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CNN Saturday Morning News

Interviw with Rajeev Dhawan

Aired May 03, 2003 - 08:16   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.


ANDERSON COOPER, CNN CORRESPONDENT: New government figures show American businesses are still bleeding pink slips. The question is, is the economy really in that bad shape?
Kathleen Hays has some of the facts.

(BEGIN VIDEOTAPE)

KATHLEEN HAYS, CNN CORRESPONDENT (voice-over): Rising unemployment, growing ranks of workers too discouraged even to look for a job, and painfully high numbers of people applying for unemployment benefits, all symptoms of an ailing economy. Manufacturing has been especially hard hit, losing jobs for 33 months in a row, while employment growth in the much larger services sector has been anemic.

ANTHONY CHAN, BANC ONE INVESTMENT ADVISORS: We're not creating enough growth to support the creation of new jobs. That's the problem, not that we're in recession. It's just that growth is just way too soft.

HAYS: The end of the uncertainty surrounding the war in Iraq is one ray of hope. Economists say businesses may now be ready to move ahead with new investments and to start hiring workers again. And home sales have stayed healthy, supported by low mortgage rates. Energy prices are falling, pulling down gas prices at the pump. And the stock market is rallying, a sign Wall Street senses recovery in the air.

But the recent rally in stocks doesn't begin to make up for the three years of losses that have decimated people's portfolios. And with wage growth stagnating and many Americans deeply in debt, the consumer is not expected to pick up the pace of spending any time soon.

MAUREEN ALLYN, ECONOMIST: The household balance is still strained and if people have been putting off saving because they think maybe things will be OK, if people start losing their jobs, that is the knock out punch for family finances.

HAYS (on camera): So who will bail out the American worker? Economists say President Bush's tax cuts may not come quickly enough. And the Federal Reserve is not expected to cut interest rates next week. That's why union leaders say Congress should act quickly and extend unemployment benefits for thousands of workers that are set to expire at the end of the month.

Kathleen Hays, CNN Financial News, New York.

(END VIDEOTAPE)

MEADE: And, yes, the new unemployment numbers are in, and they're not good. The jobless rate rose to six percent in April, and that's compared with 5.8 percent a month earlier.

Well, right now let's see what Rajeev Dhawan has to say about this. He's with the Georgia State University Economic Forecasting Center.

Rajeev, good morning to you.

RAJEEV DHAWAN, GEORGIA STATE UNIVERSITY ECONOMIC FORECASTING CENTER: Good morning.

MEADE: You say that while the unemployment number is important at six percent, you say the actual number to look at is the rate at which jobs were lost or added to the economy, and that was at 48,000 lost last month.

DHAWAN: Right.

MEADE: Why is that number so much more important?

DHAWAN: Because that, actually what you are doing over there, are you getting the jobs or losing the jobs, the unemployment rate technically depends upon how many people are searching for jobs. And some people get discouraged, that number goes up or goes down.

MEADE: So the economy lost 48,000 jobs. That's not good if you're the person pounding the pavement. What do you think it says about the economy?

DHAWAN: It says that the damage from the war, the damage from the high oil prices is still there, but it's not as bad as it was two months ago when we lost more than a quarter of a million jobs. So we have lost close to half a million jobs in the last three months, but if it was a month ago and the war was still going on, I would have said like maybe this month is going to be another quarter million or something, if the war was still going on. But it's not, so it's much less.

MEADE: So regardless of the unemployment rate being at a high of six percent, I hear some optimism in your voice. Contributing to that optimism, is it that factory orders were up two percent last month, as well?

DHAWAN: To some extent, yes, and also the consumer confidence number was up last week. That means people will be spending more money down the road. However, if the job growth does not come back, that means instead of losing these 50,000, 100,000 jobs, we don't start adding 100,000, 250,000 in the next few months, and then this optimism would not stick.

MEADE: But generally what people are hearing is that the unemployment rate is at six percent. So how do you know, how is that going to affect consumer spending, which, by the way, kind of propped up two thirds of the economy?

DHAWAN: Consumer spending is first and foremost a function of the income the people are making. So the people who already have the jobs, they're making good incomes, not as much as they were doing three years ago, but they're still doing it. So they are going to spend the money. Number two, the refinancing wave has decreased now, but it's still pretty good. So they are going to put the money back into the economy.

The biggest issue is when would the companies start hiring people back. And that is where this thing, this tenuous optimism of mind will become a proper optimism, if the companies start hiring people.

MEADE: And when the companies start hiring people, do you think that spring and summer is going to start to look upward for the person who may be watching today who has been out of a job for months on end?

DHAWAN: Yes. I think the person who has been out of a job for a few months, his real time, things will improve for that person by, perhaps, about early fall to late fall. It's not in the summer. So that's why I'm not that optimistic. It takes a while for the businesses to come back to hiring people. Remember, the revenues of the companies are hurting. They don't have the pricing power. They are giving discounts to sell the stuff. They're keeping it going, but they cannot expand it any further till they really see some signs of demand.

MEADE: Rajeev Dhawan, thank you so much for your insights.

We do appreciate it this morning and hope it helps some of our viewers who are out there pounding the pavement. Take care.

DHAWAN: Thanks for having me.

MEADE: And next week, CNN takes an in depth look at the unemployment crisis in the country. Our series, "Jobless In America," begins on Monday.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired May 3, 2003 - 08:16   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ANDERSON COOPER, CNN CORRESPONDENT: New government figures show American businesses are still bleeding pink slips. The question is, is the economy really in that bad shape?
Kathleen Hays has some of the facts.

(BEGIN VIDEOTAPE)

KATHLEEN HAYS, CNN CORRESPONDENT (voice-over): Rising unemployment, growing ranks of workers too discouraged even to look for a job, and painfully high numbers of people applying for unemployment benefits, all symptoms of an ailing economy. Manufacturing has been especially hard hit, losing jobs for 33 months in a row, while employment growth in the much larger services sector has been anemic.

ANTHONY CHAN, BANC ONE INVESTMENT ADVISORS: We're not creating enough growth to support the creation of new jobs. That's the problem, not that we're in recession. It's just that growth is just way too soft.

HAYS: The end of the uncertainty surrounding the war in Iraq is one ray of hope. Economists say businesses may now be ready to move ahead with new investments and to start hiring workers again. And home sales have stayed healthy, supported by low mortgage rates. Energy prices are falling, pulling down gas prices at the pump. And the stock market is rallying, a sign Wall Street senses recovery in the air.

But the recent rally in stocks doesn't begin to make up for the three years of losses that have decimated people's portfolios. And with wage growth stagnating and many Americans deeply in debt, the consumer is not expected to pick up the pace of spending any time soon.

MAUREEN ALLYN, ECONOMIST: The household balance is still strained and if people have been putting off saving because they think maybe things will be OK, if people start losing their jobs, that is the knock out punch for family finances.

HAYS (on camera): So who will bail out the American worker? Economists say President Bush's tax cuts may not come quickly enough. And the Federal Reserve is not expected to cut interest rates next week. That's why union leaders say Congress should act quickly and extend unemployment benefits for thousands of workers that are set to expire at the end of the month.

Kathleen Hays, CNN Financial News, New York.

(END VIDEOTAPE)

MEADE: And, yes, the new unemployment numbers are in, and they're not good. The jobless rate rose to six percent in April, and that's compared with 5.8 percent a month earlier.

Well, right now let's see what Rajeev Dhawan has to say about this. He's with the Georgia State University Economic Forecasting Center.

Rajeev, good morning to you.

RAJEEV DHAWAN, GEORGIA STATE UNIVERSITY ECONOMIC FORECASTING CENTER: Good morning.

MEADE: You say that while the unemployment number is important at six percent, you say the actual number to look at is the rate at which jobs were lost or added to the economy, and that was at 48,000 lost last month.

DHAWAN: Right.

MEADE: Why is that number so much more important?

DHAWAN: Because that, actually what you are doing over there, are you getting the jobs or losing the jobs, the unemployment rate technically depends upon how many people are searching for jobs. And some people get discouraged, that number goes up or goes down.

MEADE: So the economy lost 48,000 jobs. That's not good if you're the person pounding the pavement. What do you think it says about the economy?

DHAWAN: It says that the damage from the war, the damage from the high oil prices is still there, but it's not as bad as it was two months ago when we lost more than a quarter of a million jobs. So we have lost close to half a million jobs in the last three months, but if it was a month ago and the war was still going on, I would have said like maybe this month is going to be another quarter million or something, if the war was still going on. But it's not, so it's much less.

MEADE: So regardless of the unemployment rate being at a high of six percent, I hear some optimism in your voice. Contributing to that optimism, is it that factory orders were up two percent last month, as well?

DHAWAN: To some extent, yes, and also the consumer confidence number was up last week. That means people will be spending more money down the road. However, if the job growth does not come back, that means instead of losing these 50,000, 100,000 jobs, we don't start adding 100,000, 250,000 in the next few months, and then this optimism would not stick.

MEADE: But generally what people are hearing is that the unemployment rate is at six percent. So how do you know, how is that going to affect consumer spending, which, by the way, kind of propped up two thirds of the economy?

DHAWAN: Consumer spending is first and foremost a function of the income the people are making. So the people who already have the jobs, they're making good incomes, not as much as they were doing three years ago, but they're still doing it. So they are going to spend the money. Number two, the refinancing wave has decreased now, but it's still pretty good. So they are going to put the money back into the economy.

The biggest issue is when would the companies start hiring people back. And that is where this thing, this tenuous optimism of mind will become a proper optimism, if the companies start hiring people.

MEADE: And when the companies start hiring people, do you think that spring and summer is going to start to look upward for the person who may be watching today who has been out of a job for months on end?

DHAWAN: Yes. I think the person who has been out of a job for a few months, his real time, things will improve for that person by, perhaps, about early fall to late fall. It's not in the summer. So that's why I'm not that optimistic. It takes a while for the businesses to come back to hiring people. Remember, the revenues of the companies are hurting. They don't have the pricing power. They are giving discounts to sell the stuff. They're keeping it going, but they cannot expand it any further till they really see some signs of demand.

MEADE: Rajeev Dhawan, thank you so much for your insights.

We do appreciate it this morning and hope it helps some of our viewers who are out there pounding the pavement. Take care.

DHAWAN: Thanks for having me.

MEADE: And next week, CNN takes an in depth look at the unemployment crisis in the country. Our series, "Jobless In America," begins on Monday.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com