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Jobs Report Hints Economy Could Be Inching Toward Recovery

A new economic report showed March had the largest increase in new jobs in three years, but the unemployment rate held steady. Judy Woodruff talks to two economists about what those numbers could mean for the U.S. economy and American workers.

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    The U.S. economy showed new life in numbers today from the Labor Department. Employers, public and private, added more than 160,000 new jobs.

    Judy Woodruff has the story.


    By any measure, more Americans were working last month. Private employers added 123,000 jobs, and temporary hires for the U.S. census added another 48,000. Economists had predicted a net gain of 190,000 jobs. The actual increase was less, but it was still the best since May of 2007.

    The unemployment rate held steady at 9.7 percent, even as the economy has now added jobs in three of the past five months. In Charlotte, North Carolina, President Obama highlighted the jobs report at a high-tech battery plant that received a stimulus grant. He said the economy is beginning to turn the corner.


    I have often had to report bad news during the course of this year, as the recession wreaked havoc on people's lives.

    But today is an encouraging day. We learned that the economy actually produced a substantial number of jobs instead of losing a substantial number of jobs.


    Still, 15 million Americans remain out of work, and more than 40 percent of those have been out for six months or longer, a record.

    White House chief economist Christina Romer acknowledged today the labor market is still severely distressed. But John Boehner, the Republican minority leader in the U.S. House, charged, the president's policies are making things worse. He said — quote — "A near 10 percent unemployment rate is completely unacceptable, and no amount of taxpayer-funded temporary census workers can mask the pummeling America's employers are taking from Washington Democrats' job-killing agenda."

    But there have also been signs of hope this week in reports that consumers are spending more, and that manufacturing grew in March at its fastest pace in five years.

    To help us take a look at the new report and what it tells us about the larger economic picture, we turn to Glenn Hubbard, dean of the business school at Columbia University. He was chairman of the Council of Economic Advisers for President George W. Bush. And Laura Tyson, professor of economics at the Haas School of Business at the University of California-Berkeley. She was chair of President Clinton's Council of Economic Advisers and is now a member of President Obama's Economic Advisory Board.

    Thank you both for being with us.

    And, Laura Tyson, I will turn to you first.

    How do you read this report?

    LAURA TYSON, professor of economics, Haas School of Business, University of California-Berkeley: So, I read it as encouraging, but encouraging and moderate.

    It's encouraging because we have private sector employment growth. And, actually, the revisions to this report for January and February say that the economy, on average, has produced about 54,000 jobs a month for the first quarter of this year. Think about how encouraging that is, when you look at what was happening just a year ago in the first quarter, when the economy was losing 750,000 jobs a month.

    So, we have clearly, dramatically turned a corner. But I would use the word modest here because we have a number of special factors in this report, the 48,000 census workers, the fact that the march numbers look stronger because the February numbers were weaker because of bad weather.

    And the, finally, I would just say, the standard here is, how many jobs a month do we need simply to absorb the increase in the labor force and bring the unemployment rate down? That's got to start averaging about 100,000 to 150,000 jobs a month to really bring the unemployment rate down steadily.

    And that's why most forecasts this year have an elevated unemployment rate, staying in the 9.3 to 9.8 range. So, encouraging, modest — we still have a very long way to go.


    Encouraging, modest.

    Glenn Hubbard, how do you see — what do you see when you look inside these numbers?

    GLENN HUBBARD, dean, Columbia Business School: Well, I would agree with that.

    I think, if you strip aside the special weather factors, there was probably private sector job growth on the order of $75,000. The recession is almost surely over. I think the employment reports will continue to show job creation.

    But Laura is absolutely right. You have to create 100,000 to 150,000 jobs a month to stay even. So, the unemployment rate will stay high for the balance of this year.


    Glenn Hubbard, take us inside the numbers. I mean, what is encouraging, what is not so encouraging, whether it is manufacturing, the service sector?


    Well, I think this report is broadly encouraging, because we are seeing a turnaround in private sector employment. That is something I think many economists have been looking for, for the past few months as a key indicator of the recession being over.

    Having said that, GDP growth is doing much better than the economy's job growth. And, so, unless GDP growth picks up a great deal, this will be a pretty modest year in the labor market — positive, but modest.


    Laura Tyson, how do you see that connection, growth, employment? What do you see as the broader signs out there that could make a difference in employment as we move further into this year?


    Well, I want to say we — we need to understand again the hill we're climbing or the mountain we're climbing here.

    So, since December of 2007, the economy has lost 8.4 million jobs. If you add the reduction in hours that's occurred that's mostly been involuntary, you have got another three million missing jobs. So, that's the magnitude of the problem.

    I want to also say that economists were shocked, really, surprised in 2009 at how dramatic the job losses were, because they were much more dramatic than the decline in output would have suggested. So, we're dealing with an economy, without the declines, employment falls more, apparently.

    And then we know from the previous recoveries from recessions, not as deep a recession as this one, that employment growth tends to lag GDP growth. So, even the really strong economic forecasts for this year — I take Macroeconomics Advisers' forecasts or Morgan Stanley forecasts, which are calling for growth in the 3.3 percent to 3.5 percent range — they do not see the unemployment rate coming much — very far down.

    They see it trending down, maybe, to maybe a low of 9.3, 9.4. But this delinking of the employment growth from the outpoint growth is something that's very disturbing. And that's why the focus really needs to be on what can we do to generate jobs.


    Glenn Hubbard, how do you explain that discrepancy between the two, between the growth and the number of jobs being created?


    Well, the underlying productivity and the growth in the economy remained strong during the downturn and it is still strong now, which means we have to have very high headline GDP growth.

    Typically, in a severe recession, the first-year bounce-back is on the order of 6 percent, while the numbers Laura referred to — and I agree with her — and say the low to mid 3's are possible, those are nowhere near 6 percent.




    So, we're just not going to see that kind of a snapback.


    And — and what is the reason?


    Well, this economy, this recession was very different than a typical postwar recession.

    When you have balance sheet destruction of this level, it takes time to work through that. We have seen a recovery in financial markets. It's very welcome, but consumers still have a way to go in recovering. And I think this recovery will be more modest in GDP growth, and hence in jobs, than we have seen.

    2010 will be a pretty good year in GDP growth. The real issue for GDP growth and employment is 2011.


    Laura Tyson, do you see that the same way, that it's going to — we're going to have to wait until next year before we see some — some movement here?


    Well — well, I'm worried about the second half of this year, to some extent. I mean, I really — I agree completely with what Glenn has just said about we're — this is not a strong, V-shaped, dramatic recovery. And that's because it's a very particular kind of recession.

    I am very worried about the — the consumption sector. Two-thirds of aggregate demand in the United States is consumption. And think about the households. Even this report actually had — it had an increase in hours, which is great news. It actually had a small and unexpected decline in average hourly wages.

    Average hourly wages are growing over the whole quarter, but at a very slow rate. Now, you have a consumer that has lost money, a substantial amount of wealth in their house. You have 20 percent of households, around that number, with underwater mortgages. You have a lot of household debt, and you're going to have slow income growth.

    Two-thirds of demand comes from consumption. That engine for the U.S. economy is not going to be the robust engine it was before. Now, the second half of the year, the things that worry me, housing, the fact that the stimulus is now pulling back, and, basically, the issue of consumer confidence, if income and unemployment — if unemployment doesn't fall and income — household income doesn't rise.


    Glenn Hubbard, so what are the other factors out there that you are looking at for clues of where this economy is headed?


    Well, again, high-frequency news about the labor market — when we look at unemployment insurance claims, week-to-week, those are getting better, but still clearly in danger territory, making sure the financial market health remains as strong as it has been.

    My worry going forward is much what Laura mentioned. We're removing substantial stimulus from an economy that's just lifting off. So, the liftoff is going to be delicate. Next year, as well, we're talking about tax increases that could dampen both consumption and investment, another real worry.


    Well, a lot to — to chew over here.

    And you both, we appreciate your taking us into the future, beyond looking at just this month's numbers.

    Glenn Hubbard, Laura Tyson, thank you both.


    Thanks, Judy.