Press Briefing by Laura D'Andrea Tyson Chair of the Council of Economic Advisors, Robert E. Rubin National Economic Council, and Robert B. Reich Secretary of Labor
The Briefing Room
10:43 A.M. EDT
MR. RUBIN: Good morning. I'll start with a very brief overview comment, and then Bob and Laura will discuss what you all are here to hear about.
As you know, the employment numbers came out this morning, and we're obviously pleased with them. In our view, they very much reflect a strategy that we started with -- it was really developed during the transition -- that we started with when the President and Congress put in place the deficit reduction plan in August of last year.
Our hope and expectation at the time was that through that deficit reduction program we could both bring the deficit down, and at the same time continue to grow and create jobs. It was our view that we had been mired in a no-growth to slow-growth economy up until then, and that the way to get out of that -- since traditional fiscal stimulus policy was denied us by virtue of the 12 years of large deficits that had gone before us -- that the way to get out of that was through lower interest rates, and for the lower interest rates to trigger or jump-start a recovery.
And I think that the employment numbers today suggest that that strategy has been successful and is working. At the same time, we were very focused on the long term needs of the economy and putting in place, within the context of the deficit reduction discipline, putting in place our investment program.
And the President, at the same time that he wanted to jump-start or trigger a recovery and grow through a period of deficit reduction, also wanted to put in place education, training and other programs that would contribute to the long term productivity of this economy -- programs such as the Goals 2000, which was passed this year; the Re-employment Act, which is pending in Congress right now and which you know reorganizes the job placement capabilities and job training capabilities of the federal government.
These programs are absolutely critical in terms of long term productivity, this economy and are very much the focus of the President, and will continue to be the focus of the President going forward.
With that, let me turn the podium over to Bob Reich and to Laura Tyson, who will discuss the numbers that were announced today. And then we would be delighted to respond to any questions you may have.
SECRETARY REICH: Thank you, Bob. The data today are, indeed, very good news for American workers. We have created -- on our journey to 8 million new jobs, we are ahead of schedule. In 16 months over 3 million jobs have been added to the American economy, over 95 percent in the private sector -- 93 percent, rather, in the private sector. We're entering the summer in exceedingly good shape, and this is good news for college graduates and even for high school graduates who face the best jobs markets in years.
But even as the economy prospers, many Americans are still being left behind. We ought to acknowledge that at this stage of recovery we have an unprecedented high percentage of the unemployed who have been unemployed for more than six months. One out of every five unemployed Americans have been unemployed for more than six months, and much of that is because of the structural changes in the economy. Americans have to get new jobs.
Jobs are coming back. We are deep into jobs recovery; in fact, we are in a jobs expansion. But they are new jobs. Many Americans cannot count on getting the old jobs back. And that is why so many Americans, a high percentage of the unemployed, have been unemployed for longer than six months.
And although most jobs are good jobs, most jobs created are good jobs, our data, particularly for last year extrapolated to this year, show that most of the jobs are managerial, professional and technical jobs. There is still a gap, an earnings gap between the jobs available to the well-educated, the well-skilled, and the poorly educated and the poorly skilled.
Yesterday the Dunlap Commission reported on jobs data, aggregate jobs data, reported on the large structural changes appearing in the American economy and revealed very graphically the gap that is growing in America between people who have the skills and have the education, and people who don't. This is a long term problem; it has been going on for 15 years. Part of the Clinton administration's economic policy is not just to create jobs, but to create good jobs and to invest in Americans. And Bob already alluded to that.
DR. TYSON: Thank you. The May Employment Report, along with a series of recent statistical releases, indicates that the economic expansion continues on track. In this report we see increases in payroll employment, the length of the work week and average hourly earnings. All of those increases suggest a gradual improvement in real incomes and real living standards, which is, after all, what growth and prosperity are about.
All of this is good news for American workers, American businesses and American families. So far the good news on the employment front has also been accompanied by good news on the inflation front. The administration continues to forecast a small up-tick in inflation later this year as the expansion continues, and we will continue to monitor price trends because we remain committed to the goal of sustained growth with low inflation. But so far we've had good inflation news with good employment news.
I want to end by pointing out that the President made a pledge during his campaign that he would work to create jobs and to put Americans back to work. I think that the numbers today show that he has delivered on that promise.
Q: To what do you attribute the rather sizable drop from 6.4 to 6, four-tenths of a point? Do you think it will stand the test of revision? And also, new job creation, 120,000-plus return truckers seems to be half the recent trend, and that seems, in part, due to interest rate sensitive sectors of the economy hiring less. Do you think that is a trend?
DR. TYSON: Well, on the issue of the unemployment rate we've said all along that, obviously, we're working with a new household employment series. This series, even under its old calculation, is a volatile series. We know much less about the properties of the new series than we knew about the old series. There has been, certainly, speculation that the seasonals that are being used may be inappropriate to the new series, but we don't really have enough information to know that for sure.
May and June are oftentimes difficult transitional months in the unemployment series. And then, as I said, complicated now by working with a new series, the properties of which we don't fully understand. So my view would be take this number and don't conclude very much from one month's number here, but look over a series of months because we're learning about how this new series behaves and we're in a period of transition in the seasonals.
It's also the case economists traditionally put much greater weight on payroll employment numbers than they do on the household series. So maybe about an 80 percent weight on the payroll employment numbers and only about a 20 percent weight on the household numbers. That's true in general, and probably because of the change in the series calculation methods, there is even more uncertainty about this number than is usual.
Nonetheless, we want to emphasize here that whether you look at this number or not, let's think about where we started. In the new series going back to January of '93 we were dealing with an unemployment rate of 7.7, as calculated by new methodology. We are now somewhere around 6. That is very significant progress in the unemployment situation. And I want to emphasize that that is the important bottom line message here, that we've made significant progress in improving employment prospects and reducing the unemployment rate since January of 1993.
SECRETARY REICH: If I could just add to that, the two series, the household survey and the payroll survey, have been at some odds. What we're seeing is that the two surveys are now coming together. That is, the payroll survey -- both of them are showing progress. The payroll survey, if you take the truckers out, may be not quite as much progress as in previous months, but there was a weather factor in January and February. The household survey is showing a great deal of progress.
I would say, basically, look at them both together, you see a trend. In fact, Bob, if you could help to show this -- this trend, this shows the new procedure for measuring. This begins at the 7.7 in January of '93, and you can see the unemployment rate continues to drop very precipitously.
Now simultaneously, of course, we are generating jobs, an average of over 200,000 jobs a month on the payroll side. So what is happening, regardless of how you measure it, tremendous progress on the job side. And that's really something to be extraordinarily positive about, and we are.
DR. TYSON: I have one other thing on the payroll's employment numbers. If you look at the last three months -- there were revisions in each month -- if you look at the last three months, now you see that the economy was adding new payroll employment at the rate of 240,000 jobs a month, on average, which is the same as the last nine months.
So again, I think the question that when you look at the 191 or the 120 now, does that suggest a break in trend, I would suggest that if you look at the three-month period and look at a nine-month period, we seem to be in a range of about 240,000 jobs a month, whether you look at the last three months or the last nine months.
And so I think it's sort of still the notion of steady, solid, on-track expansion in employment.
Q: And the decline in interest rate sensitive sectors in job creation, that's not significant?
DR. TYSON: Which part of the report are you referring to? I think that, as I said, our view would be that this number, taken in the context of weather and taken in the context of the past -- not just this month, but the last two months -- would be that we're still in the range of about an average of 240,000 jobs a month. And that I don't read anything more into these numbers than that.
SECRETARY REICH: The big news is we've broken through the 3 million barrier. The economy has generated over 3 million private sector jobs. That is an extraordinary accomplishment in only 16 months.
Q: You've had the experience lately that good news has turned out to be bad news in the market. So are we going to have that same situation here again today?
MR. RUBIN: Our view has been consistent, and Laura stated it very well. They expect inflation to remain at moderate levels, a slight up-tick at the end of the year, which you would expect with continued growth but, nevertheless, for inflation to remain at moderate levels. And with inflation at moderate levels -- and of equal importance with the deficit out of the market and out of the market's consideration, our view is interest rates will remain --long-term interest rates remain consistent with ongoing solid growth.
Q: You're not worried this will be viewed as another sign of an overheated economy?
MR. RUBIN: Every day there's a number or there's something and people react to it one way or the other, and markets go up and markets go down.
But I think if you want to look at it over some time, then I think Laura really set the right stage in saying that inflation is going to remain at moderate levels, albeit with a slight up-tick because of solid growth. If you talk to people involved in the markets, the deficit clearly is not something they talk about today as opposed to two or three years ago. And in that environment, it very much remains our view that long term rates remain consistent with solid growth.
Q: BLS said today that -- back on interest rates -- that higher interest rates, though, are showing up and are affecting job growth. It pointed out -- Dr. Abraham pointed out that finance, insurance and real estate registered its first job loss in nearly two years with employment falling 15,000, month over month, and she attributed that to higher interest rates.
Is the administration not concerned about this and is this possibly a trend -- first part of the question. Second part of the question: What about the political impact of that? Is anybody thinking about the political impact of that for mid-term elections in Congress if the economy starts to slow down with job creation because of higher interest rates?
DR. TYSON: There's nothing in this report to lead to the conclusion that the rate of job creation in the economy is slowing down in any significant way. This report shows that we are -- I think you should take this report in the context of several other reports, all of which we read to be that the expansion in the economy remains on track, which means that relative to what we have said would happen this year, the 3 percent growth with around 3 percent inflation is where we are.
And it may be the case that in one month you see a shift in the composition of employment, somewhat. First of all, I'm not sure I would necessarily read a trend into that. But the other thing to say is as expansion becomes a more mature expansion, one might expect to see a shift in the composition of spending. And in fact, what should be emphasized in this report is not just the number of jobs but the length of the work week and earnings.
All of these things spell strong growth in incomes. And strong growth in incomes means a recovery which will have support coming from income growth and consumption. And I think that it may be that the composition of spending does, in fact, change a bit over time, but that doesn't really change the overall outlook for what the economy is doing in terms of growth, job creation capabilities, and inflation. So that's how I would respond.
Q: Are you beginning to see any pressure on wages? You've got a participation rate of 66 percent and an employment population rate of 62-and-a-half. That seems to be narrowing. But, Dr. Reich, you've emphasized a few times that because of the skills gap that in certain areas you're seeing perhaps people being able to bid up because there are jobs available but not enough people to fill them with the right skills. So are we starting to see any pressure from wages?
SECRETARY REICH: No, we're not. There's negligible effects on wages. In fact, the argument can be made that given the globalization of markets and also the progress of technology, American workers are not in any position to demand wage increases. Having just gone through a very long, unusually long recession, that adds to the worries of American workers. They are unlikely to be making wage demands at this point in time.
DR. TYSON: I just wanted to add one other point to this. If you look at the average hourly earnings growth in this report and then you again sort of look at it over the past 3 months versus the past 12 months, you see that over the past 3 months the average hourly earnings grew at an annual rate of about 2.7, 2.8. The same thing is true for the last 12 months.
So this report does not suggest a change in the balance of -- any change that may be occurring in the balance of demand pressures around parts of the economy is not showing up yet in the average hourly earnings number if you look over a 3-month period compared to a 12-month period.
SECRETARY REICH: Two closing comments, if I could. One, that the growth that you have -- and as Bob and Laura both said, it's very impressive growth -- is not serendipitous. This is a function of an economic policy that was developed by the economic team with the President and put in place by Congress and the President in August of last year with the deficit reduction program. The second piece of that is the investment program that Bob described and I alluded to. And, of course, the third piece is market opening. But this is a function of a Clinton economic strategy.
And number two, the 3.1 million private sector jobs have been created during the first, roughly, 16 months of the Clinton administration in contrast to, roughly, 1.3 million private sector jobs created during the entire Bush administration.
And with that, we thank you for being with us.
END 11:01 A.M. EDT
William J. Clinton, Press Briefing by Laura D'Andrea Tyson Chair of the Council of Economic Advisors, Robert E. Rubin National Economic Council, and Robert B. Reich Secretary of Labor Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/269534