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Your Money
Putting The Unemployment Rate In Perspective; America's "Shadow Economy" Spreads To New Services; Unemployment Rate Drops; Stock Market Continues Increase; Warrant Buffett Speaks about Woman in the Workplace
Aired May 05, 2013 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN ANCHOR: A recovery, yes, but is it enough for the millions of Americans still reeling from the recession?
I'm Christine Romans, welcome to "Your Money;" 165,000 jobs added in April, 173,000 jobs a month on average over the past year. That's enough to bring the unemployment rate down to 7.5 percent in April. That's the lowest it's been since December 2008.
Most months we see the unemployment rate fall because people are falling out of the labor force. That's not the case in April. For the first time in a long time, the unemployment rate fell because people went back to work. And monthly revisions reveal more than 100,000 more jobs were added in the beginning of the year than we initially thought.
But to put that in perspective, the unemployment rate was 4.5 percent before this recession. We still have a lot of work to do. One big problem: many of the jobs coming back are low-wage jobs. Largest gains in April were service jobs, retail trade, health care, leisure and hospitality.
I'm telling you, every job in America is important, but some of these jobs aren't the kinds of jobs that you can send your kids to college on. The quality of the jobs we lost, higher than the quality of jobs coming back, and the real unemployment rate is 13.9 percent.
That real unemployment rate, that number represents the total unemployed plus part-time workers who want to be working full time but they can't find a full time position.
In fact the Labor Department, the labor force participation rate now, the lowest since 1979.
Mohamed El-Erian is the CEO of PIMCO, one of the world's largest investors in bonds.
Austan Goolsbee is the former chairman of the President's Council of Economic Advisers, currently an economics professor at the University of Chicago Booth School.
Austan, I know you've expressed concern about the forced budget cuts, how they could hold back job creation.
Does Friday's job report give you any sense of optimism about whether we can sustain jobs growth into the summer?
AUSTAN GOOLSBEE, FORMER CHAIRMAN, PRESIDENT'S COUNCIL OF ECONOMIC ADVISERS: Only a little. You know, you never want to make too much of any one month, but it was a solid month.
My fear is that over the summer, it's not a real magic secret here, if the growth rate of the economy is going to be only a little above 2 percent, the unemployment rate is not going to come down very fast. We're just not going to generate this kind of job growth or faster than this on a sustained basis and that's what we need to do.
ROMANS: So, Mohamed, do you agree? Are we stuck here, are we stuck here, Mohamed El-Erian, with a jobless rate that's like ticking down sometimes but not it's not falling?
MOHAMED EL-ERIAN, CEO, PIMCO: So we've taken a big step towards a better outcome. I'm actually quite encouraged by Friday's jobs report.
If you look at the last three months, we've created 212,000 jobs; long-term unemployment is coming down, like you said, the unemployment rate is coming down for the right reasons.
So this is an important step. Now it's not the whole thing, and we still have the headwinds coming from Washington, we still have slow growth, but it tells me that the underlying economy continues to heal, and that's good news. I wish it were healing quicker, but it's definitely healing.
ROMANS: Austan, let me ask you about the quality of the jobs that are coming back. I see a lot of retail jobs here. I see leisure and hospitality, and I think it's great that consumers feel confident enough to go to the mall, to go to the strip mall, the big box store, to go to a bar or a restaurant, that's wonderful.
But I also know not many of those people working those jobs are going to be able to pay to put a kid through college. So what is the quality of the jobs coming back here?
GOOLSBEE: Well, you know, whenever you start coming back, you're going to have a mix of -- let's call it the skilled distribution -- is going to be mixed. The unemployment rate for college graduates is quite low, you know, 3.9 percent, I think, in this last report.
So if there was going to be improvement in parts of the job market, you would want it to be, I think, in places that have been hardest hit and have the high unemployment rates now.
That said, overall earnings did not -- have not improved very much over the last three months and we do hope to get improvement on that, as well as creating more jobs. So I do think it's fair to keep an eye on that.
ROMANS: I know -- I mean, I look at professional business services, for example, the category in the labor market report, 73,000 jobs created there and some of those can be very good jobs. And I know that when you talk about computer systems engineering, you talk about software engineering, you talk about anything, even software sales and some of the high-tech kinds of jobs, there are talent wars going on in some parts of the economy.
And then, Mohamed El-Erian, there's also desperation going on among people who have been out of work six months or longer. We're not seeing improvement for those long-term unemployed very much.
EL-ERIAN: Yes. It's improving a little bit. It came down to 4.3 million, but we still have a long way to go. I think critically what Austan says is also very important.
If you look at college graduates, their unemployment rate is below 4 percent. If you look at those who left school, their unemployment is above 11 percent.
So we've got an inequality element that speaks to some of the structural issues we have to work on -- better education, better labor retooling, better retraining. These are going to be key if we're going to sustain employment growth and if we're going to bring unemployment down to a more acceptable level.
ROMANS: Now both of you keep talking about the unemployment rate for college graduates. And I should point out, those are for people who have already been in the labor market, right? So a recent college graduate isn't counted in the labor market until they get in the labor market.
So, Austan, it's commencement season, we got all of these kids coming out of college, and they're hearing us say it's at 3.9 percent unemployment rate. But it is going to be a little tough at the beginning for them to get that first foot in the door. I mean, there are some degree categories where kids are having double-digit unemployment.
GOOLSBEE: I think that's a fair statement, though, look, it doesn't take an advanced degree to figure out that people that have more skills and more education are doing better and surviving better in this comeback than our people who do not.
I mean, that screams out of the data, so it's commencement season, I think in some fields, as you identify there, there's tremendous pent- up demand for workers.
In other majors that are not as practical, let's say, or not as oriented around the sectors that are growing, I think you're right. It's going to be a little bit of time likely before they get jobs.
ROMANS: All right. Both of you stick with me because I want to talk about the broader economy in just a moment.
Coming up the Fed says it's going to keep pumping billions into the economy every month until unemployment hits 6.5 percent. We're now one percentage point away. Could the ending of the Fed stimulus cause economic disaster though? And when is the right time to do it? We talk about that next.
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ROMANS: As we just mentioned, real unemployment held at 13.9 percent in April. What is that number, real unemployment? Well, that number represents the total unemployed plus part-time workers who want to be full-time and people not in the labor force, but they desperately want a job.
Only six states had a real unemployment rate of less than 10 percent through the first quarter of the year. And the 165,000 jobs added in April is nowhere near the 165 -- 250,000, rather, we need every month for a genuine recovery.
Now remember, President Obama's campaign promise of creating 12 million jobs in four years, remember that promise, our economy simply isn't growing fast enough. There are some bright spots; home values are up. Earlier this week the Case Shiller Index showed home prices in most big cities jumped 9.3 percent from a year ago.
The stock market is pushing higher, records again Friday, 15,000 on the Dow. Mixed signals? You better believe it. As for the stock market, you can thank the Federal Reserve for that, its $85 billion a month bond buying program, no end in sight combined with near zero interest rates make stocks the only game in town.
But that's giving some investors cause for concern.
Mohamed El-Erian, chief executive of PIMCO, the world's largest bond fund, says the Fed's strategy only has a 50-50 chance of leading to economic growth.
Mr. El-Erian is still with us. Mohamed, how do you get to 50-50 odds?
EL-ERIAN: So we look at it as a gut feeling. We look at it and we ask the question, is the Fed using the right tools to achieve its objective? And the answer is no, it doesn't have perfect tools. It's using very imperfect tools.
And as a result of that, the benefits that come with what it's doing is associated with cost and risks. And at some point, the costs and risks are going to become material. So think of the Fed as impacting the destination to a good outcome but it is not in control of the destination. So that is going to need help from Washington and it's going to need help from the rest of the world.
ROMANS: (Inaudible) Austan Goolsbee back in because Washington is something that the Federal Reserve chief announced this week or mentioned this week. The Fed chief planned to keep dumping money into the market, $85 billion a month, and the Fed chief, Ben Bernanke, blaming slow growth on Washington.
So what is holding things back here?
GOOLSBEE: Well, I mean, the main thing that's holding things back is we're recovering from a savage financial crisis-based recession, and so the normal mechanisms of V-shaped recovery largely do not apply.
Now on top of that slow recovery, we're adding significant drag coming from increase in the payroll tax, coming from the sequester, and that's what Bernanke was referring to. But I got to tell you, I disagree a little with your premise that the only reason the stock market is up is because of the Fed action. I think that's confused.
I mean, the -- on the real side of the economy, corporate profits are the highest they've ever been as a share of GDP. And if corporate profits are high you are going to see a strong stock market because that's what the valuations are supposed to be based on.
ROMANS: That's a very good point and they've got a lot of money in the bank, these companies, and they're able to get those corporate profits at record highs without commensurate hiring and so far that has been good for their bottom line, hasn't it?
GOOLSBEE: Yes, I agree with that.
ROMANS: Does that go on in perpetuity?
I mean, Mohamed, let me ask you, do we at some point look at companies that do well but an economy that doesn't? And where does that leave the middle class?
EL-ERIAN: So that's the big question. First on the stock market, undoubtedly corporate profits and cash buybacks and dividends have helped the stock market, but the stock market has come up all the way up here. Part of it is justified, but what we just talked about it, but another part is justified by the Fed very aggressively pushing people to take more risk.
And we see it every single day. We see people being pushed into the equity market by interest rates that are artificially low. So I think it's a combination of real factors and artificial factors that have resulted in the stock market.
And that's why a couple of things are happening. First, investors are, yes, excited; they are making money. But they're really anxious. They understand that this has an element of artificiality.
And second, you get this massive disconnect between how well the financial markets are doing and how poorly the real economy is doing. So the key issue is to reconcile these things by having the fundamentals melt up to where the financial markets are.
ROMANS: What happens, Mohamed, when the Fed stops all of the -- takes the training wheels off the economy, if you will?
EL-ERIAN: Depends why. So if it takes the training wheel off the economy because the economy has gotten to escape velocity then there is going to some minor disruptions in the market but overall it's not going to be a big issue. If it takes the training wheel off because the training wheels aren't working anymore because the Fed has become increasingly ineffective, then we have a problem. ROMANS: And now here we have -- I just have go to back to Austan Goolsbee -- 15,000 on the Dow Jones industrial average, a jobs report that, by most accounts, was a strong jobs report, clearly stronger than expected, 165,000 jobs created and a measured White House reaction.
I know you used to advise this president, so I've got to ask you, the White House has to be careful because they don't want to sound too confident on the economy in case things go south again, but also because you know, there still are a lot of people out of work.
I mean, if you were advising the president here, how would you have this White House try to be encouraging, but not cheerleading, but acknowledge that there has been progress since this president took office?
GOOLSBEE: Look, I think that's exactly right, both of those points, and I would just add, remember, we add 160,000-plus jobs, that's plus or minus 100,000. This is a very noisy measure so you never want to get too worked up, positive or negative from any one month.
Last month was surprisingly bad, this month surprisingly good, that's going to be part of the trend. The main thing is what is the growth rate of the economy.
ROMANS: I wish -- I just wish we could have months -- every month like February, but I know we can't. Austan Goolsbee and Mohamed El- Erian, very nice to see both of you this weekend. Have a nice weekend.
GOOLSBEE: Thank you.
EL-ERIAN: Thank you.
ROMANS: Up next, out of the shadows but not exactly into the light, a growing number of Americans are working off the books, but not at the jobs you'd think. We're going to reveal this shadow economy next.
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ROMANS: With the 165,000 jobs added to payrolls in April, don't count is the growing number of Americans working in the so-called shadow economy -- nannies, construction workers, retail clerks and other unskilled labor often work for cash under the table and don't report their income to Uncle Sam.
But today's shadow economy has become much more than those professions. CNN business reporter Zain Asher joins us now with more on this.
Good morning.
ZAIN ASHER, CNN CORRESPONDENT: Hey, Christine. Yes, you know, these are people with college degrees we're talking about, computer programmers, we're talking about graphic artists and even tax accountants, which is kind of ironic, because they don't always pay taxes on their income, but the bottom line is they're still working, they're still making a living. They're just doing it off the books.
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ASHER (voice-over): Who are the people working in America's shadow economy? It's probably not who you think.
PROF. SUDHIR VENKATESH, COLUMBIA UNIVERSITY: The shadow economy isn't necessarily comprised of people making $5 here and $10 here for a good and service. It's people who are designers, computer programmers, people who are preparing taxes, accountants, making tens of thousands of dollars but who prefer to do it off the books.
ASHER (voice-over): Sudhir Venkatesh is a professor of sociology at Columbia University. He's devoted his entire career to studying the criminal side of the U.S. economy. But he's discovered a growing number of Americans working in the shadows are not typically what come to mind when you think of a criminal.
VENKATESH: They may have skills and what they're doing with those skills is not applying for a job in a formal sense, but they're offering their services to people who might pay for cash or who might give them another kind of payment and they won't report that money to the government. That's really where it becomes a shadow economy, is that they don't report the wages.
ASHER (voice-over): Today's labor market has changed. In a bid to cut costs and stay profitable, companies increasingly rely on skilled freelance labor, even in a legitimate economy.
SARA HOROWITZ, EXEC. DIRECTOR, FREELANCERS' UNION: We see that this is a huge rising trend. It's now 42 million Americans, a third of the workforce, big companies like IBM are predicting that this is going to be half the workforce in just the next 10 to 15 years.
ASHER (voice-over): Sara Horowitz founded the Freelancers' Union, which now counts more than 200,000 members across the U.S., all of whom report their income to the government and pay taxes and Social Security. But she says, the pressure to work off the books is there because freelancers often pay higher taxes than everyone else.
HOROWITZ: Freelancers pay two portions of Social Security tax. They pay the unincorporated business tax in many cities. They are just really taxed so severely that they are the ones who are really providing the economic development and growth. They're in all of the growth industries in America. They are actually overly taxed, not undertaxed.
ASHER (voice-over): Economists estimate roughly $2 trillion worth of income go unreported each year and that lost revenue affects the legitimate economy.
It's harder for businesses to play by the rules if their competitors aren't paying payroll taxes or compensation to employees in the event of injury. And workers in the shadows have no benefits or Social Security and no legal recourse if their boss decides to stiff them. VENKATESH: What we really need to do is say, OK, it's illegal, absolutely, but you know what, a lot of people there have the ingenuity, the creativity, the power to innovate. And if that's where they are going, we want to help them eventually come back into the mainstream.
ASHER (voice-over): Something experts say will be difficult to do.
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ASHER: You know, Christine, we're talking about an extra $500 billion worth of lost tax revenue. That's a huge amount of money. It's basically the GDP of Sweden. And when you think about what this country is going through fiscally, you know, the sequester, $85 billion worth of forced spending cuts between now and September, obviously, that $500 billion could go a long way.
ROMANS: Oh, very interesting. Of course, bringing that labor force into the mainstream would give them the legal protections also that they need that they don't have now and benefits, you know, this is something, even as we talk about immigration reform, I think, talking about the shadow economy and immigration reform and bringing people into the light --
ASHER: Into the mainstream, yes.
ROMANS: -- and into the government coffers as well.
Zain, thank you so much.
Coming up, Justin Bieber is giving his backing to a prepaid debit card, but does it make financial sense for you Beliebers out there to sign up? Find out next.
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ROMANS: Children kicked out of Head Start, fewer meals for low income seniors, smaller benefit checks for jobless American, the most vulnerable in America are crying out over Washington's forced budget cuts. Is anyone listening?
I'm Christine Romans and this is YOUR MONEY. The pain of forced budget cuts known as the sequester, it is taking hold for some Americans. Call it a case of selective sequester around the country. Head Start programs are cutting slots for low-income children in the fall. The national Head Start Association gave us a few examples. In Kentucky, one large provider reports 164 spots gone. In California, three programs are slashing 382 spots. In Colorado, another big provider, cutting 138 spaces. Ultimately, 70,000 children could lose out.
Low-income seniors are losing Meals on Wheels. The southern Maine agency on aging tells us they've gone from providing up to 850 meals a weekend to 250. If you get federal unemployment benefits in California, this week your check got smaller, about $79 less on average. And 19 other states and the District of Columbia are also sending out smaller checks. These cuts trickle down to America's most vulnerable. At the same time, there's only one part of the sequester Congress has stepped in to fix -- massive flight delays. Last week your elected leaders voted to give the FAA more flexibility so it could bring back furloughed air traffic controllers. A cynic would certainly wonder if members of Congress only cared about fixing flight delays because they'd actually feel those. Jon Stewart joked about it on "The Daily Show."
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JON STEWART, HOST, "THE DAILY SHOW": They don't care about Meals on Wheels unless it's rolling down an aisle.
(LAUGHTER)
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ROMANS: And even the president said it.
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BARACK OBAMA, (D) PRESIDENT OF THE UNITED STATES: And maybe because they fly home each weekend, the members of Congress who insisted on these cuts finally realized that they actually apply to them, too.
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ROMANS: We are now two months into this U.S. experiment with austerity, and it comes as debate rages in Europe over whether budget cuts have actually deepened the continent's suffering. Eurozone unemployment just hit a record, above 12 percent. That's on the left side of your screen. Here in the U.S., it has fallen to 7.5 percent, the lowest since December 2008.
Are we putting the U.S. recovery at risk if the sequester stays in place? Or can the U.S. economy absorb all this? Diane Swonk is the chief economist for Mesirow financial. John Avlon is a CNN contributor and senior columnist with "Newsweek" and "The Daily Beast." Diane, let me start with you. The jobs report Friday, 165,000 jobs created, unemployment rate 7.5 percent. Did you see evidence of the sequester jobs report?
DIANE SWONK, CHIEF ECONOMIST, MESIROW FINANCIAL: Very little evidence. The part we started to see was federal jobs did outpace the loss in state and local jobs and that's completely the reverse of what we saw last year. And so now you're seeing the federal government become the headwind as the state and local government cuts abate. That's good news for the state and local side, bad news we're losing federal jobs in terms of overall jobs number.
And the sequester, it cascades over time. It's not something -- the sky is falling is not how the sequester worked. And so we'll see these effects multiply as we move into these next couple months. ROMANS: We're starting to see these one after another. We talked about Head Start, Meals on Wheels, FAA, the flight delays. But here's what liberals say, John, liberals say that budget cuts and this newfound budget religion is just a way for conservatives to gut the programs they've always hated anyway.
JOHN AVLON, "THE DAILY BEAST": Yes. Republicans and conservatives have always had this sort of starve the beast theory of politics. But I do think that the debate we're having now is about what's the best way to achieve deficit and debt reduction, and realize that the x- factor is always economic growth.
And the folks on a pure austerity path -- two things. First of all, as with the flight delays, they realize that cuts have consequences. When it affects them personally, they don't like it so much. There's this attitude about cuts in politics, that it's cuts for thee but not for me. And that makes it painless, especially if they don't have advanced lobbying firms.
The second thing is, we know just by comparison what's going on in Europe, England in particular, that the austerity path hasn't worked. The data has come in. So actually looking for a balanced plan is more advantageous. And if we can find a grand bargain that actually preserves economic growth, maybe gooses it, while dealing with the long-term cost, that's the ultimate win.
ROMANS: Let's talk about Europe, because we've seen record high Eurozone unemployment. Is that a sign or symptom of austerity?
SWONK: Absolutely. There's no question about it. It would be ideal, and frankly the Federal Reserve would love to have complimentary instead of competitive monetary and fiscal policy. We want the two feeding each other, or at least not subtracting away. In Europe you've seen it to an extreme. They can't stimulate their economies easily with their central bank. They're a bunch of countries. It's not centralized. They're not dealing with it on a fiscal basis. You actually have actual depressions in parts of Europe instead of just, you know, the slow uneven recovery that we've had to experience. We're much better off.
That said, we could be much, much better off. We could be to escape velocity now where the unemployment rate is plummeting instead of edging down each month by a tenth or so. Or we can see participation rope coming back because people have hope. And we would be seeing that if we didn't lose a percent and three quarters to a fiscal policy this year.
ROMANS: And that's how much you think we're going to lose?
SWONK: That's how much we'll lose if they keep the sequester going through September. It looks like right now they're not willing to compromise enough on it. That's unfortunate. You saw some movements in this direction, and now there's backtracking again. I have hope that they'll figure it out and both sides will be able to talk to each other. It's got to come from both sides of the ledger. But let's figure this out. Let's backload the pain when the economy can absorb it better rather than frontloading it and prolonging the pain, especially for those people who are being hurt the most.
ROMANS: Is the austerity argument over in Europe, I wonder. I mean, is Washington looking at Europe and saying OK, wait a minute, we can't slam on the brakes here?
AVLON: They should be. The problem is that you've got these -- the way politics is divided right now, everyone's in this sort of hermetically-sealed ideological echo chamber. And folks will filter out any data that doesn't conform to their political prejudices and vices. So it's sitting right there. We've got a clear comparison, folks, but they're really reluctant to do the obvious math because it doesn't correspondent to their ideology.
ROMANS: And there's plenty of frustration. We're bullish on frustration. John Avlon, Diane Swonk, thanks so much.
Coming up, how can you build your personal wealth in this economy? The house and stock market on a tear, 15,000 this week for the Dow. But job growth is lagging behind. What you need to know about the three legs of your personal prosperity, next.
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ROMANS: There are three things that can grow you money -- your job, your house, and your investments. New numbers show home prices in February rose at the fastest annual rate since 2006. If you're invested in the market, you're doing well, too. The S&P 500 hit a record high this week. And the Dow topped 15,000.
And in addition to those better than expected jobs gains, first-time claims for unemployment benefits hit a five-year low. But there are some worrying signs as well. The unemployment rate fell to 7.5 percent in April, but that's still high compared to historical levels. Before the recession hit, the unemployment rate was 4.5 percent.
And the economy isn't growing as fast as economists expected it to. You're also taking home less money. Recent data from the Commerce Department shows personal income fell by 3.6 percent in January. That's the biggest drop in 20 years.
I want to bring in Matt McCall, Rana Foroohar, and Jonathan Miller. Matt is the president of Penn Financial Group. Rana is assistant managing editor at "TIME," and Jonathan is president and CEO of Miller Samuel, a real estate appraiser. Nice to see all of you.
We'll start with you, Jonathan, with housing. S&P index shows prices have jumped 9.3 percent over the last 12 months. That's the biggest annual gains since May of 2006. It looks like a recovery. But you say we're looking at the wrong thing and we're not really in a recovery there. Why not?
JONATHAN MILLER, REAL ESTATE APPRAISER: Well, really what's driving what I call happy housing news, really the last six to nine months, you've seen better news across the board in housing because inventory is tight.
ROMANS: They're very tight.
MILLER: It's actually at 50-year lows. Inventory nationally is down about 25 percent. When you constrain or choke off supply by the throat, prices rise. And that's where we're at, when at the same time, incomes are stagnant, unemployment is high, and credit remains as tight as it was since Lehman collapsed.
ROMANS: Homeowners just aren't -- maybe the spread between what they paid for their house and what it's still worth is still too big. They're not ready to sell yet.
MILLER: People with negative equity is certainly a big part. One in four mortgage holders have negative equity. But the other part is people with low equity. People forget that when you have a home and you want to sell, you become a buyer, or a renter. Rents are at very high levels. You want to buy, you have to qualify. Maybe 10 percent down five years ago or 10 years ago was fine, you sell it for break even, you get your 10 percent back. But you need 20 percent. So if you're going to trade up, you're short. They're not under duress. They just can't sell, so they're going to wait.
ROMANS: I want to talk about stocks. This is 15,000 on the Dow this week. I mean, five years of a bull market, S&P 500 up 140 percent since March of 2009. Do you think we still have room to grow here?
MATT MCCALL, PRESIDENT, PENN FINANCIAL GROUP: I really do. Everybody out there thinks they're too late to the game. Typically the fifth year of a bull market, which we do not have many of them, the average gain is 20 percent. We're only up about 3 percent since that fifth year began, so there's a lot of upside, even though we are sitting at all-time highs. Plus you look at valuations now versus where they were in 2007, much more at this point. And a lot of individual investors are still on the sidelines. They've been waiting to get in. What are you waiting for? We're hitting all-time highs in the market.
ROMANS: They're afraid they've already seen a bull market that's more than four years old.
MCCALL: They're afraid at the bottom, they're afraid at the top. You have to get in now if you want to own stocks.
ROMANS: Well, what kind of stocks do you own? You don't have to give me specifics if you're uncomfortable. Or just buy the S&P 500 in a spider?
MCCALL: The average investor, you don't throw money. But yes, the spider, a great way to go. I love right now oil and gas. I think energy stocks are undervalued. There's ETFs out there. IEZ is one that I own that I think you go into. If you don't know, just get in the market. All the markets are going up. Be in stocks.
ROMANS: So we teased this whole segment by setting up three things, your house, your stock portfolio, and your job. So you get to be the bearer of good news and say everything's better. Will we have all three of these legs of this stool not wobbly at some point here? RANA FOROOHAR, ASSISTANT MANAGING EDITOR, "TIME": At some point, but the question is when. The jobs report that came in today is really bifurcated.
ROMANS: No three-handed economists, please.
(LAUGHTER)
FOROOHAR: There's no spring slump. That's good news. The report was stronger than we expected, 165,000 jobs. Also February and March were revised upwards, so that's really great news. If you strip out the public sector, which is still slagging behind and creating a slower economy, you're really growing over three percent now, and that's great.
But if you look at where the growth is coming from, it's not in very high quality jobs. We're talking about retail jobs, fast-food, tourism, home health aides. These are not high-paying jobs. That goes to the most important thing, which is wage growth. It ticked up just slightly, but not enough that you're going to see this huge rebound in a consumer economy that is still 70 percent driven by spending.
ROMANS: Which feeds all the way back into the discussion about housing, too, if you don't have good wage growth, you're not going to have a true recovery in home prices down the road because people can't afford it.
We're going to talk about the Fed pumping $85 billion into the economy every month, $85 billion driving growth in the stock market. So what happens when it stops? Could there be a big bubble about to burst? That's next.
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ROMANS: The fed is pumping $85 billion into this economy every month. It says it won't stop until the jobs picture improves. This week, it released a statement predicting continued, moderate economic growth and a gradual drop in the unemployment rate. That means status quo, right? You say the size of the Fed stimulus is unprecedented. You look at the federal budget stimulating the economy, the big deficit we run, when you look at the Fed even more so stimulating the economy, how long can this go on?
FOROOHAR: It's a great question. What I look at is corporate profit margins, right, because the fed has really goosed the stock market growth, and people are still very excited about that. And the stimulus is going to continue.
But when you look at underlying corporate profits, they are tighter in the last couple quarters than you've seen them. It's not like companies are out there selling a lot more and inventing great new things. We're not seeing a real boom of any kind right now. We're seeing the fed really trying to prop up this market, feeling like ben Bernanke is the last man in Washington, and he's got to do something. Nobody else is. ROMANS: It's keeping the interest rates artificially low. That's bad news for savers. It's great for investors, keeping the stock market hot. What happens when they have to pull away the punch bowl a little bit?
MILLER: When they pull it away, first of all, it means things are getting better, because the only way the Fed is going to do that is if the economy picks up, the jobs picture gets better. I think the jobs picture is absolutely horrible. I think the economy is modest at best growth. I think this continues for quite some time. When they initially pull it away, it's going to mean things are good. So the market should keep going.
However, once people realize the punch bowl is gone and that we actually have to get out there and stimulate the economy through actually creating jobs, then we're going to face the cliff.
ROMANS: I feel so bad for savers. I hear every day from savers who say you're telling me I'm 59 years old, I'm supposed to be putting my money in the stock market, and I thought I was going to put it in some CD and get some return. That's really hard for people.
FOROOHAR: It is really hard for people. Before you were asking what kind of stocks people should be invested in. I think in a way big blue chip multi-nationals have become the new security play. They are the new bonds, because if you look at big companies like P&G or IBM, they've got good dividend payments. Are they safer than certainly European sovereign debt? Yes, absolutely.
MCCALL: And you go into those big blue chips, getting 3.5 percent yield versus 1.7 and a ten-year note. Would you want to lend the government at 1.7 percent or a Wal-Mart at 3.5 percent?
ROMANS: You've still got people who are underwater, but you are seeing happy housing news. Part of the happy housing news is mortgage rates, so low, 15-year fixed, lowest level ever, 2.56 percent. The most popular mortgage rate, the 30-year fixed rate mortgage, 3.35 percent. Sometimes I can't believe these numbers come out of my mouth. You see them, you think am I living in some parallel universe?
MILLER: Basically free access -- I mean, it's just so cheap. And that has a by-product, which is pressing prices higher. And it also keeps credit conditions fairly tight. One of the things that is interesting, though, is that people that qualify at, say, a 30-year fixed at 3.5 percent, if rates go up as high as 5 percent, which no one expects that in the immediate future, as Matt was saying, things are still very weak, you don't lose that many people that qualify. In other words, I feel like that the drive for low rates in the housing market is almost falling on deaf ears to a certain extent. It's overkill. And I worry about that.
ROMANS: And I know people who have mortgages in the five percent range and I keep screaming, refinance, refinance! A re we going to get money in the economy by people refinancing the mortgages they already have? Is that going to be significant for the economy? MILLER: I think it takes some of the stress out, because you're creating more disposable spending. You're reducing the probability of foreclosures and that sort of thing. The refinance world is sort of this unseen -- everybody's looking at sales. But credit is still very tight. So you've got to bring more people to be able to reduce the stress of their payments.
FOROOHAR: Speaking about credit too, banks want about a 750 score. Most Americans have below 700. Think about that.
ROMANS: This is true.
Coming up, billionaire Warren Buffett joins Twitter. We'll show you what tweets from an oracle look like, next.
(COMMERCIAL BREAK)
ROMANS: So we've been hearing a lot about women in tech, like Facebook's Sheryl Sandberg, Yahoo!'s Marisa Meyer, and how they're shaking up the workplace. Now billionaire investor Warren Buffett is joining this conversation. I want to bring in Pattie Sellers. She's a senior editor at large with "Fortune." Pattie joins me now from Omaha, the site of Berkshire Hathaway's annual meeting. Nice to see you this weekend. You sat down with Buffett and you asked him why women make him more optimistic about America's economy. Listen.
(BEGIN VIDEO CLIP)
WARREN BUFFETT, CEO, BERKSHIRE HATHAWAY: It just stands to reason that if the United States got to where it was from 1776 and made all the progress it did with more than half of that period women really being shut out of most activities, so you had all this brain power and energy, ability not totally going to waste, but certainly not reaching its potential. Just think what you can do when you get the whole team out there.
(END VIDEO CLIP)
ROMANS: Have you heard this from other male business leaders?
PATTIE SELLERS, SENIOR EDITOR AT LARGE, "FORTUNE": Well, I think we're hearing it, Christine, from more and more male business leaders, more CEOs, more directors who are looking for women to join their board. It's really -- you know, we started the fortune most powerful women list in 1998, and I actually remember hearing this argument strongly for the first time, when we picked our first number one most powerful woman, who was Carly Fiorina the HP board was hiring to head that company. And there began the talk about using the full population instead of half the population to run corporate America.
ROMANS: Now, Buffett told you he doesn't discriminate when it comes to hiring. I want to listen to what he said about that.
(BEGIN VIDEO CLIP)
BUFFETT: It doesn't make any difference. Their age doesn't really make any difference to us. Their sex doesn't make any difference to us. Their educational background doesn't. I mean, in the end, we need to come up with the best person to run, because talent is scarce.
(END VIDEO CLIP)
ROMANS: I hear that all the time. Talent is scarce. I don't care. I want the star performer. So then why are women still underrepresented in the top leadership roles?
SELLERS: Well, there are 21 female fortune 500 CEOs. That's pretty pathetic. It's a little over four percent. Why is that? I actually share the Sheryl Sandberg point of view, which is that women think of power differently. It's not so much about climbing the ladder. It's about having broad influence. And we make other choices.
And we don't necessarily -- you know, when women start companies, the reason I believe that there's no female Mark Zuckerberg is that women start companies to create the businesses that they want to work for. Often they leave big companies and corporate America and they just get tired of the huge institution and they want to create their own companies and they don't want to create fortune 500 companies.
Guys start companies mainly to make money. And build really big businesses. So I actually think that we're never going to get to parity at the top of large corporate America. But I think it's important to make progress. And it's really wonderful right now to have role models like Sheryl Sandberg and Marisa Meyer. Marisa Meyer is the youngest CEO, male or female, in the fortune 500. And it's really cool that 82-year-old Warren Buffett is responding to these young women by speaking out for the first time in a big way about women and work.
ROMANS: And I don't know about you, but I was looking at Facebook's results this week, and Cheryl Sandberg had -- she exercised $821 million in options. You don't usually see that many zeroes on one of those SEC filings. An so she's doing something right, because she made a boatload of money this week, and a lot of women watching her career and what she's doing.
This interview was about social issues, but you also convinced Buffett to get on social media. During your interview, he tweeted for the very first time, "Warren is in the house." You can see more of that interview on CNNmoney.com.
Pattie, thanks for joining us.
Coming up, Justin Bieber is giving his backing to a prepaid debit card, but does it make financial sense for you Beliebers out there to sign up? Find out next.
(COMMERCIAL BREAK)
ROMANS: Prepaid debit cards, Justin Bieber, just the latest celebrity to attach his name to one. The number of these cards on the market is growing and consumers are signing up in droves without reading the fine print. (BEGIN VIDEO CLIP)
ROMANS (voice-over): Would you trust Justin Bieber with your money?
What about Russell Simmons?
Maybe Suze Orman?
They are all pushing prepaid debit cards.
You load the card with cash and swipe away. But it's going to cost you.
GREG MCBRIDE, SR. FINANCIAL ANALYST, BANKRATE.COM: The fees on prepaid debit cards can really run the gamut, everything from a monthly service fee to an activation fee to even fees for doing things like calling customer service or having a transaction declined due to insufficient balance. Sometimes even checking your balance at an ATM can be enough to trigger a fee.
ROMANS (voice-over): All kinds of fees, all to use your own money. Bankrate looked at 24 of the most widely issued prepaid debit cards; all of them charge fees for different features. And the one celebrities like Justin Bieber are hawking --
(BEGIN VIDEO CLIP)
JUSTIN BIEBER, ENTERTAINER: Managing your money is important, abd there's a great company that can help you do it..
(END VIDEO CLIP)
ROMANS (voice-over): -- are no exception. For the card he endorses, $3.95 every month just to have it, $2.95 to put money on it from another credit or debit card. You can transfer once from your bank account for free each month, $1.50 for an ATM withdrawal. And if you don't use the card for 30 days in a row, you pay $3.
Bieber gets $3.75 million to put his name on. Spend Smart issues the Bieber card. It defends its fees, saying it's try to help parents and teens start a conversation about reasonable spending.
And Bieber helps get that message out. But Greg McBride from bankrate.com says celebrity cards usually aren't the best value.
MCBRIDE: Consumers that are looking for lower fee, prepaid debit cards can find them. They're just not going to be those endorsed by celebrities.
ROMANS (voice-over): Paid traditional bank fees are rising, too. Maybe that's why so many consumers don't seem to mind that they are paying so much for prepaid debit cards.
The amount of money put on prepaid debit cards almost tripled from 2008 to 2012. It's expected to top $168 billion by 2015. That's a lot of money, nearly the GDP of oil-rich Kuwait or Romania. It's enough to buy 431 brand new Airbus A380 double-decker planes.
An industry trade group says parents use prepaid debit cards to teach kids about financial responsibility, but financial advisers like Ryan Mack says there are better ways to do that.
RYAN MACK, FINANCIAL ADVISER: Prepaid debit cards essentially spending money to use your own money, but they don't necessarily fix your credit and it costs -- and it is too expensive.
ROMANS: Mack says if you don't have a checking account, look for a credit union in your area and check out asmarterchoice.org or go to joinbankon.org to find a local bank that can help you open an account or build up your credit.
(END VIDEO CLIP)
ROMANS: I get it -- prepaid debit cards are easy and convenient. If that's something you're willing to pay for, go for it, but you need to know the fees ahead of time, and consider your other options. Many of those options you won't pay so much to use you own money.
ROMANS: Thanks for joining the conversation this week on YOUR MONEY. We're here every Saturday, 9:30 a.m., 2:00 p.m. Eastern. Every Sunday at 3:00 you can find me on Facebook @ChristineRomansCNN, and on Twitter my handle is @ChristineRomans. Have a good weekend.
