Authentic voices. Remarkable stories. AOL On Originals showcase the passions that make the world a more interesting place.
Wake up to your world in 2 minutes.
Jews and Money. Asian Drivers. Polish IQ. CPT… that's racist! But where do these stereotypes come from? Comedian Mike Epps explores the backstories of this humor and how history and fact often distorts into a snide – but sometimes funny – shorthand.
"INSPIRED" features celebrities, visionaries and some of the biggest newsmakers of our generation, recounting the stories behind their biggest, life-changing moments of inspiration.
In a compelling series of verite encounters, Win Win provides unique access into the minds and lives of the world’s most-celebrated entrepreneurs and athletes.
Explore what it means to be human as we rush head first into the future through the eyes, creativity, and mind of Tiffany Shlain, acclaimed filmmaker and speaker, founder of The Webby Awards, mother, constant pusher of boundaries and one of Newsweek’s “women shaping the 21st Century.”
Nicole Richie brings her unfiltered sense of humor and unique perspective to life in a new series based on her irreverent twitter feed. The show follows the outspoken celebrity as she shares her perspective on style, parenting, relationships and her journey to adulthood.
Comedy is hard, but teaching comedy to children is hilariously difficult. Kevin Nealon is giving the challenge to some world-famous comedians. As these young minds meet with comedy’s best, get ready to learn some valuable comedy lessons, and to laugh!
James Franco loves movies. He loves watching them, acting in them, directing them, and even writing them. And now, he’s going to take some of his favorite movie scenes from the most famous films of all time, and re-imagine them in ways that only James can.
The story of punk rock singer Laura Jane Grace of Against Me! who came out as a woman in 2012, and other members of the trans community whose experiences are woefully underrepresented and misunderstood in the media.
Executive produced by Zoe Saldana (who will be the subject of one episode), a celebrity travels back to their hometown to pay tribute to the one person from their past (before they were famous) who helped change their life by giving them an over-the-top, heart-felt surprise.
Enter the graceful but competitive world of ballet through the eyes of executive producer, Sarah Jessica Parker. This behind-the-scenes docudrama reveals what it takes to perform on the ultimate stage, the New York City Ballet. Catch NYCB on stage at Lincoln Center.
Park Bench is a new kind of "talking show" straight from the mind of born and bred New Yorker and host, Steve Buscemi.
Go behind the scenes with some of the biggest digital celebrities to see what life is like when the blogging and tweeting stops.
Jason Stipp: I'm Jason Stipp for Morningstar. There's no denying that the fate of the US consumer and the U.S. economy are closely connected, but just how crucial is the consumer and how is he feeling today? Here with me to offer some insights is Morningstar's Bob Johnson. He's associate director of economic analysis. Thanks for joining me, Bob.
Bob Johnson: Good to be here today.
Jason Stipp: So you recently described the effect of consumer spending as sort of a whip effect on the economy. Can you explain a little bit about what you mean by that?
Bob Johnson: Sure, it's like a giant whip or a "crack the whip" the game where the handle of the whip is the consumer. And it actually doesn't move very much, but at the very tip of the whip is something like investment spending that is very, very volatile. And you might see consumer spending go down two percent, but you might see investment spending go down, as it did this time, as much as 30 percent. So a little move in consumer moves a lot of the other categories even more.
Jason Stipp: So certainly because the consumer is just such a huge part of the economy overall that you can see a little improvement there, but it creates this sort of follow on effect on the down and on the upside as well.
Bob Johnson: It goes up both ways and the consumer, as you say, is 70 percent, but what it really affects is the business investment spending, and so forth, down the other end of the whip, which really moves the economy around.
Jason Stipp: Sure. So give us a sense, then, of how far--it seems like consumers have been improving. Recent reports showed some improvement there. How much farther do we have to do to get back to normal? Have we completely recovered or do we still have some ways to go?
Bob Johnson: Well, where we are, believe it or not, it's a hard number to believe, and I'll break it down just a little bit. But consumer spending, in real dollars, that is inflation adjusted, is higher than it's ever been in U.S. history now, as of last month's report. So I think that's a pretty amazing number. We covered the ground we lost. Now, keep in mind it wasn't all that much ground. It was around a two percent decline in consumer spending overall. Now we've gotten every last drop of that back and a little.
Jason Stipp: OK. So, I think that we have seen in retail sales reports some real spending is going on out there. Consumer wallets seem to be opening up a little bit. I think for a lot of people, they're wondering, "How is this happening when unemployment still seems quite high?" We've seen some improvement there, but we're still at elevated levels. Where is the money coming from?
Bob Johnson: Yeah, very good question. A couple places where it's not coming from. It's not coming from debt. The consumer debt levels are down from where they were at the worst of the recession. We've actually spent down, so the good news is that they're not spending it from a bunch of loans. That's the good news. It would appear that a lot of the money is coming out of savings, gains that have been made in the stock market. And given that some of the higher- end stores, the Nordstroms, the Saks, and so forth, have been particularly strong might be indicative of the fact that some of it's coming out of savings and the stock market returns. We are up in the 70 percent range in the market and some of that money, inevitably, gets spent.
Jason Stipp: So we're seeing a flip side of that negative wealth effect, that we had in the depths of the downturn, is coming back around now and people see their portfolio levels up a little bit. They feel a bit wealthier and perhaps that leads them to spend a little more money than they had been spending during the downturn.
Bob Johnson: Absolutely. And I guess the other thing I'd want to say, a lot of people are like, "Well, now the savings rate's going to go back to the same crummy result before, and then we're going to be in the same old problems again." I don't really think we're there. I think when we got to five, six percent savings rate, I think that number was high because everybody was scared, really scared and panicked, and saved more than they really needed to, if you will. And I think that now the number's down around three percent. So we've kind of cut it in half, but it's still off the zero that we reached at one point in time.
Jason Stipp: Now that we've seen a nice pop in the stock market and maybe that wealth effect, it probably has some end to it after the market has come up. And we also saw some stimulus last year, that helped to spur spending in the auto area, for example. What's it going to take to keep this engine going? Do we need to see further government stimulus? Do we need to see further stock market gains? Or are there more fundamental factors that will get consumers to continue their spending trends?
Bob Johnson: I think that the next step in the puzzle is the manufacturing component to come back, which it has. And then see them hire more people and bring the employment number up which we're seeing. And then that leads to more service jobs around the periphery of the manufacturing businesses. And I think last month's job growth of 290,000is indicative of what can happen and if we get a few more months of that, that will put a lot more income in the hands of consumers and I think that's going to be the key driver in the next six months, along with more hours worked and maybe some gains in real wages.
Jason Stipp: Last question for you. It's always nice to see some of these assumptions play out on the ground in some anecdotal evidence. What stories do you have from the street that indicate that we are seeing a real recovery for the consumer?
Bob Johnson: There are two things that are going on out there. There are a lot of things happening in the tech sector and then there's other things happening in the restaurant sector. And those are two consumer discretionary items where they're a little volatile and maybe extras, so that when people spend there you know things are getting better. In the case of restaurants, just pick a name. Most of them are doing very well right now. If you look at Starbucks, if you want to pick one name brand, the traffic in their stores was up in the most recent quarter for the first time in 13 quarters. That's more than three years.
So that's one of the signs that's going on there and you've got everybody from Brinker doing well, Cheesecake Factory and the mid cycle restaurants and then even on the low end, McDonald's continues to do well and report great sales results. So that's the restaurant side and that's discretionary and that's doing well.
On the tech side, where to start? Intel's excellent earnings this quarter were largely driven by consumer spending. We've seen articles that the netbooks are beginning to lose favor and conventional notebooks that are more expensive and more highly featured are actually selling better. Apple/Macintoshs are growing much faster than the entire industry and yet they're two to three times the price of other computers, on a list price. If you adjust it for a few things it's not as drastic. But the Apples are more expensive and people are flocking to them.
Jason Stipp: Certainly nice to see some of those positive signs. Bob, thanks for your context and the insight on the consumer today.
Bob Johnson: Great to be here.
Jason Stipp: For Morningstar, I'm Jason Stipp. Thanks for watching.