Press Briefing by Secretary of the Treasury Robert Rubin, Secretary of Labor Robert Reich, National Economic Advisor Dr. Laura Tyson and Chairman of the Council of Economic Advisors Dr. Joseph Stiglitz

The Briefing Room

10:48 A.M. EST

DR. TYSON: Good morning everyone -- a few introductory remarks. A staple of political and economic life in this country is the question, are you better off today than you were four years ago. Americans have a right to ask that question, and today we have some answers.

Four years ago the deficit was $290 billion, the highest level in history. Today it's $164 billion, cut nearly in half and the lowest as a share of the economy of any major country in the world. Four years ago the unemployment rate was above seven percent -- during every month in 1992 the unemployment rate was above seven percent. Today the unemployment rate is 5.5 percent, and has been below six percent for 18 consecutive months.

Four years ago we had one of the worst periods of private sector job growth in our nation's history. Private sector job growth averaging at 26,900 per month. Today we have 8.4 million new jobs, 211,000 private sector jobs per month. That's seven-and-a-half times more private sector job growth per month than during the previous administration.

So I think these kinds of economic numbers do suggest an answer to the question, are you better off today than you were four years ago. Today we're going to talk about these numbers in detail and about some of the economic strategy behind the numbers and I'm going to turn the floor over at this point to Secretary of Labor, Bob Reich.

Q: Why are so many people so unhappy then, if things are so great?

SECRETARY REICH: Thank you, Laura. I thought I'd begin by talking sports. (Laughter.) The eight million mark has fallen. In basketball they talk about "March Madness." Well, on the jobs front, this is a slam-dunk. And let me tell you a little bit about these jobs and what they are, because I picked up just a moment ago a little question about these jobs.

Since January of '93, three-and-a-half million jobs were created in high wage industries. Now, this marks a complete turnaround from the loss of 268,000 which took place from January of 1989 until January of '93. In 1994, again talking about job quality, more jobs were created in high wage industries than in the previous five years combined. In 1995 more than half the jobs created were in high wage industries; and since January of 1994, 76 percent of all net new jobs created have been managerial and professional.

Many of these jobs tend to pay relatively high wages, as the median wage and full-time managerial and professional jobs in the fourth quarter of '95 was $703 per week. That's some 46.8 percent higher than the median wage paid to all full-time workers. Or another and, perhaps, simpler way of putting all this, is that of the net new jobs created since January of '93, the average pay of those jobs is higher than the average pay of the jobs that were here already before January of '93.

Again, not only do we have a lot to celebrate on the jobs front in terms of the number of jobs, but also we have a great deal to celebrate in terms of the quality of these new jobs added to the economy.

And let me turn it over to the Secretary of the Treasury, Robert Rubin.

SECRETARY RUBIN: Thank you, Bob.

As Laura and Bob have said, this is really a very important day for those of us who started working with the President in the transition in December of '92, because this is the day that what he said back then would happen, which is that we would -- that under this administration over 8 million new jobs would be created in the economy, in fact, have come to be created, 8 million new jobs.

And it's no accident. The President, starting in December of 1992 during the transition, developed and put in place a consistent economic strategy that reflected the thinking that he'd had over the years about what needed to be done for this economy. And I don't think that there is any question but that the economic program that we put in place in 1993, and particularly the deficit reduction program, was predominantly responsible for the lower interest rates, and that those lower interest rates are what drove and then sustained the recovery.

I also think, having traded on Wall Street for 26 years, that those lower interest rates would not have eventuated, particularly have continued, at the same time that unemployment was falling and growth was picking up had it not been for the deficit reduction program that the President very courageously put in place in 1993, after 12 years, 1980 to 1990, when the federal debt quadrupled.

Now the challenge going forward is to have the kinds of economic policies in place that will continue the economic performance that created the 8 million jobs that were announced this morning and the economic growth that we've had for the last three years with low inflation. And that is what the budget debate is all about -- balancing the budget, but doing so in such a way that is consistent with effective programs in education and job training and the environment, Medicare and Medicaid.

Thank you. Joe Stiglitz, Chairman of the CEA.

DR. STIGLITZ: I don't know in all this good news if anybody actually mentioned the numbers. (Laughter.) The numbers --

DR. TYSON: That's what the CEA does.

DR. STIGLITZ: That's what we do. The non-farm payroll employment increased by a phenomenal 705,000 in February. That's the reason why we're all here, which brought the total number of jobs created since January 1993 to 8.4 million. And the unemployment rate is down to 5.5 percent.

Let me comment a little bit about where this fits into the overall economic picture. We had expected a comeback from the January numbers. January numbers were dismal. And from our economic analysis, we had come to the view that it was mainly weather related. Those of you who met with us last month when we looked at that data, we pointed out that our analysis showed very strongly that the decrease in jobs during January was related to the weather and the government shutdown.

But the numbers this month of 705,000 is more than just a comeback, it's more than a recovery. It's actually a total job gain over December of 500,000. So that is an extremely impressive increase in jobs, particularly given the stage of economic expansion that we are. You have to remember this is not a recovery from a recession that was the case in the 1993, '94. This is when the economy is growing at its potential GDP. So these numbers are really quite phenomenal.

If you look at the data, they show that the economic expansion, the job numbers, are very broad base. It was strong across almost every industry in the economy. So it was a very broad based expansion of employment. The numbers also suggest, corroborate that these are strong economy. The number of hours increased, production hours increased 3.6 percent above the average of the fourth quarter, which is an extremely good expansion of hours.

The February job numbers reinforce other evidence such as strong auto sales, increases in durable goods orders and improvement in chain store sales -- all of which lead to the view that the economy is in a very strong condition. And as a result of this we now expect to see solid GDP growth in the first quarter of 1996 and throughout the rest of the year. Those of you who know that when we talked to you last month we pointed out that there was some concern that the first quarter would be a weak quarter. These numbers certainly are looking forward towards a much stronger quarter for the first quarter.

Finally, let me just say that -- reinforce what Secretary Reich said, that we've been engaged in analyzing the quality of jobs to ascertain, you know, not just that there are jobs being created but what are the quality of the jobs. And the evidence is increasingly strong that the quality of the jobs being created in recent years have been good jobs. They have been in high wage sectors, they have been in high wage occupations. So some of the jokes that one hears about the quality of jobs are really not supported by the statistical evidence that is becoming available.

Q: Why is there so much insecurity, then, in the whole job picture throughout the country?

DR. STIGLITZ: Well, we have an extremely dynamic economy, and part of this dynamic economy is that there is a lot of job creation; but also part of that is is a lot of job transition --people move from one job to another. And, quite naturally, that kind of moving from one job to another gives rise to a certain amount of anxiety.

As an administration we've been very concerned about that kind of anxiety, which is real anxiety, and have tried to put into place a set of programs that address those concerns. For instance, in the budget we have a provision to provide health care for people when they become unemployed. It's one of the real anxieties that people face because we have a health care system which is job related -- when you lose your job, you lose your health care. And that's one of the examples. The kind of programs that Secretary Reich has been talking about for years -- the re-employment program, job training and education, put people in a position to better deal with these kinds of transitions.

So, you know, yes, there are some anxieties out there and really, for the last three years, the administration is trying to deal with them.

Q: Well, isn't there a lot of downsizing? Isn't that the whole wave throughout the whole corporate world now?

DR. STIGLITZ: Well, one of the important points to realize is --

Q: Thousands are being --

DR. STIGLITZ: Yes. Well, what you have to realize is that these numbers are -- this 8.4 million number is the number of net new jobs created. So what the economy has been able to do is to create enough new jobs for all the people who have been downsized and laid off, and for the new entrants into the labor force and to reduce the unemployment rate from the high level that it was in 1993 down to -- not 1992 -- down to the level of 5.5 percent that we obtained this month.

Q: How low do you think we can go? This is lower than we thought we could go, and now we've done it. So did you expect the unemployment rate to be even lower in the fall?

DR. STIGLITZ: We believe the economy is capable of sustained expansion. In our economic report to the President we talked about there being a range of numbers. The issue is how low can it go, and for inflation to remain stable -- I mean, that really is the economic issue.

And what we said in the economic report to the President is there's a range of numbers. Increasingly, people are becoming convinced that that range is lower than they had previously thought.

Q: Are you convinced that it's lower than you previously thought?

DR. STIGLITZ: I, personally, have become increasingly convinced that it's lower than the ERP talked about.

Q: For Secretary Rubin, please, we're wondering if the economy still needs some sort of inspiration to keep it moving ahead, as some people have said. We're talking about the possibility of lower interest rates.

DR. RUBIN: Well, it always needs inspiration and that's what the President has provided for three years, which is why it has moved ahead. Inspiration in the form of good economic policy.

Q: How about interest rates?

DR. RUBIN: Well, obviously, the economy is strongly affected by interest rates, predominantly market interest rates. And I think that with the economic policies that we've had and with the very moderate inflation we've had that long and intermediate term interest rates -- which are the interest rates that drive the economy -- will reflect fundamentals and should be consistent with the continuation of solid growth.

Q: Why did the bond and stock markets react so badly to this good news?

DR. RUBIN: Oh, I tell you, I've been here a little over three years now and I have had a policy of not commenting on day to day movements in markets. I think it's been a good policy.

Q: But, still, with your background on Wall Street, though, it has to make some sense to you, doesn't it?

DR. RUBIN: It might, or it might not. (Laughter.) And those are the two possibilities, or somewhere in between, but -- (laughter) -- which is also a possibility.

But I'll go back to what I said before. I think over time, markets will reflect fundamentals, and fundamentals will be driven in large measure by the policies we have and have in place. And I think that's why it is so important to pursue sound economic -- it's one reason why it's so important to pursue sound economic policy, and that's what the budget debate in some fair measure is about.

Q: Can I ask Secretary Reich, are you being muzzled by your colleagues when you speak of corporate greed?

SECRETARY REICH: My colleagues would never muzzle me. Helen, please.

Q: They try. Are they unhappy with your pitch?

SECRETARY REICH: No, no, no. Look at -- the administration has centered its policies on, first of all, macroeconomic stability, making sure that we've got the economic house in order. When we came here our first responsibility was to restore job growth and clean up the economic mess we found. Our next responsibility is to tackle a long-term issue. In fact, we've already laid the groundwork for this. And that long-term issue has to do with wages, median wages, and the stagnation of median wages.

But there is a lot to celebrate. That 8 million mark is a major, major victory in three-and-half years. The quality of the new jobs being created is extraordinarily good. We do have strategies in place right now for helping Americans get good new jobs. And one of those was referred to already -- education and job training has been at the top of this President's agenda, everything from low interest student loans to school-to-work apprenticeships, to one-stop careers centers so that people can get new training they need as soon as they may lose their job and upgrade skills even when they are not losing their jobs.

Also, the President is fighting to increase the minimum wage, making sure that work pays for people. He's proposed a 90-cent increase, a 90-cent an hour increase in the minimum wage. The earned income tax credit, which President Reagan said was the most important anti-poverty policy every created, we want to hold on to the earned income tax credit expansion, which was created in this administration.

And, finally, there are a number of policies to ease the transition from job to job. And those include health care -- that is the Kennedy-Kassebaum bill, which we're supporting, to enable people to be sure that they're not going to lose the health care when they lose a job; and also pension portability; the G.I. Bill for American workers, which would consolidate job training programs, give people vouchers that they can take if they lose a job, go to a community college, get the training they need.

We have a set of very responsible, important and, I think, ultimately, successful policies for raising wages and improving, if not job security, at least employability security of all Americans.

Q: You didn't mention tax breaks for corporations that help their employees in your list there. Does that mean that the administration has now decided not to support your call for this? And could Dr. Tyson and Mr. Rubin discuss why they oppose it?

SECRETARY REICH: First of all, I think that there is not any kind of division of the administration in terms of evaluating these things, because they haven't been evaluated. There's been no vetting. The President is open to new ideas --

Q: Well, there are reports saying that you're off the reservation, that these memos are being written. Obviously, there's dissension among the President's advisers, so you can't -- you can't tell us that there's not disagreement.

SECRETARY REICH: Off the reservation?

Q: That's what some anonymous White House aide --

SECRETARY REICH: I have no reservations at all about any of this. But let me -- perhaps others should --

Q: Is that -- true that an anonymous White House aide would say that you're off the reservation?

SECRETARY REICH: Perhaps others should speak to that point.

DR. TYSON: First of all, as I understand it, the White House Press Briefing Room is on the reservation, and here is the Secretary of Labor. We have an active agenda to deal with the issues of sustaining economic growth, which is the foundation for providing high wage job opportunities for Americans. And I think the results of that strategy are apparent in today's numbers.

The President, in the State of the Union address, also talked about the need to address challenges. And one of the challenges he talked about was the insecurities that are associated with a highly dynamic economy. And he talked about what the government can do. He talked about the issue of pension portability. He talked about the issues of education and training. He talked about the issues of the minimum wage and the EITC. He talked about the issues and what to do to help workers between jobs maintain health care coverage.

He also talked about what other institutions in our society can do. He talked about what schools can do. He talked about what churches can do. He talked about what employers can do. And he is talking today in California both about these numbers and about our policies and about what good private sector corporations do to invest in their workers and to work with their communities.

For example, on education and technology, a new initiative that was also announced in the State of the Union, he is out there working with a whole group of private sector individuals and corporations to help link up California schools to the Internet and building on what is clear evidence from experiments around the country that the use of educational technology can enhance our training and skills for the future.

So the administration is very focused on its agenda. And let me add that underpinning all of this agenda, underlying all of this agenda is our commitment to balancing the budget. We have introduced a proposal to balance the budget. It came out on February 5th. We are going to be providing the background documentation for that budget in the next several weeks. The budget is a budget which balances in the right way, a way which helps working Americans and their families. The right way and the wrong way here should be understood in terms of priorities to Medicare, Medicaid, education, training, the environment, things which matter to working American families.

So our focus is on our agenda. We also have a process. We have always had a process which reviews new ideas. And we will work together in this process to review new ideas for the future. But we have an active current agenda. And our energies are focused on getting that agenda passed through the Congress and implemented for the American people.

Q: Dr. Tyson, one of the dim spots in this morning's report was the manufacturing sector. The job gains there fail to make up for the losses during the month of January. Is that a concern to you, at all, that the manufacturing sector doesn't seem to be keeping pace with the rest? And are you confident that it will soon match the gains we've seen in the services sector and retail sector?

DR. TYSON: Well, I would say that -- I would like Joe, also, to address this issue. But I think as Joe mentioned in his comments, we have seen a number of recent indicators now which suggest that some of the downside risks to the economy, which maybe as recently as six weeks ago seemed in more high relief, those risks have been reduced. The inventory situation looks much better with the revision of the inventory numbers. The orders numbers for durable goods were strong. We see strong auto sales. And we see strong sales in these chain store numbers.

So it seems to be when you put all of the indicators together it's consistent with what we had forecast, which is a pick-up in growth moving into this quarter and this year. And we would expect the manufacturing sector to reflect that, as well. But I also think Joe might want to address that.

DR. STIGLITZ: Or address all the major issues. There is still a lagging effect on the inventories, but they are moving --they are being reduced and, therefore, we are expecting an increase in the manufacturing sector in the coming months. You have to put all of this in the context of the restructuring of the American economy, that just like the beginning of the 20th century we moved from agriculture to industrial economy. We are in the process of moving of from an industrial to a service sector economy. That's part of a natural expansion, going to high technology areas. And in that process, the manufacturing will be growing more slowly than the service sector. And when you're going through a particular -- movements of one sector or another, a period of a few months in which there's actually a negative on that is not completely surprising.

Q: Are you going to be changing your projections for monthly job growth based on this report?

DR. STIGLITZ: We don't do monthly job growth projections. We really do --

Q: Your overall yearly projection, do you think it's going to be more optimistic? Are you going to be revising that?

DR. STIGLITZ: No, we're basically expecting the economy to continuing growing at its potential GDP, which means that employment growing with the capacity of the economy. So we're basically saying that we are on target for what -- on track for what we had expected.

Q: Just, if I could put a number on that -- sorry, just quickly -- last year we had annual growth per month of 150,000 jobs. Do you expect it to be more per month this year?

DR. STIGLITZ: No, the growth in -- we expect that the level of unemployment will remain constant, which means that the number of job creation is consistent with the growth of the labor force over the period. There is obviously some uncertainty about the magnitude of the growth of the labor force, but it would probably be in the magnitude of 100,000 to 150,000 jobs per month.

Q: Discounting the weather, what combination of factors made everything sort of come together in February, as far as the large number we're seeing? And is there any collective sense that wages may at some point jump on the magnitude of what we're seeing here as far as job growth?

DR. STIGLITZ: Well, what we said earlier when the inventory numbers came out for GDP that -- that was bad news for the fourth quarter -- this is inventory numbers for the fourth quarter of '95 -- those were bad numbers for the fourth quarter of '95, but they were good numbers for going forward into '96. There was some uncertainty about when this would start translating into robust economic growth, but it happened a little earlier than we anticipated and with a little bit more gusto but we, of course, welcome that.

All the indications are that there is a movement towards, as we said, higher quality jobs, that the average new jobs being created are higher quality jobs than the average in the labor force as a whole. On the other hand, the dynamics of the labor market are such that we think that inflation will remain low. And low inflation will be associated, therefore, with low-wage growth.

Q: Dr. Tyson, this is a budget question. The Republicans on the Hill have been very critical of the proposed offsets in the appropriation add-backs that the President's proposed, that they're not -- there's not enough real cuts. What are the prospects that the administration in conference might revise the list of offsets to try to improve it, and thereby try to induce Republicans to accept the proposal that Clinton has presented?

DR. TYSON: Well, let me answer the question the following way. They have come back with a proposal, a continuing resolution proposal, which we don't find acceptable on two scores.

First of all, it simply doesn't put enough money into these critical investments of education and the environment, which are key priorities. Second of all, they didn't like our offsets, but what they have done is essentially create a kind of funny money, or funny accounting system, because they're making funding of these priorities, even at the level that they suggest, conditional on finding an agreement. And our position is, we want to work towards an overall balanced budget agreement. We definitely want to do that. But we don't want to make a continuing resolution conditional on something that hasn't been done. And so their notion of saying we don't have the right offsets -- our question is well, yes, and you're coming back to us with not enough funding for our priorities and with essentially a continuing resolution, which is not funded, because you're making it conditional.

END 11:17 A.M. EST