Press Briefing by Dana Perino and Edward Lazear, Chairman of the Council of Economic Advisers and Keith Hennessey, Director of the National Economic Council
James S. Brady Press Briefing Room
12:30 P.M. EST
MS. PERINO: Good afternoon. I have one scheduling announcement for you for next Friday: The President will travel to New York City, where he will make remarks on the economy to the New York Economic Club; so we give you that update.
And today I have special guests with me: Ed Lazear, Chairman of the President's Council of Economic Advisers, and Keith Hennessey, Director of the President's National Economic Council. Obviously there was a lot of news on the economy today, so I wanted to bring them here. They have about 15 minutes, where they'll have a short opening statement and take your questions, and then I'll follow up with anything that's not in their bailiwick.
CHAIRMAN LAZEAR: Thank you. Good afternoon. As you know, we got our jobs numbers this morning and they were negative. Obviously we were disappointed by the negative numbers. The economy is important right now and it's on the minds of many Americans, and it's certainly on our minds as well.
The jobs report contains a variety of information in it, and one of the pieces of information, and only one of the pieces is the jobs number. In addition to that, there are also numbers on unemployment, wage growth and weekly hours. And it's important to recognize that those numbers were actually good numbers; the unemployment rate actually went down; the wages continued to grow; and weekly hours stayed stable. All of those things are strong indicators that the economy is continuing to move.
Obviously we are concerned. We think this is going to be our weakest quarter. We projected that, which is why the President initiated discussions of a stimulus package back in the fourth quarter. We were successful in having that package introduced in January and passed by Congress in February. Most observers -- outside observers as well as those in the administration and in Congress -- believe that the stimulus package will work. We expect that the economy will get stronger, primarily in the third quarter of this year -- that is in the summer. So we expect to see strong growth in the summer, and this quarter will probably be our weakest quarter.
Let me stop there and open it up; we'll take your questions.
Q: When you say that this quarter will be the weakest quarter, are you expecting it to drop into negative territory?
CHAIRMAN LAZEAR: We don't really know whether it will be negative or not. And to be honest, even if it were positive, but if it were low, that would be a concern to us. So if we get a positive half-percent growth, we're not satisfied with that and that's the reason that we decided it was important to take those steps that we did.
We don't know exactly what the number will be. As you know, these numbers come out about a month after the quarter ends and then they're revised, and then they're revised again. So it will be some time before we know the actual details of those numbers. But I think everybody is anticipating that this will be a weak quarter.
Q: And what is the prospect of the economy heading into a recession?
CHAIRMAN LAZEAR: Again, we think that the growth rate this quarter will be low. There are indicators suggesting that growth will pick up, and pick up quickly. So the question is how quickly will it pick up. We think it will pick up -- as I mentioned, we think it will pick up by the summer. The consumer is going to get a pretty big influx of cash in May; we think those checks will go out -- it will go out to a large number of Americans, that will help the retail sector, it will help a variety of sectors, and we expect that to stimulate the economy.
Q: What's the answer to the question, though? Do you think there will be a recession?
CHAIRMAN LAZEAR: As I said, we are predicting much slower growth for this quarter. Recessions are things that are declared by other people -- National Bureau of Economic Research -- tends to happen well, well, a long time after the actual activity. So what we're focused on is economic growth and making sure that the economy turns around.
Q: Okay. Can I follow up? I'm sorry, I already interrupted. (Laughter.) This is different than what you've said before. Before from the podium, you've said -- or other presidential advisors have said that there will not be a recession. Have you downgraded your forecast for the economy?
CHAIRMAN LAZEAR: We have definitely downgraded our forecast for this quarter. I'm still not saying that there is a recession. There is no denying that when you get negative job numbers, realistically the economy is less strong than we had hoped it would be. That's the reality. That's why we initiated the stimulus package that we did.
The question as to whether the economy will turn around and turn around in second quarter or turn around in third quarter is one that -- you know, I mean, we can guess on it, but we think that the activity will pick up and pick up in a strong way by this summer.
Q: Does it matter --
CHAIRMAN LAZEAR: Go ahead. I'll catch him later. Go ahead, sir.
Q: Does it matter if it's technically a recession? I mean, you seem to have left, by not predicting significant increased growth until the third quarter, you've left open the possibility for two negative quarters. But does it matter?
CHAIRMAN LAZEAR: Well, as I said, we would be disappointed even if growth rates were positive, but were low. And we are expecting low growth this quarter. Again, this is not unexpected. This was forecast not only by us; I think it was forecast by almost all of -- people out on the street, all the independent forecasters. So this is consistent with the view out there. There is a bit of a revision down, I think as a result of some of these negative numbers.
But, again, I don't think we want to overreact to this. Recognize that the unemployment rate is at 4.8 percent. Four point eight percent is below the average for the '90s, '80s and '70s. So we're still at a very low level of unemployment. That means jobs are available; people are able to find work. And by the way, that conforms with our anecdotal evidence, as well. When we talk to people who are in business, they tell us that it is still quite difficult to find talented workers.
MR. HENNESSEY: I'm sorry, let me jump in. To add one point on that, a small positive growth number and a small negative growth number are both significant reasons for concern. And so on your question of, does it matter whether it is small-positive or small-negative, either one of them is a reason to want to take action, which is why the President took that action back in January.
Q: But the "recession" label -- unimportant?
MR. HENNESSEY: The "recession" label is a label that is generally, as Eddie said, assigned by economists much later in time. And so from our standpoint, as we're focusing on the policies that are needed going forward, what matters most is what do you think is going to happen over the next couple of quarters. The labeling of it is less important than what you actually predict in terms of the numbers.
Q: Last summer there was a slowdown --
Q: It's okay, go ahead.
CHAIRMAN LAZEAR: Go ahead.
Q: Two questions. One, why is the administration spending all this money to tell Americans that they're going to get a rebate check? I think they're going to spend, like, $40 million to send out letters to tell people they're going to get another letter in the mail with a rebate check. Why do we need to do that? And two -- I think it was brought up earlier in the briefing -- have we ever had a recession with, like, say, 4.8 percent unemployment?
CHAIRMAN LAZEAR: Recessions can start with low levels of unemployment, obviously, and then creep up to higher levels of unemployment. What's a little bit different in the data now is that the unemployment rate is actually going down, not up. And that's what's encouraging, and that's what we -- that's why I said this month's job report was complicated.
In terms of spending, let me -- I know this isn't quite the question that you asked, but let me focus on a different aspect of the spending. What we hope will happen, of course, when these checks go out, is that people will use the money as they see fit. Some people have mentioned that they may end up using the money to pay down bills, they may use the money for other purposes, they may even save some of the money. That's not a concern to us. We actually believe that that is consistent with the kind of stimulus that we have in mind. If they were to spend the money all right away initially, there would be nothing left to help the economy grow over the next quarter. So the fact that they pay down their debts and then have money to spend in the future is not a bad thing, and that's the way we're thinking about the stimulus.
Q: What about --
MR. HENNESSEY: On your specific question of spending the money to notify people, any time you do something as a government tens of millions of times, there is ample room for people to get confused. So if you're going to have tens of millions of taxpayers getting checks, you want to get the information out so that you have as few people as possible confused about what's happening, they understand what's coming and it reduces the number of incoming requests that IRS and Treasury have to figure out how to deal with it.
There is also a choice that tax-filers have to get the money by electronic funds transfer, rather than a check, and you want to give them advance notice about that option so they can make that choice.
Q: So how would you describe those analysts now who are out there saying -- looking at today's numbers and saying, this is it, this proves it across the line, we're in a recession? Are they wrong? Are they overreacting? Are they premature?
CHAIRMAN LAZEAR: Well, again, what I would say this proves to me is that we are going to have a weak growth quarter. And whether you call that a recession or not is something that we won't know for many months. We will know in a short period of time what the number is, at least what the initial estimate is of growth this quarter. And there is no doubt, I don't think in anybody's mind, that the growth rate will be low.
It is for that reason that we initiated the policies that we did. And as we look forward and we ask what kinds of things do we want to do, we think that this growth package that the President signed will actually work. We think it will stimulate the economy. We are not alone in that. If you look at the consensus of forecasters you will see that almost all of the forecasters are predicting the kinds of economic growth levels that we're talking about for the summer, as well.
Q: The 4.8 percent jobless rate, you called it good news, encouraging. Isn't there a flip side to that coin -- and it's really bad news? People are not coming into the labor force or they're leaving it; isn't that bad?
CHAIRMAN LAZEAR: We looked at that. Obviously that's something that we think about, as well. It's called a "discouraged worker effect," by the way, that's the point that you're making -- that people get discouraged and they leave the labor market and, as a result, the unemployment rate looks like it's low, but it isn't. That's not what's happening.
If you look at the number of discouraged workers, the Bureau of Labor Statistics actually tracks that number -- and if you look at the number of discouraged workers, the number of discouraged workers that we see in the labor force today is about the same as the number that we saw a year ago. So there has not been an upward trend in discouraged workers. Nor is there any change in the -- there are other unemployment figures that the Bureau of Labor Statistics tracks. All of those, the ones that are broader measures, that tend to take into account the kinds of issues that you're worried about, are consistent with the unemployment rate actually coming down.
Q: So then how do you explain the fact that it's going down?
CHAIRMAN LAZEAR: That the unemployment rate is going down? The unemployment rate number tends to be pretty stable. The labor force numbers tend to be very unstable. If you look at the swings in labor force numbers, they can be up and down a half million every single month. So we know that those tend to be very volatile, and we don't tend to place a lot of weight on the individual labor force numbers. What we do tend to place more weight on is the unemployment rate because the unemployment rate is not volatile.
Q: So it's a statistical anomaly that they're moving --
CHAIRMAN LAZEAR: Well, as I said -- it's not a statistic anomaly. It's just, you know, everybody is doing the best they can, but these -- there are difficulties in gathering data. It takes time for the data to come in. There are always revisions and after you get these numbers, you'll see revisions a month or two from now, and you'll see revisions actually a year from now. And we know that there is a lot of noise, a lot of variation associated with those initial numbers. That's just the way it is.
Q: Last summer there was a -- people were talking about slow growth towards the end of the year and then by now there would have been a pick-up. Now you're saying, well, you expect a pick-up to be by this summer. What gives you the confidence that it's not going to drag on all the way through the year?
CHAIRMAN LAZEAR: We believe that the policy actions that we've taken, coupled with the policy actions that the Federal Reserve has taken, will change the climate that we see going forward. Remember, you're going to see approximately 1 percent of GDP, in the form of tax cuts, coming out over the next couple of quarters. That's a pretty significant amount of money to pump into the economy. We believe that that will have the kinds of effects that we're talking about.
We also believe, by the way, that the Fed rate cuts will have an effect by then. It turns out that the rate cuts that the Fed initiates take some time to work through. So it usually takes about a year, actually, a half a year to a year for this to play out, and so the kinds of rate cuts that we saw, say, starting in September-October will be playing out in a pretty strong way by June and July.
Q: Today's numbers were all about jobs, but inflation is really high. How worried are you about that?
CHAIRMAN LAZEAR: We are always worried about inflation, obviously. It's always a concern. The inflation numbers that we've seen have been primarily a result of energy and of food. That doesn't mean we ignore that, because people have to buy energy and food. The reason that we tend to be less concerned about that is because it doesn't predict the future as well.
So we're expecting that if you just look at the market expectations about energy and food prices, we don't expect to see the same kind of inflation next year as we saw last year. That's the primary reason.
Q: If the stimulus measures that you've already taken don't have the desired effect, what are the next steps and what are the triggers for them?
CHAIRMAN LAZEAR: Well, we think that the stimulus measures will have the desired effect. And again, you know, we have to give this time to work. We just initiated this policy a few weeks ago, so we do think it will have the desired effects.
Now obviously this is not the only thing we've done. The President has also initiated plans in the housing market, in particular, with FHA Secure -- we did that back as far as August -- we have HOPE NOW, we have Project Lifeline. There are a variety of things that we're thinking about. And we're always considering new ideas. Obviously, we always are open to suggestion.
MR. HENNESSEY: Just to add to that, I think two of the most surprising things to outside analysts about the stimulus package that we did were the size of it when the President announced it, and both the speed with which it was enacted and the speed with which it appears to be implemented.
We took the big policy change in January and February and we took the things which could have the quickest effect and did those first. So a lot of the other ideas that are being kicked around, while some of them may have adverse policy consequences, they would also take much longer to have an effect, which is why we think we did the right things before and you need to give them a little time to work.
Q: Sure, but you must be considering other options in case of the worst case scenario.
MR. HENNESSEY: We are always looking at options. There was a new idea today by Dr. Feldstein in The Wall Street Journal, we're talking about that; the ideas that are coming from Capitol Hill. We're constantly evaluating both the state of the economy and the policy recommendations that folks have. And it's an ongoing process of analysis. Right now the best judgment is that the policies we put in place are the right ones, and let's let them take effect.
Q: What are your thoughts about further steps you could take with regard to the housing market, in particular, and what do you think about Chairman Bernanke's idea for a sort of equity write-down for houses that -- for mortgages that are underwater?
CHAIRMAN LAZEAR: Well, I think the Chairman's idea about write-downs was essentially a comment on what he hoped the private market would do; it would be in the interests of both parties. That is, if you have a mortgage on a house that has a value that's well below the value of the mortgage, and you expect the borrower to default on that, then it's in both parties' interest -- the lender's interest and the borrower's interest -- to do some kind of a work-out. And I think that's all he was saying. I didn't interpret his comments as going beyond that, in terms of his view of what we should be doing. I thought that was trying to encourage the private market to do what would be in their self-interest, and that is how I interpreted it.
Now, obviously, we always, as Keith mentioned, take other ideas, new ideas into account -- Marty's idea, Feldstein's idea was this -- was a housing market idea.
The one thing I always say that we have to be cautious about is that you don't want to take actions that will exacerbate the problem. So what's the problem right now? The big problem right now is that we have a very large inventory of homes out there that are waiting to be sold, and that's pushing downward pressure on prices, and as a result, people are finding that their equity values are falling, and all of that is being reflected in delinquencies and defaults. So we don't want to exacerbate the inventory problem that we have now.
That's how we got to this situation that we're in today. We got too much inventory, we got too much building over the past few years, so we have to be very careful that any policy that we initiate will not create more of a problem than we actually solve.
CHAIRMAN LAZEAR: And one of the ways in which that can happen is by slowing down that interaction; slowing down the transaction between the seller and the potential buyer. Some of the legislation that we've seen over the past few weeks, especially in the Senate, would have injected a judge, for instance, into that interaction. We think that would have slowed things down, made it harder, taken longer for the market to adjust -- which is more painful for the people involved -- and also worse for the economy.
Q: So are you endorsing Chairman Bernanke's idea? Do you think it's a good idea? Do you have no opinion on it?
CHAIRMAN LAZEAR: As I said, my interpretation of the Chairman's point was simply that the private markets should work as it always does. And he was just hoping that people would get out there, actively seek ways to do work-outs. To my mind, that's consistent with the kinds of discussion that the President has always put forth since early August when he said, look, let's help the borrowers, let's figure out ways to keep borrowers in their homes, to the extent possible. And I didn't interpret the Chairman's comments as being any different from that.
Q: I want to back into this question a little bit. I was in Florida last week and I saw a news article that really had an impact on me. It talked about people going in a gas station and using pennies to purchase gas because they're that stretched for cash. And you talked about the figures today showing wage growth, and hourly wage growth, but are these increases being eaten alive by higher gas prices and inflation? And is, in fact, the consumer really in a negative position?
CHAIRMAN LAZEAR: Well, there's no question that energy prices have gone up, and gone up quite dramatically over the past year. We are very concerned about that, and particularly because of the point that you raised. You're talking about people who are at the lower end of our income situation, and those people -- it's not only that they can't afford the additional energy, but it's also the case that they spend a disproportionate share of their income on food and energy; so when those prices go up, they get hit hard. And that's always a concern for us and we're always worried about that and thinking about policies that we have in place and some that we might consider to deal with those situations. That's always true and we always evaluate that. That's on the personal side and it's obviously the very important side.
The question earlier I think referred to more the context of energy in the macroeconomic sense and how that would play out into the future. And again any increase in energy prices has a negative effect on the economy -- no doubt about it. We've been able to weather those effects over the past few years. We've had a growing economy. Remember, we had 52 consecutive weeks of job growth -- consecutive months, sorry, of job growth. That's the longest in history. So this has been a pretty strong period. We've gotten accustomed to that. You do see, even in strong periods, occasional weak months or weak quarters. This happens to be one.
MR. HENNESSEY: Let me add to that. There tends to be a short-term focus on high gas prices when they jump up. Obviously drivers notice it more when they're filling up at the pump, and there just seems to be a general attention when the prices jump up. But high gas prices and high oil prices are a long-term problem. It took us a long time to get into this situation. It's going to take us a long time to work our way out.
But it is for that reason that a year ago, a little over a year ago, the President proposed his energy proposal, worked with the leaders in Congress to enact it, and what you're going to get, over the next several years, is you're going to get more fuel-efficient vehicles because of the fuel economy requirements in that bill, and you're going to get more renewable fuels. So you've got two of the three components that you need to start to make progress on the long-term problem of high gas prices. The third component that we still need action on is increased domestic supply.
MS. PERINO: Last one.
Q: Is you -- is your confidence in the --
Q: Yes, sir. Thank you. Sir, the President is also going to make a statement this afternoon on the economy. My question is that, are you worried about the falling of the U.S. dollar, and also deficit against China? And also do you think it's going to impact the global and the U.S. economy and how can we control it?
CHAIRMAN LAZEAR: Well, as you probably know, the only people who comment on the dollar are the President and the Secretary of Treasury, so I can't speak on that, but I can certainly speak on our view of trade. As you probably know, exports have been an extremely important part of the picture for the United States over the past year. This is really a new phenomenon for us, in that export growth has been an important source of growth in the economy. That didn't used to be true.
Now the question becomes, well, what would happen if we were to reverse that pattern, say, by becoming more protectionist? We think that would be bad for the American worker. It would reduce the amount of demand for labor. All of those things would be just the wrong thing to do, particularly in an economy where we're sitting at a pretty low level of growth. So I would say that we would have to be very cognizant of any steps that we would take to reverse our openness to trade, because trade is going to be very important going forward, and I think you'll hear the President commenting on that.
Q: Is your confidence in better third-quarter numbers based totally on the stimulus package, or are there are other factors you're seeing weighing in?
CHAIRMAN LAZEAR: I think that even in the absence of the stimulus, most people were predicting that the second half of 2008 would be better than the first half. So when I go back to our forecast that we did a few months ago, we believe that the second half of 2008 would be better than the first half of 2008. That's also true of market forecasters, as well. I think virtually everyone was saying that the second half of 2008 would be better.
Most people felt that this would be the weak period primarily because of the tightening of credit that we saw in August, and because of the extension of the housing market decline that went beyond, to be honest, beyond what people had predicted. And so I think most people are believing that this would be the worst time, simply as a reflection of that. But as we get into the second half of 2008, things will smooth out. But we do think the stimulus will also be very important in moving things beyond that.
Q: The credit markets are still tight and the Fed has announced some new action today.
CHAIRMAN LAZEAR: We're going to have to pass off to -- hand off to Dana. You're in good hands.
MS. PERINO: They're due in the Oval Office, and better not be late.
Where did we leave off? Or do you want to move on to other subjects?
Q: I'd like to follow up on their refusal to talk about the dollar, if I could. I mean, we're in a kind of a bad situation here, when OPEC says the reason for $105 or $106 a barrel of oil is the falling value of the dollar -- and you won't address that issue. Where do we go to find out who is right?
MS. PERINO: Well, as he just said, the Treasury Secretary is where you go to talk about the dollar. It's a longstanding policy that predates this administration, and I'm not going to change it today. But Treasury can talk about it.
Q: I don't expect you to change it, but I do expect you to be able to say whether OPEC is completely wrong about this, or whether there is at least something to their claim that the dollar is responsible for the high price of oil right now.
MS. PERINO: Wendell, I'm under strict instructions, and have been from the beginning, to not talk about the dollar, and I'm not going to get fired to satisfy your question. (Laughter.)
Q: Dana, I'm not sure if you can help me with this. This is the Belarus story. It's looking sort of fuzzy. We're getting reports now that perhaps the U.S. ambassador hasn't been expelled; that because we were pressuring them to release a political prisoner, and they would not, and we would impose more sanctions, that the Foreign Ministry there issued a statement saying they will withdraw their ambassador to the U.S., and they suggested that our ambassador do the same and leave. But apparently our ambassador has no intention of leaving and hasn't. Can you clarify at all, or react?
MS. PERINO: No, I refer you to the State Department. I think that overall we -- it's unfortunate that Belarus has continued its repressive actions against its own citizens. We have spoken out strongly about that, and no doubt I'm sure that they have strong reactions to it. But there have been mixed reports about what action was asked, and how we responded today. But I'll refer you to the State Department for more on that.
Go ahead. Go ahead, John.
Q: Hillary Clinton says the economic policies of the Bush administration are failures; she bases this on today's numbers. Barack Obama says that the man that the President endorsed for President, McCain, his promise of four more years of the very same failed Bush economic policies that have failed us for the past eight -- Americans can't afford that. I just wanted to get your reaction to that.
MS. PERINO: I'm not going to wade into the '08 political scene. No doubt --
Q: But they're criticizing the President, it's not a campaign question.
MS. PERINO: Well, two candidates for President, who are duking it out in the Democratic primary, are no doubt going to make charges against this President, even if they don't ring true. In fact, if they've been asleep for the last seven-and-a-half years before we headed into this downturn, I think that the American people would just have to take that into consideration as they looked into who they're going to vote for in November.
I'm going to go up over here. Laurent.
Q: Dana, do you have any reaction to Hamas claiming responsibility for the attack in Jerusalem?
MS. PERINO: I saw a report, though, that they retracted that claim of responsibility. Regardless of who was responsible, the perpetrators of it were the ones who are responsible, and whether or not a terrorist organization like Hamas or Hezbollah takes responsibility for it, we'll have to see, because there's been mixed reports about that. But it's a heinous and terrible crime, and we are -- our prayers are with the victims' families today.
Q: Do you support keeping the new NIE on Iraq classified, or do you think Americans should know what's going on?
MS. PERINO: That's a decision that's made, as you read in the report today, that the national intelligence community gets together, all 16 of them, and they make a determination and a judgment -- and I don't have a comment on it today.
Q: Well, what is the view of the White House?
MS. PERINO: Look, I haven't seen that -- I don't know what's in the report. I leave it to the judgment of the intelligence community. Obviously, this White House has been very forthcoming in putting forward NIEs, as we've all been familiar with over the past several years.
Q: Dana, two quick questions. One is, this week the USTR Ambassador Susan Schwab, she brought trade 2008 comprehensive report. And in that report, she's saying that she has been negotiating with many (inaudible); of course she has done a great job. But also, as far as India and China is concerned, she has been working very hard as far as outsourcing and all that. But she has said that she has filed -- or U.S. has filed a number of cases with the WTO -- World Trade Organization, WTO, against China. But China is not responding. So where do we stand? Is the President going to talk with Chinese officials on this when he travels to --
MS. PERINO: Well, if we have matters of dispute with countries, or they're in the World Trade Organization, that's the appropriate place for us to take them, and Sue Schwab is doing a good job of pushing that. I don't have anything more.
Q: And second, yesterday --
MS. PERINO: I'm going to go --
Q: Thank you.
MS. PERINO: Thanks.
END 12:58 P.M. EST
George W. Bush, Press Briefing by Dana Perino and Edward Lazear, Chairman of the Council of Economic Advisers and Keith Hennessey, Director of the National Economic Council Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/277492