Press Briefing by Secretary of Labor Robert Reich and Chairman, Council of Economic Advisors Laura Tyson
The Briefing Room
11:10 A.M. EST
SECRETARY REICH: Good morning. This is good news for American workers today. The March employment increase of 456,000 jobs reflects steady, sustainable employment growth over the last six months, with an average of 200,000 jobs a month. In fact, March puts us back on track to where we would have been had we not lost so much ground in the bad weather during January.
You'll remember that in the last four months of 1993 job growth averaged 200,000 -- approximately 200,000 a month. January's bluster, that bad weather, stopped that progress temporarily. We actually lost 31,000 jobs that month. And we got back on track in February in terms of 200,000, but we still were behind about 231,000. Now we are firmly back on track with regard to our goal of approximately 200,000 a month.
Unemployment is better, but it still remains a problem, especially persistent long-term unemployment. Currently, one in five Americans who are unemployed have been out of work for more than six months. Now, we're marking a major improvement from the 7.7 percent of January of '93. That's under the new measurements. The present unemployment rate of 6.5 percent represents 8.5 million Americans who are unemployed, and it calls for continued vigilant efforts on the part of this administration to ensure steady job growth and to help all Americans get new jobs.
That's why the President, a couple of weeks ago, introduced the Reemployment Act of 1994, to make sure that Americans, in fact, get the skills they need and the jobs they need and can move easily into new jobs.
Yesterday, the Census Bureau reported that 18 percent of full-time workers of the United States are not earning enough to keep a family of four out of poverty. In 1979, it was 12 percent. I don't mean to cast an aura of gloom and doom over this. We're very happy about the job numbers and everybody should be quite positive, but we still have a problem with the job quality. And that's also why the President, yesterday, signed the Goals 2000 Education Act, to ensure that all American schools come up to high standards, and why we will continue to push forward very, very hard on the issue of skills, education, training to ensure that all Americans are prepared for the economy of the future.
DR. TYSON: Thank you. I'll just elaborate a little bit. First of all, there are two reports today. There's the employment report; there's also the personal income report. Both reports contain more good news on the underlying fundamentals of the current economic expansion. Taken together, the reports indicate that the economy continues to sustain good job growth, but does so without inflationary pressures from the labor market.
Secretary Reich has already talked about the employment numbers, so just let me talk a little bit about the inflation indicators that are in these two reports, the employment report and the personal income report. According to the employment report, average hourly earnings increased only 0.1 percent in March, and only 2.4 percent from March of 1993. Industry by industry, the pace of earnings growth continues to be very moderate.
In the personal income report, total wages and salaries also increased slightly by only 0.2 percent in March. What these numbers show, taken with the employment numbers, is that the economy is creating jobs, is creating jobs at a good pace, but without the inflationary pressure from the labor market that could ultimately compromise future economic growth.
The other thing I want to say, particularly apparent in the personal income report, but also in the employment report, is that a number of special factors -- the earthquake and weather --make it difficult to interpret recent data to some extent. However, when you look at a whole series of reports, taking into account these special factors, we don't see anything in the current reports that would cause us to revise our forecast of economic growth for 1994. Overall, the economy appears to be at a path of moderate sustainable growth in 1994, following a very strong growth pattern at the end of 1993.
SECRETARY REICH: And now if there are any questions.
Q: Do you have any views on the stock market these days? Either one. What's happened?
SECRETARY REICH: The stock market is closed today. (Laughter.)
Q: Well, is that good news or --
Q: financial markets are overreacting and putting too much gloom on this economic data?
DR. TYSON: Well, I think what I -- I am on record as saying that the fundamentals looked good up until these reports today and they continue to look good. That is, if you look at fundamentals on the real side of the economy, here would be the number of jobs that are being created, what's happened to the unemployment rate over the past several months; if you look at in fundamentals on the inflation side of the economy -- look at either side, the reports continue to paint the same picture. The picture is a moderate sustainable recovery with very little in the way of inflationary pressure.
Now, if I look at all of those reports and look at the financial markets, I am led to conclude that they are overreacting to something; certainly not to -- because they're inconsistent with the news of not just these reports, but a whole series of reports.
Q: You note that there's some parallel to the pace of jobs growth and economic performance in the fourth quarter. If we had 7 percent growth in the fourth quarter, and this is a very strong figure for March -- I mean, the rest of the March study that we'll be getting in coming weeks could be strong, so are we looking at a much stronger first quarter performance than we thought, or will this portend stronger growth than we anticipated for the second quarter such that maybe the markets are not getting out so far ahead?
DR. TYSON: Well, what I say to that is that there are no simple -- you would not want to draw a simple relationship between employment growth and output growth quarter by quarter. These numbers -- sometimes employment growth moves with a lag to output growth, which occurred in the previous quarter. Sometimes -- these numbers, simply on a quarter by quarter basis, are not in such close sync that you could conclude from the employment report of today that the first quarter of this year is going to be at an output rate comparable to the last quarter of last year.
Most pieces of economic evidence and most economic analysts who do quarterly predictions for the economy -- we don't, but who do quarterly predictions, are -- the base of the evidence we have here suggesting that the first quarter, while it will be a good growth quarter, will certainly come in at significantly less than the growth rate observed in the fourth quarter of last year. That's to be anticipated. No one really anticipated that the economy would be growing quarter by quarter at 7 percent. And that's why we're comfortable with the range of 3 percent through the year.
SECRETARY REICH: If I could just add to that. Again, the last four months of 1993 we saw about 200,000 new jobs -- net new jobs -- a month. That's just about what we were aiming for all along. That puts us on a path a little bit better than two million jobs a year. That's what the administration has sought from the beginning. That is good, steady, noninflationary growth with regard to the labor force.
Q: But didn't you expect this 456,000 that we saw today -- in other words, we're not going to see a continuation of that, that's sort of a one-shot deal, and we're going to go back to this 200,000 average?
SECRETARY REICH: Predictions are always hazardous, but remember that in January we, because -- largely because of the weather, lost 31,000 jobs. In February, we were back on the 200,000 track, but we still were behind 231,000 jobs. So today's figure can be interpreted as being back on track for the 200,000 and then making up for what we lost in January.
DR. TYSON: Could I say, just to -- that most of the models for the year run by us and other economic forecasters are consistent with growth. If you're in the range of growth of 3 percent, then job creation around two million, perhaps more since maybe there's more upside risk -- that is, it's more likely, if you sort of access the risk, it's more likely that this year may end up stronger than predicted than less strong than predicted -- you'd say we believe we're on course for about a 3-percent year with about two million jobs with the upside risk on both numbers. And that's not out of line, again, with sort of the basic forecasts that are being developed around the country by private forecasters -- about the fundamentals of the economy.
SECRETARY REICH: I'm sorry -- you had a question about where the jobs -- construction employment, which is particularly sensitive to weather conditions, advanced by 74,000 in March. That's seasonably adjusted. Manufacturing employment is an interesting story. Manufacturing employment edged up slightly in March, as jobs were increased in the durable goods sector for the sixth consecutive months. And again, that's fairly interest-rate sensitive.
There were employment increases in fabricated metals, in industrial machinery, in electronics. Actually, manufacturing is up 88,000 since September. And for all of those who said that manufacturing jobs are gone forever, well, that is simply not the case. Since September, 88,000 increase in manufacturing jobs.
Remember, manufacturing jobs dropped 1.8 million over the previous five years. So this is quite an important reversal. It's been positive for six straight months.
The factory work week is another interesting aspect. The factory work week rose by a full hour in March to 42.2 hours. And again, that's reversing February and January's weather-related decline.
Q: Given the fact that inflation seems to be subdued and you're still looking for moderate growth, is there any justification whatsoever for either the markets or the Fed to raise interest rates further?
DR. TYSON: I don't think markets -- the issue of justification -- markets respond to what they respond to. And as I've said, I believe that where the markets are right now, where the fundamental indicators of the economy are right now seem to be a little bit at odds, meaning that the markets may be overreacting. If that is the case, then once the fundamentals take more hold of market participants, one might expect an adjustment in the markets.
As far as Federal Reserve decision-making, the administration view on that is that it is -- the Federal Reserve is an independent agency. It does what it does -- it reads the economy and makes a decision on what to do about the economy.
Q: Can you go on the record and say what they are responding to, if they're not responding to the fundamental -- you always just leave that as a big gap.
DR. TYSON: Well, I don't think that -- I don't leave it as a --
Q: series of things, you say. But what are --
DR. TYSON: I don't leave it as a big gap I somehow think I know the answer and I'm not giving it. I think that basically there is out there a number of hypotheses about what the market might be responding to, including concerns about inflation -- but as more of these numbers come in, I would assume those concerns would be somewhat alleviated -- concerns that the economy is growing at faster than a sustainable rate. Once again, I think the evidence suggests that this quarter will show a slowdown to a sustainable rate of expansion. But to the extent that that's a concern, that may be what the market is responding to.
There has also been considerable discussion in this week's press about various reasons in the financial markets themselves about why they may be responding this way, having to do with the operation of hedge funds and derivatives and margin calls and the first quarter behavior of financial actors often is more risk adverse than it is over the rest of the year. Those are various suggestions made by participants themselves and observers of the financial markets themselves.
So all I'm really trying to point out is that if you tried to explain what's going on in the financial markets right now on the basis of the evidence of what the economy is doing, you couldn't easily make an explanation. And that does suggest that there are other factors than the fundamentals at work.
Q: If I could follow on Steve's question a little bit on the interest rates. The fact that we've got the long bond rate -- it ticked up to 7.11 this week -- and we had Panetta saying for all last week that a 7-percent bond rate would be potentially dangerous for the economic outlook and that it would drive up the cost of interest on the debt, drive up the deficit forecast. So if the bond market is insistent at staying at 7 percent or above, do you need some action from the Fed again to try to push that long end down, or what do you do to try to get the long bond rate down other than jawbone?
DR. TYSON: I think that -- there are sort of three things that come to mind in your question. Number one, I think you first have to make the assumption that the markets will stay where they are. That is, if you accept the notion that the fundamentals can't give you an adequate explanation of where the market is right now, then you might predict that the market won't stay where it is; that fundamentals sooner or later take over as a dominant cause of where markets go. It may take some time for the fundamentals to take over, but if you believe that, then you would predict that it's not likely the markets will stay where they are. That's the first thing.
The second thing is it is certainly the case that if you have -- that higher long-term rates by themselves would tend to have a slowing effect on the economy. It would be an effect that would feed in gradually, would probably not begin to be felt until the end of this year and going into next year. On the other hand, if the economy is growing somewhat faster than predicted -- so suppose I go back to my upside risk point, that the economy might, in fact, be growing at more than 3 percent -- then there's some momentum in the economy which is sort of, in itself, going to offset the slowing effect from long-term interest rates.
And so all of this suggests that I think we should wait and see for a little while, but, of course, recognizing that if you have a sustained period of higher long-term interest rates, that does, by itself, tend to slow the economy down.
Q: Could I ask you about Japan? Since exports to Japan would mean new jobs and the Japanese government and auto companies have announced that they will be bringing in more spare parts from the U.S., do you feel that Japan is really making an effort to open up its market to U.S. exports?
SECRETARY REICH: Well, Japan is making a beginning, and I would say that it's not yet a satisfactory effort. But it is certainly the start of what will continue to be efforts, hopefully, on Japan's part, and certainly on our part working with Japan, to ensure that Japan opens its markets.
Q: You talked about the jobs -- some of the jobs being in manufacturing and durable goods. Is your enthusiasm for the numbers at all tempered by the fact that a lot of them are part-time and in service sectors?
SECRETARY REICH: We don't see a major change in parttime work. Service sector work, some of those jobs are very good. Business services are very good. We're seeing an increase over the last six months in what might be called technician jobs. These are jobs in hospitals, in manufacturing, even on the factory floor, requiring more skill than the jobs we used to have, but not necessarily college degree. In fact, not only do today it point out, but over the last month I have seen across the nation and met with a number of employers who say they can't get the skilled people they need. Not necessarily college educated, but they can't get the skilled technical workers they need. And as we come out of this recession, we're seeing a greater and greater demand for those kinds of technical workers, I would venture to say more than we have before, simply because of the nature of the economy is changing. Even sales representatives now need to have some technical skill and knowledge in many cases.
Q: But overall, you're happy with the quality of these new jobs --
SECRETARY REICH: Well, as I said before, the Commerce Department yesterday, the Census Bureau reported that 18 percent of full-time workers -- full-time workers -- are not earning enough to keep a family of four out of poverty. We are seeing a widening gap between people at the top and people at the bottom. And that widening gap and those earnings are correlated more and more to levels of education and skill and training.
Q: Well, are they being paid what they're worth? I mean, why is that, this gap?
SECRETARY REICH: The gap is largely because -- and there are a lot of theories about why the gap, but I think the gap is largely because people who have skills are being rewarded in this economy. They can use technology. They can use computers. They are able to add value because technology is their friend.
On the other hand, if you don't have skills in this economy, technology is increasingly replacing you or making you less and less valuable. We used to have a lot of bank tellers, and now we have a lot of teller machines. And the same thing can be seen across the economy.
Q: Wages and salaries are up slightly. Do you expect continued wage and salary growth, and at what point will the administration recommend an increase in the minimum wage?
SECRETARY REICH: Actually, average hourly wages are not up. I think they're up about a cent an hour. I mean, that's not very much growth. So we're not seeing any wage push; we're not seeing any push with regard to employment. And at the present time we're going to revisit the issue of the minimum wage, but I can't tell you precisely when.
THE PRESS: Thank you.
END 11:26 A.M. EST
William J. Clinton, Press Briefing by Secretary of Labor Robert Reich and Chairman, Council of Economic Advisors Laura Tyson Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/269757