What do these have in common: the unemployment rate, President Barack Obama's habit of appointing people from within his inner circle, 401(k) fees, and Americans' absurd love of pumpkin-flavored beers, bagels, lattes and M&M's?
Answer: They're all discussed in this podcast.
To be fair, most folks wouldn't dismiss a taste for pumpkin as absurd. (And then there are the lonely few who think a lager tastes just fine when it's unsullied by the taste of a huge, orange fruit. Fight it out amongst yourselves in the comment section.)
In this week's podcast:
- Thomas Perez, the newly sworn-in secretary of labor, says employment is headed in the right direction, although too slowly.
- Lindsey Piegza, chief economist for Sterne Agee, predicts how markets would react to the appointments of either Janet Yellen or Larry Summers as chairman of the Federal Reserve.
- Sheyna Steiner, senior investing reporter and analyst for Bankrate, looks at whether employees of small companies pay higher 401(k) fees than employees of big companies.
- Doug Whiteman, associate editor at Bankrate, says nostalgia is behind the craze for pumpkin-flavored everything.
What's job 1 for new Secretary of Labor Thomas Perez?
How is the new labor secretary going to help us? And who'll take over at the Fed from Ben Bernanke and does it matter?
LISTEN TO AUDIO
Mark Hamrick: From Bankrate.com this is "Your Money This Week." Here we try to connect the dots between what's happening in the world and your wallet. I'm Mark Hamrick, reporting from Washington.
This week we start with a chat with a top official in the Obama administration charged with the task of helping to get Americans back to work. He's the newly installed Secretary of Labor Thomas Perez. How does he plan to approach his job differently from his predecessors? And Federal Reserve Chairman, Ben Bernanke, will be leaving his powerful position soon. Who is in line to replace him and why does it matter? We'll talk with economist, Lindsey Piegza, who's been taking a close look at the leading candidates. Bankrate's, Sheyna Steiner, has found when it comes to your retirement accounts, you might be paying more in fees than you think. And our Doug Whiteman has a look at the sudden and surprising popularity of pumpkin products this time of year. We have all that and more on "Your Money This Week."
In our first segment home is where the heart is but for most of us work is where the money is. And whether we're talking about the unemployed or people who want or need a better job, employment is still one of the leading challenges facing individuals and the economy. As I spoke with newly sworn in Labor secretary, Thomas Perez, I asked him about his top priorities.
Thomas Perez: Jobs, jobs and jobs … making sure that we grow the economy, making sure that people have access to good jobs that provide opportunities to move up the ladder of success and climb to the middle class and it's really what the president is all about in his better bargain for the middle class; making sure we grow the economy from the middle out and through the programs that we administer here, whether it's helping people to gain the skills they need to compete or whether it's making sure our workplaces are safe or making sure people get paid for the job that they did, making sure that their pensions are viable. We protect and empower workers in a variety of ways and that's why it's a privilege to be here every single day.
Mark Hamrick: Various secretaries of labor bring different priorities to the office. Obviously, many of those priorities that you just eluded to are, in a sense, statutory, but then there are some that are philosophical that might sometimes even be slightly different than what the president himself might have. Is there anything special that you bring to the office that is unique to your own persona and reputation?
Thomas Perez: Well, we're all a function of our own experience to a large degree. I was very moved by the president's speech recently marking the 50th anniversary of the March on Washington that was a march for civil rights and a march for economic rights, a march for justice and a march for opportunity. And as the president correctly pointed out, the struggles that were being brought on the economic front 50 years ago, while we've made progress, there is an immense amount of unfinished business. And they wanted the minimum wage increased 50 years ago. They wanted the ladders of opportunity for people so that anybody could succeed if they were willing to work hard and play by the rules and our goal here is to make sure that those ladders of opportunity remain viable; that the rungs don't get further and further between on that ladder and that's why we're working so hard to ensure that people have the skills to succeed. That's why we're working so hard to increase the minimum wage. That's why we are working so hard to show that there are a lot of false choices out there that we don't need to make.
I've heard people say, for instance, that you can't increase the minimum wage because you'll lose jobs. Well, first of all, if you look at history that's just dead wrong. And secondly, I look at companies out there that have been able to debunk that false choice that you either take care of your shareholders or you take care of your workers. You look at Costco, a wonderful retailer, and the founder of Costco was a guy named Jim Senegal and he has demonstrated his employees make $15-$20 an hour and more, plus benefits. His shareholders get a remarkable return on investment. You don't have to make that false choice. And that's what we're trying to do, is demonstrate that and help lift wages because when you lift wages, people have more money to spend. When people have more money to spend, then businesses have to hire more people to produce the goods that people want to buy. That's what Henry Ford learned in 1914 when he did the radical step of something like doubling the wages of his workers. And he was asked, "Why?" And he said, "They need to be able to buy my products." And when we have wage prosperity, we have business prosperity and we have countrywide prosperity. And so we're working to make sure that those ladders of opportunity for everybody are available and that we can grow the economy in win-win ways.
Mark Hamrick: Well, Secretary, as I recall the president first mentioned that at least in the latest go-around, in his State of the Union Address and yeah, we have a Congress, which won't even agree to fund the programs that it's already approved. What, realistically, do you think are the chances that you can have Congress come together on an issue that obviously not everyone agrees with?
Thomas Perez: Well, I continue to have a lot of optimism that we can move in the right direction. I mean, the American people demand it. People who are out of work those … putting people to work is not a Republican issue or a Democratic issue or it shouldn't be. The ideas that the president has put forth and his better bargain for the middle class are ideas that have enjoyed, historically, bipartisan support. You know, investing in our physical infrastructure, for instance, our roads and bridges. Who brought us the interstate highway system? It was Dwight Eisenhower. That was his brain child. It's always been bipartisan. Passing comprehensive immigration reform, which will dramatically grow our economy, that's been something that Ronald Reagan championed in '86 and a bipartisan group of senators championed a decade later. Investing in human capital, I hear from CEOs across the country that they want to hire more people. They want to grow their manufacturing sector. They want to grow their health care sector but all too many people coming through the door don't have the skills to compete.
And so that shouldn't be a Republican or a Democratic issue and we're going to continue to work and work with that common-sense coalition. We've seen an immigration bill pass the Senate in a bipartisan fashion. And I'm hopeful and we will be persistent. As the president said at the Lincoln Memorial recently, a change doesn't initiate in Washington, it comes to Washington when people at the grassroots level come together. And we're seeing that and so we're going to be persistent and I'm confident that the economy, which is already growing at a solid and steady clip, we can pick up the pace. That's what we need to do because too many people are still suffering.
Mark Hamrick: Secretary, let me ask you one final question. That is, in the most recent unemployment report we saw that the so-called labor force participation rate, essentially measuring whether workers feel sufficiently encouraged to seek work, dropped to the lowest level, as you know, in about 35 years. What can you do to help boost sentiment out there, not only on the part of workers but on employers as well?
Thomas Perez: Well, the Bureau of Labor Statistics measures the unemployment rate in a number of different ways. And when you look at the report that recently came out on the unemployment numbers, they have a number of other measures that include looking the total unemployed, which takes into account what they call discouraged workers; those are folks that left the workforce. Other workers who are only barely attached to the labor force, so it's broader metric that looks at the unemployment picture, the underemployed, things of that nature. And when you look at the trend data in those measures, my economist friends that refer to U5 and U6, those are the geeky, economics terms for these things, but when you look at those trends, they've all been moving in the right direction. They're going down. They're not going down fast enough, that's undeniable, Mark.
And what we need to do is implement the president's better bargain for the middle class because as you repair roads and bridges and put people to work, you end up addressing issues of the long-term unemployed and other people who may be discouraged because they're going to see that they're jobs in their community and when they see that there are jobs, they will re-enter the workforce. And so that's why this is a bit frustrating at times because we know how to take the unemployment rate down and do it in short order. Stop laying off teachers and firefighters and police officers. That'd be a good idea. Stop resisting investments in roads and bridges, some of which are crumbling. Instead, invest in those and then you see that a lot of these problems will be addressed.
Mark Hamrick: Well, secretary, first of all, congratulations on your appointment and I think that all of us can agree that whether one is Republican or Democrat, it's in the best interest of our country that Americans get back to work and we know that's part of your mandate and so from that standpoint, we all wish you good luck. So thanks so much, secretary.
Thomas Perez: Thank you, it's a pleasure to be talking to you.
Mark Hamrick: Labor Secretary, Thomas Perez, he spoke with us from his office on Constitution Avenue in the nation's capital.
Next up, 401(k) plans have largely replaced pensions as the vehicle of choice for employers looking to help finance the retirements of their workers. But as Bankrate's Sheyna Steiner found out, not all 401(k) plans are on equal footing when it comes to costs or fees.
Sheyna Steiner: There are a lot of factors that go into the fees of 401(k) plan participants' pay. But do participants paying Champaign prices always get what they pay for? It can be hard to tell. In general, the cost of a retirement plan for a participant depends mainly on the size of the company thanks to economies of scale and negotiating clout, employees of very large companies pay, on average, close to a third of the fees workers at very small companies pay. That translates to over $100,000 difference at retirement. Large companies may have another advantage. They're typically more knowledgeable about the way retirement plans are set up. Understanding the very complicated details of retirement plan fees can help them make lower-cost investment choices for participants who then get to keep more of their money to save for retirement. For "Your Money This Week," I'm Sheyna Steiner.
Mark Hamrick: Ben Bernanke has been chairman of the Federal Reserve since early 2006. Since then, there's been a financial crisis, a Democratic president elected to two terms and a long climb out of the Great Recession. Bernanke's second term is slated to end in January and President Obama must elect a nominee to succeed him. The handicapping has been underway for months with some surprising developments. Sterne Agee Chief Economist, Lindsey Piegza, has been taking a look at the likely candidates, why it is important and how the candidates differ. To begin, I asked her, in effect, why does it matter so much?
Lindsey Piegza: Well, you know if you think back to Ben Bernanke's era, he navigated us through the aftermath of one of the most traumatic times for the financial market. Now we're going to be looking to a new leader to lead us out of that back into, hopefully, an expansionary period. So whoever is at the helm is going to be at the forefront of devising those policies, thus, making it one of the most important jobs in the world.
Mark Hamrick: Lindsey, like a lot of people, you've been looking at the top two candidates or those believed to be the top two candidates for the job, Vice Chair Janet Yellen and the former Treasury Secretary Larry Summers. Now you say that, and many people would agree, Yellen is seen as more of a consensus builder and Summers is more contentious. Flesh that out for us a little bit.
Lindsey Piegza: Well, that's right. The market is very comfortable with Janet Yellen talking about monetary policy. She's been very vocal. She's been very prevalent in the media and the press. So the market is very comfortable with her point of view and it's the general understanding that she will continue the consensus policy-building at the Fed. Now, Larry Summers, has been out of the game for quite some time. In fact, he's been in the private sector for years now and only recently coming back into focus and so the market is really unsure of exactly where he stands. What we do know is that he's a very firm opposition to quantitative easing, which has been one of the central programs of the Fed as of late. So we know right there that there would be quite a shift in policy if Summers came into power.
Mark Hamrick: Well, does that really mean then that one is better-suited then the other for the job?
Lindsey Piegza: No, certainly not, certainly not. And I don't want to imply that but there is a certain amount of perception that will lead to more or less volatility depending on who comes into that position. If the market views Summers as an upset that could set off all kinds of fears or traumatic sell-offs, if the market is concerned about the change in policy. If the market views Yellen as a more smooth transition, well, we could see less of a shockwave go through the Market with that transition.
Mark Hamrick: Now, Summers does have some experience in the financial sector or private industry and there's no shortage of critics, as you note, saying that he's been too willing to deregulate, particularly, before the financial crisis. Do you think that criticism is valid?
Lindsey Piegza: Well, I think the fear is valid and he's been very harshly criticized for his connections to Wall Street. In fact, some are blaming him for the financial deregulation of the '90s. And what we see is that several Democrats have already signed in support for Yellen but not necessarily because of Yellen, but simply because she isn't Summers. So while the fear is certainly warranted I don't know if that would actually translate into a dramatic policy differences between the two.
Mark Hamrick: Now, you're in Chicago, the home of the President Barack Obama and I'm in Washington and President Obama has occasionally taken some hits for maybe having been too close to his Chicago ties or perhaps being too close to his inner circle. Do you think that that is partially to explain why it is that it appears that he favors Larry Summers?
Lindsey Piegza: I do. I think you make a very good point. The president has a very clear habit of appointing people that are close to him, that he's comfortable with, that are in his inner circle. And so I think the president does have an unduly bias to appoint Summers over Yellen simply because he's comfortable from a personal standpoint.
Mark Hamrick: Now we know that there have been all kinds of sources quoted out there whether they are members of Congress or the Senate or people within the Obama administration that have sort of pointed to the Larry Summers train leaving the station, so to speak. But there's also some discussion out there almost suggesting that this is a bit of a ruse that could lead to other candidates being put out there. Who are some of those other potential candidates that would be neither Larry Summers nor Janet Yellen?
Lindsey Piegza: Well, you're right. CNBC actually reported that the president was prepared to pick Summers and then quickly back-peddled after the president decided he was going to delay the nomination, whether it was Summers or Yellen, until the Syrian issue was resolved. But you're right. Besides the top two candidates, Yellen and Summers, Tim Geithner, his name has been thrown in there; Roger Ferguson, Donald Kohn, these are among the possible candidates that have been tossed around, those former Fed members and obviously the former, U.S. Treasury secretary.
Mark Hamrick: So as it turns out, if a lot of this plays out as we expect, Ben Bernanke is almost in his farewell tour here and from where you sit, what kind of grades would you give Ben Bernanke for the job that he's done over these several years?
Lindsey Piegza: You know, I think we're gonna be giving him grades for the next several years looking back at policy and being able to actually run some analysis on the data. It's still so new. And the problem, too, is that he was dealing with unprecedented policies. We've never had quantitative easing in this country before. So to put that policy in place with any sort of expectation, well, you really can't do that. We can't run a regression on policy if it's never existed before. So I think the chairman did the best that he could with the tools in the Fed's tool belt to navigate these unprecedented times. So while it wasn't perfect, I think that the Fed certainly deserves at least a B-plus, A-minus.
Mark Hamrick: Kind of a so far, so good situation, right?
Lindsey Piegza: It really is, it really is. I think that many Fed chairmen would have resorted to policies of the past and not come up with policies outside the box. And I think Ben Bernanke did a very good job of navigating different policies that we've never had in place before.
Mark Hamrick: Well, a lot of different storylines here between the past, present and future but thank you for helping us to understand it all, Lindsey. It's been great speaking with you.
Lindsey Piegza: Thanks so much for having me.
Mark Hamrick: Lindsey Piegza, chief economist for Sterne Agee. She spoke with us from her office in Chicago.
The autumn season is here and so, too, are all kinds of products built around pumpkins, whether it's a spicy latte, beer or candy. Bankrate's Doug Whiteman carved out our next segment on the surprising pumpkin push.
Doug Whiteman: It's the great pumpkin push and this year it began before Labor Day. Starbucks has its pumpkin lattes, pumpkin bread and pumpkin cream cheese muffins. Beer aisles are filled with pumpkin-flavored ales. The company behind the Einstein Brothers, Noah's and Manhattan bagel chains has not only pumpkin bagels but also pumpkin cream cheese in its stores. And pumpkin spice M&M's have arrived for those who can't get enough of the gourd. Why the pumpkin mania? Because people love the flavor. Starbucks says its 10-year-old pumpkin spice latte is by far its most popular seasonal beverage and that more than 200 million have been sold since the steamy, spicy drink was introduced in 2003. The Einstein Noah bagel restaurant group says customers eagerly await its pumpkin products each year. The company's chief concept officer uses the word "heartwarming" to describe the line in a news release. And that may be an apt adjective because Americans have an almost romantic attachment to pumpkin.
According to Saint Louis University assistant professor of American studies, Cindy Ott, In her book, "Pumpkin: The Curious History of an American Icon," she explains that pumpkin is a reminder of a simpler time when family farms filled the national landscape. Marketing experts say limiting the pumpkin food season helps to raise the appeal level. If you've got a passion for pumpkin, you know you've got to get it while you can. Companies that try to stretch out the season and grab a bigger slice of the pumpkin pie can face a backlash. Some beer connoisseurs have howled over this year's early arrival of autumn pumpkin brews during the heat of summer. For "Your Money This Week," I'm Doug Whiteman.
Mark Hamrick: Finally, our look at this week in business history. On Sept. 17, 1920, almost one century ago was kickoff; the American Professional Football League was formed in Canton, Ohio. Two years later, it would be renamed the National Football League. Now we know that football, American football and the NFL are big business. According to Forbes, the average NFL team is worth nearly $1.2 billion. At the top of the list is the Dallas Cowboys, said to be valued at $2.3 billion.
You've been listening to "Your Money This Week." Our guests this week, Labor Secretary Thomas Perez and economist Lindsey Piegza. If you enjoyed the podcast, please check us out on iTunes and rate and subscribe to the program. We're hoping that you can help us to get the word out. Also check out our other podcast, Special Report, with breaking news and special features. For more on this and other personal finance issues, visit Bankrate.com. You can follow us on Twitter @Bankrate. Our editor-in-chief is Julie Bandy; managing editor, Katie Doyle; assistant managing editor, Holden Lewis. And thanks to our producer, Lucas Wysocki, for his work in the studio. I'm Mark Hamrick. From all of us here at Bankrate, here's hoping you have a great week.