The MacNeil/Lehrer NewsHour

MS. WOODRUFF: Good evening. I'm Judy Woodruff in Washington.

MR. MacNeil: And I'm Robert MacNeil in New York. After tonight's News Summary, is the U.S. economy in recovery or stalled in recession? We hear from two economists and four people in business. Finally, another in CharlayneHunter-Gault's special conversations pursuing Rodney King's question: "Can We All Get Along?" NEWS SUMMARY

MR. MacNeil: The nation's jobless rate jumped to 7.8 percent in June, its highest level in more than eight years. It was up .3 percent from May and represents 9.98 million unemployed workers. Shortly after the Labor Department report was released, the Federal Reserve lowered a key interest rate in an apparent rate to boost the economy. It cut the discount rate from 3.5 percent to 3. That is the rate the Fed charges member banks for loans. Most of the nation's major banks followed the Fed's lead by lowering their prime rates from 6.5 percent to 6 percent. Reporters asked President Bush about the new unemployment numbers during an appearance with Republican Congressmen on Capitol Hill.

PRES. BUSH: One, it's not good news. Two, unemployment has always been a lagging indicator. Three, the economy grew in the first quarter and we're confident that it will grow in the second quarter. But the main message that I get out of this is that the Congress ought to pass the economic growth stimulate package that we have up here, and that these people surrounding me have been trying to get through. I will say the good news is the Federal Reserve Board has dropped the rates by 50 basis points. And I'm told that a couple of banks have already followed lowering the prime rate. And I think that is a good way to stimulate growth.

MR. MacNeil: Democratic Presidential candidate Bill Clinton said the unemployment numbers show the country needs new economic leadership. In a written statement, he said, "America cannot afford a President who is willing to do anything to keep his job but nothing to help average, hard working Americans keep theirs." Undeclared candidate Ross Perot was asked about the new figures when he arrived in Olympia, Washington, for a campaign event.

ROSS PEROT, Undeclared Presidential Candidate: I understand they went up again and, as you know, unless we rebuild and reindustrialize America, we can't do all the things we've always done as a country. Step 1 is to put our people back to work. That's why I'm here.

MS. WOODRUFF: The House today passed a bill to extend new benefits to the long-term unemployed. The Senate is voting on the measure tonight. The bill would give up to 26 additional weeks of benefits to people who have exhausted their standard 26 weeks of coverage. Sen. Lloyd Bentsen, Democrat from Texas, was an author of the compromise legislation which emerged from a House Senate Conference Committee. He spoke on Capitol Hill.

SEN. LLOYD BENTSEN, [D] Texas: The job would be the most encouraging sign for nearly 10 million jobless Americans today. Short of that, they deserve the assurance that their unemployment benefits won't run out in the next few days and that this conference report is intended to give them peace of mind on that one. Americans also deserve the assurance that they won't continue to be pawns in a political crisis every few months when emergency jobless benefits lapse and the politicians in Washington argue about renewing them. So this conference will put an end to that by continuing emergency benefits if unemployment remains high.

MR. MacNeil: The jobless rate wasn't the only bad economic news today. The Commerce Department said factory orders for manufactured goods fell in May for the first time in five months. They were down .8 percent. The Commerce Department also said the U.S. remained the world's largest net debtor nation in 1991. The Department defines the debt as the differencebetween the value of American investments overseas and the value of foreign investments in this country. By that measure, the U.S. debtor position grew to more than $380 million last year, an increase of about 40 percent from the year before. The U.S. was the world's largest creditor nation in the early 1980's, a position now held by Japan. We'll have more on the economy later in the program. Judy.

MS. WOODRUFF: The House passed a bill today which includes $2.5 billion to create 50 so-called "enterprise zones" in economically distressed urban and rural areas. The vote was 356 to 55. It also creates new law enforcement and social programs. The plan was devised by congressional and White House negotiators following the Los Angeles riots. Here is a sample of the debate that preceded the vote.

REP. RICHARD GEPHARDT, Majority Leader: This country is being torn apart in its urban areas because people do not have work and people do not have hope. This bill is not the millennium in urban policy. Don't misunderstand what this is. It's a first step. But we've got to take that first step to give people hope.

REP. BOB MICHEL, Minority Leader: I hope this urban rural initiative is undertaken with a sense of our own limitations. Government alone cannot rebuild urban and rural areas that need help. Only the citizens of a community can do that and only the combination of individual responsibility and transcendent values can provide the leadership. We can only provide some money, some ideas, and show of concern. But what we're doing can be of some help, so I obviously favor it.

MS. WOODRUFF: The Senate will consider the plan later this month. President Bush today vetoed a bill that would allow people to register to vote when they applied for a driver's license. Mr. Bush said the so-called "motor voter bill" would be an invitation to fraud and corruption.

MR. MacNeil: A convoy of Canadian United Nations troops arrived today in the Bosnian capital, Sarajevo. They were there to smooth the way for a massive airlift of relief supplies to the besieged city. Edward Stourton of Independent Television News reports from the Bosnian capital.

EDWARD STOURTON, ITN: It took them three days to get through but mid morning and the first of the Canadians rolled into Sarajevo Airport. Battalion strength, combat troops, they have the numbers and the equipment the U.N. force here lacked, heavy machine guns and armor on display for any sniper watching from the neighboring suburbs. Their task will be to secure not just the airport buildings, but the perimeter too, ensuring the runways stay safe for the eight flights to come in, for Gen. Mackenzie, the U.N. commander here, the pleasure of welcoming the troops he needs and a brother officer.

GEN. MACKENZIE: Easy trip, eh?

OFFICER: I'll tell you with a beer, sir. I had to use force --

MR. STOURTON: For all the battlefield bravado, this wasn't an easy journey. They were held up not just by the logistical problems of traveling through mine fields and mountainous terrain; at one point, the commander of the local fighters wouldn't let them through.

GEN. LEWIS MACKENZIE, U.N. Commander: It was a difficult trip and they're tired, but they've got enough adrenalin going through them, I'm sure to keep them going. We've got some immediate jobs we have to do.

MR. STOURTON: The first of those jobs clearing the mines planted around the runway, but as they began, and it is likely to be a long process, the sense of security they brought was interrupted by heavy machine gun in the foothills. Fighting once again in the suburb of Dobrinja, but this time it did not threaten the security of the airport. There are enough troops here now to make sure that planes can keep coming in safely. American aid arrived on board this Norwegian flight this afternoon. The first aid has now reached the people but only French combat rations were handed out today. Most of these people were refugees who fled to the city from Serbian-controlled areas. They and the sick will be given food first. Only then will ordinary civilians like those queuing outside the distribution point this morning be helped.

MR. MacNeil: Pentagon officials said two U.S. military cargo planes would begin regular relief flights to the city tomorrow. An American businessman born in Yugoslavia, Milan Panic, today said he'd accepted the job of prime minister of the new Yugoslav federation. The 62-year-old Panic, a naturalized U.S. citizen, owns a California pharmaceuticals company. He would govern the federation now composed of just Serbia and Montenegro. Pannic promised quick democratic elections and said he would work to end fighting in former republics of the Yugoslav federation.

MS. WOODRUFF: NATO announced today that the last U.S. tactical nuclear weapons in Europe had been withdrawn. The statement gave no figures, but said that all short range missiles, land-based nuclear artillery shells, and naval depth bombs were gone. The weapons deployment began during heightened East-West tensions of the 1950's and peaked in the 1970's. President Bush said in a statement that the weapons were now on U.S. territory and would be destroyed.

MR. MacNeil: The Centers For Disease Control today said the number of AIDS cases reported in the U.S. grew by 5 percent last year. The CDC said the epidemic was growing most quickly in the South, where new AIDS cases were up more than 10 percent. Nationwide, more than 45,500 new AIDS cases were reported in 1991. That's it for the News Summary. Just ahead, the state of the U.S. economy and another Charlayne Hunter-Gault conversation on the state of race relations in America. FOCUS - GOOD NEWS/BAD NEWS

MS. WOODRUFF: We do turn first tonight to the economy, which may or may not be in recovery. President Bush says that it is, despite the nearly 10 million Americans out of work. But today's surprisingly high jobless rate confirmed for others their hunch that this spring's tentative economic recovery has ground to a halt. President Bush in his numerous appearances this week blamed people's doubts about the economy on negative election year news coverage.

PRES. BUSH: [Tuesday] All the noise and the fury out there of politics '92, endless polls, weird talk shows, crazy groups every Sunday telling you what you think, 80 -- 92 percent of the news on the economy being negative when the economy grew, admittedly slowly, it grew at 2.7 in the first quarter, 92 percent negative, what kind of reporting is that?

PRES. BUSH: ["CBS This Morning"] As they say in the old commercial, I'm bullish on America. And the reason I am is interest rates are down, inflation is down, and though it's caused hardship, many of the companies have shaken out excessive overhead. So I think we're poised longer run for a very vigorous recovery.

PRES. BUSH: [Today] The views are mixed. The economy is still growing and this figure, as I say, normally I think most experts would say a lagging indicator, but one, I've always said unemployment for one person, that's a hundred percent, and that's too much. And so we've got to keep moving till we get it back the way I'd like to see it in terms ofeconomic growth. I really do. I've got to go to work.

REPORTER: Do you believe the recovery is stalled?

PRES. BUSH: You've already had a question, madame.

2ND REPORTER: Mr. President, Mr. President, just following on the economy for a second, there are still so many people though who really question whether or not you get it in terms of -- you know, with these numbers, you're optimistic and yet look at the numbers.

PRES. BUSH: I get it. I said these numbers are not good, but I've got an answer for it. And the answer is that the Congress ought to pass these stimulants to the economy and it is unarguable. Everybody feels that it would help and get the economic growth more robust.

MS. WOODRUFF: For its part today, the Federal Reserve Board dropped its most important lending rate, the discount rate, to 3 percent. Many of the nation's banks responded by cutting their prime lending rate for their best large customers to a 19 year low of 6 percent. A drop in the prime rate means that consumers can expect lower rates for new mortgages, auto and other loans. Robin.

MR. MacNeil: Now we ask two economists and four business people if President Bush is right. Is this a recovery, or isn't it? Maureen Allyn is chief economist at Scudder, Stevens, & Clark, a global investment management firm based in New York. Lacy Hunt is chief U.S. economist for HSBC Holdings, a London-based company that owns Hong Kong Bank and Marine Midland Bank. Ms. Allyn, after today's figures on unemployment and on factory orders, is the economy in recovery?

MS. ALLYN: The economy is definitely in a recovery, but it's a recovery incognito. It has unfamiliar engines, investment, production, exports, and even public construction, and all eyes, meanwhile, focus on job growth, which is poor, and incomes which are under pressure. So consumers are having it tough, but an economist looking at this recovery says it's healthy and sustainable.

MR. MacNeil: Healthy and sustainable?

MR. HUNT: No, far away from that. This economy is very fragile.

MR. MacNeil: And is it in recovery?

MR. HUNT: Parts of it are in recovery, but parts of it are hemorrhaging. For example, in our goods producing sector of mining, manufacturing, and construction, we're still losing jobs. They hit a 10-year low. We've added a few folks to some service jobs, mainly in the government sector so far this year. We're not creating any type of income force. Many of our important dynamic industries that are keyed to exports are now starting to turn down. The housing sector, which needs to lead, home sales were lower last month than they were actually a year ago. The back log of unfilled orders, which is key to consumer confidence, is at the lowest point in the last four years. This economy is in trouble and I, for one, am very concerned.

MR. MacNeil: Are we about to see happen this year a repeat of what happened last year, the economy seemed to be in recovery through the spring and then suddenly it fizzled out in the summer?

MR. HUNT: Yes. And I think there's very good reason to believe that. Frankly, the Federal Reserve, although well-intentioned, is not doing the right job. They're not providing the type of leadership that the economy needs. They promised that we would get between 2 1/2 and 6 1/2 percent increase in the money supply. Late this afternoon, they reported another huge decline in the money supply. It's only growing 1.3 percent.

MR. MacNeil: Tell me why that is important. That means -- I mean, they've lowered the rate so much that borrowing money is a great deal cheaper than it was.

MR. HUNT: Unfortunately, the rate of inflation keeps coming down, and the business outlook continues to deteriorate. And as a consequence, the rate at which people are willing to borrow money is below the rate at which the Fed is pegging the Fed Fund's rate. And so the Federal Reserve is going to have to push the interest rates even lower in order to assure some minimal degree of monetary growth and they're frankly, they've been timid, they've been tardy, and the fact of the matter is they're not doing what they said in congressional testimony that they would do to try to help the economy move forward.

MR. MacNeil: Do you agree with that, the Fed is not lowering interest rates fast enough?

MS. ALLYN: The Fed has now brought the interest rates down more than 5 percent in 18 months. And I just cannot help commenting on my colleague's comment. He says unfortunately inflation keeps coming down. This is the good news. We are solving the problems of the excesses of the '80s. Money supply growth also means debt growth. One thing we don't need is more debt. The Federal Reserve by lowering interest rates can't erase that. They have made it easier to carry. Consumer confidence is still up. Absolutely, consumer confidence is up, because they're having an easier time carrying their debt. They're getting their balance sheets in order, corporate bankruptcies and bank credit. All of the problems that were really plaguing this economy a year ago are receding. And so it's looking much better. There's very little change.

MR. MacNeil: It sounds like you're not talking about the same country, you two. Is it --

MR. HUNT: If Maureen Allyn thinks that this is a recovery, I'd hate to see what she thinks is a recession.

MR. MacNeil: Well, so you disagree that we're going to see a repeat of what we saw last year?

MS. ALLYN: Absolutely disagree. The fundamentals just aren't there. Last year, we had a warning in consumer confidence dropping. If you have production running, don't equate job growth with output growth. One of the problems of the '80s was that we did not have production growth. True, executives are slow to thaw the hiring freeze, but they are getting more output per worker. They are really -- production is growing at about a 6 percent rate.

MR. HUNT: There's a serious fallacy in that argument. If firms try to improve their outlook by laying people off, cutting costs, slashing operations, getting more productivity, it can be good for the individual firm, but the sad facts are, that Maureen apparently does not know, is that you need an increasing number of people working to buy the goods of the corporations.

MS. ALLYN: Yes, but --

MR. HUNT: So everybody is trying to slim down. You have less an employment base. The employment base is the key. If we don't get that moving forward -- and unfortunately we lost almost 120,000 jobs, with the exception of one sector, the government sector, we did not add jobs in the month of June. That's a very serious commentary.

MR. MacNeil: Can you really have a recovery without more people getting jobs and getting the confidence from employment, steady employment, to go out and buy the things that are going to -- 60 percent of the economic stimulus is supposed to come from consumers?

MS. ALLYN: We have been having job growth this year. This month we did not. But we've had a 1 percent job growth and a 2 percent employment growth so far this year, not this month, but these statistics are volatile. And business -- or people are not the only ones with checkbooks. Businesses buy things too. We've had investment spending rising. Also, foreigners buy. Exports volume is rising at a 7 to 9 percent rate. And so these are sources of demand.

MR. HUNT: No.

MS. ALLYN: And that is -- those are the other things. And consumers' turn will come. We do see the work week, it went down a little bit this month, but it's at historically high levels. We are going to get hiring, not going to be rapid hiring, but one of the reasons that the unemployment rate is so high is that about 2 million people have come into the job force so far this year, because the surveys will tell you they think they'll have a chance of getting a job.

MR. MacNeil: Okay. But let's go back to the point Mr. Bush has made a number of times this week. He sees -- and he's obviously looking at some of the indicators you are -- that the economy is technically and maybe actually in a recovery. But an awful lot of people don't see that because they don't feel it. Now, there must be two different realities here, or you wouldn't have not only the disagreement between you two, but the dichotomy between what the administration sees obviously with political motives in mind and what the opposition sees.

MS. ALLYN: People are under pressure and my heart goes out to them. They're working longer hours. They're under more stress. Their jobs are much less secure than they were. But this is a rebalancing of the overconsumption of the 1980s. That went about as far as they could go, as they said in the old song "Kansas City."

MR. MacNeil: But can you have something you can really call a recovery so that ordinary people feel it with 10 million people out of work, officially out of work, and applying for unemployment --

MR. HUNT: Well, I don't really think you can. For example, since hitting a low, a technical low in January, we have had a .2 percent gain in employment. But typically, it's six times faster than that. And unfortunately, all of the jobs that we've created this year are very menial ones. They're low paying jobs, most of them in the government sector, as I said earlier, and a few in business services and health care. It's not the type of thing that's going to propel the economy forward. And one of the other things which I'm afraid Maureen is not very well aware of is that this is a global downturn in economic activity. Conditions in great Britain, in Canada, Japan, right now, are all extremely weak. And this is beginning to cut down our export base. We had a very significant fall off in exports. And, in fact, exports are our largest cyclical sector of the economy.

MR. MacNeil: Let's ask you for a quick reaction to that. Aren't you worried about the slowdown in the other countries?

MS. ALLYN: He has a sort of funny view of the globe. Latin America is experiencing a very wonderful revival after 10 years of slumber. Southeast Asia and China are doing beautifully. 40 percent of our exports go to those nations. They are growing at a 16 percent annual rate. Yes, Japan does have troubles. Europe does have troubles. I'm quite well aware of that. But we export capital goods to those countries that are investing and our computer sales, airplanes sales, oil drilling equipment sales, are doing quite nicely.

MR. MacNeil: Okay. So the sun's going to come out tomorrow, it's going to rain tomorrow, and let's see now how the economic picture looks in four businesses around the country. Barbara Rackes is chief executive officer of Rackes, a retailer of women's clothing and accessories with stores in Charlotte, North Carolina, and Columbia, South Carolina, where she joins us tonight. Elizabeth Fischer owns a small construction company in Dover, New Hampshire. She's in Boston tonight. Joining us from Chicago are W.H. Clark, chairman and chief executive officer of Nalco Chemical Company, which manufactures water treatment and process chemicals. The company has plants in the U.S. and 40 plants around the world. He's also on the board of directors of the National Association of Manufacturers. And Shirley Gross-Moore owns a car dealership, Barrington Dodge, in Barrington, Illinois, outside Chicago. I'd like to go round each of you with a, just a quick question. Ms. Rackes, is your business recovering or stalled?

MS. RACKES: Well, Mr. MacNeil, I think first you would need to define the word "recovery," because to me it connotes a return to a former state of good health. And I think if anyone thinks that we're going back to the good old days, they're probably headed toward their own Chapter 11. Personally, I think that there are tremendous opportunities for businesses that are attuned to the needs of the consumers and eagerly in the market showing the consumers that they can meet those needs. The other businesses that are not as quite as adjustable or adaptable are probably going to become the statistics of 1992.

MR. MacNeil: So what does that add up to in your business, a feeling that it's getting better, or it's still stalled?

MS. RACKES: What I hear from our customers is that they're feeling better, but they are extremely cautious. And what I think is remarkable is that this is not a temporary state. I think this is something that is going to be a semi-permanent state for many years to come, that consumers have been overwhelmed by the amount of the debt that they acquired from their previous prolific spending and they've been chastened by that. They've also learned to be value-driven as a result of the many sales and cost promotions of the years in the past. And I think that we will find a consuming public that is consistently cautious from this point on and for many years forward. So they're competent and they're moving, but they're moving one step at a time. Even our customers with the best pocket books are turning the skirts inside out to make sure that the seams are done properly. They're looking for value in everything that they do.

MR. MacNeil: Elizabeth Fischer, you build homes in New Hampshire. Any signs of recovery there?

MS. FISCHER: Well, there's been some activity. For the most part, I think the industry in New Hampshire is still just kind of bumping along. We think that the free fall has stopped and that there has been some leveling out of pricing so that the consumers are starting to come out, coming back into the market. They're hiring contractors to build houses on a one-to-one basis. There isn't any speculation going on. So I think, at best, we are either flat or bumping along.

MR. MacNeil: Yeah. And Ms. Gross-Moore, what about car sales in Illinois?

MS. GROSS-MOORE: The first quarter of this year was very slow. We saw some improvement in the last two months of the second quarter, certainly not to the degree that we anticipated. So we are still getting the mixed signals. I think, again, consumer confidence is still not where it should be and the figures we heard on unemployment today have certainly been alarming. So it's very difficult to say.

MR. MacNeil: What do they add up to you? What do those figures on unemployment mean to you, fewer people coming in, or fewer people making the second call back to look at a car?

MS. GROSS-MOORE: I think that could be the case. It's difficult to sayexactly how it will affect us. But, as you know, whenever the consumer hears the fact that there's a high, an increase in unemployment, and I think it does have something to do with their confidence, and they're not as likely to make those large purposes, because, again, it makes the uncertainty of their own jobs just that more prominent.

MR. MacNeil: Mr. Clark, what about the manufacturing business, do you feel in a recovery?

MR. CLARK: I think I may be a little bit more optimistic than some of the other comments that I've heard. Our business is a worldwide business and some parts of the world we're doing extremely well. The Far East, our business is doing well. South America is doing quite well. And in the U.S., our business is ahead of last year. It's not red hot. But by the same token, we can see that there is some improvement over the last quarter. I'm pretty optimistic about it and we're looking forward to the second half of this year to be an improvement above certainly last year.

MR. MacNeil: I'm sorry. Finish your sentence.

MR. CLARK: I was going to make a comment about the level of employment. Obviously, nobody likes to see people unemployed. But I'm not certain that you can directly correlate employment with whether or not business is growing or not, because a lot of efficiencies have taken place in manufacturing in this country and other parts of the world in the last year or so.

MR. MacNeil: But you would agree, would you not, with Ms. Gross- Moore that in people's perceptions, terms of their anxiety or their confidence, if they hear, either they lose their own job, or they hear of unemployment going up, isn't that likely to change the climate, or affect the climate?

MR. CLARK: It could very well change the climate. In our own particular company though, we are adding people, because the opportunities around the world are still quite large and so --

MR. MacNeil: You're adding people. In this country, you're about to take on more people?

MR. CLARK: Yes. We generally add a couple of hundred especially sales engineers each year. And we will continue to do that this year, as well as next. So in that case, we're not just laying people off. In fact, we're not laying people off at all.

MR. MacNeil: How about you --

MR. CLARK: I just wanted to mention --

MR. MacNeil: Sure.

MR. CLARK: -- we also have a freeze on a lot of the administrative side of the company now, but not in our sales force.

MR. MacNeil: Yeah. Ms. Gross-Moore, are you laying off, or hiring sales people?

MS. GROSS-MOORE: I'm not hiring any new sales people, however, in times like this, people are prone to keep their cars longer, so I have increased my personnel in the service and parts department.

MR. MacNeil: I see. And recently, is that a significant increase in employment there?

MS. GROSS-MOORE: Not significant. I have a small store, however, I replaced a part-time person with a full-time person and hired an additional full-time person. So you could say I increased my staff by 1 1/2 people. However, in a store as small as mine, that can be considered a little bit significant.

MR. MacNeil: Elizabeth Fischer, have you hired recently?

MS. FISCHER: Well, I'm a general contractor, so my mode of hiring is to bring in other subcontractors. And we've been busy with a couple of projects that have been happening traditionally in the spring. Our apartments need to have work done on them. And so people, contractors have been coming in, have been employed. How long that will last I'm not sure, but I think there has been some hiring. What'sinteresting is hiring, trying to find skilled trades people. There's been an out migration in New Hampshire of very skilled trades people, so you have to look kind of long and hard before you find people that have the skills that you need to perform the projects that you have.

MR. MacNeil: I saw in your conversation with our reporter today something that echoed, what we just heard here, that there'd been some government hiring in New Hampshire, is that correct?

MS. FISCHER: That's right. The state of New Hampshire has put some money into infrastructures improvement. There's been some federal money that's come in regarding road improvement that the state has been able to secure. There's been a little bit of a hesitancy on the state's part to do their matching funds, but I think that they've seen that the jobs are so needed that they will actually put those matching funds up. There also is a lot of community development block grant money that is coming into the state. We have some infrastructure improvements happening at our closed Pease Air Force Base with the onslaught of new airlines coming back into the area. So there is some, what I call public money out there for construction and infrastructure improvement.

MR. MacNeil: Barbara Rackes, what about your hiring picture?

MS. RACKES: Well, when we last spoke, I told you I hoped as we saw signs of recovery that we would be able to add some additional staff to our payrolls. And one of the things that we have found is that we have affected so many efficiencies that we continue to look for more ways to consolidate jobs and in some cases to out-source tasks where we find that they can be done efficiently outside of our own plant. I did want to add that I think one of the differences between layoffs in the past and layoffs in the present is that while they may have been cyclical and seasonal in the past, many layoffs today, similar to the consolidations that we've had at Rackes, are permanent layoffs. And I think that that is where the anxiety that shakes the foundations of many consumers is today.

MR. MacNeil: Let's come back to the two economists for a moment. Mr. Hunt, something that President Bush also referred to, he said many firms have greatly reduced their overheads, this is going to be a permanent situation now. It's obviously good for the firms and it increases the productivity of this country, does it not, and that's a good thing in the long run, but how can you square the two? I just repeat the question about how you build up consumer confidence if a lot of people are going to be permanently laid off.

MR. HUNT: You cannot square the confidence. You have to have a rising employment base to create the demand for corporate product. You know, I hear your guests, your other guests, and there are some pockets of strength within the economy, some parts of the South, parts of the far West. The problem though is that when you look across broad statistics, we see the severe fain and in the major population centers of the country, in New York and New Jersey, the unemployment rate is 9.2 percent. In California, which is the worst hit area of the recession, it's 9 1/2 percent. So we can pick through the data and find some bright spots. But if you take a broad view of all of the developments, there are some very worrying trends here and some may say, well, you know, it's the college students, the high school students coming in, looking for work, but one of the traditions in the United States is that we've always been able to provide meaningful job opportunities to our youngsters. And I'm afraid that unprecedented numbers of them simply were not able to get meaningful work and unfortunately, if we don't turn up the speed of this economy, they are not going to find meaningful work for many months to come.

MR. MacNeil: Let me ask Maureen Allyn about that. How do you - - I mean, obviously, we're talking about this partly because it's people's jobs and what they feel about things, but also partly because it's a political year and there are claims being made on all sides about who's responsible and what they could do about it. Can you have a real recovery, however efficient the streamlined, paired down companies may be, unless you can find jobs for all those other people?

MS. ALLYN: Of course you can. Germany has had a recovery long before there was an unemployment rate much larger than ours because they had large productivity gains and we envied them. It's just tough when it happens and we have to be sympathetic to the people that are having trouble finding jobs. But there are plenty of vibrant, competitive industries in this country. And once their profits get back -- remember, we've had a three-year profit depression going on. We are now seeing the rebuilding of profit margins. Companies have to have profits before they can hire. And I have every confidence. We heard about people putting part-time workers on full-time jobs. Once the consolidation is over and the growth is there, they'll be jobs out there. The great American job machine has not shut down by any means.

MR. HUNT: Well, I'd like to believe what she's saying, but those are not the facts. And, you know, she talks about parts of Latin America, Mexico, Chile, Argentina, doing better. Some of the smaller countries in Asia are doing better, but the fact of the matter is that we have very tough conditions in Japan, the United States, Canada, the United Kingdom. The only industrialized country that's really doing well is Germany, and they are pursuing a very restrictive monetary policy which I think is not only going to slow the German economy down in the second half of the year, but is already showing signs of leading to weakness in France, in Italy, in Spain.

MR. MacNeil: Because the Germans are investing huge amounts of money in rebuilding the former East Germany.

MR. HUNT: Yes, that's correct, but the German economy is having to pay in the form of higher taxes, substantially increased interest rates, and those are going to have repercussions for us. We're all part of the global situation. And I'm afraid that I do not see the big picture type of economic leadership to get the world moving forward.

MR. MacNeil: Let's go back to our friends out in the country. You heard -- Barbara Rackes, you heard President Bush say in the lead-in to this program, well, we had growth of 2.7 percent in the first quarter, not enough, but growth, and it's going to grow in the second quarter. The second quarter ended day before yesterday. Was that growth for you, compared with the first quarter?

MS. RACKES: It was a small amount of growth. What I think I heard --

MR. MacNeil: Less than the first quarter, or even with it, or - -

MS. RACKES: It was less than the first quarter. And I think that that is true of much of the retail industry. If I could say that there was a peak in the retail business this year, it probably would have come in February. My conversations in Washington at the National Retail Federation Conference a couple of weeks ago indicated that many other retailers had barely met their last year's sales in the latter portion of this year, or in the middle of the second quarter at that time.

MR. MacNeil: Shirley Gross-Moore, in the car business, in your part of Illinois, will President Bush's optimism be borne out? Will the second quarter show growth like the first quarter?

MS. GROSS-MOORE: There certainly was some growth in the second quarter here in the Illinois area. As a matter of fact, the area experienced a very good second quarter, but not, again, to the extent that we had anticipated, however, this is an election year and we're anticipating that the second -- the third and fourth quarters, the second half of the year, has got to be some improvement. I anticipate it, that it will be, and we're hopeful in this area, that his prediction will prove true.

MR. MacNeil: Elizabeth Fischer, was your second quarter better than your first?

MS. FISCHER: It was busier. We had new opportunities, new jobs, to bid on, to look at.

MR. MacNeil: Of course, that's a bit weather-related in the country, like New Hampshire.

MS. FISCHER: Yes, absolutely. It really is. I think what is going to be the boom for -- or not a boom for, but certainly improvement for my industry is going to be the lowering of the interest rates. Maybe that's been kind of the reaction to the high unemployment but that certainly has traditionally always helped the construction industry. People feel comfortable. They feel it is more of an urgency to get out there and either purchase the home that is existing on the market or to have that home built, because now will be the best time that they can get an interest rate that they can afford. So that I think will have more influence on our industry than maybe a rosy picture presented by the President.

MR. MacNeil: How was your second quarter, Mr. Clark, compared to your first?

MR. CLARK: Well, it was a little bit better, comparing the first to the second.

MR. MacNeil: The first was better than the second?

MR. CLARK: No, the second was better than the first, somewhat better.

MR. MacNeil: I see.

MR. CLARK: The nature of our business is such that since we provide products that go into the manufacturing plants, our type of business would be considered a little bit of a barometer of what's happening in the manufacturing plants. And, again, it's my impression because our business is greater and growing somewhat that there is a gradual improvement in the overall manufacturing economy in this country.

MR. MacNeil: What do you expect the second quarter figures to show? You heard what President Bush said, and obviously, that's been a big political impact, if that comes out less than 2.7 percent, the President calls them, the declinists will jump on that. If it's more, it'll have a psychological -- what do you expect?

MS. ALLYN: I expect it'll be stronger --

MR. MacNeil: Than the first quarter.

MS. ALLYN: -- than the first quarter, but very little consumption. I totally agree that retail is having a very difficult --

MR. MacNeil: Can it be stronger?

MS. ALLYN: Absolutely.

MR. MacNeil: Can the GDP be stronger with very weak consumption?

MS. ALLYN: Has been often in many quarters.

MR. MacNeil: It has.

MS. ALLYN: You'll get some inventory building. Inventories had gotten very low, but it will go on from there to pick up and I expect it will be stronger in the third revision than when we first get it announced, because as the export numbers, particularly exports of services come in, when the business spending gets calculated, we'll find that it was a quarter above 3 percent.

MR. MacNeil: Yeah. What are you expecting in the second quarter?

MR.HUNT: I'm going to see her for a bet later on, but the growth in the second quarter will only be about 1 1/2 percent, and if the Federal Reserve is not vigilant here and turns the money -- does not turn the money supply around, the growth in the third quarter will only be 1 percent, and the fourth quarter there is a risk that we could even turn negative again. We have to keep in mind that there are certain seasonal influences. The second quarter of the year is usually better than the first quarter, because it's the springtime, the approach of summer. When you take out these seasonal influences, the economy definitely weakened. I personally think that there was a bit of a recovery in January and February, and if we had kept it going through lower interest rates at the time, the economy would be a lot further along today than it is, but unfortunately, the Federal Reserve let that opportunity slip through its fingers, and here we are struggling. You know, I hear what the manufacturer says, but this economy lost 70,000 manufacturing jobs --

MS. ALLYN: Seasonally adjusted.

MR. HUNT: -- in June. And the manufacturing work week was cut - - there's nothing wrong with seasonally -- June is supposed to be a big production month. The fact of the matter is only 60 percent of the manufacturing industry laid people off in the month of June. That's a pretty broad-based deterioration in the manufacturing sector.

MR. MacNeil: Okay. Well, Mr. Hunt, Ms. Allyn, and Ms. Rackes, Ms. Fischer, Ms. Gross-Moore, and Mr. Clark, thank you all for joining us. CONVERSATION - CAN WE ALL GET ALONG?

MS. WOODRUFF: Finally tonight, our continuing look at attitudes about race in America and the question raised by Rodney King in the aftermath of the Los Angeles riots: "Can We All Get Along?" It is Charlayne Hunter-Gault's series and tonight she revisits an Atlanta acquaintance.

MS. HUNTER-GAULT: We first met Jane Fortson a couple of years ago during a series on the drug problem in America. She is chairperson of the Atlanta Housing Authority and managing director of the First Interstate Bank. Since we met, she's become part of the secretariat of the Atlanta Project, a program aimed at tackling social problems associated with poverty. It is led by President Jimmy Carter. We caught up with Jane Fortson at the Carter Center in Atlanta. Jane Fortson, how wide do you think the racial divide is in America? Is the South different than the North?

JANE FORTSON: In my opinion, there is more promise in the South than in the North. And that may reflect my own bias and my own prejudice. But I would like to think that it's really more reflective of the history that we share, black and white. We have a very bitter history, a very oppressive, a very ugly history, between the races, but the one thing that can be said is that we grew up together, we lived together, we ate together, and there is a sense of knowing between us that is almost familial. We are, in a sense, one big family, in spite of the wound of the past. And I think that serves to our benefit.

MS. HUNTER-GAULT: Do you have white friends who socialize with blacks?

JANE FORTSON: Absolutely.

MS. HUNTER-GAULT: How much?

JANE FORTSON: A lot, particularly people of my age, professional people, who are involved in various things, have a number of black friends and socialize in integrated atmospheres.

MS. HUNTER-GAULT: That's pretty unusual, because people in the North generally say not really. Is this a Southern thing?

JANE FORTSON: A lot of what's happened in Atlanta is Atlanta is a majority black city and with the advent of voting rights, what's happened in Atlanta is that we now have a majority black government, both at the city and the county level, and for the most part, our governmental power structure is now controlled by black Atlantans. And for those people who are involved in various kinds of things, whether they be business, or whether they be governmentally related, civil service, whether it be public service, any kind of interaction, with people who are involved in power positions, then they're involved with the black community. And what comes out of this is a social interaction.

MS. HUNTER-GAULT: Is it really?

JANE FORTSON: Very much so.

MS. HUNTER-GAULT: You mean you go to each other's houses?

JANE FORTSON: Yes, absolutely.

MS. HUNTER-GAULT: You know each other's children?

JANE FORTSON: That's right. Yeah.

MS. HUNTER-GAULT: That's interesting. So you're saying that when the power equation changes --

JANE FORTSON: Yeah.

MS. HUNTER-GAULT: -- things change?

JANE FORTSON: Sure. The interaction that's taken place over the last fifteen or twenty years as the black power structure has moved into place hasn't been necessarily an easy or a graceful one. On the surface it has been. The face that we show to the nation and to the world is one of racial harmony. Right underneath the surface though, there have been tensions and there have been resentments.

MS. HUNTER-GAULT: Does that impact on you, a white woman involved in social issues?

JANE FORTSON: The backlash that I get -- and it's quietly held, but it gets to me -- what is that white woman doing with the Atlanta Housing Authority, what is she doing in our communities?

MS. HUNTER-GAULT: Do you get that?

JANE FORTSON: For a long time, you know, my name at the Atlanta Housing Authority wasn't Jane Fortson; it was that white woman.

MS. HUNTER-GAULT: And how do you feel about that?

JANE FORTSON: It hurt.

MS. HUNTER-GAULT: Why?

JANE FORTSON: Well, when I was growing up, I grew up with a very rich, Southern liberal tradition. And I was taught literally from infancy that the best way was black and white together. My father was involved in the civil rights movement. It was very much a part of my upbringing. And the clarion call was black and white together as equals. And so as someone who wants to be involved in the community and wants to reach out and be of service and to help in whatever way I can, when I reach out and a hand gets chopped off simply because I'm white, that hurts. It is racism of its own kind. And racism, no matter what the source, hurts.

MS. HUNTER-GAULT: Where do you get the most grief about being a white woman working with blacks?

JANE FORTSON: Well, my friends who are black I don't sense any resentment from. I mean, we have a good, honest relationship, and we can talk about things.

MS. HUNTER-GAULT: Do you talk about it?

JANE FORTSON: Yes, we do. We do. It's sensitive. It's difficult at times, sometimes to be vulnerable and totally honest, but, but that honesty has a certain cathartic effect. And there are times for that honesty.

MS. HUNTER-GAULT: Can you think of an experience where you and a black friend had a cathartic exchange?

JANE FORTSON: He will probably not be happy that I would tell this, but there was a young man, a very bright, very capable young man, one of the exceptional ones, who grew up in Perry Homes, in public housing. And when he graduated from college, his father had been a minister in the community and very well known and had died some years before, and he had made a commitment to himself that he was going to become a leader of his community and he ran for the city council. He also was appointed to our board of commissioners at the Atlanta Housing Authority and that's how I got to know him. He was in a field of nine against an incumbent. And at the same time, I was beginning to put the pieces in place to become the chair of our Authority, a white woman with a majority black board and a majority black organization. And he was the key sling vote. He supported me. And he was also running for city council. And he suffered an enormous back lash for supporting me. People came to him and said, how did you support a white woman or a black man, because there was a black man who had been in the chair before, and he felt that I had the issues right and he supported me for that reason. Miraculously, he won the race. And before he was inaugurated, we were driving, going to a meeting, and I picked him up -- he didn't have a car and we were driving -- and he said, as he frequently said during that period of time, he began to sort of beat me up. We would go through about a ten or fifteen minute ritual when he would talk about, yeah, you white people, you liberal white people, you liberal white lady from Buckhead, and he would just beat on me and beat on me. And finally I'd had all I could take. And I pulled over the car and I stopped and I said, when are you going to let up, when are you going to leave me alone about this? And it broke the ice. And he said, you don't understand, I grew up in an all black, poor community, I went to an all black, poor elementary school, went to an all black high school, I was in an all black fraternity at college, you're the first white person I've ever really gotten to know. And this is a young man who was going into the city council. And it was a very moving experience for me. It literally brought me to tears and it made me understand the enormous sacrifice he had made to support me.

MS. HUNTER-GAULT: What is it going to take? Can we all get along?

JANE FORTSON: Well, I look at this perhaps a little differently than some people do. I think that there is a wound on the psyche of this country around this issue and it's a wound that we have denied exists and it's a wound that we have never really attempted as a country to heal. And that wound is racism. It's the racist feelings that we all hold and we harbor and we hide. We wear masks. We're in this almost excruciating dance of pretending that we're all racially even, that we don't harbor any racial, any racist thoughts, and we all do. It permeates throughout our society and we are all part of that society. And I think that a certain level of honesty has to come into the dialogue, an honesty that goes beyond white guilt and black blame. We have to get beyond that. And the wound, the wounding that has occurred, is really on both sides. It's a shame that we all carry. And the first step for that is to acknowledge that there is a wound, that we have done things to people that have been horrible. I don't want to sound like the bleeding heart liberal, but I think that white people are not perhaps as tuned in or aware of the real history of what happened to black people in this country. And if you think about it, we went to Africa, and we ran down and herded up people, broke them from their families. I mean, they didn't stand in line and sign up. We took them from their families and from their country and put them in holds of ships and brought them to this country. We treated them as animals. They were equal to animals. They worked the fields like animals. They were separated from their families like animals. They were bred like animals. And they were completely and totally dehumanized for over a hundred years in this country. And then we had the civil rights -- well, the Civil War, at which point we then said, okay, we will accept you into the human race, and now we will accept you as a human being, but you're a human being on inferior status; we are the superior race, white people; you as black people are inferior. And so we went through a hundred years of black people being inferior to white people, and all of the horrors of that racist era, an extremely oppressive time. And then comes the civil rights movement, itself, when, okay, okay, we'll now accept you as our equals, at least that's what was officially said. But at that point, what happened was a great complexity began from the white perspective -- and I can't speak really to the black perspective -- the lines became somewhat blurred as to who was the oppressor and who was the oppressed. There was and still is a certain amount of resentment about affirmative action policies. Those affirmative action policies open doors for many blacks. And the kind of integration that we see in middle management and upper management in corporations now are certainly the result of that. But it was not welcomed by white people, and is in many quarters still resented by white people. And we have to admit that to ourselves and we have to tell the truth. And then beyond that, we have to start finding ways to heal the wound. And in my opinion, the best way to heal that wound is to get to know each other. One of the things that's occurring here in the city of Atlanta is there is an enormous spirit of volunteerism that has just come out of the woodwork over the past couple of years. And we're talking about young, white yuppies for the most part really getting involved in all kinds of issues, social issues, and spending their weekends building houses and tutoring and mentoring and primarily in the poor black community. And in my opinion, what happens here is a certain transformation occurs, not only to the recipient of the help, but also to the person who is giving of him or herself.

MS. HUNTER-GAULT: But how do you get to a transformation where people think of one another as equals if you -- granted that this is a good thing that you've just described -- but if the relationship continues to be white people helping helpless black people?

JANE FORTSON: First of all, the communities are in dire need and the help is simply not there, not on a person-to-person basis. And a lot of our population has simply turned their back on the problem and pretends that it doesn't exist. So I think those people who are willing to wake up, get out of their couches and not watch TV and go to the community and do what they can to help should be lauded and they should be encouraged to do that, regardless of any accusations of paternalism. I think that people are fundamentally good. I think they're fundamentally caring. And when faced with the reality of evil, of bad, of something that just fundamentally is not right, I think that the American people will want to rectify that wrong.

MS. HUNTER-GAULT: Well, Jane Fortson, thank you.

JANE FORTSON: Thank you. RECAP

MR. MacNeil: Again, the main story of this Thursday, the nation's jobless rate jumped to an eight-year high of 7.8 percent. That translates to nearly 10 million unemployed Americans. The Federal Reserve cut its discount rate to 3 percent. Most major banks responded by cutting their prime lending rates. Congress approved a bill to extend unemployment compensation for people whose regular benefits have run out. President Bush said tonight he would sign it. Good night, Judy.

MS. WOODRUFF: Good night, Robin. That's our NewsHour for tonight. We'll be back tomorrow night with a five-way discussion on President Bush and whether he deserves to be re-elected. I'm Judy Woodruff. Thank you and good night.