THE WHITE HOUSE
Office of the Press Secretary
PRESS BRIEFING BY SECRETARY OF LABOR ROBERT REICH, SECRETARY OF TREASURY ROBERT RUBIN, MARTIN BAILEY, COUNCIL OF ECONOMIC ADVISORS
The Briefing Room
10:25 A.M. EDT
MR. MCCURRY: Good morning, everybody. Here we are again. Good economic news. Deja-vu all over again.
As you know, the Department of Labor reported a short while ago that the nation's unemployment rate is 5.4 percent, down from 5.6 percent. I've asked three members of the President's National Economic Council to address that today, starting with Martin Bailey from the Council of Economic Advisers. We also are delighted to have Secretary of the Treasury Bob Rubin and Secretary of Labor Bob Reich with us, who can talk a little bit more about some of the data behind the employment report today.
Thank you, Martin, and thank you, Secretary, Secretary.
MR. BAILEY: Thank you, Mike.
As Mike said, the unemployment rate was down to 5.4 percent in April. That's a full two percentage points below what it was four years ago. The unemployment rate has been at or well below 6 percent for 20 consecutive months while inflation has remained low.
Average hourly earnings in April rose .6 of a percentage point. With productivity growing, we have room for real wage growth in this economy. And so it's pleasing that real wages did rise over the past 12 months. It remains an important challenge to see real wages continuing to increase in this economy.
Monthly employment growth has rather erratic this year -- very large gains and, of course, the drop in January associated with the bad weather. So I think it's probably not a good idea to pay too much attention to each particular month. If you look at what's happened over the first four months of 1996, we've averaged 166,000 new jobs. That, I think, indicates a strong and robust economy and strong employment growth
SECRETARY REICH: Thank you, Martin. Let me just add a couple of words from the standpoint of what all this means to average working people.
Thus far, the story of 1996 is one of steady, robust employment growth. Job creation over the course of the year has averaged, again, 166,000 a month, and that is more than enough to provide jobs for people coming into the labor market.
April's unemployment figure of 5.4 percent marks the 20th consecutive month that we had unemployment below 6 percent. The unemployment rate is now two full percentage points below what it was exactly four years ago. In April of 1992, we had an unemployment rate of 7.4 percent. It is now 5.4 percent.
The news on the wage front is encouraging. Wages of production and non-supervisory workers are beating inflation. But, obviously, we still face the challenge of ensuring that all hard-working people can benefit from this strong economy. Given the strong productivity growth and yesterday's surge in GDP, the fact that average hourly earnings are running slightly ahead of inflation is good. It's also a sign that there is still room to increase the wages of working Americans. And, certainly, certainly there is room for a modest raise in the minimum wage for America's lowest paid workers.
SECRETARY RUBIN: Let me start by saying that I totally agree with Bob with respect to -- on everything. But I particularly agree with him on the last comment he made on the minimum wage. We do need an increase in the minimum wage. We need it now and it should come to a vote now.
As Martin and Bob have said so well this is a continuation of good news. We've now had three and a half years of really quite extraordinary economic circumstances in this country. And I think without question, while many factors have contributed, the absolutely indispensable factor and the one factor without which this would not have happened was the deficit reduction program the President put in place, the President provided the leadership on in 1993. And the result of that was lower interest rates, and lower interest rates have driven to sustain this recovery.
The challenge now is to do the right things going forward so that we can continue to have the kind of strong economy with low inflation we've had in the last three and a half years. First and foremost, as the President has said so frequently, what should happen is that the congressional leadership should sit down with the President and should work to putting in place a balanced budget but a balanced budget that is sensible and that deals with the priorities that are necessary for this country to have the sort of economic future that we've had and that reflects the economic conditions -- the continued economic conditions of the past three and a half years.
Thank you. We'll take questions.
SECRETARY REICH: And if I could say that I agree with everything that Bob Rubin just said. (Laughter.)
Q Are you concerned at all about the seven-cent increase in the average hourly earnings of April? That, after all, compares to a total of seven cents increase and in the first quarter as a whole. Is there any inflationary potential there?
SECRETARY RUBIN: I don't think so. If you look across all of the factors that contribute to inflation and you look out in time -- and that's what we try to do, to look at everything that's involved with respect to prices. I think that it is our view and it certainly is the prevailing view amongst economists that inflation will remain at low to moderate levels as we go forward.
Q Second question. Looking at the question of the drop in the unemployment rate, correct me if I'm wrong, but my understanding is that reflects entirely a contraction in those seeking work rather than, you know, since the actual job creation was so small at 2000. Why is that good news if people are leaving the labor force because they're discouraged or --
SECRETARY REICH: Well, first of all, there was a slight contraction in the number of people looking for work. But the overall unemployment figure of 5.4 percent, again, marks -- and I want to emphasize this -- the 20th consecutive month under six percent. We have seen 19 months in which the unemployment figure has been between 5.4 percent and 5.8 percent. There is no diminution in the number of people looking for work in most of that time.
And what we are finding is that the working population increase between April and April, April of '95 and '96, the same fraction of the population being employed, there is more than enough employment to employ all of those people. In fact, we would need only 100,000 new jobs per month over the past year in order to maintain employment. Under six percent and maintain employment for the same fraction of the potential working population. So we're doing extremely well and continue to do extremely well on the employment front.
MR. BAILEY: Could I just make a follow-up comment on that? When you look at -- this is just sort of a nerd or techy comment -- when you look at the unemployment report, you really just want to look at the unemployment rate. You don't want to look at the month-to-month changes in the labor force or employment because of the way they collect the numbers, people coming in and out of the rotation group. So it's really not meaningful to look at those month to month changes.
One sign in this report that it really is not a problem of people leaving the labor force because of being discouraged is that actually the number of discouraged workers went down. So I think you should really ignore that decline in the labor force. You've seen that's just a one month phenomenon.
Q Secretary Rubin, do you have indication that the Republican leadership in Congress is prepared to accept the President's invitation to resume seven-year balanced budget negotiations in a serious way?
SECRETARY RUBIN: Well, as the President said yesterday in response to a similar question, the right person to ask would be them. But the President's position is absolutely clear. He believes that we should continue on the deficit reduction track that he started and very powerfully in 1993, and he's extended his invitation continuously for them to come down and meet with him. And I think, Wolf, that they are the right people to address that to.
Q The ideas that they put forward, however, are likely to be some at some variance with the positions the President has taken. Do you think this could really be worked out in an election year?
SECRETARY RUBIN: Well, I'll say this, Bill. It seems to me that there is such a strong national interest in continuing in the path that we've been, the path that the President started in 1993 with this deficit reduction program that it is something that everybody should make every possible effort toward doing. And as the President has said so often, there is enough common ground with respect to the numbers and, roughly speaking, policy so that this is something that could be done and done this year, have a balanced budget, have a moderate tax cut, and then leave the big remaining policy issues to be debated out in the election.
Q Secretary Reich, if the economy is doing so well, how do you explain the sense of insecurity among vast numbers of the work force which you've spoken to in the past? Is the message just not getting through?
SECRETARY REICH: Undoubtedly, there is still some insecurity out there. And every time I go out to talk to workers around the country, I hear the same kind of message. We are moving in the right direction. The economy is expanding. The economy is doing extremely well. There is some early evidence that we've actually turned the corner in terms of the long decline in median wages that started in the 1970s, both for men and also for non-supervisory workers.
Our 8.5 million net new jobs, we know, are paying better than average wages. The problem has always been the 115 million, 116 million existing jobs that since the 1970s have been splitting between some paying better and many paying worse. And that's where education and job training are critical. That's why pension and health care portability are so important. And that's why we have to help the people at the bottom through maintaining our Earned Income Tax Credit and also raising the minimum wage. It's absolutely critical.
Q Is the economy growing in the right way?
SECRETARY REICH: The economy is certainly growing in the right way. And as I said, there are early indications that we may be turning the corner on this long-term decline in median wages. But we have a long way to go. We have put in place the foundation for ensuring that all Americans have a fair shot at sharing in this prosperity. But we still have a challenge ahead. And there is no question about that.
Q For Mr. Rubin, how much of an uptake in interest rates is tolerable to support this improved productivity, some wage growth in the GDP?
SECRETARY RUBIN: Well, let me suggest a slightly different way of looking at it if I may. And I think it's a sensible way of looking at it. And that is our long-term rates -- after all, it's intermediate and long-term rates that basically drive the economy. So the question is, are the rates that we have going to be consistent with long-term growth.
I think what happened -- I think something very fundamental has happened in this economy over the last three and a half years. I've been around a long time, I've seen economies do a lot of different ups and downs. And I do think that what happened in 1993, when you look back on this period, 10, 15, 20 years from now, is going to be seen as an historic change with respect to fiscal responsibility in this country. The result is the deficit premium got very largely taken out of long-term rates. And with that having happened, I think long- and intermediate-term rates will over time be consistent with solid growth.
Whether any one moment's rates are too high or too low, I don't know. But I think that you will see long-term rates continue just as they have over these three and a half years be consistent with the continuation of growth.
Q Secretary Rubin, will you be traveling to Mexico to the binational meeting next week? And how do you see the Mexican economy performing, and the rescue package, is it working? Do you expect that it --
SECRETARY RUBIN: I, unfortunately, cannot go to Mexico next week. Deputy Secretary Summers will go. I think that the extremely courageous action that the President took in January of 1995 to put in place a Mexican support program at a time when it was very unpopular politically was exactly the right thing to do in terms of our national interest, and I think it is working very well.
The Mexican government has been courageous. They've stuck with a very difficult program. The issues that gave rise to those problems have very largely been resolved, and you've started to see growth again in Mexico. Clearly, they have a lot left to do, but I think it's been a remarkable accomplishment thus far, and I think things are on the right track.
Q Secretary Reich or Martin Bailey, whoever wants to answer this question, is there room --
SECRETARY RUBIN: I'm excluded. (Laughter.)
Q If you want to answer it, too, go ahead. (Laughter.) If, given what you said about the unemployment rate being below six percent for 20 months, wage trends have maybe ticked up a little bit, but not much, is there room for the unemployment rate to go further down without a rise in inflation?
SECRETARY RUBIN: Well, as you know, there is a very animated discussion among economists about what is the so-called natural rate of unemployment, the nonaccelerating inflationary rate of unemployment. Two years ago, most people assumed that you could not go below six percent without accelerated inflation. We have disproved that notion. We don't know what the NRU the is. I don't think anyone knows what the natural rate of unemployment is, but we do know that we are now at 5.4 percent. We have been in the mid-fives for a very long time and there is no sign of wage push inflation. And I think that is a very important change in the economy that is a very important data point in terms of perhaps revising some commonly held notions about the natural rate of unemployment.
But Martin, would you like to --
MR. BAILEY: Well, I think you have pretty much summarized it, that there is a lot of uncertainty about what the minimum rate of unemployment that can be reached without inflation. But I think we have found that you can certainly go below the level that we thought could be achieved. And I think obviously we want to make sure you don't have an acceleration of inflation. But consistent with that, I think the more jobs we can get, the better.
Q At this point, these unemployment rates now are not an inflationary threat?
SECRETARY RUBIN: We are not seeing any sign of inflation. Remember, inflation is running March to March -- March 1995, March 1996 -- 2.8 percent. We see that non-supervisory earnings are at a yearly rate a little bit above that, but we have productivity improvements as well. And that productivity improvement allows some wage increases without any concern, without any reason to be concerned about wage-push inflation.
And if I could add just one more point, the extent to which we can overcome skill bottlenecks in this country -- that is, to make sure that employers who need skilled people can get skilled people -- allows us to operate the economy at an even lower level of unemployment, without risking inflation. And that's why so much of our education and job training initiative is critical not only to helping individuals get ahead but also making sure that the economy can run more efficiently.
Q Secretary Rubin, with the good numbers that you have gotten today and yesterday, do you feel confident that the economy is going to be strong through November? Or is it still possible we could see a downturn before the election?
SECRETARY RUBIN: Well, I tend to think of it through the end of the year. I don't know why you choose November. But in any event -- (laughter) -- yes, I think the most likely scenario is a continuation of the kind of economic conditions we have seen -- solid growth and low inflation. And as I have said now several times and I'll say it again, I think that is not an accident. I think it's because the right policies have been followed, and I think those policies contributed a great deal to the environment that we have. But, yes, I think that is the most likely scenario.
MR. BAILEY: I think that's clearly right. Without inflation pressure, there is really no reason why we should slow this economy down. It's doing well.
Q If you have to take repeal of the gas tax to get the minimum wage wrapped in a package, is that worth it? Is there a trade-off there? Is there any economic downside?
SECRETARY RUBIN: Bill, I think the best way to answer that is to say that the President has advocated a middle-class tax cut through this who budget process, and we have put forward a very powerful program based on education tax credit, a child tax credit, an IRA. And as he has said, and I think very rightly, the right way to deal with this is to come together, to put our tax program on the table -- if other people want to put other tax programs on the table, do it all within the context of a balanced budget negotiation and then try to do everything at one time. And I really do think that's the right approach.
Q If you want the minimum wage so badly --
SECRETARY REICH: As to minimum wage, look, we want a clean, clear, simple, up or down vote on a minimum wage. The public deserves it. This is a democracy. I don't understand why the Republicans refuse to even have a vote on this issue. It is not a complicated question. The minimum wage is heading toward a 40-year low. Let's have a clean, clear vote.
Q Let's put it this way. It is connected, though, the possibility of reducing the federal gas tax is connected with the minimum wage. How much at risk now is the minimum wage?
SECRETARY REICH: The minimum wage is not at risk if they would give us a vote. I believe that -- and I think there is always a hazard in predicting what Congress is likely to do. The people who predict what Congress is likely to do -- there are people who don't know and there are people who don't know they don't know. And I'm in the first category. (Laughter.) But I think that we -- I think that we probably have enough votes to pass a minimum wage increase.
Q So what happens to
Q -- the President?
SECRETARY REICH: Oh, indeed, there is an interesting discussion going this afternoon. The Vice President and I and Democratic leadership will be talking about a dubious anniversary, which is the -- today marks the 35th anniversary of the first vote by Senator Dole against the minimum wage.
Q What if the only way you can get it is wrapped up with the repeal of the gas tax?
Q What will you recommend to the President if he gets --
SECRETARY RUBIN: I don't think we need to speculate on all the various legislative possibilities that can come from, as Bob said, a very unpredictable Congress. I think Bob said it exactly right, they should vote on a minimum wage. The American people want a minimum wage and they should have a vote.
Q Secretary Reich, going back to your comment about the deficit premium having been taken out of long-term interest rates since 1993. Long-term interest rates are a lot higher now than they were in December and January when it looked like the President and the Republicans were pretty close to a seven-year balanced budget deal. Now, they are not even talking to each other. Do you think that long-term deficit premium is now going back into long-term rates?
SECRETARY RUBIN: No, I think what you have are market fluctuations, as they always do with demand and all the other factors that affect markets. I don't think -- and I have steadfastly resisted doing this over the three and a half years I have been here -- I don't think it is enormously fruitful to comment and I really don't -- to focus on the markets of the moment. I think what you want to focus on is what you think is happening over time. And what is happening over time I think is exactly what I said -- that long-term rates are reflecting demand and supply for money as they should, and the fear factor with respect to deficits and the possibility we may inflate or have to inflate our way out some day, has been very largely eliminated from long-term rates.
Q If you get minimum wage, what is the impact on inflation?
SECRETARY REICH: I'll let Martin offer his views on this. All of the evidence that we have is that it would be a de minimis effect, because remember, you're talking about 12 million workers out of a 125 million who would get a raise, but many of them are already above $4.25, and they represent a very tiny slice of the total wage bill in America. In fact, they are at the absolute bottom. So there might be a one-time, very, very tiny --
Q "Tiny" meaning --
SECRETARY REICH: "Tiny" meaning -- I believe negligible, but Martin why don't --
MR. BAILEY: I don't think we should speculate on a number. It's small. It's not going to have a major effect on inflation.
Q Secretary Reich, if there is such a minimal impact on the -- if raising the minimum wage would have such a minimal impact on the economy, why didn't the President push for a minimum wage in the first two, three years of his administration? I mean, it certainly does leave the door open to speculation that this is simply an election-year, political move.
SECRETARY REICH: Let's be very clear about this. The President proposed a minimum wage increase not a month ago, not six months ago, 14 months ago. In the campaign, in 1992, he proposed a minimum wage increase. The only reason that we did not propose it explicitly during the health care debate in 1994 was because there was a possibility of a health care mandate. And at that point we were not going to add even pennies to the payroll. But the minute that that health care mandate was off the table 14 months ago, the President proposed a minimum wage increase and has been fighting for this. And this is not a new fight.
Q Excuse me, but where has he been fighting for this? I mean, this high-profile fight by the President of the United States for minimum wage seems to be a very recent phenomenon.
SECRETARY REICH: Well, I beg to differ with you. In January of 1995 in the State of the Union address, the President called for a minimum wage increase.
Q Then what happened after that? I mean, you know, paying lip service to minimum wage doesn't seem to be a fight by the President.
SECRETARY REICH: Well, I am sorry, we have been involved in trying to get a vote. In fact, in the spring of '95, in the fall of '95, we also came very close to getting a vote. In fact, 51 senators in November of 1995 voted a sense of the Senate resolution to have a vote on the minimum wage. This has been an ongoing battle. And the mere fact that 20 Republicans have now come over to our side on the House side and said, yes, we do want a minimum wage increase, and we're beginning to see some movement on the Republican side, is good news. But we want to have a vote. And I think the public deserves to have a vote.
Q Secretary Rubin, could I ask you a question on China's threatening this morning that the United States would face retaliation if the U.S. imposes sanctions in connection with the copyright piracy allegations?
SECRETARY RUBIN: We have said from the beginning, Wolf, that we had entered into agreements with China with respect to intellectual property rights. That is a matter of enormously serious concern. Acting Head of USTR, as you know, has been involved in discussions and negotiations. It's a matter we take with the utmost seriousness, and we intend to pursue it with great seriousness.
Q But where does it stand right now?
SECRETARY RUBIN: I think I'd rather stick with exactly what I've just said. We take this with great seriousness. I think the Chinese understand we take this with great seriousness. And when we're ready to make the next announcement, we will. But this is an issue that we take with enormous seriousness.
Q In terms of renewing MFN, when do you expect a decision on that?
SECRETARY RUBIN: Well, that decision doesn't have to be made until either June 3 or June 6. I've forgotten which it is. But the President has said that he will renew MFN.
Q Secretary Rubin, the Republicans want to reduce the tax on gasoline by 4.3 cents. If this is not part of a budget balancing deal or budget reduction, what would be the impact on the economy of reducing 4.3 cents?
SECRETARY RUBIN: Well, let me make two comments if I may. Number one, as I said a moment ago in response to a different question, the right way to look at a middle-class tax cut is to do exactly what the President has said and that is sit down in the context of a budget negotiation and make a judgment on what you think is best for the middle class. The President put forth a powerful program, and that's what we think we ought to do. On the other hand, if others think we should do something different, then we should sit down and discuss all that. Now, that's comment one.
Comment two: Anybody who is going to propose any kind of a tax cut has, I think, a responsibility to propose with it the way they're going to pay for it.
Q Is the administration contending that today's employment report is a good one when there wasn't a single private sector payroll job created and when there was a loss of 45,000 manufacturing jobs when the General Motors strike workers are --
SECRETARY REICH: Yes, it is a good report in many respects. For one thing, we have an average of 166,000 per month since January. Some people may have been a little bit concerned about the 2.8 percent GDP growth. But what we're seeing is steady, continuous job growth. If you look at the average, we're also seeing unemployment around the middle range of 5.5, 5.4 percent, which is by historic standards extremely good.
Let me remind you, we had 7.2 percent unemployment in 1992, in April of 1992. The employment picture is very good, and we're also seeing a bottoming out, if not an up tick in wages of non-supervisory workers. So I've referred before to a kind of "Goldilocks" recovery in terms of not being too hot or too cold. But in point of fact, this is steady, strong, continuous economic growth.
Q If you strip out the 631,000 in February, though, it's not that steady.
MR. BAILEY: Look, the month-to-month numbers are very variable. I think the right way to look at it is the way Secretary Reich looked at it.
The other thing to say about manufacturing is we have had growth in manufacturing jobs over the course of this administration. And I think the prospects -- obviously, we're concerned about the loss of manufacturing jobs recently, but I think the prospects in manufacturing are very good. We had a good report from the purchasing managers. Auto sales are good. So I think we are expecting to see some improvements in manufacturing.
The other thing to say is we should look at this report in conjunction with the one yesterday indicating a very strong continuing economy.
Q Is James Carville happy? (Laughter.)
SECRETARY REICH: Haven't consulted.
THE PRESS: Thank you.
END 10:50 A.M. EDT