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QUEST MEANS BUSINESS
U.S. Jobs Report Takes Global Economic Toll; Eurozone Unemployment Rate at Record High 11 Percent; Inside the Royal Mint; Spain's Banking Crisis; Companies Race For Royal Brand Association
Aired June 01, 2012 - 14:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
HALA GORANI, CNN INTERNATIONAL ANCHOR: I'm Hala Gorani at CNN Washington, the headlines this hour.
The U.N. Human Rights Council has just voted to authorize an independent investigation into the massacre last week in Houla, Syria. Commissioner Navi Pillay says the killings could amount to a crime against humanity, and he's urging the Security Council to refer Syria to the International Criminal Court.
And news of more horrific killings coming out of Syria today. A huge crowd turned out for the funeral of 12 workers killed in the city of Qusayr near Homs. Opposition activists say militia loyal to the Assad regime, the shabiha, dragged the workers off a bus, lined them up against the wall and executed them.
One economist described the numbers in the new U.S. jobs report as "shockingly low." The report says only 69,000 jobs were added in May, the weakest growth in a year. And on top of everything else, the unemployment rate rose to 8.2 percent in the U.S. The figures are boosting fears of another economic slowdown.
Here's a current look at the big board, 251 points lower for the Dow at 12,141.
I'm Hala Gorani. That's a look at your headlines. A lot more on these U.S. jobs numbers on QUEST MEANS BUSINESS, which starts now.
RICHARD QUEST, HOST: The week started badly, it's ended terribly. The Dow, the DAX, they are all, as you can see, sharply down. The growth (inaudible), the cost to the U.S. is high unemployment. And tonight, in a sea of misery, the Diamond Jubilee, at least one thing, perhaps, we can celebrate.
I'm Richard Quest. It may be Friday, but of course, I mean business.
QUEST: Good evening. June has begun with one big jolt. There was a serious miss on the latest U.S. job numbers, and that has taken its toll across the economic world. The economy only added 69,000 jobs in May. The market has been expecting more like 150,000. The unemployment rate also went up to 8.2 percent.
To add insult to injury, the previous two numbers, they were revised downwards, too, shaving another 49,000 jobs off those created. You can see that pretty much not since the beginning of the year has there been anything like satisfactory large-scale job creation. And remember that it was job creation that was the bright spot on the U.S. economic recovery.
President Barack Obama had to admit things now are moving much too slowly.
(BEGIN VIDEO CLIP)
BARACK OBAMA, PRESIDENT OF THE UNITED STATES: The economy is growing again, but it's not growing as fast as we want it to grow. Our businesses have created almost 4.3 million new jobs over the last 27 months, but as we learned in today's jobs report, we're still not creating them as fast as we want. And just like at this time last year, our economy is still facing some serious headwinds.
(END VIDEO CLIP)
QUEST: That's President Obama, even before the job numbers came out, there was abysmal manufacturing data in the Eurozone and the U.K. on the PMI index, which really took its toll. Manufacturing shares bore the brunt, Adidas, Daimler, Infineon (ph) all lost around 5 percent or more in Frankfurt.
And that's not surprising that the DAX was down 3.4, 3.5 percent, every market in Europe was absolutely creamed, this, really, all of the indices are showing losses for the whole week.
If you look at the U.S., not only what was happening on the PMI and the European numbers and the Eurozone crisis, but that job number down 268, at 12,000 and change, down a loss of 2 percent. In a moment, we'll get the analysis from Julia Coronado in New York from the trading floor to hear what she has to say and put it into the wider context.
First, though, as we tick-tock through the day, Felicia Taylor joins me from New York.
Julia will give us the sort of just how bad it was, but Felicia, from your looking at the numbers, what was underlying it? Why are we now seeing this unwinding?
FELICIA TAYLOR, CNN CORRESPONDENT: You mean unwinding in terms of lack of job creation or unwinding in the marketplace? OK. This -- they say three makes a trend, and we've now seen three months of dismal jobs growth. The sentiment just isn't there.
And I spoke to a number of different experts out there. Traders are hoping that this is the kind of thing that's going to stimulate the Federal Reserve to initiate a QE3. But if you talk to economists and analysts out there, what they really believe is that this has to come from the fiscal side in order for there to be job creation in this marketplace.
There's only a few more months before there's a national election in the United States, and President Obama has a problem in terms of fixing this economy. If they don't reduce taxes, if they don't stimulate business spending so that businesses are willing to get out there and put the cash that they've got on the sidelines back into the economy, you're not going to -- you're not going to see any kind of job growth.
There is nothing pretty about this jobs report. It was dismal, horrible, pathetic, any adjective you want to use to describe it, this was a dismal report. If we don't get somewhere at least about 150,000 in the next month's report, this is definitely going to point to the fact that there is anemic growth happening in the United States.
A revised GDP number, 1.9 percent, you know, there just isn't the kind of growth that we need to see. And frankly, the whisper number for the jobs report -- that's the number that traders really expect to see, even though the consensus was 150,00 -- was 130,000. We got half that number. It's not good, Richard.
QUEST: Felicia Taylor, who is in New York.
Julia Coronado, the chief economist for North America, BNP Paribas, Julia joins me now.
You heard the adjectives that Felicia used. And (inaudible) care to throw in of your own?
JULIA CORONADO, CHIEF ECONOMIST FOR NORTH AMERICA, BNP PARIBAS: Well, I'm actually -- although it's not usually my role, I'm going to sort of take a step back here and say let's not get too panicked about this.
We knew there was a serious seasonal issue. We knew that a record warm winter meant fewer layoffs in the construction industry in the winter months, contributing to much higher than trend numbers and we were going to get some payback in the spring, and that was a big story here. We saw 28,000 decline in construction jobs. That's not really the trend. The trend in construction is probably --
QUEST: All right.
CORONADO: -- but we got positive numbers in the winter, negative numbers, smoothing through, we're probably running at a trend pace of around 125,000 jobs, which is in line with sort of 2 percentish GDP. So it's not great, but it's not really a train wreck.
QUEST: OK. So the shock value of the number, thank you, you point out we can discount if you like, we can come down off the ceiling. But at 100,000 to 125,000, even if you average out, the worrying point, particularly throwing in my Eurozone crisis, if there is no engine that will tell us that it's going to back up to 150,000 and 200,000.
CORONADO: Exactly. Well, and that is the worry, is that over the last six months, really, the U.S. has been the star of the class, right, there's -- the U.S. has been outperforming expectations, outperforming the global economy and to the point where people were looking to the U.S. to drive the global economy, something that always worried me very deeply, because we can see the structural headwinds are still here. Housing has a very long road ahead of us.
The government sector is still shrinking. We see that in the numbers. So we're not -- it's really going to be a struggle for the U.S. to achieve above trend growth. And that does mean that really you can't look to the U.S. to be the engine of the global economic train. And then the question is, OK, so who will be?
QUEST: All right. Well, staying in the U.S., then, if the U.S. is not the economic train, let's stay in its own bailiwick, does these sort of numbers, along with the PMIs and the other numbers that we're seeing, is QE -- I can't remember whether we're up to QE3 or 4 now. But whatever it is --
CORONADO: We're on QE3.
QUEST: We're on -- well, are we looking for QE3, do you think, or is the Fed going to (inaudible)?
CORONADO: Certainly it's going to be on the table for the discussion at the June meeting for the F1C, yes. I think it's on the table. I don't think it's a foregone conclusion. I think it's going to be close call. Keep in mind that the Feds' dual mandate says they need to keep prices stable and they need to keep the unemployment rate coming down, basically, the labor force continuing to heal.
So stable prices we have. Our core inflation's been stable, inflation expectations are stable. The unemployment rate, up until now, have been making some progress. You know, there's a lot of debate as to how to interpret that. But on balance, the labor market has been taking baby steps in the right direction. Yes, this raises questions that you might not be making progress.
And so maybe you should do more. So it's definitely on the table. It will be tied to events in Europe. If we get further deterioration in sentiment, in the stock market, in the European economy, in the Chinese economy, certainly the Fed will be willing to play a role in keeping the -- in stimulating the economy and helping get us to better growth numbers.
It's true what Felicia said. It's -- monetary policy can't create jobs. But it certainly can help cushion a deeper weakening than what we've seen already.
QUEST: All right. We will leave it there for the moment. We'll talk more about your thoughts on QE as and when it happens, if indeed it happens, and whether or not it actually does work. Julia Coronado, good to see you. Thank you for joining us.
And now a lovely weekend, if only we have a lovely weekend with so much gloom in the economic -- of course we can have a good weekend. If the situation's bad in the U.S., in Europe it is absolutely desperate. Unemployment reaches a Eurozone record and we'll take you through the numbers on why they are so horrific. (Inaudible).
QUEST: A sovereign debt crisis, a banking crisis and now a jobs crisis. The Eurozone unemployment rate is at a record high. It is a disturbing number, 11 percent. There are almost 25 million people without a job across the European Union and the split between the core and the periphery is not painfully obvious. If you join me at the superscreen, we can show exactly the way in which this all falls about.
The countries with the lowest unemployment at the moment, well, obviously, there is Austria which has the lowest in the zone. It is now just down at just 4 percent. It is the lowest country. The Netherlands and Luxembourg, they are both at 5. 2 percent, second lowest in the zone.
And in fact, if you look at Germany, Germany comes in at 5.4 percent, the fourth lowest in the Eurozone. So you have those countries which (inaudible) what we call now the northern European -- I mean, obviously not, which we have -- they're still further.
But those are the core area of that. Now if you put into the highest, no great surprise there, with the countries that are so badly affected. You've got Spain, look at that, 24.3 percent. That's the highest in -- level of unemployment anywhere. We also have Greece, you have Portugal at 15.2 percent and onwards and upwards.
You can see the country's 21.7 for Greece. Now what I really want to show you, is besides these number -- because we were talking to Julia Coronado a second ago in the United States, and if you compare the situation -- and remember what we're talking about. We are talking about Austria with its 4 percent and Spain with its 24 percent.
Now put it into the United States. And here you have those countries, those states like North Dakota, 3 percent unemployment, OK. Nevada, 11.7 percent unemployment. So let's pull our strands together. And what we can clearly say is that most of the United States, in fact, all of them except for three states, has a better rate of unemployment than the E.U. average. It puts it into perspective.
Paula Newton is with me now.
PAULA NEWTON, CNN CORRESPONDENT: Well, and the figures that you gave would be even more stark if we take Austria and Germany out of the entire equation, right? The problem here, Europe still another thing for Europe to figure out, are workers -- generally in Austria, for all intents and purposes, you can see 4 percent. You can play 6 percent.
You and I both know that's full employment. That means actually labor shortages in some place in Germany. Are the workers from Greece or Spain going to Germany? No. And that's the way an economic zone should work.
QUEST: Right. But they can't. We know the reasons why they can't.
NEWTON: Do we?
NEWTON: -- 20 years on --
QUEST: No, no, no, language skills. You can't -- you know, that's why the U.S. is able to have that mobility of labor.
NEWTON: Let's discuss another problem with the unemployment crisis. OK? You do have pockets of industry that are working, even in Spain, even in Greece. What's happened? The economy is freezing in those areas. The banks refuse to lend money. They are not lending money. They are not giving the right support to industries that can create those jobs.
Another problem that they have to look at, when we're doing this debate between austerity or growth.
QUEST: OK. So when you put it into context of where we go from here, you cannot have a Eurozone with 11 percent unemployment. It's actually gone up a percent since the previous year. And still not -- you know, eventually the bubble is going to burst. The unrest is going to arrive.
NEWTON: We talked about this yesterday, right? Two things that people fear, one is a run on the banks, the second thing, civil unrest. Can you imagine in the psyche of especially the young people and in both Italy and Spain, you're dealing with large populations of the youth, unemployed, Richard, have gone to school, great educations, nothing to do.
This is a risk. It's a risk on the street. It's a risk with the banks and it's something they're going to have to address in that euro summit again coming up, and perhaps at the G-20 as well, because there's a lot of momentum going into that meeting.
QUEST: Don't start with me on the G-20. Don't --
NEWTON: -- they want progress.
QUEST: -- G-20.
NEWTON: I'll be back next week, (inaudible).
QUEST: Don't go just yet. (Inaudible). (Inaudible) thank you very much, right. Cristina Parra lives in Barcelona. The 30-year old finished a psychology degree four years ago. She hasn't been able to find a job in that field. Instead, she's doing temp work for a property rental business. Her employer's struggling to pay her. Cristina joins me now via Skype from Barcelona.
Whenever we talk about the numbers as we have done this evening, Christina, it really doesn't bring home the fact that there's 25-30-40 percent unemployment amongst youth. But you've really found it difficult to find work, haven't you?
CRISTINA PARRA, BARCELONA RESIDENT: Yes it is very difficult to find -- it is (inaudible) education but (inaudible) don't really get (inaudible) job (inaudible) studied for. You know, it's -- you can't work in your professional field.
QUEST: Unfortunately, we have a poor connection, which is a great shame, Cristina. We will remedy that so that we can talk to you next week, where we will have a clearer connection. Thank you for that. Serious matters, and we actually want to make sure we hear what she says. And I don't know about you, but I was having a lot of difficulty hearing that.
The "Currency Conundrum," eagle eye viewers, you will spot it the same as yesterday. Because of the breaking news, we didn't have a chance to reveal the answer. So the biggest and heaviest gold coin in the world weighs more than a ton. Whose image will you find on it? President Sheikh Khalifa bin Zayed Al Nahyan, the Queen, Elizabeth II, or Lady Liberty?
The dollar has weakened following the U.S. jobs report. Talk about two weak men holding each other up, the dollar versus the euro. (Inaudible) saw the euro bounce back, though, get excited. It's still under 1.25. It's off nearly 7 percent against the dollar this month. Sterling's coming back from an early move. Those are the rates. This is the break.
QUEST: The answer to our "Currency Conundrum," who's on the biggest gold coin in the world? Queen Elizabeth II. The coin was minted in Perth, Australia, last year in time for the Queen's visit to the city for the commonwealth heads of government. The coin weighs more than a ton. It's worth about $50 million.
For 60 years, British people have seen Queen Elizabeth II's profile shining at them from their pounds and their pence. The Royal Mint estimates that there are about 28 billion coins in circulation today with the Queen's face on them.
The oldest coin we could find in the office was from 1971, the year the decimal currency came into being. The Royal Mint's chief executive Adam Lawrence showed us just how much there is to know about the coin in your pocket and how the mint itself is joining in Jubilee celebrations.
(BEGIN VIDEO CLIP)
ADAM LAWRENCE, CEO, ROYAL MINT: We produce (inaudible) 4 billion coins of blanks every year. We have thousands and thousands of tons of product going through here every month. Depending on the coin, we would make either get some steel or we would melt materials.
We would then make a blank. We would then make it soft enough that we could hit it with two pieces of metal. We'd (inaudible) and then we would strike it. And then we would pack it up and store it here, and then it goes off to a cash center at some point in its future.
I think people don't understand how (inaudible) a process it is. They don't understand the scale of the operation. They don't understand the amount of processes it goes through. And I don't think they understand quite how much passion and dedication is put into each coin that we make.
LAWRENCE: Every single coin that we make for U.K. actually is approved by the Queen herself. It's important for us to do these things very, very well. (Inaudible) back to Alfred the Great, the kings and queens. I think it would be a crime if we weren't involved in (inaudible).
The process for making a Diamond Jubilee coin, it's a lot longer than we would do for a normal circulation coin. The designer's been invited to put forward designs for it. We'll probably (inaudible) try and produce is really special mementos of a really special occasion. We'll start off with a sketch and once everyone's agreed that the sketch is the right thing, the next stage is to go to a plaster model.
This is (inaudible) into our (inaudible). So (inaudible) start off with (inaudible) until they get the right relief. Once we've got this right, we'll (inaudible) scan so we have some very high (inaudible) scanners, and they will scan (inaudible) scan the surface to get every single variation in the surface. And then after (inaudible) with that, we've got it on the computer, we'll then generate what we call a master tool (ph).
Just for 2012, we've got (inaudible) but we've also got a brand new effigy of the Queen on the back as well. And we thought it was special, just for this year and just on these coins that that effigy goes there. It's really (inaudible) the young queen when she came to power and the Queen (inaudible) for 60 years now.
(END VIDEO CLIP)
QUEST: And are many people like the Queen, who will be able to have their - -
(BROADCAST INTERRUPTED BY EMERGENCY ALERT SYSTEM TORNADO WARNING)
QUEST: Hello, I'm Richard Quest, more QUEST MEANS BUSINESS in a moment. This is CNN, and on this network, the news always comes first.
The U.N. Human Rights Council has just voted to authorize an independent investigation into the massacre last week in Houla, in Syria. Commissioner Navi Pillay says the killings could amount to a crime against humanity, she's urging the Security Council to refer Syria to the International Criminal Court.
May was the weakest month of job creation in the United States for a year. Just 69,000 jobs were added, far short of expectations and unemployment rate ticked up to 8.2 percent. President Obama admits the economy is not growing as fast as he wanted.
Ireland has voted yes in the referendum on Europe's fiscal pact. The new rules aim to bring stricter fiscal discipline to member states. More than 60 percent voted in favor of the treaty. The European Council President Herman Van Rompuy, he said, it's an important step towards recovery and stability.
Meanwhile, celebrated opposition leader is trying to temper the excitement surrounding her country's political reforms. Aung San Suu Kyi urged participants at the World Economic Forum in Bangkok to invest in Myanmar's development. But she also cautioned them to keep a healthy skepticism about the reforms which, she says, are not irreversible.
QUEST: As Spain's banking sector hogs the spotlight of the euro crisis, the country's borrowing costs are now truly, well and truly stuck in the danger zone. The yield on 10-year bonds, around 6.5 percent. They've been about 6 percent for the best part of a month.
We traditionally say 7 percent is the limit at which pain usually forces some form of bailout package. But frankly, 6.5 percent for any length of time, with the level of debt that Spain carries and the borrowing that it still requires is a serious matter.
Spain's banking crisis has been a long time coming. And as (inaudible) correspondent Al Goodwin explains from the capital, at its root is the chronic housing crisis.
AL GOODMAN, CNN MADRID BUREAU CHIEF: This is a major shopping center near Madrid's airport. And right here in the shopping center package lot, over here, is a housing fair. You can hear the loud announcement for this fair in Spanish. The Spanish developer is trying to get people who may have come here to buy only new clothes to go a bit further and buy a new home.
There are hundreds of thousands of new homes leftover from the real estate boom that were never sold, the government says. That's a big problem for Spanish banks, which got stuck with a lot of these homes when projects they had financed, loaned money to, went bankrupt.
These bad real estate loans are dragging down the bank balance sheets and international investors are worried, not just about the banks but about Spain's sovereign debt. There's talk of a potential European bailout for the banks or for Spain or for both.
But the government says it's not going to happen. Meantime, everyone's trying to sell their new homes. (Inaudible) just this week to offer me a 40 percent discount on a new home on the Mediterranean coast. At this fair, this long-time Spanish builder and developer, is trying to sell its new homes built recently with its own financing.
And the offers here are enticing. You could even walk away with a brand-new car if you would just buy a new home -- Al Goodman, CNN, Madrid.
QUEST: Now for this weekend, Britannia rules the retail sales. If you want to sell something, put this flag and perhaps the Queen's face on it, and you stand a good chance. Making the most of Brand Monarchy after the break.
QUEST: You know, it's always quite difficult to quantify the actual value - - cost. There are plenty of numbers that you can throw at it as to what the royal family and the Queen are actually worth to the United Kingdom. Well, according to Brand Finance, the diamond year, the British royal family will contribute around $1.5 billion to the U.K. economy, says Brand Finance.
The Brits are expected to spend more than a billion dollars celebrating the Queen's 60 years on the throne, more than double what they spent during the royal wedding last year. And you don't have to look far to see those retailers that are cashing in on Brand Royal.
(BEGIN VIDEO CLIP)
QUEST: The fact that companies are cashing in on the Diamond Jubilee is no surprise. It's the way they're doing it that is perhaps a bit different. From corgis and cushions to coats and soaps, companies are attacking this with an enthusiasm and a gusto that's rarely seen. And it's all the more remarkable because a few years ago, one wondered what was going to happen with the monarchy.
Today in this era of brand association, all companies want to be associated with the Queen, because they've learned, with the Queen, there's right royal profits.
(END VIDEO CLIP)
QUEST: A small portion of the economic worth of the monarchy, according to Brand Finance, put the value at nearly $70 billion.
Mary Ellen Field is the associate director, joins me now.
How do you come up with a number like that?
MARY ELLENFIELD, ASSOCIATE DIRECTOR, BRAND FINANCE: Well, it's really your fault, CNN's fault, because last year at the royal wedding. one of your reporters asked us what we thought the monarchy brand was worth. So we did a back-of-the-envelope calculation, but we got really interested. So this year we thought we'd do it properly.
QUEST: How have you done it? What's -- where did you come up with this number, because (inaudible). Which way is the wind blowing?
FIELD: This is not the Queen's personal worth?
QUEST: No, this is what the monarchy's worth in the U.K.
FIELD: To the U.K. So we've looked at everything from the tourism that it brings in from the royal warrants, the royal warrants that businesses get who've given good service to the royal family, various members of the royal family who have given royal warrants, which they can display on their stationery, that brings in an enormous amount of money and increases the premium that they can charge for their brand.
QUEST: And fundamentally, I mean, I'm on their sort of monarchist, if you like, or Brits that see the royals as being a part of the constitution of the country, not necessarily the commercial benefit. But I can see that tourism and go to it, and it's tourism that tends to be the way people look at it commercially, isn't it?
FIELD: Yes, but it's not only tourism, it's the encouraging businesses. And you know, a lot of criticism of the royal family is, you know, that they're not elected and that they cost us too much in security. But then if we had a president, it's a non-negotiable. You'd still have to pay the security costs if you had a president. So that's not really -- that's not a good argument.
QUEST: If Britain decided that it was time to -- not that they're going to, because the latest polls show that 70 or 80 percent --
FIELD: Eighty percent.
QUEST: -- 80 percent in the latest polls, it really comes down to whether it's value for money, doesn't it?
FIELD: Yes, well --
QUEST: I mean, that's really the core of it.
FIELD: Yes, they -- the royal family cost us all 62 pence per year.
QUEST: That's about $1.
QUEST: Just (inaudible).
FIELD: Yes, a dollar a year.
QUEST: A dollar a year.
FIELD: So I think we can manage that.
QUEST: Right. But when you start all the (inaudible), the moment you go to the Queen, and then you go to William and Catherine and people of that -- it's the rest of them the people sometimes rankle.
FIELD: Yes, but most of them are not on the civil list. We included the civil list in our calculations. That was a cost. We took the civil list away from it. We looked at the property or the property maintenance, but not a lot of them are on the civil list any more.
QUEST: Right. And what did you find -- or I think you found that the royal support granted, it seems, to have been changed (inaudible). What did you find was the single biggest contributor to the economy from the Royals, did you think?
FIELD: At the moment, it's all the activities. It's the people who are employing (inaudible). I was out at a factory this morning with another network, interviewing, in fact, a business owner, who the enormous increase in their business is being generated by products that they're making, that they made for the royal wedding, and that they're making for the celebrations at the moment, which are continuing on.
The Crystal (ph) Jubilee's going all year. They've employed lots more people because of it. And as you've seen, I mean, the viewers who aren't in London can't see. I mean, the city and all the -- everywhere is really dressed up for this, and everybody had to buy the material for it.
QUEST: Absolutely. Thank you for joining us --
FIELD: Thank you.
QUEST: -- and talking about this. I have (inaudible) I do need to show you, but I'll show you after I've just talked about austerity and (inaudible) special coverage focusing on the Diamond Jubilee.
QUEST: Oh, but that always has to be the cue for (inaudible) music. Be part of the celebrations. Book your tickets for Sunday's Thames Diamond Jubilee pageant, a flotilla, up to 1,000 boats from around the world. It's live. It starts at 4:00 pm in London.
Now, before we go to Jenny Harrison, I do need to show you this little gem. This is what I bought when it was the Queen's Silver Jubilee. There you are, the Silver Jubilee 1977. I was a mere grasshopper, knee-high, and I bought this mirror. And it's hung lovingly in a part of my apartment ever since.
Jenny Harrison's at the World Weather Center. She wouldn't remember. She wouldn't remember the Silver Jubilee --
JENNY HARRISON, CNN METEOROLOGIST: Of course I do. Look, I've got my bunting. I brought it in specially.
QUEST: Oh, (inaudible).
HARRISON: (Inaudible) smarter (ph) than yours. It's nice, isn't it.
HARRISON: I've got nowhere to hang it.
I know. I've been singing away, in fact. And I do remember the Silver Jubilee. Of course, I do. In fact, it's the only time I ever won a prize, 10 pence in a raffle and I won a prize. Ten pence. That's inflation for you. Would cost you more than that now. As for the weather conditions, Richard, I know you need to know what is happening.
We all need to know, is it going to rain? The answer is, yes, it's just the timing, really. Is it going to affect any of the events? Now in the last few hours, we've actually seen a lot of the showers die away from the U.K. They've been very well scattered, scattered showers as well across into Germany. Again, they've been easing.
The temperature, this is a whole different weekend temperature wise from last weekend, bit of a shame, really, but at least it won't be too hot. We have got this cold air, of course, across the north, the temperatures actually back to the average or, in some cases now, a little bit below. But this is the concern, this line of rain showers that are pushing in.
At times, this rain could be pretty heavy. It's looking right now as if this band of showers, even some thunderstorms are going to come through later on Saturday night into Sunday morning. Sunday, of course, is the big day. That is the day of the pageant along the river, but Saturday should be fine. We've got the races, Epsom Downs.
Of course, the Queen and the Duke of Edinburgh will be heading off for their first official engagement. And the weather conditions, there might be some showers at either end of the day, but for the most part, it should be dry, certainly in the afternoon, temperatures maybe 15, 19 degrees Celsius. And then on Sunday, the morning, this is when, of course, all the boats will be getting inclined preparing for the big pageant along the Thames.
It will be raining. There's a 80 percent chance of some rain. Hopefully, it won't be as heavy as in the overnight hours. Midday on Sunday, it should clear to cloudy conditions, still a few stray showers. The afternoon we are hoping for some sunshine comes through.
It's looking pretty unlikely and you'll look at the temperature, and it's not a mistake. It's 10 degrees Celsius. It's probably the temperature we will see throughout the day. So this is the rain that's coming in and of course, as I say, Sunday really is the big day. That huge procession, over 1,000 boats along the Thames. It's going to be so much music on all those boats.
If you're trying to get there on Saturday, well, most of the major airports not faring too badly, a bit a low cloud, some strong winds certainly in Stockholm on Saturday. And then you can see elsewhere, just lots of green boxes with all that low cloud. So temperatures Saturday elsewhere, 24 in Paris, 32 in Madrid and just a reminder again for the next few days.
So Saturday should be mostly fine and dry. It's cloudy for Epsom races. Sunday heavy rain in the morning, clearing as we go later on throughout the day, and then Monday another cloudy day. And that's what we said. But we will keep looking. And if we could change the weather forecast, Richard, we could, but we can't.
So be prepared. Wellington -- no, not Wellingtons. You have Wellingtons. But you will need your brolly and your mack.
QUEST: OK, now hang on a second, hang on a second. I'm fascinated by this whole thing, because as we get close, really close now, the weather has been simply extraordinary. We had this magnificent spell.
We'd hoped it was going to last, and it hasn't. And now we've got all the way downhill till next weekend and onto the Olympics, Jenny, what's this music? Did we pay extra for -- every time you mention the -- every time you mention the Royals, cue some twee (ph) music.
HARRISON: Maybe they're just trying to drown us out, Richard. Maybe that's the idea, so they can't hear us talking.
QUEST: Right. So, Jenny, I need me waterproofs and I need to be prepared. And I need to (inaudible). Thank you very much, Jenny Harrison. (Inaudible) quite nice. All right, thank you, Jenny.
A final look at the markets, because we do need to turn to some serious stuff before we do love you and leave you for this Friday and for your weekend. The unemployment numbers, the jobless numbers in the United States, pretty awful.
The number of new jobs created, 69,000, on top of the Eurozone numbers, this is the way the Dow Jones is currently pulled back marginally from the awfulness that we were seeing earlier. But the Dow is still now off nearly 2 percent at the New York Stock Exchange, 236 points.
President Obama admitting that more needs to be done for the year to create more jobs. On the European markets, it was -- I mean, you pays your money, you takes your choice -- down 3.5 percent for the DAX, off more than 2 percent for Paris.
London was down sharply over 1 percent. It just gives you an example of three-year low, all in all, one can hardly say this has been an achievable week. As we leave May and go into June.
And that, however, is QUEST MEANS BUSINESS for -- oh, no, no. Let's have some Royal music. What happened to -- that (inaudible). Because whatever you're up to in the hours ahead, I do hope it's royal and profitable. MARKETPLACE AFRICA is next.
ROBYN CURNOW, CNN HOST: You're watching MARKETPLACE AFRICA. I'm Robyn Curnow.
Now walk in any African market and you'll find shoes, clothes, toys, electronics, much more, made not here but of course in China. While these cheap imports may be popular with consumers, they're not so popular with manufacturers who just feel like they can't compete.
Well, there is a glimmer of hope for the Ethiopian manufacturing sector. One Chinese company there is not just selling their wares in Addis Ababa, they're manufacturing them there, too.
HELEN HAI, V.P., SHOE COMPANY: My name is Helen Hai. This is my shoe factory in Ethiopia. We produce 2,000 pairs of shoes every day. Today I'm very proud to tell you on January the 5th, 600 workers, two production lines, all new brand machines with (inaudible) produce shoes for the U.S. market, make the shoes with the label "Made in Ethiopia."
When we first started, we also made a decision which we recruited 86 Ethiopian union workers (inaudible), (inaudible) through China to our training school to teach them how to make shoes.
TURNESH MANECHA BULTO, EMPLOYEE: (Inaudible). I have been here for two months and then we're now (inaudible). I love so many things, for example, (inaudible). I have to work, for example, I have to be a good worker.
UNIDENTIFIED MALE: (Speaking foreign language).
GROUP: (Speaking foreign language).
HAI: I talk to a lot of business (inaudible). They told me that they give the salary to the local workers. The next day, one-quarter of the workers will disappear. They will want to spend all the money. They come back after 15 days, after they spend all the money. This is typical lack of discipline (ph) and teamwork. That's why in China, over the years, we developed the remedy to overcome this.
UNIDENTIFIED MALE: (Speaking foreign language).
HAI: After (inaudible) Ethiopian union was (inaudible). I can tell you I don't know other things, but for shoes making, they learn as much as fast as Chinese workers.
MAEREG MAMO, EMPLOYEE: There is many, many students will be graduated from university (ph) (inaudible). But there is no work opportunity, you know. And I think (inaudible) will cover (inaudible) into the future.
HAI: It's very well known. Africa offer low cost labor. China right now is the largest training (ph) company to Africa at the moment. And for a company like ours, from (inaudible) point of view, the reason they came here, we want to create value for our stakeholders. Number one, it is the government, because we want to be -- to build a friendship between the two countries.
Secondly, we want our company to prosper (ph).
One of the biggest challenges (inaudible) are in China, the costs, the (inaudible) costs, the (inaudible) manufacturing around 2 percent. But right now in Ethiopia it's about 8 percent. So this is a big issue if we cannot reduce the cost. Secondly, the time. In China, the lead time for us for producing shoes is around 45 to 60 days.
Right now, our output (inaudible) more than (inaudible) days. So this is the biggest challenge. I've got approach that several other finance ministers from the neighbor African countries, they are very keen to invite us to come to their country to do the same thing.
UNIDENTIFIED MALE: (Speaking foreign language).
GROUP: (Speaking foreign language).
UNIDENTIFIED MALE: (Speaking foreign language).
If we don't care about the output in this family (ph) and (inaudible) this family (ph) has no future.
(END VIDEO CLIP)
CURNOW: So the question is how to stimulate the manufacturing sector in other African countries. After the break, we go to Washington and the World Bank (ph) for an expert opinion.
JUSTIN LIN, WORLD BANK CHIEF ECONOMIST: The competitive advantage is determined by what they have now, their labor force, their natural resources and if they have such a large supply of young labor force, then it was quite good education and a strong motivation for improving their life.
CURNOW: Low labor costs may help attract some businesses here to Africa, but crumbling infrastructure, rigid employment laws and a lack of skills are just some of the obstacles holding back Africa's manufacturing industry.
Well, for this week's "Face Time" interview, we turn to Justin Lin. He's the chief economist and the vice president of the World Bank. He's been helping companies to try and set up factories here in Africa.
(BEGIN VIDEO CLIP)
JILL DOUGHERTY, CNN CORRESPONDENT: Mr. Lin, thank you very much for being with us. You know, your overall point is that there are global centers of manufacturing and that Africa at this point has the potential to become a global center. Why is that? What is their potential?
LIN: If they are not developed, they're (inaudible), which they can become parative (ph). You (inaudible) they are in abundance of (inaudible), of labor force and also their resources. And that's important, not only for African country, that's the secret of success for any economy.
DOUGHERTY: And so what are the competitive advantages that Africa has?
LIN: The competitive advantage is determined by what they have now, their labor force, their natural resources and if they have such a large supply of young labor force, then it was quite good education and a strong motivation for improving their life.
And (inaudible) they can use that as a way to compete in the international market by producing those kind of products. They require a lot of labor inputs (ph).
DOUGHERTY: There's a Chinese company, Hua Gen (ph), shoe manufacturer, something you don't normally think about when you think of Africa. Why is it important for African countries to diversify?
LIN: I think it's very important, certainly African country in the past 10 years is doing comparatively well, compared to the past. But they have not diversified. Their economy (inaudible) resources (inaudible). And we know that in the resources sectors, if they only concentrated on those sectors, there are some drawbacks.
And so our approach is looking to every countries and to identify sectors which they be -- they can be very competitive, like in Ethiopia, they have very good supply in leather (ph), and leather (ph), like shoes, ladies' shoes or sportswear, (inaudible) very intensive.
So they have those kind of natural resources. They have the labor force. We can produce that. And they can (inaudible) with technology with access to international market. I'm sure quickly they can turn into one of the major global production centers.
DOUGHERTY: Let's say if labor prices keep rising in Asia, and then Africa comes in to fill that gap, could Africa overtake Asia in manufacturing, ultimately?
LIN: Yes, because the channel (ph) has been doing so well in the past 32 years and (inaudible) right now increase very quickly, because the sub-part (ph) labor in China has almost (inaudible). (Inaudible) for African countries to enter.
They could take over those kind of (inaudible) produced by low wage workers and become very competitive. And at some time, China, with the aspiration of (inaudible) to higher wage economy, Chinese economy also need to (inaudible) to higher, more technological intensive, more (inaudible).
DOUGHERTY: So I guess what you're saying is Africa would fill in, let's say, from the bottom, the primary manufacturing and China becomes ever more sophisticated in terms of what it produces.
DOUGHERTY: Yes. There almost seems to be a message from China, which is you do well when you have very low wages. You don't do so well when wages rise.
LIN: It's a process of growth, because every country in the early stage of (inaudible), they're agrarian, they are poor. When they are poor, they cannot have high wages, otherwise they are not poor. And if they are poor, they have low wages.
And so you need to (inaudible) low wages is a starting point to gain competitiveness and if a country become very competitive, they will (inaudible) to other more sophisticated industries.
DOUGHERTY: Is there an overriding one message or one lesson for Africa in China?
LIN: Well, I think that because China follow other countries, (inaudible) experiences. So I would not say overriding experiences from China, I would say overriding experiences from other successful countries in the world (inaudible). You know, to look into what you have. And that do, you know, what you can do well based on what you have. That is the secret of success in any economy.
(END VIDEO CLIP)
CURNOW: That's it for me, Robyn Curnow. Please do go to our website at CNN.com/MarketplaceAfrica. See you again next week.