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CNN Live At Daybreak

Unemployment Remains Steady in July

Aired August 03, 2001 - 08:33   ET

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

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CAROL LIN, CNN ANCHOR: We have some new unemployment figures to show you, and actually, they're not very much changed. We just got these numbers for July unemployment, unchanged at 4 1/2 percent. That means 6.4 million people remain unemployed, but a figure that's not moving, despite all the information that we've been hearing about layoffs.

COLLEEN MCEDWARDS, CNN ANCHOR: Yes, analysts expecting a bit of an uptick, but no.

LIN: So we invited Rajeev Dhawan. He is the director of the Economic Forecasting Center at Georgia State University, to be with us here this morning, to divine the deeper meaning of this.

Unchanged -- how do you explain that? We keep announcing layoffs for different companies, and yet this number doesn't budge.

RAJEEV DHAWAN, ECONOMIC FORECASTING CENTER: You see what happens is that in the economy, there is always some jobs being created and some jobs being lost, and what matters is, which way the balance goes. So right now, we're getting news about layoffs and all that, announcements like this month. But those layoffs show up three months down the road. In between, there is some job creation going on, hopefully, because I haven't seen that little job creation number.

LIN: We don't have that number yet. We're just getting these numbers.

DHAWAN: This kind of like holding the fort down. Unemployment has not gone up. It if would have gone up to like 4.7, 4,8, I would have said, this is really bad times. But this gives me a kind of like good feeling that the recovery that I'm expecting down the road in the later part of this year, say, November, December, has a better chance of coming out, which also mean that the Federal Reserve may not have to cut the rates anymore, and it means that people may have to start spending again, because job losses imply lack of spending.

LIN: But consumer spending is still hot and happy, you know, and people are still buying houses. It's businesses, not buying networking systems from a Cisco or you know, cell phones from a Motorola. It seems to be the indication that the economy is slowing down.

DHAWAN: You brought up a very good point that the consumer confidence, the way the people spend is OK so far. But the businesses, the executives are not feeling good, and they're not spending, and that means those layoffs a little bit lack of job growth. And this is what I call a stall in the economy or growth recession. Now if turns more pessimistic from the consumer side, then we're into the big bad "R" word, you know, and that is what I think we will avoid, because the Fed has been very proactive. It has cut the rates a lot. It could still cut more. This more weakness. Like everybody was thinking, Thought July would be pretty bad, but it turns out to be not as bad. And of course the date gets revised a couple of more months down the road. We will have a clear picture.

But looking forward, it tells me that if the bleeding is a little bit now, it is going to become a big wound.

LIN: It seems to be solidifying, because our producer just got in my ear and said 42,000 jobs lost last month, but that's not the figure you are concerned about. It's really the figure of job creation that will indicate, well, you know, some people are losing jobs, but other people are getting jobs, so everything just evens out.

DHAWAN: Yes, this 42,000 job losses mean that there were more losses than job creation. Now if this number was 250,000 jobs lost, that's a very bad thing. Now, in the first three months of this year, we created around a quarter million job in the year's economy. That we used to create in a month just a year ago. In the next three months, we lost a quarter million jobs. So we have net out even for the year so far. What that means is bad times for the people who lost jobs or for the people who are seeking jobs.

LIN: Let's say you make a big decision today. You know, you see a house this weekend that you really want to buy. Interest rates look good. But you don't know where the economy going. On what do you base this decision?

DHAWAN: How secure your job is. The moment you make a decision that you want to buy a house, that means you're preapproved for the mortgage, you have the financial means to buy it, so that should not impact your decision to buy the house, because rates are low, compared to a year ago. What matters if your job is very shaky. You're working in a dot.com, and you say, oh, I need to by the $2 million house because I have all these options and all that, no, that's not the right thing.

LIN: So maybe hold off on major decisions for a while and try to divine where the economy is going?

DHAWAN: Only for the people who are in shady jobs. But the rest of the people, for the more common people, it's still OK, and they should look out and see how it looks to them. Now this is exactly what I'm saying, if everybody holds back, and if everything still is fine, but you hold back, you cause the problem because we need to be spending.

LIN: And that's exactly what administration officials are saying. DHAWAN: Hopefully, we're seeing the right to now (ph). In the old days, they used to say, we are going to enter a recession or something. So all I'm saying is that if the consumers don't lose their cool, we will all be fine.

LIN: OK, I will buy those next pair of shoes.

DHAWAN: Sure.

LIN: Thank you very much. Good to see you, Rajeev Dhawan.

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