Press Briefing by Secretary Lloyd Bentsen, Secretary Robert Reich, and Chair of the Council of Economic Advisors Laura Tyson
The Briefing Room
12:36 P.M. EST
SECRETARY BENTSEN: Well, a lot of people told us we couldn't cut the deficit and create jobs at the same time. Let me tell you, we have. We're about $65 billion ahead of projections on deficit reduction. We have our fiscal house in order, and finally, we have broken the back of deficits. And that encouraged the markets to react. We have created approximately 1.9 million jobs. Employment this January was 1.9 above last January when the President took office. It's a great time to be Secretary of the Treasury.
The fundamentals for sustained economic growth are very positive; business investment up at what looks like 16 percent annual rate in '93; corporate earnings up; consumer confidence up. It's the kind of recovery where we'll see American productivity and wages grow.
Let me tell you something about today's labor numbers. Don't get stuck on the levels. Look at the trends. We're trying to put some honesty into the system. And as we adjust, the honest way to do it is to look at the trends. It's like the company that has a loss one quarter because they took a restructuring hit or an accounting change. So you have to factor that one out to do apples to apples.
If we had kept the old survey both months, the drop would have been one-tenth of one percentage point. If we had started the new way of figuring it a month earlier, it would also be down, and on that one, about three-tenths of one percent. If I had Harry Truman's one-handed economist, I'd know by how much. (Laughter.) But it's down, and that's the trend.
The President said he wanted to create eight million jobs in four years, and we're sure on our way. And the jobs are good-paying jobs, they're not just hamburger-flipping jobs. The manufacturing sector created 26,000 jobs last month, the fourth consecutive increase. It's a good trend and I hope it keeps up.
A few weeks ago, I saw a graph that charted the President's popularity in the polls and the unemployment numbers. There sure was a correlation. Over the year his job approval rating went up as the jobs increased and unemployment headed down. That's because the American people sent him here to fix the economy; and that's just what the President's doing. That's the trend they see.
Now, the Federal Reserve has announced its intentions to raise short-term interest rates by a small amount. We would anticipate that would mean roughly a quarter of a point. Such an increase was, in fact, anticipated in our forecast; was not unexpected. We still think the economy will grow at a three-percent rate this year. Inflation appears to be well contained at the
present time. The Federal Reserve is an independent central bank and we respect its independence.
And I will now turn to Dr. Tyson for her comments.
DR. TYSON: Well, I agree with everything that the Secretary has just said. I will just make a couple of remarks on the employment numbers.
First of all, we anticipated that this would be an employment report with a difference. That is, as everyone now, I think, well understands, the unemployment rate reported here officially for the first time is based on a new survey method and is not comparable to the unemployment rate as measured by the old survey method.
In addition, we had a special factor at play here -- the extremely cold winter weather which many of us have experienced personally. And it appeared to have been a major factor in a relatively small gain in payroll employment in the month of January. For these technical reasons, it's important to recognize that there is some noise in today's numbers. So -- but nonetheless, recognizing the noise, I still think we can decipher some important conclusions.
First of all, on the weather -- it's fairly clear that the weather was a major factor here, because if you look at where employment really had disappointing gains or even had contractions, they're in activities where cold weather would be likely to have an effect -- in construction, eating and drinking establishments, amusements parks. I think no one around here went to an amusement part during that week, or to a golf course. We would, of course, liked to have seen a larger payroll gain, but it's quite possible that there would be a snap back in payroll employment in the coming months when normal weather returns.
The good news in the report on the payroll side, of course, is in the manufacturing sector. We now have four straight monthly increases in manufacturing jobs and this suggests that we may well have turned the corner on the manufacturing jobs front. Other signs of strength in the job area, of course, are the private workweek lengthening and overtime hours remaining at record highs.
On the unemployment measures, the unemployment report really appears to be a good one. If you measure on a consistent basis -- and you can choose either to compare old methodology with old methodology or new methodology with new methodology -- in either approach, the unemployment rate declined between December and January. And then, as the Secretary of Treasury already has mentioned, the number of payroll jobs over the past 12 months has increased 1.9 million.
Altogether, if you take this report with all of its possible noise, if you take the underlying information in the report and you couple it with other pieces of information on what's happening this quarter -- indicators of the first quarter of 1994, such as low inventories, strong purchasing managers information, strength in consumer confidence, you can conclude, we believe, that the economy remains on a solid, sustainable expansion path for 1994.
SECRETARY REICH: Thank you, Laura. Lloyd, it's a good time to be Secretary of Labor as well.
Let me just say that the good news on the jobs front is gratifying to all of us. We are cognizant, of course, of the fact that there are still many millions of Americans who are still unemployed or caught between jobs, and many young people who are still having trouble getting into the work force. And that's why the President's jobs and skills program is so important.
Goals 2000, the educational standards bill which is now being debated in the Senate, will be coming up for a vote on the Senate floor within the next couple of days. Also the school to work opportunities act, we hope is scheduled for debate tomorrow, will also be coming up for a vote on the Senate floor within the next few days.
These provisions are vitally important for ensuring that our young people get the education and the training they need, the skills they need, to prosper in today's world. There are also vocational and occupational skill standards in Goals 2000. The House has already passed these pieces of legislation; the Senate will be taking them up very shortly, and we're hopeful, indeed we're confidant that they will be passed. And they are a critical part of the President's work force investment strategy.
Finally, within the next few weeks we will be sending to Congress a reemployment bill. Again acknowledging that although there is very good news, still with the corporate downsizing, defense downsizing, with all the technological changes facing Americans -- as never before Americans need to change jobs, they need skills, they need one-stop shopping and consolidation of all of these various training programs. And we intend to make that system work for Americans, not just to keep them intact until they get the old jobs back again -- because many of them are not getting their old jobs back again -- but to create a system which helps them get the new jobs.
Thank you and we'll all take questions..
Q: Secretary Bentsen, you talked about the deficit coming down. In the new budget, you're talking about eliminating over 100 programs. What makes you think that the appropriations committees are going to be able to do it. The presidents have long tried to eliminate programs and it was a struggle to even get rid of the honey bee program this year.
SECRETARY BENTSEN: No question of whether it will be tough. But I am encouraged by the caps that we have in place and that we have agreed to. I am encouraged by their past performance last year in making the substantial reductions that they did. So I anticipate that we'll be successful in the process -- but not easy. There will probably be a lot of blood on the floor by the time we finish.
Q: Secretary Bentsen, you mentioned the Fed's action today. The stock market's initial response was a 40-point drop. What do you think about that reaction?
SECRETARY BENTSEN: And their second response was a 30- point drop -- 40, then back to 30.
Q: Ten-point gain then. (Laughter.)
SECRETARY BENTSEN: What I'm saying, in effect, what we've seen thus far the response has been minimal. And I sure don't want to try to project the stock market. If I could, I'd be calling you from my yacht.
Q: Secretary Bentsen, with the fact that we have some good employment data today if we take out all the noise and the utilization figures were down, really revised to suggest there's more capacity than we thought out there before inflation comes on, does it look like the Fed pulled the trigger too soon?
SECRETARY BENTSEN: Oh, they're an independent agency and we respect that. But from what we've seen, inflation is well contained and we're quite encouraged by that.
Q: Is there no concern, sir, that the Fed's actions will chill growth?
SECRETARY BENTSEN: I don't anticipate that a modest increase such as that will inhibit growth. In our own forecast, the troika forecast, we were anticipating in forecasting modest increase in short-term rates this year.
Q: What's your message here? Are you saying that you believe that the Fed has taken a responsible cautionary step that you're applauding? Or are you trying to tell the Fed that this is enough and not to do any more? What are you saying here, Mr. Secretary?
SECRETARY BENTSEN: I'm saying exactly what I'm saying -- that we think inflation is contained and it is in good shape. I would interpret this is to be a preemptive strike on the part of the Fed.
Q: Do you think it's unnecessary?
SECRETARY BENTSEN: I didn't say that. I said we respect their independence.
Q: If you had said it I wouldn't have asked it.
SECRETARY BENTSEN: No, no. Well, because we're going to respect their independence.
Q: Secretary Reich, on the labor data today, we saw a 20,000 increase in retail jobs and service sector jobs were flat. Do you see those numbers as being weather-related or -- I mean, after two years to suddenly see no jobs and services, that's sort of alarming.
SECRETARY REICH: Yes, some of those jobs undoubtedly are weather-related. Retail services, particularly last month we saw some pretty bad days around the country, some pretty cold days. And the survey was done right after a big wind chill affected the nation.
Q: So the service sector jobs you think would continue to be a boom --
SECRETARY REICH: I would expect service sector jobs to continue. Also, let me just say that service sector jobs are not all bad jobs. I want to underscore something that Secretary Bentsen said before. When we tend to talk about service sector jobs, we tend to have in our heads low wage, retail, restaurant, hospital orderlies, hotel maintenance jobs. But there are many, many service jobs in the economy now that are good jobs. In fact, the majority of the jobs we are seeing created now are managerial and professional and technical jobs. Technical service jobs, business service jobs -- they are paying good wages.
Q: Given the reemployment program, the CBO data, which may or may not be consistent with the administration, was calling for what, a 6.3 or 6.4 unemployment rate this year. If you pass the reemployment act, would actually expect that figure to go down?
SECRETARY REICH: We would expect that we would ease the transition that many Americans are now finding very difficult from job to job. Because many Americans simply have not had to cope with the kind of transition, given corporate downsizing, defense downsizing and technology, and also, international trade. There are
great opportunities there, but many Americans have got to be prepared for those opportunities. They've got to get first-class information about them.
Let me be very specific. The reemployment act will, number one, consolidate these dislocated worker training programs; number two, provide one-stop shopping for unemployment insurance for dislocated workers, for job search assistance, which is very important for a lot of people even who have not been getting training; and number three, it will provide for those in training long-term extended benefits -- because we have found that long-term training is very important for many, many people, imbedded in a system of information -- high quality, computerized information about where the jobs are and what to train for.
Q: Is it more of a human effect rather than a macro number effect?
SECRETARY REICH: We don't expect in the short term any macro number effect. We want to make it easier for people to get the next job and we anticipate that will help individuals, will improve the microeconomy, certainly improve labor mobility -- flexibility of the labor market system -- help people get jobs, improve the quality of jobs people have. I don't anticipate any noticeable short-term macro effect.
Q: What impact will the consumer feel from the increase in these short-term interest rates?
CHAIR TYSON: Well, look, our forecast, as the Secretary of the Treasury mentioned, anticipated that there would be some increase in short-term rates this year. We believe that that increase is consistent with continued expansion of the economy in the range of three percent. There is also evidence from the yield curve to suggest that that increase in short-term rates is consistent with continuation of low long-term rates.
So the expansion of the economy and our expectation that long-term interest rates will remain low, together with continued growth and employment in the economy as it continues to expand, all spells good news for the consumers: Rising consumer incomes as a result of more employment and more expansion of output, and continued low long-term interest rates, which will help with consumer durables.
Q: What about things like car loans, things like that? Are people going to be paying a little bit more for certain kinds of products?
CHAIR TYSON: As I just said, since many of these kinds of loans depend upon what happens at the longer end of the market, our reading of the historical relationship between short-term rates and long-term rates at this time is consistent with an increase in short-term rates not having an effect on long-term interest rates, or not having very much of an effect or a persistent effect on long-term interest rates.
Q: Don't businesses deal on five-year plans and a five-year note reacted in a major way today, more than the long --
CHAIR TYSON: This is not to say that it has no effect, it is to say that we have incorporated into our forecast the effect of a rise in short-term rates through various yields. And with that incorporation of the effect we have the economy growing in the range of three percent.
So it's important to emphasize that we anticipated that there would be some change at the short end, that that would filter
through various interest rates, that it would not have a perceptible effect on the long end of the market --
Q: What about the medium end where --
CHAIR TYSON: It filters through various different term maturities at different rates. But I think the important point that we want to underscore is this is all in our forecast, which you will see, incidentally, officially with the release of the budget. But it's all in our forecast.
Q: Granted that you anticipated all this, do you agree that this -- with the Fed statement, that this move today is beneficial at prolonging the economic expansion?
DR. TYSON: I think I would say that this move today is consistent with the continuation of a solid and sustained economic expansion.
Q: What if the quarter of a point increase turns out to be a half a point increase?
DR. TYSON: I think our forecast allowed for the possibility that over the course of this year short-term rates could rise as much as 50 basis points.
Q: Secretary Bentsen, I wonder if we could ask you just for a second look ahead to next week's meeting with Japanese Prime Minister Hosokawa. Let us know where things stand at this point as far as talks on agreements for that meeting, and if there's any concern at this point, given recent events, as to whether Prime Minister Hosokawa will be able to deliver on anything that he might agree to.
SECRETARY BENTSEN: Well, I'm not going to get involved in the internal politics of Japan. I will tell you that when I met with Prime Minister Hosokawa, he said to me that he was looking forward very much to coming here and having meaningful talks. Obviously, that means, to my way of thinking, some changes insofar as the stimulus package that we saw. We don't have all the details of that yet, and apparently that isn't totally resolved, but it certainly was a step in the right direction.
Q: No problems going into the meeting at this point?
SECRETARY BENTSEN: That's why they're meeting. (Laughter.) Sure, of course, you have concerns and differences.
THE PRESS: Thank you.
END 12:55 P.M. EST
William J. Clinton, Press Briefing by Secretary Lloyd Bentsen, Secretary Robert Reich, and Chair of the Council of Economic Advisors Laura Tyson Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/269523