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First Move with Julia Chatterley
Artillery Fire Observed Despite Russia's 36-Hour "Ceasefire"; EV firm Cutting Prices in China again; Violent Clashes Break Out after son of "El Chapo" Arrested; U.S. Economy Adds 223K Jobs in December, above Expectations; DressX becomes Meta's First Digital-Only Clothing Company; CES 2023 Underway in Las Vegas. Aired 9-10a ET
Aired January 06, 2023 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:00]
(COMMERCIAL BREAK)
RAHEL SOLOMON, CNN HOST, FIRST MOVE: A warm welcome to "First Move", I'm Rahel Solomon in today for Julia Chatterley good to be with you. And just
ahead on today's show Speaker looking bleaker Kevin McCarthy's leadership it shot down for the 11th straight time Wednesday. Republicans still
divided on who will become the next Head of the U.S. House of Representatives.
A full report just ahead, plus, border reorder historic weekend ahead in China, Beijing officially scrapping quarantine requirements for tourists.
The Chinese border with Hong Kong also set to reopen even as Chinese COVID cases continue to surge and employment well still pretty buoyant. The U.S.
is out with the first big economic report of the New Year.
The all-important U.S. jobs report showing that the U.S. economy added 223,000 jobs in December, that's a bit higher than expectations. The
unemployment rate, also falling unexpectedly to 3.5 percent wage gains though they moderated. We also saw downward revisions to the past two
months of data.
Let's take a look at reactions on global markets, U.S. stocks. Look at that green arrows across the board DOW, NASDAQ and S&P futures all up about 1
percent. Europe, as you can see in the green as well. European Investors also getting some encouraging news on Eurozone inflation this session.
Happy Friday for Investors, at least at this point, let's get straight to those jobs numbers. Matt Egan is with me now. So Matt, walk me through this
report. I mean, it doesn't seem to be quite uneven recovery. What industries are adding jobs? What industries do you see if at all, pulling
back?
MATT EGAN, CNN REPORTER: Well, Rahel, a happy Friday, you know, markets are really looking for a Goldilocks number here, you know, not too hot, not too
cold. And I think we got a little bit of a mix here. There's really something for everyone. You know, on the cooling side wages, you mentioned
that wages did slow down significantly they were revised lower for November.
That is good news, if you're worried about inflation, if you're sitting at the Federal Reserve. It's not good news for workers of course we're
struggling to keep up with the cost of living. But also some parts of this did come in a little hotter than expected payroll growth. You mentioned
223,000 jobs that, was ahead of expectations, although it is a slowdown from the prior month.
The unemployment rate, I mean, 3.5 percent that is tied for the lowest level in the last half century, pretty amazing, that we're still seeing
this really low level of unemployment. Now as far as sectors, a lot of parts of this economy are still adding jobs, leisure and hospitality
continues to add a lot of jobs up 67,000, healthcare, 55,000 construction, retail manufacturing, all of them adding jobs. On the negative side, we're
not seeing many industries, outright lose jobs except for professional and business services that's, down by 6000.
Most of that was driven by temporary help. Also, technology information was down by 5000. We've heard about all these layoffs from Amazon and
Salesforce and other major companies. That is starting to show up a bit in the jobs report. So I think Rahel, big picture, this looks pretty mixed.
But right now Investors are happy with what they see.
SOLOMON: Yes, investors seem to like it for sure. Matt, how about the Fed? How does the Fed interpret this because as you know, we have gotten a slew
of labor data today? How do you think the Fed reads this?
EGAN: Yes, we have gotten a lot of reports and you know most of them have come in stronger than expected. You look at jobless claims yesterday
falling to a three month low. The number of job openings remains surprisingly high. And then this sort of mixed jobs report.
I think that this means that the Fed is still on track to continue to raise interest rates, it frees them up to potentially slow the pace of those rate
hikes that markets are anticipating the Fed goes from 50 basis points in the final meeting of last year to 25 basis points but that is of course,
still raising interest rates.
I don't think that this report is going to satisfy the Fed in terms of giving them an all-clear sign to stop raising interest rates altogether. I
think they need to see even more proof that the jobs market is cooling off and inflation is coming down.
SOLOMON: Speaking of inflation, I think we get CPI next Thursday, so a lot more to come there. Matt Egan, thank you. Let's turn to Ukraine now where
artillery is still being fired. Despite the start of what is meant to be a unilateral ceasefire, Vladimir Putin ordered the temporary truce to
coincide with the Orthodox Christmas holiday. However, Ukraine has not agreed to the ceasefire with President Zelenskyy calling the move by Putin
hypocrisy and a cover.
[09:05:00]
(BEGIN VIDEO CLIP)
VOLODYMYR ZELENSKYY, PRESIDENT OF UKRAINE: Now they want to use Christmas as a cover to at least briefly stop the advance of our guys in Donbas and
bring equipment, ammunition and mobilize men closer to our positions. What will this bring just another increase in the death toll?
(END VIDEO CLIP)
SOLOMON: And 10 months of war in Ukraine has led to a new normal for many Ukrainians, like delivering pensions to the elderly in a war zone, when we
demand travel to a town on the front lines in Eastern Ukraine for postal workers serve as a lifeline for retired Ukrainians.
(BEGIN VIDEOTAPE)
BEN WEDEMAN, CNN SENIOR INTERNATIONAL CORRESPONDENT (voice over): Sometimes a morning stroll to the post office is not just a stroll. The town of
Siversk has been on the firing line for months. But a few mostly the elderly hang on with dogged determination. And on this day, the post
office, the mobile post office has come to town.
Alexei Vorobyov heads the local military administration, and urges residents not to bunch up just in case shelling starts. They're waiting to
pick up their modest state pensions for most just around $100 a month. But enough to buy supplies from the handful of shops still open. Getting the
job done safely is a challenge.
We're trying to choose the right time and place Alexei says, but this is what today. It's like this and tomorrow can be totally different. Russian
forces on the distant Ridge are just a few miles away.
WEDEMAN (on camera): Rain or shine, we're shelling the people from the post office come here once a month to hand out pensions. Without those pensions
the few people remaining here would not be able to survive.
WEDEMAN (voice over): In the cold, they wait patiently for their turn. This is essential says --. We have nothing only water in the well. No
electricity, no gas, nothing since March. Living in constant danger for months on end, they get by on stoic fatalism.
I was born here says --, this is my Motherland. I'm not going anywhere. What will be, will be? And - runs the mobile post office, is she afraid? I
asked her? A good question she answers. We just feel people need us. When you entered the town, you probably thought no one is here. But look, how
many are here, someone needs to come here and give pensions if not us, who? Despite the gloom of war, the mail or rather the pensions always get
through. Ben Wedeman CNN, Siversk, Eastern Ukraine.
(END VIDEOTAPE)
SOLOMON: And CNN's Scott McLean is live for us in Kyiv. Scott, I want to circle back to that unilateral ceasefire, as I said, Is there even any
indication on the ground that Russia is honoring this unilateral ceasefire?
SCOTT MCLEAN, CNN CORRESPONDENT: Yes, not so from what we've seen thus far. Ben Wedeman, whose story that you just showed there says that his team
witnessed both incoming and outgoing fire just after this ceasefire was set to begin. And this was fairly predictable, Rahel, because of course, the
Ukrainians never accepted this ceasefire.
In the first place President Zelenskyy called it pure deception. And so this was not something that you Ukrainians were ever going to agree to, or
going to abide by. They viewed this as the Russians simply trying to give themselves a chance to resupply the front line, send more troops to the
front lines.
Maybe get a better positioning along the front lines in Ukrainian simply did not want to allow that. You also had the Russians who made abundantly
clear that if they were fired upon, they would return fire. And they also would fire if they sense that the Ukrainians were trying to gain the upper
hand on the front lines during this, suppose that ceasefire time.
And so this ceasefire was sort of doomed from the beginning. And when you talk to people in this country, no one had any faith that Orthodox
Christmas this time of year would be a quiet one. In fact, I spoke to one woman who read the statement from the Kremlin very carefully, and it
indicated that the ceasefire would be along the line of contact, along the front line well keep as a long way from the front line.
And so her expectation was that there would be missile strikes in the rest of the country. Now we haven't seen that thus far. The air raid sirens did
go off after that ceasefire was set to begin but that's not necessarily always a sign of incoming fire, but I attended a church service at St.
Michael's just behind me under those gold domes in the head of the Orthodox Church of Ukraine was leading that service for soldiers.
[09:10:00]
MCLEAN: When he heard the air raid sirens he told me afterwards that he thought this is just more evidence that the Russians were never going to
hold to this kind of a truce. The Former President of Russia, Rahel, Dmitry Medvedev, also said that in rejecting the ceasefire, the Ukrainians had
rejected the Christian hand of mercy. Well, no one that I've spoken to thus far thinks that Russia's invasion of this country has anything to do with
Christianity or involves anything resembling mercy.
SOLOMON: It's a great point, Scott McLean live for us there in Kyiv thank you. Well, Greece is now becoming the latest country to require a negative
COVID test for travelers from China. Nearly 20 governments now have introduced new travel restrictions as COVID cases surge in China, following
the sudden reversal of zero COVID policy.
Ivan Watson is live in Hong Kong with the latest. Ivan, so we know the border with Mainland, China also opens on Sunday. Help me understand a
timeline of how exactly this is all unfolding? I mean, how soon before you think we'll actually see people flying in the air?
IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, and they can fly now, but a lot of the flight to and from Mainland, China over the last
three years have come to a stop, because the China effectively closed its borders for the better part of three years.
And in fact, to this day, I might point out, if you try to fly to China, there is still a mandated government hotel quarantine of at least five days
followed by three days of home quarantine and may not be enforced as much as it had been in the past. But that's still there until Sunday.
So, you know, you showed this map. Let's bring it back up again because all throughout this week, there are more and more spots of red on the map,
illustrating the countries that are imposing restrictions. And most of them it's just, hey you need to get a COVID test within 48 hours of departure to
prove that you're not sick.
With the most dramatic move being Morocco, which had visa free travel for Chinese citizens and has suspended any travel from Mainland, China to
Morocco right now. The Chinese government doesn't like this. And it has been criticizing these moves, accusing them of being discriminatory. Take a
listen.
(BEGIN VIDEO CLIP)
MAO NING, CHINESE FOREIGN MINISTRY SPOKESPERSON: There should be no discriminatory practices, let alone political manipulation and response to
introduction of unreasonable practices by some countries. China will take corresponding measures in accordance with the principle of reciprocity.
(END VIDEO CLIP)
WATSON: And, and I just point out again, there's still a mandatory quarantine if you try to travel to Mainland, China today from the outside.
But OK, that's going to go away in about 48 hours. There's an incredible amount of pent up demand, trip.com Rahel, it reports that there was a surge
in interest for outbound flights from China over the last two weeks of some 83 percent compared to the previous two weeks.
And that there has been a surge in bookings of nearly 60 percent for outbound flights from China over that same two week period. The travel to
Hong Kong because Hong Kong a part of China has been effectively cut off from free travel from Mainland, China. That is also set to come up on
Sunday.
But there are quotas, only about 60,000 people from Mainland, China allowed in here a day, and people have to book to cross the boundary between the
two territories. One of the big concerns here, though, from critics around the world is of a lack of transparency. That's the accusation.
For example, the Chinese Center for Disease Control Rahel, it reports that only six people in all of China died of COVID on Wednesday and Thursday of
this week. The World Health Organization, it says that those numbers are under reported. And that is leading to this kind of concern from some
governments around the world about allowing plane loads of potential sick people to fly to their territory.
SOLOMON: Yes, you pointed out a 20 governments at this point now sort of enforcing these new restrictions because of those concerns about
transparency. Ivan Watson, thank you. Now to Tesla, Tesla shares beginning the New Year and low gear amid growing concern about slower demand and also
increased competition in China. Elon Musk's EV firm down 10 percent so far this January.
It's closer to 7 percent right now, as I said, that's an early trading on word of new price cuts actually 15 minutes before the trading session
begins. Paul R LA Monica joins me now. So Paul help me understand I mean, how concerned should Investors be? I mean, you have a whole slew of issues
right now for Tesla, as we say you have the increased competition domestically for EVs in China, but then you also have weaker demand.
[09:15:00]
PAUL R. LA MONICA, CNN REPORTER: Yes, I think that Rahel, right now Tesla Investors have to be incredibly nervous about the situation in China. We
know that a recent surge in COVID cases is troubling and could be a problem for the economy there.
But as you point out, if Tesla is cutting prices, again, this the second time in just a few months, it is a reflection that maybe they need to have
lower prices in order to get buyers to be enticed enough to want the model 3, the model Y and other Tesla vehicles, because there is a lot of
competition homegrown competition in China for electric vehicle manufacturers like Neo and Xpeng.
And then there's also BYD group, which is backed by Warren Buffett's Berkshire Hathaway. So it is very troubling right now and then you throw on
to that there are the same worries in the United States about increased competition from the likes of GM and Ford and major European and Japanese
automakers as well. Tesla doesn't have the electric vehicle market all to itself anymore.
SOLOMON: Not at all and Dan Ives, an Analyst who covers the company very closely pointing out that this may not be the last of these price cuts that
we're seeing in China. Paul, you know, one additional challenge for Tesla investors is that, Elon Musk also has his hands full over at Twitter. And
we're learning that some lay off Twitter workers are complaining that they may not have gotten severance. What are you learning here?
MONICA: Yes, the reports that we've had, is that there are some people who have talked to CNN's Clare Duffy about the fact that they thought that they
would be getting more details about their severance packages, and they're still waiting. That's obviously a very troublesome sign if true.
And I think that it won't help Elon Musk's reputation, which I think is starting to become a challenge. There are a lot of people particularly on
the coast, I think, who bought Tesla's in the past because they felt like it was the right thing to do for the environment, it was a good social
thing to do.
But are people going to want to associate themselves with a guy who may not be paying severance to, Twitter employees and is making all this other
noise on Twitter that doesn't exactly shine himself or portray himself at the best of lights. It's going to be a continued challenge, because as we
pointed out, you don't have to just buy a Tesla, if you want an electric vehicle. There are a lot of other ones out there.
SOLOMON: It's an interesting point, just in terms of the brand damage that Elon Musk could potentially cause the Tesla shares are off, by the way, 69
percent over the last year, just a shocking fall for Tesla. Paul La Monica, great to have you thank you.
Let's turn to Washington now where Republican lawmakers are struggling continue to struggle to elect the next House Speaker Kevin McCarthy failed
to secure enough votes five more times on Thursday, he has now lost 11 rounds of voting and three days.
(BEGIN VIDEO CLIP)
REP. KEVIN MCCARTHY (R-CA): So if this takes a little longer, and it doesn't meet your deadline, that's OK because it's not how you start? It's
how you finish? If we finish well, we'll be very successful.
(END VIDEO CLIP)
SOLOMON: Jessica Dean joins us live from Capitol Hill. Jessica, great to see you look, I mean, what does this group one? I mean, what are the main
sticking points at this point? And from what you can tell, is the group of rebels as they have called themselves, are they growing larger?
JESSICA DEAN, CNN CONGRESSIONAL CORRESPONDENT: At this point, they're kind of holding steady, Rahel. But there is a group of them a small sect, let's
say four to six, that are just never ever going to vote for Kevin McCarthy. And that's where the rub is. So right now they are furiously negotiating
with a larger group of these 20.
And McCarthy and his allies believe they can bring them on board with some of these concessions at Chief among them at lowering the threshold to call
for the ouster of a sitting speaker to just one member being able to call for that vote instead of half of the conference. So that's a big change.
And that was something McCarthy was hesitant to do. But he's going to have to do it to convince them to come to his side.
But the fact remains, even if they get 10 or 12 of them, they're still not at 218 and so that's really the rub. But I'll tell you today, is truly a
key moment for McCarthy, he has got to show progress to his supporters. And moderates are getting a little bit twitchy about what he's giving away,
whether they're willing to stay on board. He's really got to hold this together, so he's got to show progress.
We know they've got a 10:15 conference call, they'll all be on the phone, he'll be talking about some of these new rules that he's been circulating
with this group, and then they are scheduled to be back in at noon. The question now is will they go to another round of voting? Will they move to
adjourn to try to work through this? That's the big question right now, but he's got to show some movement today, or he's going to risk this whole
thing kind of falling apart on him.
[09:20:00]
SOLOMON: Yes, it's really interesting to watch and as you point out, as he makes these concessions, it makes you wonder if some of these concessions
force him to lose some moderate. A lot to watch, Jessica Dean, thank you. Well, straight ahead violence erupts in Mexico after the son of notorious
drug lord El Chapo is arrested. We'll have the latest, plus, later in the show making the Metaverse fashionable. The startup selling apparel fit for
an avatar. Yes, you've heard all of that correctly. Don't miss it.
(COMMERCIAL BREAK)
SOLOMON: Welcome back the son of the notorious drug lord Joaquin El Chapo Guzman remains in Police custody in Mexico. Authorities arrested Ovidio
Guzman and a dramatic operation that led to violent clashes between police and drug cartel members. Raphael Romo joins me. Raphael, great to have you,
I mean, as I said, this has led to violent clashes what's the status now on the ground there?
RAFAEL ROMO, CNN CORRESPONDENT: Yes, hi, definitely violent the operation and subsequently, the chaos that ensued in the Northern Mexican City of
Culiacan is evidence of how powerful some criminal organizations in Mexico can be after the early morning raid. A battle between criminal gangs and
Mexican security forces and sued putting at risk the civilian population including some passengers, who got trapped at the local airport.
(BEGIN VIDEOTAPE)
ROMO (voice over): Residents in the Mexican Northern City of Culiacan walk up to what seemed to, many like a warzone. Roads were blocked throughout
the city including this one leading to the airport. This is how criminal groups responded after this man Ovidio Guzman-Lopez was detained by Mexican
security forces. His arrest produced clashes between cells of his criminal gang and Mexican security forces.
Mexican Defense Minister Cresencio Sandoval said that after Guzman's detention cells from his criminal group state 19 blockades and armed
attacks in different parts of the city, including its international airport in an Air Force base. Ovidio Guzman-Lopez also known as the mouse, who is
the son of Joaquin El Chapo Guzman, the Former Leader of the Sinaloa Cartel was convicted in the U.S. in 2019 of 10 counts related to leading a
criminal organization, drug trafficking and firearms charges. He was sentenced to life in prison plus 30 years.
[09:25:00]
ROMO (on camera): Mexican Defense Minister Sandoval said Ovidio, El Chapo's son leads the criminal group known as the miners part of the cartel of the
Pacific which is responsible for violence in four Mexican States and the country's Northwest region.
ROMO (voice over): And according to the U.S. State Department, law enforcement investigations indicate Ovidio and his brother, Joaquin Guzman-
Lopez, function in high level command and control roles have their own drug trafficking organization, the Guzman-Lopez transnational Criminal
Organization, under the umbrella of the Sinaloa Cartel. The Mexican government had already tried to capture Ovidio Guzman-Lopez in October
2019.
After he was detained, the Sinaloa Cartel unleashed the heavily armed fighting force. A gun battle in the streets of Culiacan ensued, putting the
lives of countless civilians at risk. It quickly became painfully obvious that Sinaloa cartel had outmaneuvered and overpowered Mexican security
forces. In the end, Mexican authorities decided to release Guzman to prevent further bloodshed.
(END VIDEOTAPE)
ROMO: And Rahel, I have an update for you a few moments ago Mexican Defense Minister Cresencio Sandoval said a total of 29 people died, 19 alleged
criminals and 10 members of the Mexican Military. Now the question is what's going to happen to Ovidio Guzman now that he is behind bars.
The United States has requested his extradition asked about the matter. Mexican Foreign Minister Marcelo Luis Ebrard said yesterday, the judicial
process and Mexico has to run its course before a decision can be made on whether a Chapo's son can be extradited Rahel, back to you.
SOLOMON: Interesting developments there. Raphael Romo, thank you. Coming up after the break the latest on today's jobs numbers with Chief Economist at
KPMG Diane Swonk, we'll be right back.
(COMMERCIAL BREAK)
[09:30:00]
SOLOMON: Welcome back to "First Move". That would be the official bell ringing on this first Friday of 2023. U.S. stocks up and running as we look
at PPR there, opening their ringing bell, they're ringing the bell, professional bull riders. And if you were an investor in this market, maybe
you feel like you've been pulled riding this market to lots of twists and turns.
Investors today are reacting to the all-important U.S. jobs report and green arrows across the board with the NASDAQ up about six tenths of 1
percent starting the day in the DOW and the S&P closer to about three quarters of 1percent. But there is a lot of session left so we'll see how
the day shapes up.
And the major averages again solidly higher, up more than half a percent Wall Street also currently on track to finish the week with gains like in
the first week of 2023. There's also a lot of year left in 2023. So we'll see how it all shakes out. The December report, the December jobs report
showing the U.S. added 223,000 jobs that was a bit higher than expected, the unemployment rate that ticked down a bit too, but wage gains.
And this is what I think Investors are really keying on to slowed a bit and that's potentially an encouraging sign on inflation. That said, today's
numbers come after a whole host of data this week pointed to a continued strong and robust labor market, including solid reads on private sector
employment growth and job openings.
Fed numbers were out in force Thursday, making it pretty clear that their fight against inflation is far from done. The Head of the Kansas City Fed
saying benchmark rates should rise to above 5 percent and staying there for at least the rest of the year.
Diane Swonk is the Chief Economist of KPMG and joins me now. Diane, great to see you on this job's Friday, the day that we all look forward to quite
a bit. So tell me your top line reaction to this. So as I said, 223,000 jobs being added slightly hotter than expected, but wages coming in softer
than expected.
DIANE SWONK, CHIEF ECONOMIST, KPMG: Well, this is about as Goldilocks of a report as it gets for the Federal Reserve, we still had solid, as you said
employment gains. And in fact, the gains would have been even stronger if not for a system wide strike in the University of California system. So I
think that's important to put in there as well, because the public sector has been hiring up where there's been acute staffing shortages, most
notably in public education.
What we saw in this jobs report was that leisure and hospitality is still leading overall gains and trying to catch up on what was lost during the
pandemic. We are seeing participation also come up with the unemployment rate coming down. That was good news and welcome news, after we had seen a
reversal in that trend during the fall. And I think that's important too.
But one of the more interesting issues is that participation among both men and women, although prime age women have reached the peak, they hit
basically in February 2020. They're still lagging the G20 countries along with men, and that is something that just can't happen.
We're really discarding a lot of talent in keeping it on the sidelines, and not tapping that talent, as our competitors are both in the developing and
developed world despite the fact that we don't have a lot of safety nets.
SOLOMON: Where we certainly need people to come off the sidelines. As you point out, Diane help me understand the recovery that we're seeing. I mean,
we've seen a job growth for covering certain industries to pre-pandemic levels and not so much in other industries. It seems to be a bit of an
uneven recovery. What are you seeing in terms of industries?
SWONK: Well, there is a big shift from what we saw in February of 2020. And that's because we're still lagging in many of the care sectors, education
and in childcare, long term nursing health care, those sectors are still badly lagging. Also, leisure and hospitality are still lagging.
And even though prime age women are participating at a pace that they were prior to the pandemic in February of 2020, their recovery has not been as
strong as the recovery for men, even though they were hit harder for the overall employment levels, even though they were hit harder by initial
layoffs.
So there still is a very uneven recovery. And the distribution of job gains is very different than what it was prior to the pandemic with some of the
legacy increase in good side of the economy versus the service sector, outpacing the recovery from that initial sort of reopening and spending
heavily on goods as opposed to services.
Of course now we're seeing that shift in revenge travel and the move in leisure and hospitality and in health care. But we still have acute labor
shortages and that can't be escaped. The labor force is almost flat with where it was in terms of size from February of 2020.
That's mostly because of retirements and a shortfall in immigration and of course the soul as we lost in the prime age labor force to the pandemic. On
margin though we saw this week as well demand for workers job openings are 50 percent above the level, they were in February of 2020.
[09:35:00]
SWONK: Our analysis suggests that's almost entirely due to high quality new business formations, which those are businesses that are actually hiring
workers, not just the self-employed.
SOLOMON: That's an interesting point. I think it's why you're also starting to hear a lot more talk about structural changes to the labor market,
because of some of those points that you've already pointed out retirements, people who, who may not ever return to the labor market.
Diane, can I ask for wages, they appear to vary certainly by industry.
And I think there was a lot of talk about how much excess savings we have. But I wonder if there is a group at the lower income, who perhaps maybe
they're making more, but they're still not making a lot and they have tapped through their savings. And I just wonder is there enough focus on
the people at the lower end of the spectrum who are probably not still sitting on a lot of savings? And yes, they may be making more, but
inflation is probably - into that.
SWONK: Exactly. And I agree entirely. It's a great question. Our analysis suggests we're down to as of the late fall, we've drained over half of the
savings that we accrued almost half of the savings, the excess savings we accrued during the pandemic via both stimulus checks and what we weren't
spending things on.
The bulk of that drawdown came in the bottom 40 percent of income earners. So not just the poorest but the bottom half of the middle class as well.
And is starting to move up the economic food chain, the overwhelming majority of excess saving is concentrated in the highest income earning
households, those are the households less likely to tap their savings to spend.
They also had better incomes, of course and better wealth. But that is important because you won't have as much of a tailwind on consumer spending
going into 2023. We did get an extra boost at the end of the year in terms of consumer spending, because of the fall in prices at the gas pump. That
really helped out those workers that were at the lower end of the wage scale, because it's their commute costs went up, they were really squeezed.
We actually saw a contraction in retail sales in November. I think we'll see better numbers in December. But as we move into the year, the bottom
line is that the slowdown in wage growth for low wage workers is where it's occurring. And in fact, those are the workers that were burned the most by
inflation overall. And we can't rule out a secondary shock in energy and food prices come the second half of 2023.
SOLOMON: Right. And I think Diane, you've said this and forgive me if I'm butchering this, you once told me before when I spoke with you that
inflation hurts everyone. But it you know, it doesn't devastate everyone, right, it devastates certainly those who are at the lower income spectrum.
Before I let you go Diane, and quickly if you might, looking ahead to 2023, you've said before that storm clouds will get darker, before they clear.
Have they darkened enough from what you've seen?
SWONK: I don't think so I think unfortunately, we're going to see more unemployment before we see the Fed stop, basically turn around and cut
rates. And that is their baseline. The feds baseline says that it is a soft dish landing, which is not exactly soft; their baseline is to stall out
growth in 2023 and raise the unemployment rate by more than a percent from where it's at today.
Now, it's at an extremely low three and a half percent. And that's wonderful. But that's not what this many people participating as even were
in the prime major labor force in February of 2020. And so clearly, this is still a very mixed bag, even though it is a much better economy than we saw
in a better recovery, more rapid recovery than we've seen in the past.
It has come with that singe of inflation. And that's something that the Fed is still very worried about a lot easier to get from six to 4 percent core
inflation than from four to two. And that's where they're worried about where the heavy lifting is going to come. And they're going to have to
stand firm on rate hikes.
SOLOMON: Yes, it makes me think of what Powell has said before, you know, I wish there was a painless way to do this in terms of fighting inflation.
And I think heading into 2023 a lot; at least for me will be looking forward to sort of what that pain looks like and who was feeling it the
most. Diane Swonk, we'll leave it here. Thank you. She was the chief economist at KPMG.
And still to come the designer dresses that do not need washing and they ever creased because you can only wear them online. I will be talking to
the co-founder of the company, which makes them, we'll be right back.
(COMMERCIAL BREAK)
[09:40:00]
SOLOMON: Welcome back. My next guest is making sure that when you walk down the virtual street and the Metaverse, you do it in style. And you may not
be the only one because last year to Lloyd estimated that Metaverse fashion may be a $55 billion industry by 2030. Dress X is its name it sells digital
fashion for avatars and images.
Since its launch in 2020 the company has wrapped up some pretty big partnerships including Coca Cola, H&M, and American Eagle. Even Mark
Zuckerberg is taking notice over the summer DressX became the first digital only fashion company to provide clothes for Meta's new avatar fashion
marketplace alongside luxury brands like Prada and Balenciaga. Joining me now is DressX Co-Founder Daria Shapovalova. Daria, great to have you!
DARIA SHAPOVALOVA, CO-FOUNDER, DRESSX: Hi, how are you? Thanks so much for inviting me.
SOLOMON: I'm doing great. So I think we just start at the top, explain to me a bit how it works? Is it only for the Metaverse? Is it also for social
media and the digital world? Explain to me from the top how it works.
SHAPOVALOVA: Yes, of course, it's also for the social media. So if you go to dressx.com, you can actually purchase any item that will be digital
only. And in order to wear it you just need to upload your picture. And then you will be dressed in that item. And so it is ready to be posted on
your social media feeds.
Whenever you, wherever you want to boss it, either its Twitter, its Instagram, any other social media use it as a profile picture. But yes, as
you've mentioned in the intro, we also sell clothes for the avatars. So you can directly purchase clothing from DressX in the Instagram and Facebook,
Oculus NVR, and dress your avatar as well. So it's your kind of digital self.
SOLOMON: It's so interesting. And how much does it cost? I mean if a real dress, let's say a real dress retails for about 50 to $100 obviously some
more, some less, how much would a dress in the Metaverse or digital dress cost?
SHAPOVALOVA: Yes, absolutely. So for the avatars, it's somewhere between three and $10. And for the social media when you draft your picture, it's
usually around $30 because it's a different process of how it works.
SOLOMON: You know, is it is it clear when you look at a digital image on social media if this is a digital image, or is it a real dress? Is that
clear to tell? Or is it not so clear?
SHAPOVALOVA: To be honest, it's not so clear, some dresses they look so real that even I am the founder of the company when they see the results, I
can believe that this dress is digital. And I also do post a lot of course on my social media on my Instagram myself wearing digital dresses. And
sometimes people don't realize that dress is digital that is fascinating obviously.
[09:45:00]
SOLOMON: And so it's also sort of this ecosystem that it creates because I read that there are also now paid professional stylists for the Metaverse
and for virtual reality. I mean, it's sort of created also this other entire ecosystem.
SHAPOVALOVA: Absolutely stylists, designers that creates only a process in the digital world designers for the Metaverse, let's say, those occupations
and professions never existed before. So yes, that's an entirely new industry that I'm sure we'll create some new professions after a couple of
years.
SOLOMON: Do you worry at all about folks who are concerned that maybe the lines are blurring between real life, real fashions and virtual fashion.
So, you know if you're scrolling social media, and you're a young person, and you see your favorite influencer and a great dress, but it's actually a
virtual dress and you aspire to one face things and maybe the person doesn't even have it? Do you worry about that blurring line?
SHAPOVALOVA: We do understand there is a blurring line, but Wilson needs to also think about kind of advantages of digital fashion. So imagine if you
continue purchasing something in from the fashion every day, from the fashion brands, it will be not sustainable. But actually, it takes way less
resources to produce a digital dress.
So you can actually move some of your consumption into the digital only reality. And actually, your consumption habits will become more
sustainable, because you can still continue to have your physical wardrobe. But then you will have your digital wardrobe. And you can explicitly
mention that this dress is from my digital wardrobe and I purchased at DressX and despite its designed there.
Actually, overall, it can make your wardrobe way more sustainable because like there is a problem of overconsumption in the fashion industry for
people because we tend to consume a lot. And we're not saying that let's purchase last physical items. Let's go just - those physical items with
more thoughts about do we really need them to wear on a daily basis? And if we're not sure, why don't you try to purchase the same dress and digital
reality and see if you like it?
SOLOMON: I see. So that would explain sort of why you have said in the past, we don't see digital fashion is something that will substitute for
physical fashion. In your perspective, it's more of an addition or something to have fun with when you are online or playing in the digital
space.
SHAPOVALOVA: Yes, absolutely. We truly believe in the future one every person in the world will have that physical wardrobes and digital wardrobe
is my DressX. And that's it will be like two different wardrobe. Some of the clothing will be in physical and in digital reality as a copy.
So definitely this is something that we're moving into and especially as you've mentioned that Metaverse became the words of the year for a couple
in 2021 for sure. So people get familiar with this concept. And even when we started in 2020, it was not that evident.
SOLOMON: Right. It certainly has sort of picked up pace. But I'll tell you one thing, Daria; I'm going to be looking a lot closer on social media at
some of the people that I follow to see if those dresses are real or if they are virtual. Wonderful to have you, thank you.
SHAPOVALOVA: Thank you so much. Thank you, have a good day.
SOLOMON: You too. That is Daria Shapovalova. She is the Co-Founder of DressX. And coming up on "First Move" a very costly meltdown, the price
that Southwest Airlines is paying for all of that holiday travel chaos, will tell you coming up next.
(COMMERCIAL BREAK)
[09:50:00]
SOLOMON: Welcome back to "First Move". Southwest Airlines is suffering from a case of costly chaos. Southwest warning today that the operational
meltdown that had suffered during that massive and deadly U.S. storm last month will cost the firm as much as $825 million. The price it will pay in
terms of reputational damage while that could be much higher. Pete Muntean joins me now. Pete, well, good to have you.
I mean, it's only been a few weeks since that meltdown. What are we learning in terms of how much of that is lost revenue because of those
flights or other expenses?
PETE MUNTEAN, CNN AVIATION CORRESPONDENT: You know the Southwest stock symbol is LUV, L.U.V, hard to believe that shareholders really love all of
this news. And we're really getting this fuller picture of how bad this meltdown really was for Southwest Airlines 16,000 flights, Southwest
canceled between December 21 and December 31.
So when you total all that up a hill, there was about 140 people on average, on a Southwest Airlines Flight, we're talking about 2 million
people had flights canceled on them. So when you really sum all that up, it's really not all that surprising that these losses are between 725
million and $825 million for Southwest in the first quarter.
The interesting thing here is that Southwest says sure its revenue went down; its expenses went up because they had to pay out employees and
compensate them for overtime. Because all of these planes and all of these flight crews were out of position. And then also the amount that Southwest
was spending on refunds went up, we have not seen the totality of how much southwest will pay out to passengers.
We're still learning about that. And they're still paying out people, right as we speak. So we're not totally sure in the end, how much southwest will
really pay here. There's still some lingering questions out there. Will they be paying out folks for last bags, a south west - folks, about $3,800
for each check bag, so long as they can prove what's inside.
Still some check bags out there that are still not returned to passengers two weeks after this meltdown started. And then also will the airline be
fined by the U.S. Federal Department of Transportation. So there could be some more expenses that Southwest has to incur here for this big meltdown.
10 times bigger than its most recent meltdown, a real huge and staggering amount that Southwest last year well, almost a billion dollars.
SOLOMON: Yes, exactly. And what you're saying is there's more to come, more to learn, Pete Muntean, thank you. Well, the annual Consumer Electronics
show is underway in Las Vegas right now. CNN's Lynda Kinkade has a look at some of the cool gadgets being unveiled at this year's show.
(BEGIN VIDEOTAPE)
LYNDA KINKADE, CNN CORRESPONDENT (voice over): Thousands of emerging startups and global brands are showcasing cutting edge gadgets and gizmos
designed to help solve some of the world's greatest challenges from the day to day to the life-saving by taking the guesswork out of testing the
ripeness of an avocado. We're - anxiety with a therapeutic - pillar that waxed.
SHUNSUKE AOKI, PRESIDENT & CEO, YUKAI ENGINEERING: The more you - the more excited.
KINKADE (voice over): Health innovations are prominently featured trying to brain scanning helmet that claims to detect early signs of dementia and
Parkinson's. Rest your head on a pillow designed to give a better night's sleep and watch a demo of an ad hoc defibrillator, a device that the
company says saved 17 lives last year.
JOHANN KALCHMA, CEO, LIFEAZ: But we have developed the first life-saving defibrillator made for the home, so anyone can have it at home. It's
extremely simple to use. It's portable; you can have it at home. You can have it in your backpack when you do the gym when you go on vacation.
KINKADE (voice over): Right past the booths on a remote controlled pair of electric rollerblades that can go about 30 kilometers an hour. And check
out an autonomous wheelchair that hopes to soon transport travelers to their gate at the airport with a click of a button.
UNIDENTIFIED MALE: So it's an autonomous wheelchair, so passenger will get into the chair, select what gate they're going to be going to and then the
chair just takes them directly to that gate. They don't need to drive it. They don't need to tell it where it needs to go. It'll just take them right
there.
KINKADE (voice over): Cars will become a big part of CES with major automakers and others showcasing cutting edge advancements and nearly 300
exhibitors expected. It will be one of the largest auto shows in the world.
[09:55:00]
KINKADE (voice over): This year there will also be a lot of talk about web three and the Metaverse. So as with most of what you'll find it will take a
while before all these gadgets become widely available. And before you rush out to buy your ticket, there is some bad news. This show will not open to
the general public. It's only open to businesses and move that this events president says it due to public health concerns.
GARY SHAPIRO, PRESIDENT, CONSUMER TECHNOLOGY ASSOCIATION: We've instituted a lot of different measures in terms of trying to make this a place where
we mitigate diseases. We have wider aisles; we have greeters at the door, so people don't have to open some of the major doors, so we're encouraging
people to come. But it is not open to consumers. It's only open to business.
KINKADE (voice over): Just by that the shows organizers are expecting as many as 100,000 people to attend. Lynda Kinkade, CNN.
(END VIDEOTAPE)
SOLOMON: And that is also it for this show. I'm Rahel Solomon. "Connect the World" is next.
(COMMERCIAL BREAK)
END
