouldn't be, because it is a daunting task. As you said, we want the prices lower, but then we have to be able to recoup on that investment. Worse still, Ali, we have to factor in that hey, we all want a green agenda, so we are pushing for the alternative fuels. So if you are running quote, unquote big oil, how do you justify investing in your plant and equipment when by potentially government fiat 30 percent of your future market share is going to be legislated away from you so you might not be able to receive that.

And it is beyond our borders because now OPEC who is essentially, what does OPEC do? They produce crude oil, but now in the last five years they have had a material expansion in their ability to refine that crude oil and now they are going to become a bigger component in the global trade.

VELSHI: And gasoline, too.

SCHORK: And they will be exporters of refined gasoline. So they are now, so the owness is now put across our borders so what is happening we are losing more and more control of the consumer mechanism of this market, so as we try to transition into alternative fuels then our impact to impose or keep the gasoline prices lower is virtually going to be impossible, because you can't go to tell somebody, hey, guys, I don't want ten years from now, I don't want to buy your product, but while I create this technology make it cheaper for me. It is not going to happen.

VELSHI: Pleasure to have you on the show and thank you for the good information that you share with us. As he told us we know that prices are sky high and as we head toward summer it is unavoidable, they tend to get higher.

Our own Greg Hunter takes a look at what you can do to save now on gas. You heard Steven; I have to figure they do this every year, this change over from the summer to winter gas. Is it like making extra virgin olive oil and we know it has to be done and why can't hey just get this done and move on and it seems weird to me, but bottom line, you have to move on.

GREG HUNTER, CNN CORRESPONDENT: It does happen and it cost more money. When it comes to saving money on gas and there are rip offs and then there are things you can do right now to save some serious cash at the pump. First, take a look at some of the myths and rip offs. Myth one, running your air conditioning will cost you big bucks by significantly decreasing your gas mileage. At most, it is a mile per gallon according to "Consumer Reports."

Next, avoid fuel additives and devices that promise big increases in gas mileage. According to the Environmental Protection Agency, they have tested approximately 100 gas saving products and not a single one makes a significant difference in fuel economy and not only are we talking gas myth here, the EPA called any promise to save you big money with one of these products a downright scam.

Speaking of rip offs, here is one to look out for. I asked Mike Allen of "Popular Mechanics" if you need fuel injector cleaning as part of the regular maintenance to improve the performance in gas mileage of your car and listen to what he says.

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MIKE ALLEN, "POPULAR MECHANICS:" Well, no. If your car is running fine and the check engine light is not on and it is not missing or getting poor fuel economy, you don't need to do that.

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HUNTER: Fuel injector service costs up to $150 and it is a total rip off. Unless your car is already running poorly and hey, here is one for you, try to find it in the owner's manual, because if it were so important, they would put it in your car's owner's manual and it is not in there. I have news for you, I don't care if you drive a Chevy or a Toyota, it is not in there and don't do it unless your car is running badly. What can you do to save money?

First calm down. Stop driving like a maniac. Aggressive driving is not only unsafe, but it can cost you up to 37 percent in fuel economy. Unbelievable. Try driving like you have a glass of water sitting on your front seat and it is tough to do. Second, slowdown when you are on the highway. Just by dropping the speed 10 miles per hour on the highway, you will get 3 to 5 more miles per gallon on the fuel economy and last, avoid idling and one of the best places is to skip the drive through and go in to get your fast food.

Turn off the engine and you can save up to 20 percent on fuel economy and for more information you can check out fueleconomy.gov and they have plenty of tips there to save you fuel and money. That is what you can do right now to at least take a little bite out of these $3.50 and $4 a gallon of gas prices across the country.

VELSHI: There is very little you don't know and know well. I was waiting for a cab driver who was at the corner and he said, I can't drive around anymore.

HUNTER: He had the engine off?

VELSHI: Yes, totally stopped. And this tire pressure thing, people always tell me to keep it up. Is this a big deal? Because my tire pressure is fine, and I still burn a lot of gas.

HUNTER: Well, it is a big deal for safety. Under inflated tires will cost you maybe a mile a gallon, but under inflated tires will not only cost you more heat, but they are unsafe. So checking the tire pressure is gas saving device, save you some, but it is a life-saving device and makes the tires last longer, tires are expensive and they are a petroleum product and check your air pressure and put it right where the company says to put it which is usually between 32 and 35 pounds.

VELSHI: Good to see you body. Thank you. Greg Hunter.

Coming up after the break, more doom and gloom in the housing market. But is the end in sight? What you need to know about the housing prices coming up next on YOUR MONEY.

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VELSHI: Jennifer Westhoven is with us and she is going to tell us despite the fact that we have been reporting this past week some economic indicators that might give some people the impression that the economy is turning around, but we have that housing issue hanging over us and it is not clearly turning around.

JENNIFER WESTHOVEN, CNN CORRESPONDENT: It is not turning around. I really think that this is an area where people are the most desperate for signs of a turn around in some ways. But if you are looking here in terms of the housing market, you are going to have to keep on looking. Foreclosures more than doubled in the first quarter from last year. Reality track says that 1 out of every 200 homes is now in foreclosure and that more than 150,000 families lost their homes, they were repossessed by the banks and home prices fell, too, by nearly 13 percent from February to February, it was a record decline for that month in the S&P Case Schiller Report.

VELSHI: Another theme that has been in the news a lot this week is airlines whether it is fuel increases or talks of mergers.

WESTHOVEN: I believe you can barely keep up with the headlines here, because they are moving so fast. To merge or not to merge. Right after Delta and Northwest said that they would tie the knot, airlines are suddenly crowding around the board room tables, they are trying to see if getting bigger will mean staying financially sound.

Well, British Airways considering a deal with American Continental and then Continental considered going with United and then it pulled the plug. And now United is considering a deal with U.S. Airways and the talks are called advanced which might make the world's largest carrier, but not necessarily the healthiest carrier.

VELSHI: And then they can lose twice as much luggage. When I actually, you know, earlier this week when you and I were working on that story when it happened I remember one of my producers saying this is old news and I said no, no, it changes so much in the airline industry, that it is not old news, this is the new story of a new merger discussion.

And another thing we are talking about with these sky high record gasoline and oil prices renewed discussion about drilling for oil in places that we have not drilled for oil before.

WESTHOVEN: Yes, this is part of the political game, right, but it is also part of what are we going do about this crises that we have going on, and people can't pay for the gas. The president was out and he was sounding off on the economy in general, but also high gas prices and he was blaming Congress, he said for blocking his plan to drill in Alaska wilderness areas. The president said that opening up Anwar would help bring down energy prices, but I have to tell you that his own energy department has said it would barely make a difference. A couple of years ago they looked at it and said if Anwar drilling was approved it would only result in your gas prices falling by one penny a gallon and not a huge savings. All three of the presidential candidates have said that they oppose it.

VELSHI: Right and whether one agrees with it or not, it is useful to make the point that it is always brought up in reference to depending less on foreign oil. While it may provide more oil, it does not solve the problem; America imports most of the oil it uses, so we have to do a lot of different things.

WESTHOVEN: Now, speaking of a lot of different things is one of the reasons why you anchor the show and why your title is senior correspondent, but our own Ali Velshi got a new title from Jon Stewart.

(BEGIN VIDEO CLIP)

VELSHI: This is the seventh Fed rate cut in a row and you have to pay attention to this, because this is major.

JON STEWART: Who is that hairless prophet of doom? And how can we appease his anger? Please! If we give you a hair, will you give us back our money? Will you do it, sir? I beg of you! Velshi!

(END VIDEO CLIP)

WESTHOVEN: Velshi! I have been dying to do that.

VELSHI: Ever since he has said, that I have been having happier news.

WESTHOVEN: I am curious why he chose the word hairless instead of bald.

VELSHI: Well -- well, the prophet of doom sounds scarier. Jennifer good to see you. Thank you so much.

Coming up on YOUR MONEY, prices are rising in the supermarket, everything from bread to milk to eggs and we will tell you why it is happening and more importantly, is there any end in sight? But first, this week "Right on Your Money." (BEGIN VIDEO CLIP)

CHRISTINE ROMANS, CNN CORRESPONDNET (voice over): Anita Outlaw's mother recently passed away leaving her daughter a hefty inheritance from a lifetime of savings.

ANITA OUTLAW, INHERITED MONEY: There is a guilt associated with spending it. I don't know how long it will last, but I am very aware of why I have the money that I have.

ROMANS: A few weeks after her mother's death, Anita quit her job.

OUTLAW: I am trying the figure out what to do with the rest of my life. That is a good feeling.

ROMANS: According to "Wall Street Journal" personal finance columnist Jonathan Clements, Anita should take it one step at a time.

JONATHAN CLEMENTS, "WALL STREET JOURNAL:" If you get an inheritance there are a couple of things you really want to do, one is to slow down for a minute.

ROMANS: And it is best to make a plan and review your finances.

CLEMENTS: Think about how much debt and savings you have and think about whether this is a time to be buying a home or paying off the mortgage.

ROMANS: Clements says that one of the smarter things to do is to pay off your debts and invest carefully.

CLEMENTS: You don't want your money around three stocks, because you want to own a diversified portfolio of mutual funds.

ROMANS: Anita is grieving and there are still many more difficult decisions ahead.

OUTLAW: My biggest thing is to make my mom proud of me in what I do with the money.

ROMANS: Christine Romans, CNN.

(END VIDEO CLIP)

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(NEWSBREAK)

(BEGIN VIDEO CLIP)

CHUCK SCHUMER, CHAIRMAN, JOINT ECONOMIC COMMITTEE: While some might be telling us to make lemonade out of the lemons this economy has given us, even this is going to be more expensive. The price of lemons has gone up nearly 50 percent.

(END VIDEO CLIP) VELSHI: That is a second reference I have had to lemons this week going up in price. I didn't think we were all that consumed by lemons, because that is Chuck Schumer he is the chairman of the Joint Economic Committee on Capitol Hill this week to address rising food prices.

Our next guest participated in the hearing, Joseph Glauber is the chief economist for the U.S. Department of Agriculture and he joins us now to explain why food prices are rising and if there is any relief in sight. Thank you for being with us. I must say in all the time I've done business news, I don't believe I have ever interviewed the chief economist from the U.S. Department of Agricultural. You must be very busy guy these days because pretty much everything you deal with is more expensive.

JOSEPH GLAUBER, U.S. DEPT. OF AGRICULTURE: Yes, very busy. And we have had food inflation at 2.5 percent for about 15 years, so when we see inflation poking up like this, there is a lot of calls.

VELSHI: Well, in a few minutes I will be talking to my good colleague Allen Chernoff who is following inflation very carefully for us here at CNN, but he and I were discussing the other day. Put this in perspective, we know that wheat prices are up and corn prices are up and rice prices are up, but for the average family out there, they see those prices, but is it a big proportion of their budget? I mean, what kind of spike are we seeing compared to what they earn or what they have seen as an increase in the earnings?

GLAUBER: No, that is a good point. You know the price of food as a share of personal consumption expenditures has declined over time and it is roughly 10 percent right now on average. However, that said, you have to really consider the distributional impacts on lower income families who see a higher proportion of their income going to food. The lowest quintile, the lowest 20 percent spend as much as 30 to 32 percent or so on food expenditures.

VELSHI: And the point is that no matter how much you make, we tend to eat three meals a day and drive to work and there are nondiscretionary items, things you have to spend money on and what is the upshot for these people? Is there good news in the near future? Some talk as the dollar strengthens and we don't cut the interest rates, commodity prices come down, but we spoke to Peter Morici from the University of Maryland a few moments ago who said that prices of food are expected to go up four or five percent a year.

GLAUBER: Well, we are projecting this year 4 to 5 percent for the CPI for food to increase for 4 to 5 percent. If you look at the futures markets for most of the major grains at least, corn, wheat, soy beans, you know, for the next three years we are seeing projections for the prices to be about at current levels. Now, a lot will depend on the weather and if we have good crops, you can see the prices moderate as stocks are built up and the like, but it will take two the three years before we get back to the 2.5 percent range.

VELSHI: There are a lot of people who really have no interest in one way or another in government policy, but they seem to glum on to the idea that perhaps using a food product like corn to create ethanol in hind sight not be the best idea given the food prices are going.

GLAUBER: Well, ethanol has an impact on the corn market and to some degree on the soybean market which has impacts on the livestock prices, et cetera. But if you look at what has gone on in the wheat market for example and the rice market where we see a lot of the attention worldwide, I think that very little of that could you point toward ethanol being an issue. They don't compete as much for area here in the U.S. and elsewhere, certainly not rice, and, you know, so those price impacts which, again, have been very, very large this year, I think that it is hard to put the blame on ethanol.

Even corn, there is a lot going on in the corn market. Certainly with the weaker dollar, we have seen the exports increase this year, far beyond what we were anticipating at the beginning of the year. There is a lot, you know, income growth in Asia, and has meant increased livestock consumption and increased poultry consumption which means they are importing more livestock which means that livestock is getting fed with corn and soybeans somewhere, either in Asia or --

VELSHI: So it is a worldwide problem is what you are say.

GLAUBER: Absolutely.

VELSHI: All right. Thank you for joining us, good to talk to you. Joseph Glauber is the chief economist at the U.S. Department of Agriculture and food prices and inflation. Obviously are a big deal for us here at CNN, because they are a big deal for you. The prices of dairy products at the grocery store are squeezing your pocketbook and at in places jumping double rates. Milk in particular has been a concern for many families. Allen Chernoff has spent a day on a farm and he got a closer look at the process of this milk that is costing us that much more.

ALLAN CHERNOFF, CNN CORRESPONDENT: That is right, Ali. Maybe you should blame the grocer for the high prices, but the truth is, there is a lot that goes into this carton of milk, a lot of expenses.

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CHERNOFF (voice over): To make sense of the milk prices in the dairy case, it is best to start here in the barn at feeding time. As this farmer dispenses a diet rich in corn and soybeans, it is like watching the 300 cows eat dollar bills. Feed has never been so expensive.

RICHARD BYMA, FARMER: We watch every pound of feed that we give to cows.

CHERNOFF: The cost of feed has doubled in the past year, so Rich has his cows on a strict diet. But the less he feeds them, the less milk they produce. Many other farmers are doing the same says the U.S. Agriculture Department, and the less milk that farmer produce, the higher milk prices are likely to go.

BYMA: I think that we need to be concerned as Americans that food prices are going to get really expensive and there maybe some people that don't have enough food. CHERNOFF: Milk already is expensive, the average price for a gallon of whole milk last year soared nearly a dollar and consumers responded by cutting back and leading the price of milk to ease a little bit in the recent months, but now that the cost of fuel has hit a new record, it is more expensive than ever to operate farm machinery and transport the milk, 75 hundred pounds a day for Byma's cow.

BYMA: I understand, but if we want to keep the next generation in business to take over the dairy farms, they need to be profitable.

CHERNOFF: Meaning that milk prices may soon be climbing near $4 a gallon.

(END VIDEO CLIP)

CHERNOFF: In some cities, the average price already is above $4 a gallon and those cities include Baltimore, Miami, Minneapolis, New Orleans as well as New York City. Ali.

VELSHI: You know we talk about anything that we do in CNN when it comes to money and where things are going on a larger trend does lead to the same question, what can anybody do about this? If you have to buy milk, you don't have the buy milk, you don't have to do it, but if you have to buy milk and you have kids at home, what can consumers do?

CHERNOFF: What you can do is whole milk and whole milk is the most expensive, so you can cut back to 2 percent and maybe people who are drinking whole milk don't want to go down to skim, but 2 percent is cheaper and maybe ten cents or so cheaper a gallon and little cheaper and you can save a little money that way.

VELSHI: And you can't do too much comparison shopping, because it doesn't save you to be driving somewhere else to get your milk. If you are driving to save on the grocery bill that is one thing, but people are trying to limit the time they are out.

CHERNOFF: And with fuel prices, you don't want to drive around.

VELSHI: Why didn't we see pictures of you milking a cow?

CHERNOFF: Well, you saw me feeding, but the machines do all the milking these days.

VELSHI: Likely story. Allen Chernoff, thank you so much.

Coming up next, retailers want you to give them for tax rebate, but you may want to hold off until Memorial Day weekend and we will tell you why after this. You are watching YOUR MONEY on CNN.

(COMMERCIAL BREAK)

VELSHI: That stimulus money that is supposed to save the economy, well, it starred to go out today and this weekend and maybe if you got it and planning to receiving it in coming weeks, America's retailers are hoping that you will hand them your new-found money. Well, not so fast. Most of you have told us at CNN and told people who have asked you many times that you plan to use that cash to pay down debt or to offset some debt that has been created by inflation and those high gas prices. Britt Beemer is the chairman of America's Research Group, he keeps an eye on all of this and we often rely on him for his information because you track how people spend the in this country and that is America's favorite pastime spending.

BRITT BEEMER, CHAIRMAN, AMERICA'S RESEARCH GROUP: It has been for years.

VELSHI: It takes a lot to get Americans not to spend. So when you are giving people literally found money, they are saying they won't spend it. Do you believe that first of all?

BEEMER: Yes, I do. First of all consumers said they will save 60 or 70 percent of their income tax refund checks and they have saved almost 75 percent. And keep in mind that the banks and the credit card companies if you are behind, they are making calls to the consumers to pay the bills and get current, because the credit card companies know that this is the only window this year where there is refund checks and stimulus checks that are to go out, that is the only time to make the money and get these people current for the rest of the year. There is d-day for them.

VELSHI: So a lot of people, when they get the check, if you are on a set income and you make a certain amount of money, this and your tax refund are going to be the only extra money that you possibly get.

BEEMER: Correct.

VELSHI: So is that going to help the economy or is it going to help America's retailers, what is going to happen?

BEEMER: Well, the problem is that the consumer debt level today is at an all-time high and we are 70 cents of the dollar will go to pay off bills or debts and leaves only 30 percent left to be spent.

VELSHI: Right.

BEEMER: Keep in mind that a lot of consumers will take their spouses out to dinner and 5 percent will be spent on entertainment and 20 percent of the dollar will be spent at retail which is surprising, but keep in mind that today a lot of the consumers are keeping in mind one other issue, at the first of March this year, only 16 percent of people made any vacation plans. That is an all-time low.

VELSHI: I am one of them. I typically have this all worked out ahead of time, but this business about the dollar and gas prices and accommodations prices means it is going to be leaving this decision for a while.

BEEMER: And last year 40 percent of consumers made plans for vacation by the time first of March rolled around, so keep in mind now, some consumers will take the extra money they have left and put it in a drawer and say, when I go on vacation I will need that $200 or $300 to pay for the higher gas bills. What happened and this is the big issue today, consumers have psychological mental blocks out there. VELSHI: Yeah.

BEEMER: When gas prices hit $4, you will be hitting a new mental block and when they hit that point, they will freeze, and their point of spending and say, I will do nothing for a few weeks and see how this holds up.

VELSHI: And AAA thinks we will get to that point as a national average by Memorial Day, but obviously there is some people in the United States already paying that, so what happens then? You have people pulling back, what happens to the consumer? Do they see sales at stores? Do they see more free shipping, because I know that the National Retail Federation said that shipping prices have to go up, because companies have to pass on those costs, but Americans do pull back sometimes?

BEEMER: They do, but there is one window of time and it is that retailers this year are really facing huge inventory levels. So what is happening now is that, is that the retailers have always made Memorial Day a big weekend sale event period. So what you will see this year, more than you have seen in the last two years, the discounts over Memorial Day will be incredible. So if somebody is watching this show, and they want to save money, don't spend any money and wait for Memorial Day, because you are likely to see 50, 60, even 70 percent off advertised specials, because that is when the retailers know the consumers are out of the workplace for a few days and that many consumer taking the weekend off and many people will be shopping. And keep in mind that over Memorial Day weekend typically shopping levels in stores are up 30 to 40 percent over normal levels and retailers know that is the time to give the consumers the best deal, because then you have to wait for July 4th which is never a great weekend.

VELSHI: Right.

BEEMER: Because of how it falls, so you have to wait for Memorial Day. So if you are a retailer which is scary, you want to keep it out.

VELSHI: Yes.

BEEMER: And if you are a retailer, you have three weekends to make the summer. Memorial Day, and July 4th and Labor Day.

VELSHI: So you can't get off to a slow start. Thank you, Mr. Breemer for being with us and the good advice.

Well coming up next on YOUR MONEY we will tell you why telling other people how much you earn might not be a taboo any longer. Stay with us, you are watching YOUR MONEY on CNN.

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VELSHI: In the age of youtube and myspace and other places, there are information that people are willing to disclose to others. The "New York Times" and "Fortune" recently wrote about people under 35 who discuss their salaries with their friends and colleagues. So the salary topic might not be taboo at least among the younger generations, but is it a good idea, Ines Ferre has the story for us, Ines what have you learned?

INES FERRE, CNN CORRESPONDENT: Well, Ali, you know times have changed. Nowadays people share more information about each other and oftentimes they expect to know more about each other whether on a Website or in a casual conversation and people talk about it. Listen to this.

(BEGIN VIDEO CLIP)

(UNIDENTIFIED MALE): I do see a lot of my friends just openly talking about it, and trying to discuss and it seems like everybody knows what everybody is making and it helps sort of helps when you are going for a job.

(UNIDENTIFED FEMALE): Because they are curious and people want to know. It is always a comparison, like how much you make and how much your friends make.

(END VIDEO CLIP)

FERRE: Now, whether you agree with talking about salary or not, experts say that there are benefits to knowing how much others make.

(BEGIN VIDEO CLIP)

HAIG CHAHINIAN, CAREER CONSULTANT: If I learn that a colleague of mine or a friend of mine is making a certain amount that I am not making, a higher amount that I am not making, in an organization, I can feel empowered to ask for a raise. If I am looking for work, I can use this information, first to choose which industry I am seeking, and second, to negotiate a salary that is in line what with what I know.

(END VIDEO CLIP)

FERRE: OK. That is all good, but now, when do you not talk about it, right? I mean, people have different feelings about it.

VELSHI: Absolutely. I met a lot of people who think that you should never talk about these things, but I get that it helps you in getting a raise and where you stand amongst your colleagues, but when should you not?

FERRE: Definitely you don't talk about it with people you don't trust and also some companies have written rules that you shouldn't disclose how much you make either written or unwritten rules, and also, people get jealous about it, and people can use it against you and go to the employer and say this is what this person is making and your employer might not be so happy about that, and the bottom line is that it is always better for you to know what others are making than you to disclose how much you are making.

VELSHI: It stands to reason if you are younger that you don't mind sharing it as much. Because it tends to be obvious that when you come into an entry level job, you know what the sort of salary range is and when you are further your career, that it becomes less clearer where you are against your peers. So is this something that young people like, because, because it is not that much of a secret or has it got to do with the fact that they share more information because of the Internet?

FERRE: Well it is a little bit of both. You have more information out there and these young people are going into a lot of times entry level positions, and also, these young people also change jobs a lot. Nowadays, we all change jobs a lot, so it is a topic that comes up again and again and also there is also Web sites where you can go to, to post anonymously and you can check out what other people make and they ask what do you make.

VELSHI: Good advice. I learned your lesson, it is always better to know what other people make and not tell what you do.

Still to come on YOUR MONEY, your questions and comments on the economy and your bottom line. We be right back with those. Stay with us.

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VELSHI: And now let's look at the e-mails from the past week.

Dennis writes, "Don't you think with the price of food and energy that it is about time to include these items in calculating the inflation rate? Dennis, they do, and that is called the headline rate, but a lot of the economists just use the core rate and I am completely agree with you, because the core rate does not have food and energy in it and I don't know anybody who doesn't use food and energy.

Sandra writes, "To be joyful at all the good money shoppers can make if they take advantage of foreclosures just leaves a bad taste in my mouth. Making money or profiting by misfortune is just plain awful. That's Sandra from Washington State.

Todd offers this sobering thought to us, "You can stop complaining about $4 gas and start complaining about $7 gas, it's not going to get better any time soon." Well Todd the only good news I have for you is the first time in 18 days at the end of last week, we didn't see a new record in gas prices, but $3.62 for a national average doesn't mean anybody is getting a deal.

Listen, thanks for getting all those e-mails. We want to hear from you, your questions and comments about the Fed, the job markets and anything else that has to do with your money or anything you want us to break down and explain or answer for you. Drop us a line at YOURMONEY@CNN.com. Thanks for joining us for another edition of YOUR MONEY. We will see you back here next week Saturday at 1:00 and Sunday at 3:00. See you then.

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