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Economists Sound The Alarm About A Possible Recession; McDonald`s Restaurant Chain Ends Its Business In Russia. Aired 4-4:10a ET
Aired May 17, 2022 - 04:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CARL AZUZ, CNN 10 ANCHOR: Economic experts are increasingly sounding the alarm about a possible recession. What that is and why it matters are our
first topics this Tuesday. I`m Carl Azuz.
A popular definition of recession is two consecutive quarters of decreasing economic growth -- sounds technical and maybe not something a major
concern. So why is it? A healthy economy is always growing. It`s always expanding.
So, if you have at least two quarters in a row, basically a six-month period or more when the economy is shrinking, you`re likely to see company
sales drop, gross domestic product drop exports drop, people losing jobs and having trouble finding new ones and consumers spending less money on
That`s not all happening right now. The U.S. economy did contract or shrink in the first quarter of this year, but consumer spending was strong in the
winter and early spring and the jobs picture is overall a good one. The unemployment rate is very low and the economy has added 400,000 jobs or
more in each month of 2022. These are some reasons why President Joe Biden said last month that he wasn`t concerned about a recession anytime soon.
However, there are economic storm clouds over America. Inflation is a big one we`ve talked about. The jump in prices of many things we buy hit their
highest levels in decades last year and they`ve only gotten worse since then.
The president`s critics blame his policies for driving up oil prices which are a major factor in inflation, and they say government spending from the
$1.9 trillion COVID relief package he signed last year also caused inflation to get worse. That package came in addition to those passed
during the Trump administration.
Inflation is expected to be a major issue in the upcoming U.S. midterm elections, one that could hurt President Biden`s fellow Democrats who
currently control both chambers of Congress.
America`s Central Bank, the Federal Reserve, says keeping prices in check is really its job not the president`s, but even the Fed`s been criticized
for its response to inflation.
CHRISTINE ROMANS, CNN CHIEF BUSINESS CORRESPONDENT: Has this booming pandemic economy run out of steam?
Despite widespread job growth, a housing market frenzy, and a monster gain on the S&P 500 last year, many economists and CEOs now warn a recession
could be looming. As the Federal Reserve tries to tame high inflation by aggressively hiking interest rates, even the head of the Fed himself admits
central bankers probably should have acted sooner.
JEROME POWELL, FEDERAL RESERVE CHAIRMAN: Hindsight says we should have moved earlier. We`re going to use our tools and we`re going to get this
ROMANS: Now, the challenge for the Fed is this: slowing the economy enough to get inflation under control, but not so much that it lurches into
recession. It`s the search for the so-called soft landing, but it won`t be easy.
BILL DUDLEY, FORMER PRESIDENT AND CEO, FEDERAL RESERVE BANK OF NEW YORK: The chances of pulling off are very, very low because they have to push up
the unemployment rate. And in the past, when you`ve pushed up the unemployment rate, you`ve almost never been able to avoid a full-fledged
ROMANS: As recession fears grow, investors are dumping stocks and other risky assets, everything from the tech sector to retail stocks to Bitcoin
has plunged. Other factors like Russia`s invasion of Ukraine and COVID lockdowns in China, they aren`t helping the outlook.
So, if the U.S. economy does slide into recession, what shape will it take?
There`s an alphabet soup of possibilities.
The V-shaped curve is the best-case scenario. It`s a sharp drop followed by an equally sharp recovery. Often that results from a one-time shock to the
economy, like we saw at the beginning of the pandemic.
The U-shaped curve is a more drawn-out recession that takes a few years for GDP to fully recover. Now, that occurred in the mid-1970s during the oil
crisis, and a period of stagflation.
Then there`s the dreaded L-shaped or hockey stick recession. That`s the worst case. That`s when a prolonged recession turns into a full-blown
depression. The Great Depression is a classic example.
But some economists argue the financial crisis which started in 2007 and took nearly six years for a full recovery also met that L-shaped
There`s also the W, when the economy bounces back quickly only to slide right back into recession.
And, finally, there`s the K. Now that`s when different sectors of the economy rebound more quickly than others creating two separate recovery
lines. Some economists argue that`s what really happened after the start of the pandemic when low-income workers were the last to feel the economy come
That`s a lot of letters. But remember a recession is just a possibility at this point. Still, it`s when economists are treating very seriously.
KEN ROGOFF, FORMER IMF CHIEF ECONOMIST: I was talking to a bunch of professional forecasters the other day and one after another said they
can`t remember an environment where it was this uncertain. The lockdowns in China on top of an already fragile economy, war in Europe, galloping
inflation in the United States, you have the makings of a perfect storm global recession. It`s a risk. It`s not a certainty, but it`s a pretty
ROMANS: A risk that American families are increasingly beginning to fear.
(BEGIN VIDEO CLIP)
AZUZ (voice-over): Ten-second trivia:
Speedee was once a mascot of which restaurant chain?
Checkers, Wendy`s, Steak `n Shake, or McDonald`s?
In the 1950s, Speedee smiled on signs and bags for McDonald`s.
(END VIDEO CLIP)
AZUZ: In Russia, hundreds of foreign companies have cut back on operations, suspended them for the time being or quit doing business there
altogether since Russia`s military invaded Ukraine on February 24th.
McDonald`s which had temporarily shut down almost 850 restaurants in Russia, just announced it`s leaving the country for good. The burger chain
says the humanitarian crisis caused by the war in Ukraine, plus an unpredictable operating environment contributed to its decision to sell its
Russia business. The jobs of more than 60,000 employees are now in question and McDonald`s could take a hit as its 155 locations in Russia and Ukraine
combined accounted for nine percent of its revenue last year.
The decision closes the door on more than 30 years of McDonald`s operations in Russia.
Here`s a very different sounding CNN report from when that door was opened.
REPORTER: In a dismal season for the Soviet economy, a golden vision of hope on the horizon.
Wednesday, after a dozen years of preparation, McDonald`s opens its largest restaurant in its 52nd country. Payment in rubles only.
Unlike the new hard currency stores which have made life seem better for foreigners and privileged Russians but left the great majority resentfully
out in the cold.
Inside, room for 700, with an international motif that combines Big Ben with Big Mac.
For the novice, instructions on what to order with your cheeseburger, maybe a milkshake blurring in the name morozni (ph) cocktail, ice cream cocktail.
Six hundred young Soviets have had a month of training in a way of working unfamiliar to the Soviet Union, fast and hard. The usual order of the day
here is service with a snarl, but McDonald`s has set out to change that with a zeal partly (ph) missionary.
GEORGE COHON, FOUNDER AND SENIOR CHAIRMAN, MCDONALDS OF RUSSIA: We`re certainly going to make money here. We`re not evangelists, so though. It`s
sort of neat to see the young crews and to see them smile and say, "thank you, please come back again".
REPORTER: And the Soviet kids in uniform sure look like converse.
UNIDENTIFIED FEMALE: People, they are very nice. They`re all smiling. And as you know, in Moscow, not in every restaurant you can find smiling
REPORTER: A meal here will cost two or three-hours wages for the average Soviet citizen, but he may think it`s worth it.
Here`s the competition: a place that sells pelmeni, meat-filled dumplings, guaranteed to stay with you.
Muscovites are used to queuing up for something to eat. The difference at McDonald`s is they promise there`ll be something left when you get to the
head of the line.
AZUZ: Two weeks ago, we told you about the longest glass bottomed bridge on or above the Earth. Today, we`re taking you across the world`s longest
suspension footbridge which stretches for a little under half a mile but over a deep mountain valley in the Czech Republic, about 312 feet over it.
It`s mainly supported by six cables. It took two years and almost $8.5 million to build. Pedestrians say it gives a great view, but it does shake.
So, if you`re looking to shake a leg, shake, rattle, and roll, shake it up, shake your groove thing, shake, shake, shake your booty, and hopefully not
shake anything off the bridge, it could be kind of fun if you`re not shaking with fear or shaking at the knees after getting roped into a
suspenseful shaky bridge shake off.
I`m Carl Azuz and that about spans all the bridge puns I got left.
Massabesic Middle School, shout out to our viewers in Waterboro, Maine, for subscribing and leaving a comment at youtube.com/CNN10.