THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING BY SECRETARY OF LABOR BOB REICH, CHAIR OF THE COUNCIL OF ECONOMIC ADVISORS LAURA TYSON. AND DIRECTOR OF THE NATIONAL ECONOMIC COUNCIL BOB RUBIN The Briefing Room
12:15 P.M. EST
SECRETARY REICH: Good afternoon. In our first 13 months here in the Clinton administration the economy has now created 90,000 jobs over the two million mark. And we are very well on the path, very well along on the path to eight million jobs within four years. Unemployment is down. In our first 13 months we have now seen the unemployment rate, based on the current CPS standard, that is the new survey, drop from 7.7 percent in January of '93 to 6.5 percent in February of '94.
Now, that translates into 1.9 million private sector jobs. In our first 13 months the economy has now created 1.9 million private sector jobs. That means over 90 percent of the new jobs we created were created in the private sector. It also means that we've now created 90 percent more private sector jobs in 13 months that were created in the previous four years combined.
In the previous four years private sector job growth averaged 20,000 per month. We are now averaging 146,000 per month, over seven times that previous rate.
Manufacturing jobs are up. Manufacturing jobs went up for the fifth straight month, the first time this has happened since 1988.
That's the good news. I want to sound two cautionary notes, however. One is that January's unemployment numbers have been revised, and they've been revised downward, showing no net job growth in January, which means that the net job growth for January and February was on average 107,000 jobs each month. This is good, and given the weather conditions, the very severe weather conditions in January and February over much of the country, this shows a continuous good, steady expansion of job growth.
The other cautionary note is that although the news is good, although jobs are coming back, we must also be sensitive -- and we are sensitive -- to the fact that 8.5 million Americans are still without jobs. We still have, in fact, 4.5 million Americans who are involuntarily working part-time. They would rather have full-time jobs; and another half million Americans, at least, who are too discouraged to look for work.
We are continuing to be vigilant on the job front with regard to ensuring that all Americans do have good jobs. That's why next week the President will be introducing his reemployment act of 1994; and that's why the President, a week from Monday, will be hosting, in Detroit, an international jobs conference focusing on the jobs issue not only in the United States, but also in other G-7 nations.
DR. TYSON: The creation of 200,000 -- over 200,000 jobs last month and over two million jobs during the last year certainly is good news for the economy. It shows that the economy is on a solid growth path with more jobs, rising incomes, and improving family well-being.
The harsh weather clearly affected the February employment data, as it did the January employment data. And incidently, the harsh weather has also affected some other indicators in the economy like retail sales and construction activity. Construction employment and employment at eating and drinking establishments, for example, were clearly depressed in January and February, in part because of bad weather. The drop in the factory work week in February also appears to be the result of bad weather.
If Mother Nature proves to be a little nicer to us in March, the economy could return to a more normal pattern. The weather phenomenon will obviously make an interpretation of the first quarter numbers -- a whole series of numbers and the overall performance a little more difficult for all of us.
An important feature of the economy over the past year has been the high level of investment spending, and there are linkages between investment spending and job creation. For example, the recently announced plans of one of the major automobile manufacturers to invest billions of dollars to increase production capacity over the coming years will mean the creation of many goodpaying jobs in the United States.
I want to emphasize in my comments today that, best of all, the signs of continuing economic growth in the economy are signs that suggest growth is occurring without accelerating inflation. Not only is the current inflation extremely modest, but the fundamentals, the things that explain future inflation -- wage patterns, productivity growth, import prices, energy prices, for example -- all remain well behaved. The downward revision in this month's employment report, the down revision of average hourly earnings in January, and the very modest increase in February should help allay wage inflation fears. These earnings are up just 2.7 percent over the past year and have only risen at an annual rate of just 3.1 percent over the past half year.
Nonfarm business unit labor costs have actually fallen in the past two quarters, and we're just 1.3 percent higher in the fourth quarter of 1993 than they were in the fourth quarter of 1992.
Import prices overall have been flat. Prices of goods from Canada and Europe have actually fallen over the past years. When you look at the fundamentals of inflation and you look at the continuing signs of forward momentum in the economy despite the bad weather, we conclude that the economy continues to enjoy healthy growth with low levels of inflation.
MR. RUBIN: We'd be available for questions on anything that you'd like.
Q A question for you, Mr. Rubin. What is your reaction to the sharp upturn in long-term interest rates? How do you explain it, and why do you think its gone up so much?
MR. RUBIN: Well, long-term rates are a function of inflation and, primarily, inflationary expectations. And as Laura said, we don't see any reason to expect inflation to be significantly greater in 1994 than 1993. In fact, Chairman Greenspan testified a
couple of weeks ago that he didn't think that inflation in 1994 would be significantly greater than it was in 1993.
So with that as a framework, although I've made it a practice of not commenting directly on markets, I think it's fair to say that with those years of inflation it doesn't seem to me that long-term rates ought to move out of a range consistent with our growth expectations.
Within the context of those comments, markets fluctuate, and sometimes they go a little bit this way, sometimes they go a little bit that way. But I think the key is what are inflationary expectations, and as Laura and Chairman Greenspan have both said, there is nothing that we can see that would cause those to be -- inflation expectations to be significantly greater than they were in 1993. And number two, with that view of inflation, I don't see any reason for rates to be out of the range as consistent with our growth estimates.
Q Is there anyone who would like to jump in -- could you please outline once more what you intend to propose in regard to the G-7 partners? And what is going to happen to the American economy if the employment rate is going up again and isn't going to stop for the near future in Europe?
MR. RUBIN: I can take the first one, which is the G-7. The second question -- what's going to happen to the American economy --
Q If unemployment is deteriorating in Europe even further.
MR. RUBIN: Oh, if unemployment gets greater in Europe. Why don't we take the second question first, and then I'll take the first one.
Q Expectations are going down.
DR. TYSON: Well, we have built into our forecast for 1994 and going into 1995 what most private forecasters expect, which is a slow recovery in Europe, basically taking hold sometime in the second half of this year and continuing into next year. However, the current projected growth rates for that recovery in Europe are looked to be insufficient to have a significant effect on the level of unemployment in Europe.
Now, that doesn't affect -- our forecast is built on an assumption that Europe will go into this modest but continuing recovery, and right now there's no reason not to expect that. But it is the case, as you know, that over a rather long period of time now the European unemployment rate has tended upwards even as the European economy has been in periods of cyclical slowdown and cyclical expansion. And at least for the foreseeable future, with the kinds of growth rates that we are assuming, it's quite likely that there would not be significant progress on the unemployment rate in Europe. But that would not affect the forecast for this economy.
Q But as far as your expectations for exports -- in your calculations are concerned -- it doesn't have anything to do with that?
DR. TYSON: No, no, no -- I did not say that. What i said is our export growth is based on an assumption of economic recovery taking hold in Europe sometime in the second half of this year -- getting much stronger next year. What I said was that that -- we are assuming a recovery and that does have an effect on our export projections.
On the other hand, the recovery that is being predicted here, both here and in Europe, the recovery of the European economies predicted in Europe and predicted here is a recovery which at least initially may not be strong enough to make any significant progress on reducing the unemployment rate in Europe. The unemployment rate in Europe looks to be a significantly long-term problem which is quite resistant to at least a slow cyclical recovery in Europe. Nonetheless, we are optimistic that Europe will move into recovery and that some progress on the unemployment rate will be made. But it will be a slow process in Europe.
Q Dr. Tyson, exports seem to be revising without a recovery in either Japan or Europe -- at least they were in the fourth quarter. Do you need to even worry about a recovery in Europe or Japan anymore?
DR. TYSON: The exports series is, I think I mentioned last time, is an extremely volatile series. Out of the four quarters of 1993, two quarters had negative growth in our exports; one quarter had a very small positive. The very large positive in the last quarter of last year is not something which we anticipate can be sustained. Certainly the U.S. economy benefits from an expansion, a cyclical upturn in Europe and Japan. Certainly the U.S. economy would benefit tremendously from having a significant improvement in the unemployment problem in Europe. And that's one of the reasons why we want to get together in the G-7 jobs context to really discuss and exchange ideas about what each country has learned are effective policies dealing with job creation and reducing the unemployment rate. So it's clearly in the U.S. interest. It is clearly in the U.S. --
Q Who from the administration is going to the jobs conference next week? And can you talk a little bit about what's --
MR. RUBIN: Sure. The jobs conference, as Bob Reich said -- Secretary Reich said -- the President is enormously focused on the question of jobs and the economy and has been every since he took office. When he went to Tokyo for the G-7 summit, he had the idea that since all of the G-7 countries are suffering from a common problem, which is unemployment, that what we ought to have is a conference of the relevant ministers from the various countries. And it was out of that idea that came this conference.
The conference itself will have four ministers from each country. Ours will be Secretary Reich, Secretary Bentsen, Laura Tyson and Ron Brown. The corollary ministers, the -- ministers will come from the various other countries. And there will be a series of sessions covering the various issues that relate to jobs, growth, the economy.
I think it's going to be a very, very interesting session, because the world is undergoing enormous changes. Each of the G-7 countries has to deal with those changes. As Laura Tyson said, there are successes; there are failures; there's common experience to discuss. We're not looking for a communique; we're not looking for an agreed-upon set of actions. What we're looking upon is for an exchange of experience, an exchange of views, and for all of us to benefit from this -- what, in effect, will be a symposium on growth, jobs and the economy in a time of enormous change in the world.
Q So we have no plan -- nothing we're putting forward?
MR. RUBIN: What?
Q We have no plan, nothing that we are -- no blueprint?
MR. RUBIN: Well, the President has, as you know, a broad-based comprehensive economic strategy. He will be addressing the conference on Monday morning. And I think what you will find is that he gives a very good speech on his economic strategy and how he views jobs, the economy and growth in the context of this very rapidly changing world.
SECRETARY REICH: If I could just say one more thing with regard to the G-7 jobs conference, this is a very rare opportunity for ministers and labor economics and finance to roll up their sleeves and talk about common problems. It is not just the number of jobs or the rate of unemployment, it is also the quality of jobs, average wages, or the wages of nonsupervisory workers.
We are aiming not so much for a common communique or a common solution. These countries are different. They have different circumstances. But there are underlying trends which are in common having to do with technological changes, having to do with aging populations, having to do with the role of advanced economies in an increasingly integrated world economy. And we hope to share diagnoses and different kinds of solutions.
MR. RUBIN: Could we make a suggestion on the G-7 jobs conference? We are going to have a full briefing for you next week with everybody involved. I think you're going to find it very, very interesting. Maybe we ought to save the questions on the jobs conference until then.
Q I'd like to try on long-term interest rates one more time.
MR. RUBIN: We just did that.
Q Well, I think I have a slightly different question. MR. RUBIN: Oh. I'll have the same answer, but go
ahead. (Laughter.) No, I'm teasing, go ahead.
Q Last year long-term interest rates fell dramatically. The administration has said without much question, I don't think, that that decline was a key to engendering the economic recovery that we saw in the second half. Given the magnitude of the increase that we've in the first two months of the year, does that raise a question as to whether it might slow the economy down later this year? For instance, might the mortgage refinancing boom -- is that going to peter out? What impact would that have on the economy later this year?
MR. RUBIN: Let me give you comment, and then Laura Tyson also comment on that; and Bob, too, for that matter.
When President Clinton was elected, long-term rates were about 7.7 percent or thereabouts. So they are close to a hundred basis points below where they were then. At the same time, we now have a good steady strong economy that's being fed by many sources. So I think rather than -- solely on the lower interest rates, which is where we were in the beginning as we tried to come back from the Bush period, we now have an economy that's fueled by strength from various sources. In the context of a strong economy, it doesn't seem to me surprising to see long-term rates go back up somewhat. I think the key is how much below they are where they were when he was elected at the same time that you have strong and steady growth.
DR. TYSON: I would basically say more or less the same thing. I think the economy has a significant amount of forward momentum right now; that there are a number of factors which have come into play -- much improved business confidence, much improved
consumer confidence -- anticipated and some signs of recovery now occurring in some of our trading partner nations.
I think that the other thing to point out is that there are several hypotheses out there as to why long-term rates have risen as far as they have risen. As to my knowledge there is -- no one of these hypotheses has to do with budget. That is, essentially we have a situation in which we have had very credible action on the budget; the deficit is down relative to GDP; it's down dramatically relative to where it was forecast to be. The debt is down on a downward path relative to GDP. Clearly the concerns of the market a year ago that suggested rates would rise because of the government borrowing needs and the deficit and the debt, I don't think anyone's suggesting that that's what's going on here. The hypotheses now are fears of possible future inflation. But as we have said, and again, as Chairman Greenspan has said, there really isn't much evidence out there that the underlying inflationary fundamental in this economy have changed.
We do predict this year a slight increase in the rate of inflation. It's actually in the CPI from 2.7 to 3. So we anticipate something, but you would hardly call that a change in the underlying inflationary fundamentals.
Another hypothesis -- right now the markets may be trying to figure out if the underlying momentum of the economy is so strong that we may actually be in a three-plus growth range right now. Early to tell, but I think part of it -- the market's grappling with that. My own sense is that given -- we don't know exactly why the market has behaved the way it has, but when we look at the fundamentals, we remain absolutely comfortable with the forecast we have out there in terms of growth in the range of three percent this year and inflation in the range of three percent this year. That is our forecast and we remain totally comfortable with it.
Q To what extent has U.S. exports already benefitted from the decline of the dollar? And to what extent have we yet to feel those effects? How much more benefit do you expect us to get in that period from the dollar depreciation?
DR. TYSON: I'm not sure which -- which decline in the dollar are you talking about?
Q Primarily against the yen, of course.
DR. TYSON: I think the correct way to characterize the dollar is that over the past 12 months on a multilateral tradeweighted basis, the dollar has actually strengthened a bit and import prices have been relatively flat. I think that our unit labor costs, if you look at issues of our unit labor costs, I would suggest look at the domestic economy for the reasons of improved competitive performance internationally. We have had very strong performance on unit labor costs. We've had a lot of restructuring in the U.S. economy and a lot of improvement in the underlying competitive fundamentals. So I think that's really the issue that we should look for as a source of export strength as the rest of the world enters a higher growth period.
THE PRESS: Thank you.
END12:35 P.M. EST