JIM LEHRER: The Labor Department announced today that the nation’s unemployment rate fell to its lowest level in five months, but that was only part of the story.
JEFFREY BROWN: And the broader economic picture and prospects for a recovery remained uncertain.
The Labor Department reported the jobless rate fell to 9.7 percent last month, down from 10 percent in December, as 541,000 Americans said they found work. But overall, the economy lost 20,000 jobs in January. And, today, while outlining new loan proposals for small businesses, the president said the new figures aren’t good enough.
U.S. PRESIDENT BARACK OBAMA: These numbers, while positive, are a cause for hope, but not celebration, because far too many of our neighbors and friends and family are still out of work. We can’t be satisfied when another 20,000 have joined the ranks and millions more Americans are underemployed, picking up what work they can.
JEFFREY BROWN: Job losses in January were led by hits in the construction and warehousing industries. And many of the gains last month were attributed to seasonal data adjustments. At a joint economic hearing, Bureau of Labor Statistics Commissioner Keith Hall said a rise in temporary hiring last month could suggest job growth to come.
KEITH HALL, commissioner, Bureau of Labor Statistics: And, in past recessions, a pickup in temporary help services has preceded a pickup in payroll job growth. So, the fact that temporary help services added 52,000 jobs this month and a quarter-million over the past four months or so, I would consider to be an indicator of potential payroll job growth.
JEFFREY BROWN: Still, revised data from last year shows past job losses were actually worse than previously reported. Since the recession began more than two years ago, the nation has shed 8.4 million jobs.
Looking to make up for those losses, the president has recently put forward proposals targeting areas of job creation, including tax credits and the help for small businesses he talked up again today.
Yesterday, Senate Democrats announced they were working on their own proposal, but said they’re still hammering out details in a bid to win Republican support. The House passed a Democratic-led jobs bill in December.
In the meantime, uncertainty over the economic picture had taken a sharp toll on Wall Street in recent days, but, today, after an initial fall, the markets eked out small gains. The Dow Jones industrial average rose 10 points to close at 10012. And the Nasdaq rose nearly 16 points to close at 2141.
For the week, the Dow lost about half-a-percentage point. The Nasdaq fell about a quarter-of-a-point.
And we look at where things stand and possible fixes now with Robert Kuttner, co-founder of “The American Prospect” magazine and a senior fellow at the policy research organization Demos, and David Malpass, a former Treasury official in two Republican administrations and chief economist at Bear Stearns. He now heads his own economic advisory firm, Encima Global.
Well, Robert Kuttner, first, today’s report is in some ways even more confusing than usual. How do you parse the good job news and the bad job news?
ROBERT KUTTNER, co-founder, “The American Prospect”: Well, the simple explanation for this is that Labor Department does two different kinds of surveys.
They ask households whether people are working or not, and then they ask employers how many jobs they have. So, one indicator went one way; the other indicator went the other way. The survey of employers,, the one that shows the $20,000 job loss, is usually considered the more reliable one on a month-to-month basis.
So, this is not terrific news, particularly when you measure it against the loss of something like a million more jobs than were originally thought to be lost once they went back and they actually looked at unemployment records and tidied up their flash estimates from the previous year.
And the big problem is that you have a job deficit of about 11 million jobs. You have got the 8.4 million that we have lost and then you’ve got normal population growth. So, you need 11 million new jobs in order to get back to the unemployment rate where we were prior to the beginning of this recession.
JEFFREY BROWN: David Malpass, how do you see it? Do you choose to look on the brighter side of these numbers?
DAVID MALPASS, Encima Global: No, I agree that it was a mixed picture.
The household survey showed gains, but it had shown big losses in December. So, on that, neither survey is showing much in the way of job growth. And that’s hard, because we’re at such a low level of employment.
I think it’s just going to take quite a bit of time to rebuild the economy from this lower base. Small businesses are critical to it, to the growth. And they’re not yet showing the gains that should be there if we were in an all-out recovery.
JEFFREY BROWN: David Malpass, staying with you, what about — there was this very good sign, I guess, because we haven’t seen this in a long time, some growth in the manufacturing sector. What does that tell you?
DAVID MALPASS: That’s right.
Well, there are two separate things going on in the economy. The government has made money very plentiful and bailed out the — the auto sector. So, you’re seeing job growth in the government sector and in the manufacturing sector related to automobiles. But that leaves the rest of the country paying for it, and with weak job growth. That’s in the services sector. That’s in small businesses, for example.
And so I think that’s something that has to be thought about. Do you really want to draw so much money out of the rest of the economy that are hurt in order to build up the government and the auto sector?
JEFFREY BROWN: Well, Robert Kuttner, that leads to the question of what to do, of course, because this uncertainty in the economy plays into this debate. I mentioned in our setup that there are various things on the table. What do you see happening? What do you want to see happen?
ROBERT KUTTNER: Well, I think President Obama’s initiative is a step in the right direction, but I think it’s too small a step.
And if you look at the numbers, the House passed a bill for a $154 billion spending program to create jobs, to increase unemployment compensation, to have some direct employment, to give fiscal aid to the states and localities.
I mean, the states have lost about $500 billion worth of revenues in the past three years. They’re on track to lose another $120 billion. That almost offsets the total effect of the federal stimulus. So, with one part of the government cutting, another part of the government adding, you almost have a draw.
The Senate is proposing an even smaller bill, on the order of $80 billion. And everybody’s getting obsessed with deficit reduction. It’s much too soon in this cycle to focus on deficit reduction. We probably need another year or two of heroic public investment.
And Democrats and Republicans can argue about whether the increased deficit ought to take the form of tax cuts or increased spending, but, one way or the other, we need more stimulus before we start obsessing about deficit reduction.
JEFFREY BROWN: Mr. Malpass, are you obsessed with deficit reduction?
DAVID MALPASS: Well, I would like to see the deficit reduced. But what I don’t think works is having the government spend so much, and wastefully, because then the public conserves and — and offsets it. There really isn’t any net stimulus, I don’t think, out of wasteful government spending.
We saw a $787 billion package last year that they said was going to be shovel-ready projects. But, in New York state, for example, we don’t see that. There’s no acceleration of the Moynihan train station. That’s an important part of the Midtown Manhattan and so on around the state.
And, so, we have this big problem that Washington is sucking the money out of the economy, and then there aren’t new jobs that come out of that. They’re basically just maintaining or transferring money to existing state jobs. There’s no net growth.
So, I’m not in favor of this new spending bill that they’re talking about pushing through now this spring.
JEFFREY BROWN: Mr. Kuttner, go ahead.
ROBERT KUTTNER: Well, the money goes right back into the economy. I mean, you see the signs, American Reinvestment and Recovery Act, all over the place. It’s too small. There’s not enough of it.
But I think this is a matter of thinking short run, long run. In the short run, which is a year or two, you need a lot more stimulus to get the economy back on track and create more jobs. Then we all need to get serious about deficit reduction.
But that’s easier if you can get growth on track first.
JEFFREY BROWN: Mr. Malpass, what about things, smaller things that are actually being talked about now, like tax credits, particularly aimed at small business?
DAVID MALPASS: I was happy to hear Robert talking about the openness to tax cuts.
Now, the tax credit I think that the president is proposing is simply not — not very helpful to the — to small businesses. Basically, they’re saying, we’re going to tax banks, and then the government is going to decide which new banks to give the money to. And then they’re going to have those banks give it to chosen small businesses.
It’s a pretzel shop of policy errors, I think, in that loop. I would rather see just a straight lower top marginal lower rate that helps small businesses so much. Right now, remember, small businesses are facing this giant tax increase at the end of this year. And the president’s not really proposing anything that’s going to avert that.
JEFFREY BROWN: Mr. Kuttner, what — is there something wrong with targeting companies like that for the specific job growth?
ROBERT KUTTNER: Well, I think the problem is that we have targeted Wall Street for assistance, and small banks are starving small businesses for credit, because they haven’t gotten the same free pass that Wall Street banks have gotten.
So, I mean, I would like to see more help to smaller banks. The president has proposed some of that in his budget. I think that’s good, because you need to take your foot off the oxygen hose if small businesses are going to get credit.
I would like to see a much more robust program of mortgage relief, because you have defaults and foreclosures still on track to reach eight million foreclosures by the end of Obama’s term. And that’s dragging down the whole economy, too. So, you really need a multipronged initiative to really get a robust recovery going.
JEFFREY BROWN: All right, we will leave it there and keep watching. Robert Kuttner and David Malpass, thank you both very much.