Press Briefing by Secretary of Labor Robert Reich and Chair of the Council of Economic Advisors Dr. Laura Tyson
The Briefing Room
11:16 A.M. EDT
DR. TYSON: Well, it's nice of you to enjoy your preLabor Day Friday with us.
On the eve of Labor Day in 1994, the U.S. economy continues to enjoy healthy growth in incomes and employment. Since last Labor Day -- a good time to reflect upon -- real GDP has increased 4 percent, personal incomes have increased 6.3 percent, inflation has remained subdued. Indeed, the core CPI inflation rate during the last year was lower than the core CPI inflation rate in the previous two years. And finally, since Labor Day of last year, the economy has produced 3.1 million new jobs, 94 percent of them in the private sector.
Now, today's report on the month of August shows that the economy created an additional 179,000 new jobs. The manufacturing sector added an impressive 32,000, the eighth consecutive monthly increase for manufacturing. Since last Labor Day manufacturing has increased 131,000 jobs.
Now, today's household survey shows that both employment and the labor force increased by nearly three-quarters of a million people in August; the overall unemployment rate thereby remaining unchanged at 6.1 percent. An unemployment rate around this level, around 6 percent -- a level the economy has had for approximately four months -- is consistent with a high degree of utilization in capacity and in labor markets. At the same time, there is no sign of an intensification of inflationary pressures in today's report. Since last Labor Day, unit labor costs have posted their smallest annual increase in 29 years.
Finally, I want to point out that the administration forecast, as you know, anticipates a gradual moderation in the economy's growth rate as the economy continues to absorb its capacity. So everything we've seen so far this year is on path for our forecast.
So I'd like to end with the following note: as families and workers commemorate Labor Day this year, they can celebrate the solid expansion of the American economy during the previous year. Moreover, the economic fundamentals suggest they can look forward to more good news next Labor Day.
Q: So, in other words, you're happy.
SECRETARY REICH: In other words, we're happy, that's right.
DR. TYSON: We're happy. We are happy.
SECRETARY REICH: And American workers have a lot to be happy about. The jobs news on the eve of this Labor Day -- by some accounts the 100th Labor Day in the United States -- is, indeed, extremely good. Working Americans are much better off than they were one Labor Day ago. Personal incomes up 6.3 percent, over 3 million new jobs added since last Labor Day.
And if you look to the Labor Day before that, working Americans are much, much better off, not only on the jobs front, but if you look at all of the progress that has been made -- everything from family and medical leave all the way through a new system for helping workers move from school to work, and also the beginnings of a re-employment system -- all of the other progress that has been made for American workers to ease the transition to a new economy.
American workers are far better off, both in terms of getting the macroeconomics right -- getting our macroeconomic house in order, reducing the deficit, getting more jobs -- but also beginning the hard and long term work of improving the skills of the American workers which transcends the business cycle. And in the views of this administration really is very much at the core of rising living standards over the long term.
Manufacturing employment continues to rebound -- and I want to emphasize that -- growing by 32,000 this last month. This is the eighth straight monthly gain. That means that since last September factory jobs have increased by 143,000.
Let me also add that manufacturing overtime is at an all-time high. We haven't seen this degree of manufacturing overtime, I think -- in April we reached this kind of a degree, but we haven't seen this degree of manufacturing overtime since -- well, really since about 1956, when the series began.
We have much more to do. I don't want to paint an overly positive picture because there are still 8 million Americans who are unemployed. The challenge is still ahead of us. There are additionally 4.3 million working Americans, working part-time, who would rather be working full-time. Our strategy is working. The President's original economic plan, getting our economic house in order and now moving as vigorously as we can to improve the skills and the microeconomic prospects of Americans, all of that strategy is in place but we still have much more to do and we are intent on doing it.
So, again, American workers, much to celebrate this Labor Day, 1994. We'll take your questions.
Q: While there is good news on the manufacturing front, you could also see that as bittersweet. I mean, you've got the payrolls up, overtime at record high, earnings up -- which always suggests there could be a wage-cost pressure problem down the road. Economists are saying today the Fed is going to have to stay evervigilant in removing accommodativeness from the system because of the manufacturing sector in particular.
So how can you deny that, and wouldn't you say that interest rates are going to have to continue to reflect the growing inflation problem that could be created?
DR. TYSON: Well, I assume that in the Federal Reserve's entire history it has always been ever-vigilant. So I don't think that anything in today's report or in any other reports we have seen recently would change that.
I think, in fact, that -- I really want to emphasize the point I made: there is absolutely nothing in today's report that suggests an intensification of inflationary pressures. It seems to me useful to celebrate, for the moment, the fact that unit labor costs have posted their smallest increase in the past year than 29 years. We have a 29-year record of this.
Now, I also said that the economy is running at a high level of capacity and a high level of labor market use. That's good news. And when you combine it with the good news on the inflation front, I think that we view this as a good news report.
Q: Well, it might be good, but, I mean, if you have overtime at record high, that's going to get passed on.
SECRETARY REICH: There is no indication right now of what we call "wage push inflation."
Q: A couple of months down the road, I mean, might not today -- this is a lagging indicator.
SECRETARY REICH: We just don't know what is going to happen a couple of months down the road. But right now we have good, solid jobs growth, the indicators continue in the direction that we had planned and hoped. The great American jobs machine continues to hum along as we had expected, and we're doing it in a noninflationary environment in terms of employment.
There are some spots, bottlenecks, with regard to some skill shortages here and there; but overall, we are not hearing reports of labor shortages.
DR. TYSON: Can I say one other thing on this? As far as the forecast is concerned, if you look at our forecast, or you look at the forecast coming out of the private sector, the forecasts do see a continued expansion with modest inflation. And what we're saying is when you look at the numbers we have to date -- and that's all we have -- and you look at the forecast of continued expansion with modest inflation, everything is playing a consistent picture.
If you go down a list of indicators of inflation in the economy -- and you can have a long list -- and you go down that list, you don't see any breaking points. So I think that what that's telling us, and what that seems to be telling other forecasters, is that our forecasts are on target. And that's why I would say this is good news in terms of what we forecast, and it's also good news in terms of the absolute performance of the economy.
Q: Is it good news for interest rates in the markets?
DR. TYSON: You'll have to see what the markets do today.
Q: You don't think an interest rate push needs to be waged by the Fed now, based on today's data -- figures did a week ago.
DR. TYSON: I think as you well understand, the administration does not give advice to the Federal Reserve. The Federal Reserve has made it clear in their statements about their policy that they're after the same thing that we're after, which is a sustainable period of growth with modest inflation. The numbers, as we read them, and as most private forecasters read them, is the economy is on course for precisely that.
Q: But that's why it's been in these -- he keeps raising them. I mean, I don't think you're together on this at all.
SECRETARY REICH: I think the point is that the President's strategy is working. American workers today, Labor Day 1994, are far better off than they were a year ago Labor Day, and far, far better off than they were two Labor Days ago. And the plan that the President put into place -- deficit reduction, controlling inflation, shifting from consumption to investment in terms of the composition of the federal budget -- all of this plan is working, it is paying off.
Q: Mr. Secretary, you've said to us before in any one of a number of these statements last month that refer to the 8 million who are still unemployed, and you've always said that we have more to do. Like what? Is there something that you all figure you're going to need to do, of a concrete nature, to intervene, or is it simply a case of trying to keep conditions right so that the economy will --
SECRETARY REICH: There are two aspects of the President's strategy. One is getting the macroeconomic house in order. Remember what we inherited. We inherited an extraordinary debt, we inherited a very long, prolonged recession, a jobless recovery. Getting the macroeconomic house in order was the number one priority, and we're going to still continue to work on that. We're going to continue to be vigilant with regard to deficit reduction, we're going to continue to be vigilant with regard to making sure that the public is getting every dollar of its tax money, and also that the composition of the federal budget moves from public consumption to public investment.
But, simultaneously, strategy number two is helping labor markets perform better. And that is making a better match between the skills that people have and the skills that are in greater and greater demand.
One of the problems we are facing -- and this is a longterm problem and we've talked about this before -- is that we have mismatches between what employers need and the kind of skills that employees either have or fail to have. Given technological change, given deregulation, given international competition, given all of the structural changes to American industry, people have got to get the right kinds of education and skills and that's why so much of the President's attention, and that's why so much of our discretionary budget and so many of our new initiatives have been focused on education and skills and overcoming that mismatch.
So we're going to continue to operate on both the macroeconomic strategy, getting that macroeconomic house in better and better order; but also the microeconomic strategy, overcoming those skill bottlenecks and making sure Americans have the skills and the education, and that their kids have the skills and the education they need to regain the American dream.
Q: I've seen copy quoting people as suggesting that the 6 percent -- roughly around 6 percent unemployment figure that we've got at this point is, for practical purposes, full employment. Is it likely that those 8 million are simply going to be something built-in, a structural something that we aren't going to be able to --
SECRETARY REICH: Laura may want to add to this. I think that we are spending much too much of our time and attention debating whether the natural rate of unemployment is 5.8 or 5.9 or 6 percent or whatever, and we are not spending enough of our time as a nation debating what we are certainly debating internally in the administration, and that is how to get the natural rate of unemployment down, regardless of what it is.
And the one way to get it down, back to what it used to be -- remember there were not too many decades ago we were talking about 4 percent as the natural rate of unemployment -- one way to get it down is to improve the labor market and improve the functioning of labor markets, making sure that people get the information they need about jobs, about training, about skills, making sure the basic education is continuously improved.
Q: Could I take a contrary line? Doesn't the new payroll employment growth of 179,000 indicate that the economy is, in fact, slowing more radically than you would be happy with, and that tightening so far may have been too sharp?
DR. TYSON: I don't believe it does. First of all, it's very important here on a one-month number not to put too much weight on a one-month number. That's the first thing. I think these numbers are subject to rather significant month-to-month revisions.
That having been said, there has been some speculation in the press -- I've seen it -- coming from a series of reports on the economy that perhaps there is some slowing of the economy.
Now, as I said in my comment, if you look at forecasts, including ours, they do anticipate a gradual moderation in the economy's growth rate. So we look at the evidence of the economy's performance in the past first two quarters of this year -- we know a lot about that now, and going into the third quarter, being in the third quarter -- and we conclude the economy is more or less where we forecast it to be, and that is consistent with our policies, it's consistent with the goal of sustainable, non-inflationary growth.
And note: that is going on with significant job creation. That is going on with significant job creation.
SECRETARY REICH: I just want to underscore Laura's point about not reading too much into a single month. Remember in May we had a dip, approximately the same kind of small dip we have seen in this month, it was revised upward. It's very -- there are perils in trying to read too much into a single month's figure, particularly when it is not that far removed from the average job growth over the past year.
Q: Following up on that, Dr. Tyson, do you have any estimate of third quarter growth? Do you think third quarter growth could be soft, and then do you think there could be some kind of rebound with auto production and more consumer spending in the fourth quarter?
DR. TYSON: We don't do quarterly estimates of the growth rate. I think looking back on last year, looking back on other years, it's certainly within a year's growth -- it's possible to have ups and downs quarter by quarter. And the production and sales of automobiles are often a big contributor to movements up and down in quarter to quarter growth rates. But we actually don't do quarter to quarter forecasts, so I don't have anything that I would want to predict about the third quarter.
Q: I understand you don't want to publicly nudge the Fed in any direction in the future, but can you look back on the interest rate hikes this year so far? Have they been helpful, have they indeed moderated future inflation? Do you believe that is intended?
DR. TYSON: What I would say is that if you look not just at our forecast, but you look at private sector forecasts from the beginning of the year through their revisions -- ours are revised once mid-session, they were revised just about a month ago now -- and other forecasters are revised on a more regular basis -- what you see there is forecasts which have marked up somewhat the growth rate averages for 1994 at the same time that they have marked up interest rate forecasts for 1994. What the interpretation of that kind of forecasting adjustment over time, is that the economy actually had considerably more foreword momentum than anticipated at the beginning of the year, coming out of a very strong end of last year. That generated an increase in demand for credit, an increase in the demand for loans -- we've seen a real improvement in that area -- and one would expect interest rates to rise accordingly.
So all of this tells a consistent story about the economy being at a strong level of utilization and a strong performance.
Q: Can I follow up, please? So then you think what the Fed has done this year has indeed been helpful?
DR. TYSON: As I would -- as I have said in numerous times, I think, what we have seen in the area of interest rates this year has been consistent with forecasts we have made for the year. That's all I would say.
Q: A recent labor report shows that the economy is creating higher paying jobs in lower paying industries. Is this, indeed, a surprise, and is there an administration policy to continue this trend?
SECRETARY REICH: Well, we are seeing a trend. In the Labor Department the recent BLS survey shows this -- that there is more job growth in relatively higher paying occupations. Now, it is true that those relatively higher paying occupations do tend to be in relatively lower paying industries.
What does that mean overall? Overall, it means that there continues to be a shift in demand in favor of people with skills. This year's data, because we have a new household survey, I don't want to project on the basis of this year's data. On the basis of 1993, I can say with some confidence that most of the new jobs, the net new jobs were managerial, professional and technical jobs. Most of the new jobs are paying better than average.
Now, a word of caution. The American work force is splitting, and splitting more than ever before on the basis of education and skills and training. If you are well educated, if you are well skilled -- and the administration strategy is to try to get more and more Americans better educated and better skilled -- your wages have tended to do quite well. If you are poorly educated, if you have a high school or less education, if you don't have the appropriate skills, you have tended to be -- and this is not a new story, this has been going on for 15 years -- we don't see any change yet in this trajectory -- you tend to be on a downward escalator in terms not only of your wages, but also your benefits -- health benefits, pension benefits and others.
DR. TYSON: Let me just add a little note here, since this is Labor Day, right before school starts for many American children -- certainly before school starts for our children who are spending the morning together playing, it's important for -- I think this should really be linked to the method of --
SECRETARY REICH: I thought they were spending the morning reading. (Laughter.)
DR. TYSON: It's important to link this to -- I think it's an important moment for us to really say what these numbers tell you very clearly. It is worth a lot to your future earnings and the future quality of the job experience you are going to have in this nation to finish high school and to go on. And I think that's a very important point to make on this Labor Day because there are a lot of people who are going back to high school, many unwillingly, facing a difficult year. But this is a very important thing, too.
SECRETARY REICH: And the data confirm what we have been saying about life-long learning. It is not simply a matter of compiling degrees, it's not a matter of ending your education at the age of 22, it's a matter of continuing to upgrade your skills. There is no longer job security out there. I don't know how many of you here today feel that you are secure in your jobs. (Laughter.) But there is no longer job security in America.
Q: Has Panetta been talking to you lately? (Laughter.)
SECRETARY REICH: What you can have is -- no comment -- (laughter) -- what you can have, though, is employability security through gaining the right skills and continuously upgrading your skills. If you are on the job, if you are between jobs -- and that's what the administration has been encouraging. That's why so many of our programs and initiatives are geared toward helping people in life-long learning.
Q: How old are your children?
DR. TYSON: Eleven and 10.
SECRETARY REICH: The ones we're talking about are 11 and 10.
Q: Sir, you have been telling us for months now that the economy is performing better. Do you think the President is getting recognition for the performance of the economy?
SECRETARY REICH: Well, when people ask me about why the economy is doing so well and all of the economic indicators are so well, and why is it that the press has not given him credit, usually they are members of the press asking me. And I turn the question back and say, you are much more expert on that than we are; what are your theories?
Q: Do you think the financial market or the analysts or the private sector is backing the President on the performance of the economy?
DR. TYSON: There was a story yesterday suggesting that 60 percent of the stories about the U.S. economy during the past year have been negative. I think that part of what's going on is that the way the news is being reported on the economy is oftentimes with a negative slant.
I have made the point, and I will stick by it, that if you look at the overall indicators of the economy's performance during the past 18 months, you rarely find a period of U.S. economic history during the post-World War II period that's been as good. There are a few, but if you look at everything -- what's happening to the deficit, what's happening to income growth, what's happening to the unemployment rate, what's happening to the growth of employment, what's happening to the manufacturing sector, what's happening to balance sheets, what's happening to productivity growth, what's happening to investment growth, which there's more of a demand for now, but also builds prosperity in the future -- all of those indicators -- and I could go on -- paint an economy which is a healthy economy in a period of sustained expansion with very low inflation.
Now, that is good news. If 60 percent of the stories about that are negative, then I sort of think there must be a disconnect between the stories about the economy and how I think an objective observer, just looking at the facts of the economy, would respond. That's the first thing.
The second thing is, really is what Secretary Reich spoke about on Wednesday. It is the case that there is an anxious group of people out there and they have, in a sense, right on their side of anxiety, meaning that the economy has not, for a long period of time -- 15 years -- really delivered very much in terms of real family income growth or real compensation growth, and there is increasing inequality. Those are real facts which we inherited, which affect how people must feel about the economy. So I think they're something real, but I also think there is a little bit of a communications issue here.
SECRETARY REICH: But I think the point also is that the President's strategy is working. The 6.3 percent increase in personal incomes over the last year, since last Labor Day, the 3 million new jobs since last Labor Day -- those aren't matters of just perception, those are objective realities. Average working Americans are, indeed, better off.
Q: Is it time for another minimum wage hike increase? Will we take that back up now? I mean, health care is a kind of --
SECRETARY REICH: Well, health care -- we're hopeful with regard to health care, on health care, and we've made it very clear that health care is the first priority. The earned income tax credits, something that very few people know about, although 15 million American -- working American families are benefitting from it -- has gone a long way toward helping make work pay. Fifteen American families have actually seen their taxes drop or have had a wage supplement with regard to the earned income tax credit, and that is continuing to occur.
We will revisit -- as I said, the President does intend to revisit the issue of minimum wages sometime in the future.
Q: In '95, or before the end of this year?
SECRETARY REICH: I suspect probably '95.
Q: Do you think there will be any health care legislation? What's your feeling about it?
SECRETARY REICH: I'm positive about health care.
Q: In what way? How about insurance reforms, or more?
SECRETARY REICH: We are very hopeful that there will be legislation.
THE PRESS: Thank you.
END 11:40 A.M. EDT
William J. Clinton, Press Briefing by Secretary of Labor Robert Reich and Chair of the Council of Economic Advisors Dr. Laura Tyson Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/269798