Return to Transcripts main page
Quest Means Business
IMF Sees Recovery; U.K. Prosecutors Take Aim at BAE; Bermuda Premier Touts Island as Investment
Aired October 01, 2009 - 14:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
RICHARD QUEST, CNN INTERNATIONAL ANCHOR: You're on the up (ph), says the IMF, but investors are singing a different tune, as you can see from the markets.
Did BAE bribe its way around the world? British prosecutors are firing shots at the company.
And it's the playground of the rich and famous. Tonight, the premier of Bermuda joins me to talk about why everyone should cash in on his island. I'm Richard Quest, tonight, I mean business.
Good evening. The fourth quarter is under way. It's not exactly the best beginning that we've ever seen. Twenty-four hours ago I was telling you how things have been rip-roaring over the past three months, now it's a very different story as investors are selling and they seem to be selling hard.
A raft of economic data, some of it important, some of it merely indicative, it has all given pause for thought. Let's put this into perspective. The Dow Jones Industrials off, 152 points down, nearly half a percent. It had been worse earlier in the session. Any thought that we might be seeing 10,000 this week seems to have just about evaporated. We're at 95 -- well, no, it hasn't just -- it has evaporated.
All of this despite a report from the IMF, which we'll talk about in a moment, that said economic growth is back and we are powering forward in some shape or form. It's as though the rally that had power markets over the past couple of months simply disappeared.
And from London to Frankfurt to Paris, they were sharply down. Exactly why and what caused it today? Well, we have some economic numbers in the United States, and you have some worrying corporate developments in Europe.
Take the London FTSE, down 1.6 percent. HSBC, the banks were big losers, particularly RBS, which may have to bail out its Irish subsidiary, RBS down 4.5 percent. BP was down, which meant, of course, if energies were lower, then mines also took the brunt, Xstrata, Rio Tinto, all the usual ones.
British Aerospace, BAE systems, which I'll tell you about later, down 4.5 percent. They are going to get or potentially be clobbered by the prosecuting authorities. We'll have a report on that.
London was off 1.6, pretty bad. But an industrial market like Frankfurt, really saw down 2 percent. Commerz off 3, Deutsche down 2.7. The reason here, German retail sales, they fell by 1.5 percent in August. What we're starting to see, whether it's in London or Frankfurt, is that numbers are -- we thought the recovery was going to be stronger than it actually is, or at least proving to be.
So once again Paris CAC 40 following that front -- following that lead, down 1.9 percent. All of the major banks were down, 3.8 for BNP, Credit Agricole down 2.9 percent. Michelin down -- down 4 percent. The markets and how they have been trading.
When it comes to forecasts, the IMF, the International Monetary Fund, which is just about to start its meeting in Istanbul -- the annual meeting, says that recovery is under way, but it will be neither strong nor V- shaped.
The positive news for the first time in more than a year, world growth is going to be 3.1 percent in 2010. Global recovery will be slow. And there will be risks as stimulus -- or stimuli in the plural, of countries is withdrawn.
This is the big problem, that stimulus -- that stimulus that has been poured into global economies, the head of the IMF, the managing director, Dominique Strauss-Kahn, was pretty positive, all things considered.
(BEGIN VIDEO CLIP)
DOMINIQUE STRAUSS-KAHN, MANAGING DIRECTOR, INTERNATIONAL MONETARY FUND: We are at the beginning of the recovery, but the crisis is not over. The crisis will be over when we will be sure that unemployment is going to decrease, which is not yet the case.
I will say the crisis over maybe in one year from now, when really it will appear clearly that unemployment is going down. But until this point, I won't say the crisis is over.
(END VIDEO CLIP)
QUEST: Now that is the way the global position looks. In the United States, two reports, the Institute for Supply Managers, we had jobless claims, we'll talk about them in a second, they gave an overview that perhaps was not as encouraging.
Talk to Peter Morici. Peter, the IMF says that things are looking better. They, of course, are talking about emerging and developed economies. In the United States, it's not quite as rosy.
PETER MORICI, PROFESSOR, UNIVERSITY OF MARYLAND: That's absolutely right. The United States and Britain continue to face formidable challenges in accomplishing a recovery. In Britain, because of its huge financial sector, 10 percent of the economy, in the United States simply because it has a large trade deficit and there is not enough demand for all that it makes.
You know, the global economy is going to grow at 3 percent. But if it's all in China, and China has a trade surplus, the rest of the world has trouble growing unless there are a gigantic stimulus packages in the West basically that bar money from China, directly or indirectly, to keep demand up.
We've got to rebalance the global economy.
QUEST: That's easier said than done, as you and I have talked about on many.
MORICI: I know.
QUEST: On many occasions. But is this potential failure of a stimulus in the future, is this why we're seeing an unwinding of stock markets a little bit?
MORICI: I'm very puzzled today. We knew the institute of supply chain management was going to come in a little lower than forecasts, because the forecasts get written last week on Thursday and Friday, I handed in my sheets with everybody else. Then the beginning of this week we started to get indications.
But the ISM data still showed expansion in manufacturing. The economies are taking off like the IMF says.
QUEST: Right. But putting that into perspective.
MORICI: So, you know.
QUEST: But putting that in perspective, we also had consumer spending in the United States. Now that number was the best since 2001. Peter, viewers tonight need to know what is going on.
MORICI: Well, that was the "Clunker" deal. You know, all of those cars going off the lots, that inflated the number. Now the Commerce Department said it was almost all "Clunkers," but I took the data report. Non-durable goods, that's shirts, food, things like that, that expanded briskly -- that consumption expanded briskly. That wasn't the "Clunker" deal.
So I don't know why the Commerce Department wrote that, but they did. And traders read it. And that was wrong.
QUEST: Now as we go forward, we have -- we have the IMF saying things are looking better, but not brilliant. We have mixed economic data. I need you to lead me out of this economic thicket, Peter.
MORICI: OK. Here is my deal. I think the markets are going to recover and continue to move up once they realize the economies are growing. There is a lot of liquidity to buy stock.
In the West, in the United States, we'll get 2 percent growth, that's enough to sustain the stock market into next year because American companies and European companies make a lot of money in Asia where there is real growth.
Bottom line, 3 percent growth globally, 1 to 2 to 2.5 percent in Europe and the United States, a little less in Britain, and a gradually rising market. We're going to pierce Dow 10,000. We're going to go beyond that. Things are not that bad yet.
The real clouds emerge after the middle of the year, after July 1st. Does the -- do the economies keep on growing? And that's up to the governments to sustain.
QUEST: Is -- are we -- as we come to an end for our discussion tonight, are we in danger of simply talking ourselves into double-dip? The risk of double-dip, you and I could talk it there.
MORICI: Absolutely. We could do that. Pessimism could make that happen. And also, Ben Bernanke doing silly things. In his last policy statement, he declared the recession over and declared that it was a V- shaped recovery by saying he was going to withdraw his support for the housing market by the first quarter of next year.
He even scaled back commitment to use the weapons at his disposal from all available means to, you know, a selected group of tools. And that was very foolish of him to make that call. He knows we can't forecast that well.
So, no, we could talk our way out of this, but we don't have to. We can get there from here.
QUEST: Peter, you and I will talk our way in, out, and roundabout in the days and weeks ahead. Peter Morici joining us from Maryland.
Now, we showed you the IMF managing director Dominique Strauss-Kahn, who, incidentally, will be on this program tomorrow night. Mr. Strauss- Kahn has joined an exclusive club of international figures after he gave a lecture at the University of Istanbul. The MD had a shoe thrown at him. A CNN intern who was at the lecture says other protesters shouted "go away IMF, you're stealing money." Like George W. Bush in Baghdad, China's premier, Wen Jiabao, in England this year, Strauss-Kahn was not hit.
And tomorrow night, we will ask him what he thought. Those events in Istanbul.
And, of course, we will have our correspondent Ivan Watson, who is in Istanbul, and he will be covering the IMF annual meetings.
A busy morning, the markets are down, the news is mixed. Fionnuala Sweeney is at the CNN news desk.
FIONNUALA SWEENEY, CNN INTERNATIONAL ANCHOR: Thank you, Richard.
Iran agrees to extend a dialogue over its nuclear program. Diplomats meeting in Geneva say a second round of talks will take place later this month. Iran also provided signals it will cooperate with international inspectors. An E.U. envoy says U.N. inspectors could get access to the recently revealed uranium enrichment plant in the next few weeks.
The meeting in Geneva presented a rare opportunity for senior U.S. and Iranian delegates. A U.S. State Department spokesman says both sides had a frank exchange on other issues, including human rights. Iran's chief negotiator says he looks forward to the second round of talks.
(BEGIN VIDEO CLIP)
SAEED JALILI, CHIEF IRANIAN NUCLEAR NEGOTIATOR (through translator): Talks and negotiations will be continued with a positive view, especially within the next month, we hope to reach to a framework in order to continue these discussions in a form -- in the best form so that these talks will be fulfilled and realized so that all the walks of human beings would be -- benefit, the prosperity, peace, and tranquility according to justice.
(END VIDEO CLIP)
SWEENEY: Another powerful earthquake rattles Indonesia. The 6.8 magnitude quake shook the island of Sumatra less than a day after a deadly earthquake hit. At least 529 people are now confirmed dead. Hundreds of schools, hotels, and hospitals were damaged or destroyed in the city of Padang, trapping many people inside.
Indonesia' military is sending earth-moving equipment to help crews clear debris. Officials say the death toll could rise into the thousands.
Relief teams are bringing in emergency supplies to islands in the South Pacific hit devastating tsunami waves. Officials say at least 139 people were killed on Samoa, American Samoa, and Tonga following Tuesday's earthquake and tsunamis. Officials are warning the death toll will rise as rescue crews reach more villages.
India's southeastern coastal state of Andhra Pradesh has been inundated by two days of monsoon rains. The Press Trust of India reports at least 40 people have been killed in the flooding. More than 15,000 homes have been damaged, and some 300 square kilometers of land is under water. Parts of Andhra Pradesh have received more than 35 centimeters of rain since Tuesday.
China has thrown itself a lavish party. Communist leaders staged a one-day-long celebration to mark the 60th anniversary of the People's Republic of China. Earlier in the day, Beijing strutted its military might. But the evening ceremony was similar to the one held at the close of the Olympics. Thousands of dancers and singers took part, backed by a magnificent fireworks display.
Now we just mentioned those nuclear talks in Geneva, well, Iran's chief nuclear negotiator, Saeed Jalili, talks to Christiane Amanpour in a CNN exclusive. You can hear what he has to say about those talks. That is tonight on "AMANPOUR" at 8:00 p.m. London time.
Back to you, Richard, in the studio.
QUEST: And you will be with us at 8:30 London time. Fionnuala Sweeney, many thanks indeed.
One of Britain's biggest companies faces allegations it won billions of dollars worth of business, but it did so with backhanders. Is it true? Accusations of corruption have followed BAE for years. Prosecutors are about to shoot the company down with a prosecution -- or at least that seems to be the threat, in a moment.
(COMMERCIAL BREAK)
QUEST: Welcome back.
One of the world's biggest weapons manufacturers could be taken to court. It's all about corruption charges. U.K. prosecutors are going to seek government permission to bring a case against BAE Systems. It's accused of paying bribes to win contracts from foreign governments. The company, with more than 100,000 employees, is one of the U.K.'s biggest exporters. It makes military equipment, tanks, submarines, warplanes, missiles, and the like.
It's not the first time it has been accused of serious corruption, the Al Yamamah contract in $70 billion with Saudi Arabia with arms deals, an investigation into how the company secured and expanded that deal was quashed by the then-British Prime Minister Tony Blair, said the probe threatened national security, upsetting the Saudis was politically unacceptable at the height on the war on terror. Correspondent Jim Boulden has been looking into this. Jim joins me now.
They need government permission to try and prosecute this. But what is the thrust of the allegation? Who are they bribing and how much?
JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: We're talking about the number of contracts of over a decade ago, the Czech Republic, Romania, Tanzania, and South Africa, something in the region of 500 million pounds to a billion pounds, so somewhere between $700 million and $1.5 billion. And that's why if this happens and they're fined that amount of money, it's to take all of the money back from what used to be called British Aerospace, back from them that they made all of these deals.
QUEST: A couple of points, firstly, under the law, the amount they would have to pay if found guilty is great -- is (INAUDIBLE) of the whole contract, isn't it?
BOULDEN: Yes.
QUEST: If you -- it's quite an interesting way they do it.
BOULDEN: They're trying to make this more like the U.S. where you also punish the company for what happened, not just for, you know, the underlying contract 20, 30 years ago.
QUEST: Let's talk -- is this different from the Saudi case?
BOULDEN: A lot of people see it as exactly the same. The Saudi case, of course, was a long time ago. You're talking about a deal back in the day, right? Back in the '80s. So it is the same but it isn't part of the investigation from what you said very clearly. The prime minister at the time said you can't investigate that any more.
QUEST: So the Saudi case came to an end, basically.
BOULDEN: Yes.
QUEST: We remember Lord Goldsmith and -- the attorney general at the time, and all of that. Is there any likelihood that the government would step in on this case and say, no, we're going to stop this one as well, or was it -- are we too soon to say that?
BOULDEN: I think it's too soon to say that. But I would be shocked if that were to happen. Of course, people were shocked when Tony Blair did it. But the reason this matters a lot is BAE Systems is very big in the U.S. now.
(CROSSTALK)
(LAUGHTER)
QUEST: They've almost shifted to being an American company.
BOULDEN: Correct.
QUEST: If they are -- if, if, if they are convicted in some shape of form of this, damaging repercussions.
BOULDEN: Yes. And don't forget, the Department of Justice in the U.S. is still investigating the Saudi deal, just because the U.K. stopped doesn't mean the U.S. has stopped. And what will the politicians in the U.S. say? They will -- glee if a British company that does very well in contracts in the U.K. -- in the U.S. is, you know, shot down because of this. And then this could help the politics.
QUEST: Fair dues all around, as my late Aunt Heddy (ph) used to say, fair dues all around, what do BAE Systems say?
BOULDEN: They are -- they are saying this is about historic matters. They're saying that they have cooperated with the SFO, and if need be, they will go to court on these issues. But they are making decisions based on what is good for the shareholders and what is good for the company.
QUEST: Jim, watch it for us, come back with a smart (ph) report. Jim Boulden joining us there.
When we continue in just a moment, a dream of a job that takes you to the ends of the earth. "World at Work" continues. We're going to be talking about the daily life of the flight attendant.
(BEGIN VIDEO CLIP)
MAUREEN HENDERSON, FLIGHT ATTENDANT, BRITISH AIRWAYS: I like flying to all, you know, different countries and meeting different peoples, different cultures, it's great. I love it and I wish I had done it sooner.
(END VIDEO CLIP)
QUEST: Does jetlag, long hours, and the smell of aviation fuel lure you to a life at 40,000 feet? In just a moment, QUEST MEANS BUSINESS. Good evening.
(COMMERCIAL BREAK)
QUEST: The budget airline that once threatened to make you pay to go to the toilet is breaking the mold, and not in that way. It's all about cutting costs for the airline, not for you, the passenger.
Now you'll know well enough whenever there is an airline story, you'll find me getting involved. So we're talking about Ryanair, which is perhaps diametrically opposite to the flight that I took yesterday -- we covered yesterday when we were talking about the BA London City to New York.
Ryanair has some interesting and innovative ways. As of Friday, they're going to cut in costs by check-in desks are being scrapped. From Friday they're going completely. You will still be able to check in at the ticket, but you'll end up paying a 40 euro charge.
In other words, it's charges, charges, charges, ancillary bits and pieces. That's the first thing. Ryanair say that the check-in desk scrapping will basically save $80 million for the company. They say anyway most people check in online, so it won't make that much difference.
The total so-called ancillary add-ons, whether its food, they're paying for an exit seat, paying to check in extra, paying to put your grandmother in a seat next to you or down in the hold, they say the add- ons, $870 million was raised in 2008. Now that is a sizeable amount of money for any airline in any economy.
Ryanair is joining the long list of airlines that are thinking of ways to pinch the pennies. EasyJet says it will try mobile check-ins, replacing desks with staff using handheld devices. BA, as you know, is charging passengers to reserve preferred seats. Let's (INAUDIBLE) Steve Bond says where the industry is going. Steve is senior lecturer and airline operations at City University.
Many thanks for coming in.
STEVE BOND, SENIOR LECTURER, CITY UNIVERSITY LONDON: You're welcome.
QUEST: Now, all of this charging, this ancillary income, what do you think of it?
BOND: Well, it's not a surprise. If you look around the world, most airlines, a majority of airlines are doing something similar. You need to look at how Ryanair -- as you were talking about Ryanair, how their profitability has gone in the last few years. Most airlines have traditionally gone for yields of single-digit figures. Ryanair five years ago were having yields in -- well into double digits, really good stuff.
QUEST: Right. So they've got to make up the difference as the cutbacks come around. But everybody is getting on the act now.
BOND: Yes. Absolutely they are. And the ancillary revenue, which we've already mentioned, is a most important part of airlines' revenue, and increasingly so.
QUEST: But when you get British Airways charging for pre-selecting your seats, Ryanair would love to charge you to use the lavatory on board, where does it -- I mean, that's not going to ever happen, I don't think, but.
BOND: No. I think that was a Mr. O'Leary joke.
QUEST: It was. But where do the authorities -- but where do you think -- you're an expert on this, where does it end up?
BOND: Well, that's a really good question. It's going to end up -- who knows where it's going to end up? I think one of the reasons.
(CROSSTALK)
QUEST: . speculation!
(LAUGHTER)
BOND: Well, I'll speculate, that's for sure. To be honest, one of the points of Ryanair is they're a little bit a victim of their own publicity. Mr. O'Leary, many years ago, famously was asked, what would you do if another airline undercut your fares? And he said he would always undercut theirs, and he would always be cheapest.
So he in a bit of cleft stick there. He has always said he will be the cheapest. Now the headline fare is what he is talking about there. Now you've got to make up the difference somehow. So he wants the headline fares to still be the cheapest in the market. So he has got to add on all of these ancillaries.
QUEST: What do the public finally think about these ancillary fares? I know whenever I talk to anybody, they loathe them, they hate them, they feel they're being robbed after buying the ticket.
BOND: Yes. And you can sympathize why people would feel like that. You go on to a Web site, you check a headline fare, and you think, that's a good fare, I'll go for that. So you click on the next button, continue, and up pop the extras. But you're hooked by that point.
Now the other thing you need to remember, talking about Ryanair in particular, is that their target market, and you talk about doing away with the check-in desk, you talk about doing away with any other way of booking a ticket other than online, and people will say, well, what about the percentage, whatever it is, of the population that have access online?
Well, generally speaking, by and large, that's not his target market. His target market is the young, single, and couples, backpackers.
QUEST: He doesn't want -- he doesn't want you and me. All right. Many thanks, Steve. Thank you for making sense. And let me just point out that Ryanair has a news conference in London tomorrow. I hope to be speaking to Michael. I'm putting some of these points to him.
When many people were growing up, one of their ambitions was to be a flight attendant. It had glamour. It was an exotic way of seeing the world, and you did it at somebody else's expense. Is that still the case? Clearly the flight attendant, I had to discover from Maureen about her "World at Work."
(BEGIN VIDEOTAPE)
QUEST: Maureen.
HENDERSON: Yes.
QUEST: How long have been flying?
HENDERSON: Ten years at British Airways.
QUEST: Ten years.
HENDERSON: Ten years gone in August.
QUEST: There are many tricks of the trade of being a good flight attendant. What, to you, is the real knack of it?
HENDERSON: Good sense of humor. The people, like working as part of a team. I like flying to all, you know, different countries and meeting different peoples, different cultures, it's great. I love it and I wish I had done it sooner.
For 10 years, before I came flying, I used to be a tour guide in Scandinavia. And then I decided at the age of 42, I wanted a change. So I applied to British Airways and I was so lucky to be accepted for the job.
QUEST: Do you ever get weary of this? Getting on and off the planes? The jetlag? Everything that goes with it?
HENDERSON: Never, ever. Never. Never get jetlagged or never get tired. I've been tour guide. I traveled for 10 years on and off of coach and hotels, traveling around Scandinavia, so I was actually -- you know, I got used to it.
Sometimes I might think, oh, here we go again, but that's my lifestyle, that's what I love.
I think in the '60s and '70s, edge was there, more glamorous then. But you had to be a certain age, a certain weight, a certain height. And thank goodness all of that changed.
QUEST: Any destination you've not been to?
HENDERSON: I'd like to go to the Far East, yes, I want (INAUDIBLE) to go visit Asia, South Africa, and also New Zealand. And you never know, and I'm happy doing a mixture of short-haul and long-haul right now.
QUEST: A job that many dream of and many more try to do. It's safety first, service second, but it's Maureen's "World at Work."
(END VIDEOTAPE)
QUEST: And "World at Work" continues, of course, tomorrow when we'll meet the pilot to hear about those. As you can see, this week very much has an aeronautical air to the program.
Some breaking news to bring you now. It's being reported that at least 1,100 people have died in Indonesia as a result of the two large earthquakes in as many days. This has been reported by John Holmes, who told reporters on Thursday. Mr. Holmes from the United Nations humanitarian -- he was in charge of United Nations humanitarian relief effort. The two earthquakes, of course, powerful, and devastating, and deadly. We'll have more on those details in the hours ahead.
This is CNN.
(COMMERCIAL BREAK)
QUEST: Good evening.
I'm Richard Quest, QUEST MEANS BUSINESS.
This is CNN.
It's the first day of the fourth quarter and a rough start on Wall Street. It's the worst that we've seen since the early days of September, in fact. All this when things had started to look better and the last quarter was a bit of a rollicking session.
Let's talk to Susan Lisovicz, bring her in, who is at the New York Stock Exchange.
And we have Maggie Lake, who is in New York to -- which we're going to be looking after with the important U.S. unemployment data, which will be coming up, of course, on Friday.
Let's start with you -- Susan.
I leave you alone for a moment and the market decides to tank.
What went wrong?
SUSAN LISOVICZ, CNN CORRESPONDENT: Well, we have, Richard, a virtual econorama today. We have lots of figures, everything from auto sales to weekly jobless claims to manufacturing to building permits. And there have been some disappointments. And the market is very nervous right now. I think the gain spectacular for the third quarter, the best third quarter for the Dow Industrials since 1939. We're right on the cusp of earnings season and there's a lot of nervousness about that.
QUEST: OK...
LISOVICZ: And so the market is falling.
QUEST: Right. Ken Lewis, Bank of America -- Ken Lewis deciding it's time to go.
The question is why now?
He didn't drop off the end during the worst time of the Merrill Lynch debacle and calls for his -- for his scalp.
So -- so what's changed?
LISOVICZ: Well, you know, for somebody like Ken Lewis, who, as my producer puts it, is a lifer at Bank of America, has literally been with this firm for decades and who has helped -- who was a key figure in building it to a national bank, that would have been a terrible thing -- a terrible thing to do during a financial crisis. It would almost be unpatriotic when -- when there was so much fear in the country.
Having said that, a couple of things. One is that I think everyone would like to think that we're past the worst of it. We're not out of the woods. And -- well, there are reports that say that he just -- he's just fed up, that he's a poster boy of -- of excess in the financial industry and, frankly, he was in an untenable situation.
He must rue the day that B of A decided to pick up Merrill Lynch for cheap. They had done so -- they had done, remember, Countrywide Financial, earlier in the year...
QUEST: (INAUDIBLE)...
LISOVICZ: . was big enough, strong enough...
QUEST: Just a second...
LISOVICZ: . strong enough.
QUEST: Just a second. Now, you say he must rue the day. But he must rue the day when he decided to pick up Merrill Lynch for cheap.
LISOVICZ: Yes. Oh, yes. Well, you have to remember, I mean I remember vividly what was happening. You were -- you were seeing -- you were seeing a run on banking stocks. That's what was happening. And both Merrill Lynch and Lehman Brothers executives were reaching out -- out to him, calling, saying help us.
He decided to go with Merrill Lynch...
QUEST: Right.
LISOVICZ: . and what happened was he had cold feet afterward. Hank Paulson and Ben Bernanke, by all accounts, put pressure on him and said you can't do it...
QUEST: Are they...
LISOVICZ: . you can't do it. And then what happened is he had the government saying, you know, we're going to take you to task because look at all the -- look at all the toxic assets on the books and look at these bonuses paid to executives at this troubled firm.
So he was getting it from both sides and -- and he had had it.
QUEST: All right, Susan Lisovicz in New York.
Many thanks, indeed, Susan, joining us from New York.
Mixed news in the U.S. jobs market. The number of people filing new claims for unemployment benefits rose more than expected last week. A private survey showed the number of planned job cuts in corporate America shrunk and sunk to an 18-month-low.
The big jobs number still awaits us.
Maggie Lake in New York is with us, as well -- Maggie, the significance of this job -- job numbers are always important.
Why is this one more important?
MAGGIE LAKE, CNN CORRESPONDENT: Because I think people are -- are sort of coming to the realization that all the enthusiasm about the fact that we are stabilizing is over and the reality that we're stable, but we're still not in a good place, is really setting in. And that's really reflected in the jobs market.
Yes, it's stopped getting worse, but we are still shutting jobs. The number -- the forecast for tomorrow expecting losses of somewhere maybe between 150,000 and 200,000. The unemployment rate is supposed to go up to 10 percent. I mean, by all accounts, this is one of the toughest job markets since at least the 1980s.
(BEGIN VIDEOTAPE)
LAKE: Jam packed job fairs, huge lines to turn in resumes -- for the millions of people in the U.S. looking for work, the struggle to stand out seems to intensify by the day.
UNIDENTIFIED MALE: It's a lot of competition out there.
UNIDENTIFIED MALE: It's a little harder because everybody is trying to apply to the same places.
UNIDENTIFIED MALE: There's so many people out there looking for a job right now.
LAKE: The odds of landing a job has never seemed so remote to so many. According to recent figures, there were fewer than two-and-a-half million full-time job openings for the 14-and-a-half million Americans actively looking for work during the summer. That means for every available job in the U.S. there were, on average, six job seekers fighting to fill it -- the highest ratio on record.
Economists see little improvement in the months to come.
UNIDENTIFIED MALE: We're likely to continue to lose jobs through the rest of the year. And just to keep even with the growth of the labor market, the labor force, we have to have about 130,000 or 140,000 new jobs being created. So we're falling further and further behind.
LAKE: The U.S. has been falling behind for some time now. Since mid- 2007, the number of available jobs in America has declined 50 percent. And even though companies are pleasing investors with stronger profits through cost-cutting and easier profit comparisons from previous quarters, firms are still reluctant to create jobs.
UNIDENTIFIED MALE: No business is going to hire just for the sake of hiring. They're going to hire because they feel they need additional workers to meet the demand. And the demand is not being created because people aren't spending and they don't spend for the simple reason, they don't have jobs.
(END VIDEOTAPE)
LAKE: And that's the bottom line, Richard. It is hard for anyone to see how we're going to have a sustainable recovery if there are no jobs. Economists like Dean Baker, in fact, think what we're going to need eventually is another round of massive government stimulus.
But I can tell you, there is absolutely no appetite right now for that in Washington, DC.
QUEST: Maggie, you'll be with us to help interpret those numbers tomorrow when they come.
Maggie Lake, who joins us from New York.
You might think if you live somewhere like this, you would be happy to keep it exclusive.
So why on earth is Bermuda wanting to throw open the doors to all and sundry?
Well, maybe not to all and sundry, but the likes, perhaps, of you. Never mind me. The territory's premier will be with us in a moment, in just a second.
This is QUEST MEANS BUSINESS.
(COMMERCIAL BREAK)
QUEST: Back when only the rich and famous could afford to fly the globe -- the jet set, they used be called that -- well, Bermuda was the sort of place, the paradise that mere mortals imagined they were jetting off to. That was then, as they say.
The tiny British territory is still famous. It has pristine beaches, turquoise seas. There's another side to the island's economy -- its international reputation as a tax haven. And that image is hurting the tourism industry. Moves are afoot to turn that around.
The man trying to spare that reputation is the territory's premier, the Honorable Ewart Brown, the premier. He wants to attract a wave of visitors to the island. He's been in London for talks on financial regulation. The premier joins me now.
Good evening, sir.
EWART BROWN, PREMIER OF BERMUDA: Good evening.
How are you?
QUEST: Well, very well, thank you.
I want to know how is your economy?
BROWN: Oh, the economy is standing up well. It is.
QUEST: When it comes to tourism, the vast majority of your tourism, obviously, is from the United States.
BROWN: Right, 85 percent.
QUEST: Eighty-five percent. An economy that's in recession in the United States, how has that taken its toll for you?
BROWN: Well, in the first quarter of 2009, we had about a 27 percent decrease in...
QUEST: Wow!
BROWN: ... yes, it was pretty big. But in the second quarter, it was half that. And I just got some numbers for July which indicate that we're on par with last July, which is a good sign. We don't think that that means total recovery, but at least it -- it means that we haven't gone downhill.
QUEST: Is that because resorts have cut costs, they've basically -- they've basically cut the product?
BROWN: Well, it -- there's a combination. People have reacted to the circumstances and cutting costs is one thing. We've managed to keep the costs of getting to Bermuda down.
QUEST: But you want, obviously, more high spending tourists from further afield to come, because they spend more than your U.S. market.
BROWN: Absolutely.
QUEST: You do.
BROWN: And they stay longer.
QUEST: They stay longer...
BROWN: That's right.
QUEST: ... and they spend more.
BROWN: That's right.
QUEST: (INAUDIBLE).
(LAUGHTER)
QUEST: So tell me, what's this airline that you want to start?
BROWN: Well, you know, a couple of years ago we had an airline from London and -- called Zoom.
QUEST: It was Canadian?
BROWN: Canadian.
QUEST: It went -- it went...
BROWN: Back in the (INAUDIBLE)...
(CROSSTALK)
BROWN: Exactly. But before they went, we found something out and that was when they were flying to Bermuda, we had a 22 percent increase in the number of U.K. visitors -- 22 percent.
QUEST: So are you hoping that somebody is going to start a low cost airline flying to Bermuda?
BROWN: If not start one, an existing one could simply add the Bermuda route.
QUEST: Who are you talking to?
Are you talking to...
BROWN: I don't -- I don't want to call names yet.
QUEST: Sir Richard?
BROWN: I don't want to call names yet. I don't think it's (INAUDIBLE)...
QUEST: Are you talking to Willie Walsh?
BROWN: I don't think Sir Richard is interested, but there are others who have indicated an interest.
QUEST: Michael O'Leary?
Right, you're not going to tell me, are you?
BROWN: I am not going to tell you.
QUEST: You're not going to -- I could -- we could sit here all night.
Let -- let's talk, though, about the -- the idea.
Will you put government money, either in terms of a subsidy or cheap airport landing fees, to help finance something like that?
BROWN: We -- we use incentives for airlines, sir.
QUEST: Yes.
You have -- your island has just been put on the white list, hasn't it...
BROWN: Yes.
QUEST: ... for financial regulation.
BROWN: Yes.
QUEST: Are you angry at the way the G20 has beaten tax havens over the head?
BROWN: Well, I'm not angry, but I was disappointed that we even -- that we weren't on the original white list. Bermuda has a pristine reputation for having a regulatory environment that is super.
QUEST: And if I come to Bermuda, will you show me a piece of beach?
BROWN: Absolutely. I won't have to show you.
QUEST: Thank you very much.
Many thanks, Premier.
BROWN: Thank you.
QUEST: Thanks for coming in.
BROWN: I appreciate it.
QUEST: Thank you very much.
Now, the weather forecast, of course, has been very important in major parts of the world.
Guillermo is at the World Weather Center -- I'm not -- you -- you have so much on your plate, Guillermo, at the moment, I'm not sure which crisis you wish to focus on first.
GUILLERMO ARDUINO, CNN METEOROLOGIST: Precisely. I'm going to be talking about the Philippines. That is the impending crisis. And it's happening right now but it's going to get worse toward the weekend.
Why?
Because we have a typhoon/super typhoon over the Philippine Sea that is coming right after another typhoon that we saw last week. That can be translated into floods, landslides and devastation. This is unfortunate, but it's happening.
So the center of the system now clearly defined very close to island. Now it's the time when we see a little bit of intensification, so it doesn't really matter if it's a typhoon or a super typhoon. It's so strong, so close to super typhoon status -- 240 kilometers per hour would be super typhoon.
The problem is that we saw before the floods and all the soaking of the ground in the area that is mountainous. So we are going to see landslides, unfortunately -- pretty much a repeat of what we saw in Vietnam in the last two or three days.
So here we have it, over 25 centimeters per hour -- sorry, accumulation that we're expecting in 24 hours, in the next two days, especially this side -- that is actually the worst side of the cyclone, where we see most of the convection.
Behind, we have another one, pretty much the same thing. A day, a day-and-a-half it will be near Spain and Guam. So it's the same strength.
But for our viewers in Europe, I want you to know that the weather will be improving in France, it will be improving in Spain and deteriorating especially in Italy, the southern parts, and then into Greece, as well, because of this stubborn low pressure center that continues to affect the area. While in the northern section, we see temperatures going down.
So very soon, like two days or so, Italy will be improving. Then will be the time for the Balkan Peninsula and later on for Istanbul and that area.
And here we have the temps that we are expecting for tomorrow -- 13 in Glasgow, 19 in Paris. You see warmer in the south, still, but with a lot of bad weather and also travel delays, especially for airports operating anywhere from Italy all the way into Istanbul -- Richard, back to you.
QUEST: We thank you for that, Guillermo.
Keep watching these other incidents around the world, earthquakes and mud slides.
At least -- there are major developments out of Indonesia. At least 1,100 people are now feared dead as a result of the two large earthquakes in as many days. That information coming from the U.N. humanitarian organizations.
Our correspondent, Richard Roth, is at the United Nations.
Richard joins me now on the line.
And I suppose, to some extent, it's not a surprise that this number of people. We always knew the number was going to rise -- Richard.
But do they believe that it's now crested, that number?
RICHARD ROTH, CNN SENIOR UNITED NATIONS CORRESPONDENT: No, they believe that there still could be hundreds of people bowed -- bodies buried under rubble, other buildings that have collapsed. There -- according to the United Nations, thousands of people are trapped under damaged houses. Early reports indicate 500 buildings have collapsed. Fires are affecting homes and hospitals in two key cities there.
Following the earthquake in West Sumatra, as you mentioned, Richard, 1,000 deaths reported; hundreds of people injured being treated in hospitals -- Richard.
QUEST: And I suspect, knowing the way that the (INAUDIBLE) of these stories goes, there is an appeal out, obviously, for humanitarian relief effort.
What does the U.N. say the world community most needs to do now?
ROTH: Well, they would need funding. They're going to issue what's known as a flash emergency appeal. They need shelter. They need blankets. They need food supplies. They want to rush in aid, as much as they can. And they've been down this road before. And as John Holmes, the U.N.'s humanitarian chief, put it, it's not a question of if, it's just when these disasters -- natural disasters keep happening. Six countries affected in the Pacific Region in the last few days.
QUEST: Richard Roth at the United Nations.
Richard, as I said to Guillermo, the moment you have more details, please come back to us. We'll take you on air the moment we hear from you.
Richard Roth at the United Nations.
This is CNN.
I'll be back in a minute.
(COMMERCIAL BREAK)
QUEST: They talked and planned for many months. They put in vast submissions that cost millions of dollars. There's an enormous amount riding on the announcement of which of four cities will be selected to host the 2016 Olympic Games.
Whether or not it's boom or bust, Phil Black on the high stakes game of hoping -- of hosting the Games.
(BEGIN VIDEOTAPE)
PHIL BLACK, CNN CORRESPONDENT: (voice-over): Four cities with dreams of throwing one of the world's biggest parties -- Chicago, Madrid, Tokyo and Rio de Janeiro have each spent tens of millions of dollars campaigning to host the 2016 Olympics. It's big money invested in the hope of spending even bigger money.
Chicago believes it can host the Games at a cost of around $4 billion. Madrid and Tokyo are budgeting for around $6 billion. And Rio is planning on spending almost $14 billion. These don't include contingency funds for unforeseen costs.
But are the budgets realistic?
There are lessons in London's successful bid. Its early number crunching wasn't even close.
(on camera): Preparations for the London 2012 Olympics are going well. Construction is ahead of schedule, but the budget has ballooned enormously. When this city was bidding for the Games, the estimated cost was less than $4 billion. The current budget is almost $15 billion.
(voice-over): The initial budget was too low on things like security and infrastructure. And two big projects, the media center and athletes village, have been bailed out by the government because private finance couldn't be found.
Analysts say the credit crunch could cause further challenges for London and whoever ends up hosting in 2016.
ED HULA, OLYMPIC ANALYST: I think the big question looming over London and some other cities will be the availability of private financing to construct some of the things that are needed for the Games that aren't really venues, but hotels, infrastructure for -- for -- for public transportation, that sort of thing.
BLACK: London's Olympic organizers say there are also benefits from the recession -- materials and commodities are cheaper and labor costs are down, too. The 1932 Olympics, staged in Los Angeles during the Great Depression, showed the Games can be successful despite a global financial disaster. But over every host city looms the shadow of Montreal and its 30 year struggle to clear Olympic debt.
Despite the great costs and potential risk, cities still compete fiercely for the Games -- fighting for the boosts in tourism, investment and image that are believed to come with hosting one of the world's greatest sporting events.
Phil Black, CNN, London.
(END VIDEOTAPE)
QUEST: Now, so the four cities are in the running to be chosen as hosts for the Games. And less than 24 hours from now, only one, of course, will bask in that glory. Plenty of people are placing bets on which city will be triumphant.
Don Riddell hit the bookies to see where the safe money -- is it Rio?
Is it Madrid?
Is it Chicago?
Where is it going?
(BEGIN VIDEOTAPE)
DON RIDDELL, CNN CORRESPONDENT: The Olympic motto is faster, higher, stronger. It's sports at its most pure. And predicting where the Games themselves are going to be is also something of a sport -- at least it is at the bookies.
Information is key when it comes to placing a good bet. So before I do mine, I want to make sure I've got some good information from Ladbrokes' spokesman Robin Hutchison.
Hi, Robin.
ROBIN HUTCHISON, LADBROKES: Good morning.
RIDDELL: How are you doing?
We both know, as Londoners, how exciting it is to be involved in an Olympic bid, and especially a successful one.
Is there much interest around the world in this race, do you think?
HUTCHISON: Oh, absolutely. It's huge. It's the biggest sporting occasion the globe ever sees, the Olympics. And 2016 is going to be absolutely massive. And I have to say, the great thing for Americans is that Chicago are the odds on favorite first.
If you had had this conversation 72 hours ago, all the money was for Rio. They were set 13-64. They're now 13-8. But the interesting decision is obviously that Obama is going to Copenhagen.
Will that sway the bid?
Will it sway the judges and the other countries that are voting?
We think yes, he can.
RIDDELL: Let's talk about who's not going to win it so we can rule them out. It seems to me you've got -- Madrid and Tokyo aren't going to get it. It's not going to go to Europe twice in a row. And, of course, Beijing will have had it eight years before. Tokyo may or may not get it.
So is anybody even betting on those two?
HUTCHISON: We've had a few quid, I must admit. But it's only been, because, really, the prices are quite high and therefore the odds are attractive. But the school of thought goes that the Latin vote transfers from Madrid when they get wiped out in the first round. So that goes to Rio.
But Chicago probably got the bet big -- they've got a better infrastructure. But, you know, South America has never had the Olympics. South Africa got the (INAUDIBLE) the World Cup.
Therefore, is it South America's turn to get the Olympics?
RIDDELL: Here's the big question.
When it comes to the Olympic bid and the betting around it, does the favorite win?
HUTCHISON: Well, the interesting thing, obviously, is we know more than most in this city that Paris were the odds on favorite for the 2012 Olympics all the way along, even to the day of the actual decision. And, of course, London beat them on the line.
RIDDELL: And -- and you think that Obama's presence really is going to really make a huge difference here?
HUTCHISON: Yes, I would think so. I mean, obviously, the Japanese prime minister is going. The Madrid -- the Spanish prime minister is going for Madrid. And, obviously, Rio's president is going. Even the king of Spain is going.
So I think the fact that Obama wasn't going this time last week would have been frowned upon. But he's getting on Air Force One. He's going with the press corps. He's going out there to win the bid and it may well just make the -- make the difference.
RIDDELL: All right, Robin, good stuff.
Thanks very much.
All right, I've now got all the information I need to go and place my bet.
Cheers.
Sorry, Rio. Three on Chicago, please.
Don Riddell, CNN, London.
(END VIDEOTAPE)
QUEST: And I'll be back with more in a moment.
(COMMERCIAL BREAK)
QUEST: Finally tonight's Profitable Moment. But this time tomorrow, one city will be celebrating Olympic triumph, having been chosen to run the 2016 Summer Games.
Living in London, I can tell you, the lucky city is about to embark on seven years of financial overruns, arguments and ultimately disagreements over whether it was all worth it.
We're a long way from Montreal in '76, when it took the city three decades to pay off the debt.
Los Angeles in '84 showed you can host the Games and not go broke.
It's a costly business. London's Olympics budgeted 3 billion pounds and then costing, of course, that budget to 9 billion. The U.K. government underwriting the over spend.
So, Chicago, Rio, Madrid, Tokyo -- may the best city win. And whoever does win, well, the check writing starts tomorrow.
And that's QUEST MEANS BUSINESS for this Thursday.
I'm Richard Quest.
Whatever you're up to in the hours ahead, I hope it's profitable.
Christiane is next, after the headlines from the I Desk.
END
