THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING
BY
LAURA D'ANDREA TYSON
CHAIR OF THE COUNCIL OF ECONOMIC ADVISORS
9:47 A.M. EDT
MS. TYSON: Hello. I'm here to make a brief statement about the employment and unemployment report this morning. This report for November showed a decline in the unemployment rate by .4 percentage point, and payroll jobs increasing 208,000.
Taken together this report also indicates that now, from the beginning of this year, January through November, the economy has generated a total of 1.6 million new jobs. That's two times the monthly rate of job creation in 1992.
All of this is very good news for the American economy. And I want to point out that this report is another in a long list of reports recently suggesting that the recovery has picked up pace and the recovery is a sustainable economic recovery.
It's also important to point out, I believe, that the recovery is being driven or propelled by the interest sensitive components of spending, by investment spending, consumer durable spending. These are construction spending. And these are the areas of the economy which have benefitted tremendously from the historic low interest rates which have been incurred by our budget and deficit reduction effort.
We're particularly heartened to see in this employment report a sharp increase in the number of construction jobs, 27,000 in November; and an increase in manufacturing jobs, 30,000 in November. We certainly hope that we've turned the corner on manufacturing. Manufacturing jobs were up in October, and up by more in November. So maybe we've turned the corner in manufacturing.
One of the best pieces of news in this report is on the factory work week. The factory work week is now the longest since World War II, and overtime hours are also very high. Both of these factors taken together suggest that there is a likelihood that companies will go out and employ more people in coming months ahead, so that we should see manufacturing continuing to add payroll jobs in the coming months.
So once again let me just say this is good news for the American economy. It suggests a recovery that is picking up pace, and a sustained economic recovery.
And let me finally note just in passing that the final element of this report on wage growth during November suggests that inflationary pressure coming from the labor market remains tame. So we have here a situation in which average hourly earnings were only 2.2 percent above their year earlier levels. So even as we're adding jobs, the rate of growth of wages remains slow enough to keep inflation under control.
Q To what do you attribute all of this?
MS. TYSON: Well, we did, of course, argue from the beginning of this year that if we put in place a plan which was a credible plan and a long term plan for getting the deficit under control, that we would encourage a long period of much lower longterm interest rates, and that those rates, in turn, would stimulate the economy, in particular the interest sensitive parts of the economy.
We saw the results first in business equipment and plan spending. We saw them in consumer durables. We saw them more recently in residential construction. So that all of the interest sensitive parts of spending are now growing at much more rapid paces than they have in a very long time. And that is propelling the economy forward.
It is also the case that sometimes employment response was a lag to output growth. At the beginning of this year there was concern about the recovery being jobless in nature. I think what we've now seen is that the rate of employment growth has begun to pick up to be in a more normal relationship with the rate of output growth. The rate of output growth is accelerating because of lower interest rates. The rate of employment growth is now moving in a more normal relationship to the rate of output growth.
Q There is some feeling, as you know, that what the fate of the health care plan could undermine the economy, depending on your point of view, one way or another could undermine this economic recovery. What is your view about the relationship between the --
MS. TYSON: Well, my view of the health care reform package is that it is a package which will be good for the economy in a variety of ways. It will reduce the phenomenon of job lock, by which people are locked to jobs because of a concern about losing insurance. It will reduce the phenomenon of welfare lock, whereby people on welfare who would like to move off of welfare into employment feel they cannot because their health care benefits will be jeopardized. It will, for many companies, reduce the cost of the health care bill which they face for their employees over the coming decades.
So I think this is good news for the economy, it's a good package for the economy.
Q What about the concern to follow up that its costs added burden on many business could take the starch out of economic recovery?
MS. TYSON: I think you have to look at the fact that the costs of health care on the American business sector, without health care reform, continue to grow. And what our numbers show us is by the end of the decade, through the end of this decade total business spending on health care would actually decline, relative to baseline.
So this is a reform effort that will actually slow the rate of growth of health care costs for American companies.
Q What do you expect the next quarter to be like? Do you expect it to continue?
MS. TYSON: Well, our official forecast, which we are in the process of looking at for the next round of revisions, suggests that the second half of this year was supposed to pick up pace relative to the first half. We have seen that happen.
Then we are currently predicting that the pick up of pace will continue through the next year. So basically we're working with a forecast which suggests that the last two quarters of '93 and the four quarters of '94 will show growth at around three percent.
It may be the case that growth in the fourth quarter of this year is slightly above three percent. There are a couple special factors that might cause that to occur. One would be, essentially, some flood effects coming in from rebuilding effects from the flood earlier this summer that may come in the fourth quarter '94 numbers.
Another possibility that we're looking at is an increase in the pace of auto production in the fourth quarter. Third quarter auto production seems to have been hampered somewhat by some production difficulties associated with the changeover in models. There were rather low inventories in the auto sector, and with very strong demand for automobiles, one would anticipate a strengthening of auto production in the fourth quarter. And if it's big enough, would be a factor that you would see in the fourth quarter rates.
So there are a couple special factors that might bump up the fourth quarter rate. Nonetheless, over that six quarters we think of a rate of about three percent.
Q Are we out of a recession?
MS. TYSON: Well, we have formally been out of recession since the formal end of the recession in '91. What I would say --the economists measure recessions in formal ways, and as I said, we were formally out of a recession. What I want to emphasize here is that our interpretation is we had a long period of a recovery from recession that was seesaw in nature, that was very slow in growth relative to previous periods of economic recovery from recession. So it wasn't that there was no recovery, it was that it was very slow and had a seesaw character to it which undermined a sense of consumer and business confidence, and therefore a sense of job creation and spending that could really propel a sustained recovery.
I think what we feel now is that we've moved to a sustained and steady recovery at a faster clip. The clip we're talking about is, again, about 3 percent. And if we can sustain that, and we believe we can, that would be a different part of the recovery process. It would differ much from the proceeding.
Q Now that the economy seems to be stronger, isn't there more room for more deficit reduction measures?
MS. TYSON: I think right now we want to look -- the economy is growing at -- if you take our forecast, our current forecast of about three percent growth over the last two quarters or of the next four quarters, you would say that we still have a substantial amount of excess capacity in the economy. We still have a substantial number of long-term, unemployed people in the economy.
We still have a world which is growing very slowly. The recessionary conditions in Europe have not turned around. The recessionary conditions in Japan have not turned around. Consumer confidence, although it is certainly on the uptake, on the upswing, is still below levels that would be associated with a very strong recovery. I think we should -- we have a package in place which looks to be generating the results we anticipated. And we look to be on track, and I think we should continue on this course for a while.
Q The inflation question, you said that you're not that worried about inflation. But clearly I think that markets have been in the last few weeks somewhat jittery about inflation. And today's spurt, as reflected in the unemployment figures and the LEI as well would indicate that there is a pick up going on which would perhaps cause the markets to be more jittery. What can you tell the markets to calm their fears?
MS. TYSON: Well, I don't know if I can -- markets are inherently volatile. I would use the word volatile rather than jittery. And that's one of their characteristics, and I assume that whatever I say they will continue that characteristic.
I think it is important to emphasize that so far all of the numbers on inflation do not suggest an uptake in the underlying fundamentals of inflation. That is, we have very modest, as I indicated, wage growth. We have very soft commodity prices, including the decline in oil prices this week. We have, if you look at the numbers -- just look at the numbers -- we have a CPI rising over the last 12 months at 2.8 percent, which is the lowest rate in 20 years. We have the producer price index, the core producer price index for finished goods increasing at only 0.1 percent over the past 12 months. And finally, unit labor cost -- that is taking into account now the productivity side of inflation when you have high productivity growth that tends to keep costs under control and keep inflation in control. Unit labor cost during the past 12 months decreased by 2 percent.
So I think that when you put all of these things together you would say that the current evidence we have does not suggest any uptake in the inflationary situation. We will certainly continue to watch that, but I think that the evidence is compelling.
Q Excuse me, what is the rate for African Americans, men, women, teenagers?
MS. TYSON: The unemployment rate --
Q And what is happening to that rate?
MS. TYSON: The unemployment rate, the overall unemployment rate for blacks is an unemployment rate which was in October, 11.7; and in November was 12.5. In fact, there are two parts of this report which -- as well as the overall rate -- which suggest that we still have a ways to go on the issue of employment and unemployment. And one is the issue that you raised with your question.
If you look down the list of unemployment rates this past month, the October to November change, the category of increase -- the single category of increase was black workers, which increased from the 11.7 to the 12.5. All other categories declined in the month of November. So you have a situation where you have a higher rate for blacks, and also an increasing rate for blacks.
Incidentally, the other part of the report which suggests that not all of our problems are solved -- and I certainly don't mean to suggest they are -- is that we had an increase in the share of unemployment accounted for by people who are long-term unemployed. And that suggests that the problem of grappling with long-term unemployment is a problem which simple -- or which a quickening pace of economic recovery may not be sufficient to grapple with.
Our other policies that we're obviously talking about, worker retraining programs being the most important, to deal with the issues of, I would say, parts of the country with still high unemployment rates. For example, California, where there was a big decline in the unemployment rate, it still remains much higher than the national average. Or groups in the population which have higher than average unemployment rates, as the black community. And also the issue of the long term unemployed. Those are issues where I think we have to work with retraining programs and additional efforts. The economic recovery itself makes headway on creating more jobs and reducing the unemployment rate, but it's not the only thing.
Q Are you going to change your unemployment forecast for next year to --
MS. TYSON: We're going to go work on it right now.
END10:03 a.m.