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Jobs & the Economy

Aired November 07, 2003 - 13:27   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


MILES O'BRIEN, CNN ANCHOR: We want talk about this latest report, which shows some very encouraging signs for the economy. We turn now to a senior economist with the Economic Policy Institute, Jared Bernstein, joining us live from Washington.
Mr. Bernstein, good to have you with us.

JARED BERNSTEIN, ECONOMIC POLICY INST.: Thank you.

O'BRIEN: I tried to find anybody who had a negative comment about this report. I didn't see a single economist saying anything bad about it. So this must truly be great news.

BERNSTEIN: Oh, it's definitely good news. I'm not going to be the skunk at the garden party either. We've been waiting for a couple of months of consistent job gains, and we have them. That said, we need to put this report in perspective, and we need to talk about the question of sustainability. How sustainable are these job gains? How sustainable is the type of growth we experienced in the third quarter GDP, over 7 percent? Most economists argue that's going to slow down. Once that slows down, pressure for employment growth in the economy will slow as well. That's point one.

Point two is that at this stage in every prior recovery, we were doing a whole lot better. Now, I don't want to negate any of the good news we've heard so far. It's a whole lot better to be adding jobs than losing them. But in the last recovery, the jobless recovery of the early '90s, by this time we were adding 150,000 to 200,000 jobs per month, which is what we need to keep pace with the growing labor force.

So good news. But in context, there's still room to improve.

O'BRIEN: When you get away from the number, get under the hood on all this, where are the weaknesses? What are the sectors that are having some difficulty still?

BERNSTEIN: Actually, there's one big place to look if you're interested in weaknesses, and that's wage and income growth. The very strong growth that we enjoyed in the third quarter of the year was fueled exclusively by tax cuts and mortgage refinancing, and the president is correct to connect the dots between his tax cuts and the boost in incomes in the third quarter. But both of those steroids that were pumping up growth are one-time events that are probably working their way out of the system now.

Wage and income growth has been flat. And even in today's report, wages are up almost zero over last few months. And at this point, wages are actually lagging inflation on an annual basis. Wage and salary income contributed nothing to growth of third-quarter income. That will be a constraint on the recovery, once some of these very impressive stimuli are out of the system. So that's one weakness you have to consider.

O'BRIEN: But how serious a problem is inflation, though? And how serious a problem thus would that problem be with wages. Inflation isn't going crazy on us.

BERNSTEIN: No, inflation is quite quiscient, and that's another positive attribute of this current economy. We have strong productivity growth, low inflation. We're finally getting some job growth. Practically every trend is pointing in the right direction.

However, none of this has made much of a difference yet in the wages and incomes of working families. There, to the extent their incomes are growing -- and they have grown -- it's been fueled exclusively by tax cuts, mortgage refinancing. As we know, many of those tax cuts were tilted towards higher-income families. I was in Detroit yesterday talking to a group of working families. They didn't want to hear about a 7 percent growth GDP, 8 percent growth of productivity. They wanted to know when are wages and incomes going to start rising in the labor market? As I said, that hasn't happened yet. If we don't start to see more robust growth, wages and paychecks, it's going to be constraints on growth moving forward.

O'BRIEN: Just a quick final thought. How confident are consumers? We're getting close to the holiday shopping season. When you get a report like that, I suspect that you might be thinking about spending a little more money, but then again, if they don't have a job, they're not going to be doing that.

BERNSTEIN: Exactly. Remember, the unemployment rate, while it did tick down a tenth of a percent, is still high. We still have about three million more people unemployed than we did a few years ago. Consumers are definitely feeling more confident. But unless the labor market starts coming back at a quicker clip than it's been, I think it's fair to be concerned that the holiday season, while certainly positive, may not be off the charts robust.

O'BRIEN: Jared Bernstein, senior economist with the Economic Policy Institute, pleasure having you with us. Thanks for explaining the dark science to those of us who are laypeople. We appreciate it.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com







Aired November 7, 2003 - 13:27   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
MILES O'BRIEN, CNN ANCHOR: We want talk about this latest report, which shows some very encouraging signs for the economy. We turn now to a senior economist with the Economic Policy Institute, Jared Bernstein, joining us live from Washington.
Mr. Bernstein, good to have you with us.

JARED BERNSTEIN, ECONOMIC POLICY INST.: Thank you.

O'BRIEN: I tried to find anybody who had a negative comment about this report. I didn't see a single economist saying anything bad about it. So this must truly be great news.

BERNSTEIN: Oh, it's definitely good news. I'm not going to be the skunk at the garden party either. We've been waiting for a couple of months of consistent job gains, and we have them. That said, we need to put this report in perspective, and we need to talk about the question of sustainability. How sustainable are these job gains? How sustainable is the type of growth we experienced in the third quarter GDP, over 7 percent? Most economists argue that's going to slow down. Once that slows down, pressure for employment growth in the economy will slow as well. That's point one.

Point two is that at this stage in every prior recovery, we were doing a whole lot better. Now, I don't want to negate any of the good news we've heard so far. It's a whole lot better to be adding jobs than losing them. But in the last recovery, the jobless recovery of the early '90s, by this time we were adding 150,000 to 200,000 jobs per month, which is what we need to keep pace with the growing labor force.

So good news. But in context, there's still room to improve.

O'BRIEN: When you get away from the number, get under the hood on all this, where are the weaknesses? What are the sectors that are having some difficulty still?

BERNSTEIN: Actually, there's one big place to look if you're interested in weaknesses, and that's wage and income growth. The very strong growth that we enjoyed in the third quarter of the year was fueled exclusively by tax cuts and mortgage refinancing, and the president is correct to connect the dots between his tax cuts and the boost in incomes in the third quarter. But both of those steroids that were pumping up growth are one-time events that are probably working their way out of the system now.

Wage and income growth has been flat. And even in today's report, wages are up almost zero over last few months. And at this point, wages are actually lagging inflation on an annual basis. Wage and salary income contributed nothing to growth of third-quarter income. That will be a constraint on the recovery, once some of these very impressive stimuli are out of the system. So that's one weakness you have to consider.

O'BRIEN: But how serious a problem is inflation, though? And how serious a problem thus would that problem be with wages. Inflation isn't going crazy on us.

BERNSTEIN: No, inflation is quite quiscient, and that's another positive attribute of this current economy. We have strong productivity growth, low inflation. We're finally getting some job growth. Practically every trend is pointing in the right direction.

However, none of this has made much of a difference yet in the wages and incomes of working families. There, to the extent their incomes are growing -- and they have grown -- it's been fueled exclusively by tax cuts, mortgage refinancing. As we know, many of those tax cuts were tilted towards higher-income families. I was in Detroit yesterday talking to a group of working families. They didn't want to hear about a 7 percent growth GDP, 8 percent growth of productivity. They wanted to know when are wages and incomes going to start rising in the labor market? As I said, that hasn't happened yet. If we don't start to see more robust growth, wages and paychecks, it's going to be constraints on growth moving forward.

O'BRIEN: Just a quick final thought. How confident are consumers? We're getting close to the holiday shopping season. When you get a report like that, I suspect that you might be thinking about spending a little more money, but then again, if they don't have a job, they're not going to be doing that.

BERNSTEIN: Exactly. Remember, the unemployment rate, while it did tick down a tenth of a percent, is still high. We still have about three million more people unemployed than we did a few years ago. Consumers are definitely feeling more confident. But unless the labor market starts coming back at a quicker clip than it's been, I think it's fair to be concerned that the holiday season, while certainly positive, may not be off the charts robust.

O'BRIEN: Jared Bernstein, senior economist with the Economic Policy Institute, pleasure having you with us. Thanks for explaining the dark science to those of us who are laypeople. We appreciate it.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com