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Glimmer of Hope for the U.S. Economy; Life of the Long-Term Unemployed; Protecting the Middle Class; Investing in Facebook; The Big Fix by Kairos Society
Aired February 4, 2012 - 13:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: It is the number one hurdle in this economic recovery and everyone knows it. This country has got to get people back to work.
Welcome to YOUR MONEY. I'm Ali Velshi.
Here's something I haven't said in a while. The latest jobs report is excellent, period. Here's the breakdown. In the month -- in the month of January, we created 243,000 jobs. Take a look at this. From January of last year all the way, we had great job creation for the first few months of last year. Then it cratered in the summer. Still not a loss of jobs but it cratered and we've been building back since then.
Now 243,000 jobs in January. Where are those jobs? Let me show you how it breaks down. Of the 243,000 jobs that were created, 257,000 jobs were created in the private sector. That's where everybody wants them created. You subtract the jobs that were lost by the government, 14,000, and you end up with that number, 243,000.
Let's talk about this with Diane Swonk. She's a chief economist of Mesirow Financial, with Will Cain, a CNN contributor, and with my good friend, Richard Quest.
What a treat to have all three of you with me in the studio.
Diane, again, these numbers are very strong. There's a disconnect between what some of our economic numbers and forecast say and what the American consumer has been feeling. The American consumer has been telling us for a few months that they're feeling a little more energized about this economy and nothing helps them more than jobs.
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Absolutely. This number is good and I want to absolutely underscore this is -- any way you cut the data, there's noise in it. You can take away some of the noise. We had people playing golf in Chicago in January. I don't know about the rest -- that just doesn't happen in January.
SWONK: So there were some seasonal things.
SWONK: A lot of construction. Even if you take all that out, it still is a good number. And oh, thank god. You know.
SWONK: The only thing -- you know, you still, what you look at is where is the pain still. The pain is in the 42.5 percent that are still long-term unemployed.
VELSHI: Right. More than six months.
SWONK: More than -- more than six months.
SWONK: The people who -- you know, that's not changed. Five and a half million unchanged.
SWONK: And so what we're employing to people that are coming back in the labor force, maybe they're just graduating from college or they're finally deciding, you know, I'm going to look for a job now.
SWONK: Although labor force participation is an output, the labor force did grow so people look for a job and got some jobs. We also are seeing in the breakdown of data, it looks like not shown in the overall data, but we're starting to see some movement in small business creation.
SWONK: And that's the backbone. New business formation. Talking a lot of larger companies, they're not hiring out but you know what, they're starting to seed smaller companies for innovation.
SWONK: And that's what you need to see for a more sustained recovery. So you know the world is not perfect, 8.3 percent unemployment rate --
VELSHI: Still high. Still --
SWONK: Pop champagne corks over but --
VELSHI: Still 50 million people were still looking for jobs.
VELSHI: Still -- well, the intractable problem of our time. We actually have a slightly -- even you have a hopeful view about this. You're sort of saying this is a long-term process, something that we all, right?
VELSHI: But that the public demands faster results on.
WILL CAIN, CNN CONTRIBUTOR: Well, look, you'd have to be a partisan hack to spin that number in the wrong direction. We're headed in the right direction. The most important number isn't the actual 250 you showed, it's that chart that shows growth over that long period of time.
CAIN: It's the trend. That being said, I've told you this, Ali, I think unemployment is unfairly or inappropriately treated as the economic scoreboard. There are so many other things going on.
VELSHI: Sure. Sure.
CAIN: From private debt to GDP growth to indicate how people feel. What they spent. And there are greater threats out there. From foreign policy issues like Iran to China slowing down.
CAIN: To the EU. These things are going to impact not only how the economy goes but how people vote.
VELSHI: What a great way to get into our resident European.
SWONK: There we go.
RICHARD QUEST, CNN'S QUEST MEANS BUSINESS: All right.
VELSHI: I will tell you, though -- I will you, Richard, there is even some theory, it's just been floated out there by a few people that if our growth continues to be as strong as it is in the United States, rather than worrying about Europe sucking America down again into another recession, it might be the other way. We might actually be able to help you folks out.
How can we help you, Richard?
VELSHI: You need it.
SWONK: It's going to be in (INAUDIBLE).
QUEST: Hey, hey, hey, one at a time, please, one at a time. Look, I don't think you're going to be able to. I think with the eurozone and the European Union being the second largest or the largest in the world --
VELSHI: We'll run with second largest.
QUEST: All right. And there's nothing you can do about it because the problems in the eurozone are so deep and they threaten to get worse and they threaten to get worse before they get better. And, and before you all start beating up on me, your growth -- your growth is fragile.
QUEST: There is no -- there is no depth to it.
SWONK: We're sitting here celebrating what should be 500, 800,000 jobs a month. I mean this is not -- the threshold is easy to -- the hurdle is easy to clear now in terms of what we've been through and what's good.
QUEST: Right. And I would love to see Europe having those sort of numbers instead of what I know is going to be the story in Q1 of this year.
QUEST: Which is higher unemployment, at 10.4 percent within the eurozone. The U.K. is going to get higher.
VELSHI: Let me show you something. Let me go back to the wall if I can for just a second. Because when we look at these jobs report and when we are trying to parse them and find things that are not great, one of the things we want to look at is where the jobs are. Are they sustainable and are they -- are they broadly based. Look at manufacturing. It's always a pleasure to see manufacturing numbers go up in the United States, because for about 15 years we saw them going down. In January, 50,000 manufacturing jobs added. Leisure and hospitality, 44,000 jobs added. Some of that has to do with, as you said, climate, some of it has to do with currencies and where people are traveling to the United States from.
Retail trade was up 10,500. We almost might have thought we would have seen fewer retail trade jobs added because it's post-Christmas. Health care jobs which have continued, I mean, every single month even through the recession, we added health care jobs, 31,000. And mining jobs were up 10,000.
These are just a sampling, but generally speaking it was broadly spread. The question, you mentioned it in your first response, is this kind of stuff sustainable?
SWONK: Yes, that's what's really interesting. Some of the leisure stuff was clearly seasonal, construction was seasonal.
SWONK: Manufacturing, a lot of it auto related and machinery.
SWONK: The good news of that is there is some on-shoring going on and we're actually building up machinery for that. Also machinery related to those mining jobs. Natural gas, we need machinery for that. And the automakers are opening idle plants, retooling and -- buying machinery. Retail trade, one of the biggest increases, automotive.
SWONK: Auto dealers. Because we --
VELSHI: Right. We saw it in December, we saw record sales for automakers.
SWONK: Right. Well, not record.
VELSHI: Not record.
SWONK: We're five million below with peak.
VELSHI: We're still -- right. Right.
SWONK: You know, we're back to jobless recovery levels in the 1990s.
VELSHI: We are. But we need to think about -- and you're from Detroit originally.
SWONK: Yes, I am.
VELSHI: And you live in the Midwest. We have to remember that when we talk about jobs in the same way we talk about autos, we're not going to be talking about records necessarily, we're going to be talking about the new realities.
VELSHI: Around them.
VELSHI: So they weren't records, they were great numbers for this world in which we live.
SWONK: Right. And some of the auto -- the manufacturing jobs, some of that is catchup and some of it is really fundamental. That's good news. But you know there was this seasonal component to some of the other things. Still a good number.
SWONK: Still would love to see more.
SWONK: And boy, you know, my forecast for the year, it's only 2.25 percent, I'm probably going to be marking it up. I'd love to eat crow but you know I haven't killed the bird yet.
VELSHI: OK. Will?
VELSHI: We don't -- we don't want to go -- there's enough politics on TV that you can watch and you are a great contributor to it.
VELSHI: But if I were a Republican --
SWONK: There's too much politics on TV.
VELSHI: How would I deal with this? This is really messing up my narrative.
CAIN: So here's the deal.
VELSHI: And let me add something to this. If this job -- this pace of jobs creation continues, President Obama will recover every job that was lost under his presidency by Election Day.
CAIN: OK. So here's the deal. I've told you over and over, I don't think the focus should be on jobs, I think it should be on debt. And I don't mean by that federal government debt, I mean private market debt. To extend our battle across the pond here, we're headed in the right direction on debt as well. These guys are headed in the wrong direction. They're leveraging up.
QUEST: Whoa, whoa, whoa. No.
CAIN: What I would tell you is where you bring --
QUEST: If you go so far, no.
CAIN: Your debt -- your debt is through the charts.
QUEST: How can you say --
SWONK: No, we are a highly indebted economy. You know deleveraging is not nearly as far along. We're running, you know, in the GDP --
CAIN: We're better off than these guys.
SWONK: You know OK.
QUEST: OK, so then if we go -- so I'm on the Titanic and you're on the --
SWONK: On the --
SWONK: The disaster that killed 800 people. So, you know, I mean, so we have another -- the debt situation is still very bad. You know the political uncertainty, the inability to make -- we've got the end of year is enormous and we've got major drag on growth.
CAIN: Agreed. SWONK: Because of that.
VELSHI: Hold that thought. Very good distinction to make, by the way, between debt as all of us have come to talk about it, which is not the debt you're talking about. You're talking about people's debt, household debt, the degree to which we are indebted as individuals.
CAIN: That's right.
VELSHI: Being a much more serious period perhaps than our national debt.
Stay right where you are. Richard, great to see you here. That's a great tie. We're going to talk about that when we come back. Will Cain and Diane Swonk. It happens to be my tie that he's wearing.
Americans want this economy fixed and they are ready to hit the ballot box to do something about it. Is your vote actually going to make any difference and what's going to make you vote one way or the other when we come back.
VELSHI: Two parties, one promise. Whether you end up voting for President Obama or the eventual Republican nominee both sides are claiming they've got what it takes to fix the U.S. economy. But Douglas Elmendorf, director of the Congressional Budget Office, warned this week that despite all this optimism, America is many years away from an economy that's hitting on all cylinders.
(BEGIN VIDEO CLIP)
DOUGLAS ELMENDORF, DIRECTOR, CONGRESSIONAL BUDGET OFFICE: We expect economic activity to quicken after 2013, but will GDP to remain below the economy's potential through 2017.
(END VIDEO CLIP)
VELSHI: Will, let me -- first of all, we don't usually have Elmendorf on our show. I don't think --
SWONK: I like him. He's a friend of mine. All right.
VELSHI: I know. He's a good guy and he makes a very important point. As excited as we are, and it's legitimate to be excited about some of these numbers, bottom line is we are still well away from a real recovery and most thinking economists have told us that.
CAIN: That's right.
VELSHI: So --
SWONK: You find those unthinking economists?
VELSHI: Like I said, most thinking economists will tell you -- SWONK: I hope I don't resemble that comment.
VELSHI: Well, they will tell you that it doesn't really have all that much to do with who wins in November.
CAIN: But it can have an effect, Ali. So look, the historical averages on a credit bubble recession, when you've built up large amounts of debt, it's like seven years. In the process, if that's true, we're following that model, we're three to four years into a seven-year process. Meaning expect three more years of slow growth out of this thing.
What can politicians or how will your vote actually impact that? Let me say this. Short term, not a lot of things that can be done. I do believe, and this is going to sound cliche, but conservatives believe in the principle of certainty. Certainty on taxes. Shouldn't have spent time working on health care, carbon trading, taxes. These things are distractions. Shouldn't be that.
Long term I do trust conservatives as stewards of the economy long term. But I don't want to overstate the short term things. The short-terms effects in the economy. The politicians have limited controls over.
VELSHI: The one issue we've got here is whether or not Europe will mess things up for us. And as you have observed astutely in your -- in your covering of this, it is -- talk about slow. We may be four years into a seven-year recovery, but Europe seems to be taking four years to make a decision about what to do.
QUEST: No, no, we're going backwards.
QUEST: We are going backward. And the -- I always find it very dangerous to argue with somebody that might have a philosophical point of view, as my friend on the left does.
QUEST: No, my physical left. My physical left. And -- but the battle that is now raging in Europe between those that believe in full throttle austerity.
QUEST: To squeeze the countries of Greece, and probably Portugal next, and then Ireland and Spain and the U.K., versus the (INAUDIBLE) who are pushing really hard for it, versus those who now believe that there should be some form of growth. And the problem is it's all talk and not much action. The risk is still very real, and that's why the ECB basically lent half a trillion last time and it will do up to a trillion next time.
VELSHI: Yes. Diane, I saw you tweeting the other day when Ben Bernanke was talking about Ben Bernanke, which is why -- SWONK: Yes. And stay out of politics.
VELSHI: Let's listen to this because he conceded this week that the recovery has been frustratingly slow, particularly on this intractable issue of getting people back to work.
(BEGIN VIDEO CLIP)
BEN BERNANKE, FEDERAL RESERVE CHAIRMAN: Nevertheless as shown by indicators like the rate of unemployment and the ratio of employment to population, we still have a long way to go before the labor market can be said to be operating normally.
(END VIDEO CLIP)
VELSHI: So you said you stay away from the politics and with no politicians in the room, there was a hint in a number of things that Ben Bernanke said that in fact politics and policy are getting intertwined. The politics is messing up the ability for good sound policy to help fix this economy.
SWONK: Well, you know, it gets back to something Will said. The certainty issue. And when I talk to audiences, I say, I don't care who you vote for, Republican or Democrat, or independent, vote for someone who's going to be willing -- I always thought a good politician is someone that wouldn't be my best friend because they'd be willing to compromise their own personal ideology for the good of a whole to be able to compromise and come to a deliberate decision.
VELSHI: But it wouldn't be partisan to say that that seems to have gone out the window.
SWONK: On both sides.
VELSHI: On both sides.
SWONK: And that's the problem, is we need to vote for people who are willing to make decisions for the certainty going forward on the tax code. I think some major reforms need to be made in the tax code that could eventually be more pro growth. There needs to be --
CAIN: Totally agree on that.
CAIN: -- long-term changes to entitlements that still protect enough people but people like me, I don't need a lot of those entitlements and I'm fine without them. So, you know, there needs to be some major changes. Some of them tweaking, some of them major changes, and they can be made over a period of time.
CAIN: If we make the decisions now. Why do we want to wait until we're in Europe's situation where we're forced to make changes by financial markets that are draconian and horrific? That's just -- VELSHI: But even being forced into a corner doesn't help you make decisions faster.
Will, is there any chance, politically speaking, because you are a political commentator --
CAIN: With a philosophical perspective.
VELSHI: To Richard's left. Is there any way that anybody -- any of the parties at this point can re-tack and decide they're going to take this very sensible approach, because that's the approach that would really help, wouldn't it? If Diane were running, I'd vote for her.
CAIN: Yes. No. The answer --
SWONK: A lot -- no, neither party could contain me, by the way. But yes.
CAIN: The answer to your question is no. No. The answer to the question is no, and by the way, neither party has the monopoly on the things that are needed.
SWONK: Right. Absolutely.
CAIN: The Republicans generally have the good idea on tax reforms.
VELSHI: But if you go with Diane's idea that you elect people who are not so attached to their ideology that if the other party has got the better idea, you can go and support that. You and I are not old enough to have forgotten that that used to happen in American politics.
CAIN: That's right. But let's not all --
CAIN: Let's not all dump on ideology. Ideology gives you long-term perspective. It allows you to think about where this should be in 10 to 20 years. By the way, I think we can all agree, we're in emergency circumstances right now. We're doing things that we think shouldn't be done for the long term. That's why I'm very honest on my political perspective. I think conservatives have a longer term vision that's better. We're not deficits reduction, tax reform. They don't have infrastructure, Democrats are better at that, but these are the ideas that I think we should be talking about.
VELSHI: Well, you always have a welcome place to talk about them on this show. We enjoy having you on here for this.
QUEST: Always welcome.
VELSHI: And Diane, what a pleasure to see you here. You are always welcome in the show as well.
SWONK: Great to be here. Thank you.
VELSHI: Richard, you're not only welcome, you can't leave.
VELSHI: We need you back after the break, so to you, stay there.
The middle class -- we've discussed this. The middle class in this country is in trouble. What some solutions if any the middle class can count on now and in the future. That's next on YOUR MONEY.
VELSHI: It's no secret the middle class in this country is struggling. In Morris County, New Jersey, which is one of the nation's wealthiest counties, one family of five went from making six figures to living together in one small room in someone else's house.
CNN Money's Poppy Harlow has the story.
POPPY HARLOW, CNN MONEY CORRESPONDENT (voice-over): One room now home to a family of five.
TALIA MOBLEY, MOTHER: Now the two girls sleep on the bottom, Simone and Isis. And then Masir, our oldest, she sleeps on the top.
HARLOW: Mom and dad somehow manage to sleep together on the couch.
T. MOBLEY: Most of the time honestly I lay on top of him.
HARLOW: If you think you know what long-term unemployment can look like.
ADAM MOBLEY, FATHER: Why don't you come in the kitchen?
HARLOW: Think again.
A. MOBLEY: You can't understand something until you've lived it.
HARLOW: Adam and Talia Mobley brought in more than $100,000 just two years ago, by all measures middle class, until they were both laid off. Frightening new numbers show 50 percent of the unemployed in New Jersey have been out of work for more than six months, and it's a similar story elsewhere.
A. MOBLEY: I was a lead technician for Comcast. HARLOW (on camera): You had it made?
A. MOBLEY: Yes, I had it made.
T. MOBLEY: I was customer service rep.
HARLOW: What's the hardest element of this situation that you think people might not know? A. MOBLEY: It's definitely not financial. It's emotional. If you're not strong people, it could break you. Yes.
T. MOBLEY: It can break you. Yes.
HARLOW (voice-over): The Mobley's unemployment checks have run out and they've exhausted their savings.
A. MOBLEY: The only benefits we ever get from the state right now is assistance with the food.
HARLOW: Human Services of Morris County, New Jersey, where the Mobleys live has seen their food stamp caseload surge 140 percent since 2007.
PHYLLIS TONNESEN, MORRIS COUNTY HUMAN SERVICES: Seeing dually unemployed families, that's unusual for us.
HARLOW (on camera): So the bottom is falling out of the middle class.
TONNESEN: I believe that.
HARLOW: Have you seen something like this before?
TONNESEN: No, not like this, never. And I've been here since 1980.
HARLOW (voice-over): This is one of the wealthiest counties in America, where the median household brings in over $91,000 a year. But when you can't find a job here, you can't get by.
T. MOBLEY: You send out a lot of resumes, you pray to god someone goes back to you.
HARLOW: Five hundred resumes later, nobody has offered Talia a job.
(On camera): How long do you think you can go on like this?
A. MOBLEY: Honestly not very much longer.
UNIDENTIFIED FEMALE: What's up with you?
A. MOBLEY: I was at work.
HARLOW: Afternoons are spent at grandma's with their three kids. Then it's back to Laura Sullivan's house where they're living rent- free. She took them in after knowing the Mobleys less than a year.
LAURA SULLIVAN, FRIEND: People ask like why would you take someone in and you have no privacy. I'm like honestly, you want to compare my privacy to a family not having a home? Like is there any comparison?
HARLOW: It's far from ideal, but when you've been out of work this long, there's no room for ideal.
(END VIDEOTAPE) HARLOW: And, Ali, just to let you know, just the kicker in all of this, the wife there, Talia, she went back to school after she lost her job. She retrained as a certified medical assistant because she heard, like we all do, that the jobs are in health care. She still hasn't gotten a job. She did have a second round interview, waiting to hear back on that one.
Her husband, in the meantime, started his own T-shirt company with his brother trying to do something.
HARLOW: But again no funding, Ali, to get it off the ground.
VELSHI: Good point. Right. So they've hit on two other problems.
VELSHI: Retraining into health care is useful, but the jobs aren't evenly distributed around the country. And starting a business, this may be one of the best times to start a business, but the availability of funding or credit is a problem.
VELSHI: This sounds like an extreme situation.
VELSHI: How common do you think this is?
HARLOW: Well, you know, Talia said to me we're not the only ones going through this. A lot of my friends are in that situation. And it doesn't give me comfort, it just makes me more worried. And if you dig into the numbers, even in the very good jobs report that we got on Friday, Ali, they're not really any better for those long-term unemployed.
HARLOW: You still got 5.5 million Americans that have been out of work for six months or longer. It's about 43 percent of the unemployed. And it was little changed in this jobs report, even though a lot of the other numbers were significantly better.
HARLOW: That's a big area for concern.
VELSHI: Yes. That is a big area of concern.
VELSHI: Because it does seem to show some prejudice against hiring the long-term unemployed.
VELSHI: All right, Poppy, thanks very much for that.
VELSHI: We want to move into solutions now. What can be done right now for families like the Mobleys who are slipping out of the middle class.
I want to bring in my good friend, Christine Romans, host of CNN's "YOUR BOTTOM LINE", and Don Peck, whose the features editor at the "Atlantic" and the author of "Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do about It."
That's exactly what we want to talk about.
Christine, let's start with you. What is the best solution you've heard for helping these folks get back to work as soon as possible?
CHRISTINE ROMANS, CNN'S YOUR BOTTOM LINE: Well, you know, so far it's been mostly people themselves figuring out what their solution has been and they've been mostly, you know, unemployment benefits, long- term unemployment benefits, food stamps and like that family, the Mobleys, lots of different things that they're trying to rely on.
But you know we talk about a safety net. There's a lot of talk this week about a safety net or a trampoline. What are we going to do for the long-term unemployed. We need to be focusing our national strategy and all of our resources on turning a safety net into a trampoline. Revamping our retraining programs and figuring out how to connect, Ali, the people who say they need a job with the companies to say for some reason they can't find qualified workers.
ROMANS: There's a disconnect there.
VELSHI: There is a -- it's a mismatch and a disconnect in some cases. Connecting them still won't solve it because they're not trained for the right job.
ROMANS: Mismatch, right.
VELSHI: Don, you think that the best solution for the nearly 13 million Americans currently unemployed could actually come from Germany?
DON PECK, FEATURES EDITOR, THE ATLANTIC: I do. You know, when you -- when you look at the U.S. economy, it's incredibly dynamic. We lose maybe 2 or 300,000 jobs or more each month, we gain maybe 4 or 500,000 jobs each month.
What Germany has been doing since the crisis has been a short work program, which encourages employers not to fire workers, but rather to put them on part-time with the government making up a large part of the difference. If we could do that right now and reduce some of those job losses that we're still seeing every month, it would reduce the queue for the unemployed and it would allow people like the Mobleys to get back into jobs faster because they'd be competing with fewer people who are newly unemployed.
VELSHI: But Don, doesn't that -- doesn't suggest that companies would have to say that they're in partnership with the government or that there's some sense that they hold some responsibility for helping solve this problem, even if they're not to blame for getting us into it? That sort of partnership doesn't really exist here.
PECK: Well, it doesn't really, but circumstances I think call for it. And we're not really asking for companies to do something that would be in any way against their interests.
PECK: We're just really giving them an alternative.
PECK: Instead of firing one worker, you know, put two on part-time work. That's really in companies' interest because, you know, it's costly to lay people off. It's costly when the economy picks up again to find new workers and train them.
VELSHI: To retrain and re-hire --
PECK: So by keeping more people in work now, not only would we be helping the unemployed, we'd really be helping businesses stay more efficient as we come --
VELSHI: Christine, do you remember this conversation years ago when we said maybe the banks should work harder to keep people in their homes because it's a lot easier than having empty homes that you can't sell, that bring the value of all homes down. I mean I wish we could be as forward thinking. But guess what, we're here. Let's be forward thinking about this.
We've talked about immediate solutions for people struggling to stay in the middle class right now. What about the long term? Both of my guests have excellent ideas for protecting and rebuilding the middle class for the long term, something we don't think enough about.
That's next on YOUR MONEY.
VELSHI: Welcome back to YOUR MONEY. How do we protect and strengthen the American middle class? Since 2008 Americans have collected more than $434 billion in unemployment benefits.
Christine, you've made the point that unemployment benefits are just one of the things helping prop up the middle class. We've got food stamps, we've got programs to help underwater homeowners, just a few. This is designed to be emergency assistance.
VELSHI: Not long-term assistance. So what do we do for the long term?
ROMANS: Well, that's a big question. And right now it might -- you might want to keep that kind of assistance going on forever, but the political conversation is much, much different, and, you know, the fiscal situation of the country is much, much different. So what we need to do is we need to recognize that you've got people falling out of the middle class and we have to redesign how we're spending money --
VELSHI: But why does it matter? Let's just be clear on this. It matters to keep people in the middle class because the middle class is our tax base.
ROMANS: Right. They're paying taxes, they're funding your schools, they're buying your products. American companies, multinationals. Let me -- look, earlier this week my producer had a conversation with a CEO who told us the news media is talking down the jobs market. Ninety-two percent of Americans are working if you take the unemployment rate upside down.
VELSHI: I've heard this so many times.
ROMANS: Yes. And every time --
VELSHI: It's a highly uninformed way of looking at it.
ROMANS: Right. And every time I have steam that comes out of my ears. Let me bring this chart I showed you. The employment population ratio, 58.5 percent of the working age population in this country is working, 58.5 percent. Even on Friday when you saw the jobless rate get better, this number did not --
VELSHI: And just to be -- just to be --
ROMANS: It did not get better.
VELSHI: Put this into perspective. It was 1983 when it was last this low.
ROMANS: And 1983 really hurt and it took the American middle class a long time to come back. And by the way, manufacturing helped the American middle class come back after 1983, so we need to have a national strategy and decide in a very bipartisan way how we're going to spend this money so we have, again, a trampoline for the middle class to get into it and to stay into it and so that we're -- really focused on keeping people there because it's good for the country.
VELSHI: Right. It's just a good lesson to remember. Tell everybody you know that 8.3 percent unemployment doesn't mean that 91 point some percent of the population is employed.
ROMANS: No. VELSHI: Don, you think that in order to help protect and rebuild the middle class over the long term, our education system needs to build our students' work skills rather than simply teach academic subjects. What do you mean by that?
PECK: Well, I mean of course we should continue to promote college access and four-year college degrees. That is the best ticket into the middle class. But you know when you look at young people today, even among young people, only 30 percent of people have a college degree. And I think we need to recognize that number has been growing only very slowly. So when you're talking about the middle class, in reality you're usually talking about people who lack a college degree.
And for those people, I think starting in high school we need to offer them apprenticeships, part-time apprenticeships, role models and a real sense of what jobs are out there, what's available to them in manufacturing, in health care, and what it takes to get there.
You know, if you talk to machinists, for instance, in South Carolina, making fuel injectors, machine operators need to know calculus.
PECK: They need to know -- they need to know computer languages. And by creating apprenticeship programs in high school, by doing some applied skill learning in high school, we can motivate learning for more Americans who might recognize that a four-year college might not be right for them. It gives them skills and a career path from high school.
VELSHI: But we need them -- we need those students in high school and as they enter college to have had this discussion. And one of the guests I had last week argued that we have all the data, all the data about how much you'll earn when you graduate, no matter what you do is out there and yet we still encourage people to study things at sometimes $17,000, up to $39 or $40,000 a year, depending whether you're in state, public or at a private university that will not return that investment -- Christine.
ROMANS: If we get them there unprepared, we get them there unprepared, I mean I think that this discussion should start even before kindergarten. I mean we talk about K-12 education in this country but even some of the people on the president's job council are saying that's not the right model for education. I mean by the time a kid is 5 years old, if a kid is not in the middle class, if the kid is already socioeconomically suffering, they're already behind.
So this great equalizer of American public school education doesn't help them. And now you're seeing already a 5-years-old, a worker who's going to have that much more trouble being in the middle class further on. I mean, I think that education -- it's vocation schools and high school.
VELSHI: You lost me at kindergarten.
ROMANS: At kindergarten. What? VELSHI: Every day I thank my lucky stars that I'm not Christine's kid.
VELSHI: Christine, you did point out, however, that this is a very interesting statistic and I need you to help me understand what it means. Of every dollar of income earned in the United States in the third quarter of 2011, the last three months of 2011, every dollar of income that was earned, just 44 cents went to workers' wages and salaries, making it the smallest share since the government began tracking this in 1947. What does that mean?
ROMANS: What it tells us is that the American worker has the smallest share ever of the economic pie, and that is shrinking. So as the economy even is starting to grow -- I mean look, the economy has recovered to its pre-bubble -- you know, it's prerecession levels, right, but the American worker hasn't. What is that disconnect? What are we doing to make sure that the American worker also shares.
I mean companies aren't American companies anymore. They're multi national companies.
ROMANS: They're global companies. They're focusing on profit growth else so what are we doing to make sure that the American worker is still enjoying the benefits of a growing American economy.
VELSHI: Great conversation. Christine, as always, thanks so much. You can watch Christine on "YOUR BOTTOM LINE" Saturday mornings at 9:30 a.m. Eastern. And remember to follow her @ChristineRomans on Twitter.
Don, thanks very much. Great article, it's really worth a read. Don is a features editor at the "Atlantic." He's also the author of "Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do about It," but he's written about this particular issue in the "Atlantic." Really, long and worth your time.
All right. So many questions about the Facebook IPO. We asked you to tweet us yours. We'll answer some next on YOUR MONEY.
VELSHI: It was one of the most expensive status updates ever this week. Facebook filed for its $5 billion IPO. The social media giant generated $3.71 billion in revenue last year. With you, me and the roughly 845 million users the site has, will Facebook going public make it a revolutionary stock or one that just might start out overpriced?
Matt McCall is the president of Penn Financial Group, back with us, Richard Quest.
Gentlemen, welcome. Let's talk a little about this. Because for all the stuff about whether you like Facebook and whether they have to advertise more, the question most people ask me on Twitter and in person is how much is the stock going to -- cost and am I going to make money.
So let's just take a look at this. They had $3.7 billion in sales last year, 845 million active users. Now what's it going to cost you on day one? According to their filing it could cost as little as $30 a share. That is not going to be likely. Some of the better guesses are $45 to $50, taking into account all of the hype.
What are we comparing this to? Let's compare it to Google for a second and you can take exception with that because some people have been calling it Zynga or Groupon or Yahoo!. Or the not public MySpace. Part of Rupert Murdoch's empire.
What happened to Google in its first year? It priced at $85, closed above $100 on its first day and closed at $280 a year later, but even on day one, you had people, including me, saying this is expensive.
This is a different paradigm, Matt. I wonder whether we shouldn't be thinking of -- of Facebook as a Google.
MATT MCCALL, PRESIDENT, PENN FINANCIAL GROUP: You know, if you're going to compare it to anything, I think you have to pick Google, that's probably its closest competitor. But if I'm comparing the two, I then look at evaluation it brings down the numbers.
VELSHI: Right. It's nuts.
MCCALL: Yes, you're looking at 27 times revenue last year versus Google trades at five times. So you're over five times overvalued than Google.
MCCALL: That tell me --
VELSHI: And if you're one of these people who looks at PE, price to earnings.
MCCALL: One hundred.
VELSHI: At 55 to be about 100.
MCCALL: Yes. It'd be 100 --
VELSHI: Versus 20 for Google?
MCCALL: Google. So again you're five times overvalue of Google. But it does have the hype and the hype can keep a stock valued that high for a short term.
VELSHI: What do you say, Richard?
QUEST: I'm going out on a limb here. It may well be compared to a Google, but Facebook is not Google. Google has become the modern day equivalent of the phone book. Facebook is not the modern day equivalent of anything in that sense.
VELSHI: But that's good. Isn't that good?
QUEST: No, because --
QUEST: Google doesn't stand -- Google is unlikely to suddenly have the fad. Arrival and they come along, but the fad element is not going to. I had a great analyst say once the moment your parents start using Facebook, that's when the kids go in the opposite direction.
VELSHI: OK. Let me -- let me hit you with this, Richard. This is interesting. It struck me as odd. You know, Mark Zuckerberg, the founder, put out a letter when the IPO is announced and in it he said this which I cannot read with a straight face. Quote, "It was built to accomplish a social mission, to make the world more open and connected. We think it's important that everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do."
And it went on to say things like that. He'd like you to think that Facebook is all about opening up the world. And I don't -- I don't object to that. I also don't object to the fact that it is a business. And quite likely a very lucrative business. The question is should you invest in it?
QUEST: And, and when you look at the numbers underneath the IPO, it's not that much of a remarkable business. It's nearly a billion users, 800 million, the revenues are not that high, they're growing. But other than that, the metrics of this company are not that extraordinary.
VELSHI: Matt, they have more than half their users use Facebook on a mobile device.
VELSHI: They don't monetize that all. So when you're saying it's not that profitable, my view is that you -- this company hasn't started hitting the gas pedal yet.
MCCALL: No, there are opportunities and it's going to be all about mobile. We know -- you know everybody has everything on their phone these and five years from now everything is going to be mobile. So if they can monetize and somebody else is in trumpet the problem like Richard said, somebody may jump in whether them and take this over and then where is the revenue going.
QUEST: Or something else comes along. Will you -- I come back to this idea, I think it's a completely fallacious argument to look at it as being Google. We use Google every moment of every day, paying or whatever it is, as part of our everyday life in our work, in office, whatever. Facebook is not --
MCCALL: But think of Google when it originally came out. It was basically just a search engine.
QUEST: Right. That's right.
VELSHI: They had other search engines so you could have used --
QUEST: So put it back to mouse trap.
VELSHI: Right. Yes, so Facebook has built a better whatever it is.
QUEST: Yes, but some -- but it's not essential.
MCCALL: What about China? You cover the rest of the world, what about China?
VELSHI: Google and Facebook isn't in China. The China competitor that has about 200 million users versus 847 million users. Facebook has made lots of noise that it wants to be in China. Does that change the game?
QUEST: Not really, no. It will just get bigger proportionally, but no, it doesn't -- it doesn't change my fundamental point.
VELSHI: OK --
QUEST: At some point, a rival to Facebook will come along and that's where the risk is.
MCCALL: But when you look at Facebook, the majority of their revenue comes from just ad revenue, which grew 44 percent last quarter.
VELSHI: Right. But unlike everybody's ad revenue it is highly specific. It knows everything about you. Right? It knows what I want, how tall I am.
QUEST: MySpace, MySpace.
VELSHI: Where --
VELSHI: Come on.
QUEST: You fell for it.
VELSHI: Nonsense. It is not MySpace, ignore that. I ask the jury to just ignore that comment.
Matt, on Twitter I asked the folks following me to send us comments, on Facebook and Twitter, Facebook included, on their questions on the IPO, @WashingtonFlak asks, "Should small," meaning private, noninstitutional investors, regular people, for instance, "try to get in early or is the deck too stacked against us?"
Actually, let me just give you the second one because they're related. MCCALL: OK.
VELSHI: What's my chance -- this is from @gohoke asks, "What's my chance of buying a share on the first day?" Your chance of buying a share on the first day is excellent. Anybody can buy a share.
MCCALL: Everybody can buy one share if you want.
VELSHI: Yes. The question is, should you?
MCCALL: No, you should not. I mean look at -- a lot of the other social networking IPOs that hit last year. They ran it for a couple of days, that first day is going to be crazy. Everybody has been out there buying it. And then two weeks later, once they realize, wow, this is valued six times probably at that point more than Google, we're going to sell into it, and big money is going to be selling into it. You're going to be stuck holding a share that you may not hit that level for another year or two.
QUEST: I have made my entire career and keeping this on my back by not predicting.
QUEST: I mean, I'm the person who -- I'm the person who bought (INAUDIBLE).
VELSHI: Very good. You all are terrific, thank you. You look like a million bucks, as always, Matt. And Richard, you are looking splendid in that tie of mine. Are you leaving it or are you taking it?
QUEST: No, no, you can do with a tie.
VELSHI: I can have it?
QUEST: Yes. Would you to have a tie because you've admire it so much.
VELSHI: I really enjoy this tie. It was hanging on the back of my office door so --
QUEST: Shut up, (INAUDIBLE).
VELSHI: That comes next.
On this show we are constantly looking for innovative solutions to America's greatest challenges. Why our next guest says you shouldn't be surprised if those solutions come from students who have yet to earn a college diploma. We'll explain next.
VELSHI: It's time for the "Big Fix" where we take a look at a problem facing America and break down solutions. Over the past few weeks we've heard some of the biggest names in business, media and academia offer solutions to problems that affect each and every one of us every day.
You may not have heard of my next guest. But we want to introduce you to Ankur Jain. He founded an organization that helps student entrepreneurs turn ideas into innovative business that tackles some of the world's most pressing issues, not issues you would normally associate with students. It's called the Kairos Society. It puts the most promising student entrepreneurs from around the world in contact with global business leaders.
Ankur, thanks for joining us. You've got a gathering this weekend in New York City of some of these people. What's your thinking? What do you think these group of students can do that hasn't already been tackled?
ANKUR JAIN, FOUNDER AND CHAIRMAN, KAIROS SOCIETY: Yes. You know, Ali, right now we have a unique opportunity with the next generation of entrepreneurs. Right? This generation is not only more interconnected than any previous one.
JAIN: But they're able to look at problems from new angles and new ways. So we take the brightest talent. And you got to look at the cross disciplinary approach at the engineering students, science and business students, and we say, how can we look at health care in a way that hasn't been looked at before?
JAIN: Can we take the AI knowledge that our students in China are learning about?
VELSHI: AI, meaning artificial intelligence.
JAIN: Artificial intelligence.
JAIN: And then combine that with some of the mechanical iPhone applications that our students in Silicon Valley are building? Right? And when you do that, we can create a new platform that can diagnose patients better than a board certified doctor, right? So what happens now when you bring these students together and really focus them on specific problem spaces.
JAIN: And that's what we're doing this weekend.
VELSHI: All right. And what do you do? Do you open it up to them to try and determine what the biggest problems that are out there to be solved are?
JAIN: It's a combination. So we've gone out to leaders like yourself and said, if you could focus the world's most influential young entrepreneurs in solving one problem.
JAIN: What would that be?
VELSHI: And you put that out to everybody?
JAIN: And we put that out. And we came up with 10 specific problem spaces.
JAIN: You know, 40 percent of health care diagnostics are incorrect today?
JAIN: Right. Education today is not personalized to the individual.
JAIN: It's tailored to the masses. So now let's take these specific problems and now take these students, put them in a room not only with their peers but with leaders of today. So we can take the wisdom of what's happening today.
JAIN: And merge that with a new way of thinking.
VELSHI: What's the benefit? I know you're not a great person to observe it because you're young and smart yourself. So you don't have this ability to say, why does this group of students, why are they able to look at it from a different angle or look at the same house rather than going in through the front door through a side door or a window?
VELSHI: How is it -- is it just the nature of these young entrepreneurs that they don't look at things the same way?
JAIN: I think there's two parts to it. One is a generational thing where when you're younger, you don't have the, quote, "experience" to tell what you hasn't worked in the past. So you can look at things in totally new ways. If you look at the X PRIZE Foundation, for example, it's the people that had never been in the oil industry that have developed the world's best solutions for oil cleanups.
JAIN: Right? Because you take a totally different approach. VELSHI: They tripled the industry standard of cleaning oil out of water.
JAIN: And you're seeing that with these students again today. You're seeing 21-year-olds saying why are we treating cancer with these big machines? Why can't we take targeted genetic sequencing approaches to individual cancer cells.
JAIN: To identify what type of cancer they have and then make it --
VELSHI: So the idea is they're not invested in whatever system is not working as efficiently. They can start with a blank slate.
We really admire that you're doing this. We are focused on this show on big fixes and new takes on it. And you are doing that. I look forward to coming down and joining you for a little while and listening to some of these great entrepreneurs.
JAIN: Now thank you. I mean definitely think of me as you're looking to celebrate these young entrepreneurs, the Kairos is 50 this year on Kairoscity.com is really promoting and showcasing how these young entrepreneurs are specifically solving our world's biggest problems.
So thank you, Ali.
VELSHI: Very good. Ankur Jain is the founder of the Kairos Society.
Well, this whole segment you've probably seen the words "big fix" all over the screen. I'm going to explain why we're doing this and how you can participate in it. My XYZ is next on YOUR MONEY.
VELSHI: Time now for the XYZ of it. There's been a change in the works here at YOUR MONEY. I hope you've noticed. I, like you, have grown tired of a typical point, counterpoint discussions that dominate political discourse and by extension, media coverage of it.
Instead, I want to offer you highly informed conversations between people who have worked hard to study or develop solutions. Now to do that, we need to think big. Less than a month ago, CNN's Fareed Zakaria sat here in this studio and said we have to find a way to get the role of government to be pro-growth, pro-middle class by investing in science, technology and education. He said you can't cut your way to a new generation of prosperity.
Mort Zuckerman, editor-in-chief of "U.S. News and World Report", lamented the mismatch between the number of people coming out looking for jobs and the qualifications that those people need for jobs. Well, going forward, we're going to discuss new ways of looking at the same old problems. It's not enough to say we want to create jobs and we want better education. There are specific things we can do to achieve these goals. And they are what I will be talking about.
We have in the last few years become unsure of ourselves as a society and in some case as individuals. Even as indications seem to show that we're heading into some sort of economic recovery. It's as if Americans have stopped believing that hard work and drive can lead us to prosperity and a better future for our children.
Look, we know what the problems are. We're looking for solutions. I'd like to know your biggest concerns and the best solutions you heard. If I could do one good thing in this year of half-baked ideas being pitched to earn your vote, it's to stimulate the tougher, less sexy, less bumper sticker like conversations that should be happening about our collective future.
You know how to contact me with your ideas. Tweet me @Alivelshi. Tweet the show @CNNYourmoney. The good news is though the clock is ticking, it hasn't yet struck midnight. We still have time. We have the resources. We have the technology. The question is, do we have the will? That's my "XYZ."
Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday 1:00 p.m. Eastern and Sunday at 3:00 p.m. Make sure to check out my book with Christine Romans, "How to Speak Money." It's a step-by-step guide to understanding the language of money with everything you need to know. We hope can you pick up a copy, learn from it, and tell us what you think. Have a great week.