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As the debate over an economic relief bill continues in the Senate, the surge in hiring in February suggests that the prospects of a better spring ahead for the U.S. economy. Treasury Secretary Janet Yellen joins Judy Woodruff to discuss the latest and how it might affect the debate over the size and scope of the COVID relief package.
The surge in hiring last month suggests that the prospects of a better spring may be ahead for the U.S. economy.
I spoke earlier today with Treasury Secretary Janet Yellen about the latest, how it might affect the debate over the size and scope of the COVID relief package, and more.
Secretary Yellen, thank you very much for joining us.
You are going to be briefing the president this afternoon on the state of the economy. There was an unusually strong report today for unemployment in the month of February. Does that tell you the recovery is coming sooner than expected? When do you think we could have a full recovery?
Sec. Janet Yellen:
Well, I was pleased to see 379,000 new jobs this month. The unemployment rate ticked down just a tenth of a percent.
It was a bit stronger than expected. But, really, Judy, we have to put this in perspective. We still have an unemployment rate that, if we really measure it properly, taking account of all the four million people who've dropped out of the labor force, it's really running at 10 percent.
And the jobs were mainly in leisure and hospitality, the hardest-hit sectors of our economy. Leisure and hospitality, over the last year, are down more than 3.5 million jobs. And when you think about the pace, although 379,000 jobs in one month, it sounds like a lot.
But, at that pace, it would take us more than two years to get back to full employment. And we're — we want to make sure that our workers get back to full employment, the state we had in the economy before the pandemic struck, a lot sooner than that.
Well, as I'm sure you know, one of your predecessors as Treasury secretary, Larry Summers, has said he sees these jobs coming back even as — as soon as by the end of next year, and that that's an argument for not having as large a COVID relief package as the administration has.
Is it possible that it makes sense to do something smaller because the recovery is on the way?
Well, I think we should want a rapid recovery.
We have a large number of workers who are long-term unemployed, and we have to make sure that they're not scarred to the point where this pandemic has a permanent impact on their lives. The Congressional Budget Office estimated that, without this package, it would take until 2024 to get back to full employment. And I think it's very important to have that occur sooner.
You know, the package that the president and his advisers put together that's working its way through the Senate now was really geared to relieve the suffering of the American people.
So, there are some projections out there that I know you have heard, that the economy could even grow at a rate as high as 7 percent or 8 percent this year.
You're saying, even with that, this large a relief package is necessary? It's more than the entire discretionary part of the federal budget.
Well, it's a big package, but I think that we need to go big now, and that we can afford to go big.
And the most important thing is to get our economy back on track and help people get their lives back, in order to make sure that this pandemic doesn't permanently scar our work force. And I think this is what we need. I'm hopeful that, next year, with a package of this size, we can be back at full employment.
And remember, Judy, before — I mean, people talk about inflation risk. We had a 3.5 percent unemployment rate before the pandemic struck, a lower rate than many people think is consistent with full employment. But inflation was extremely low, if anything, too low, rather than too high. So I think this is what the economy needs to get rapidly back on track.
And I did want to ask you about that, because, yesterday, as you know, the chair of the Federal Reserve, Jerome Powell, said that, yes, there may well be inflation once this recovery gets under way, but that the Fed has tools to get it under control.
Even with that, the markets reacted negatively. They don't seem to believe — they don't seem to have the concern that inflation can be kept under control.
Well, I don't see that the markets are expecting inflation to rise above the 2 percent objective that the Fed has as an average inflation rate over the longer run.
Long-term interest rates have gone up some, but mainly, I think, because market participants are seeing a stronger recovery, as we have success with getting people vaccinated and a strong fiscal package that's going to get people back to work.
And, of course, the Fed does have tools to address inflation if it becomes a problem. But I don't believe — I don't believe it will. And I don't see markets or most forecasters worrying about that.
So, the rising interest rates don't concern you?
I think they're a sign that the economy is getting back on track, and that market participants see that, and they expect a stronger economy.
And instead of inflation lingering below levels that are desirable for years on end, they're beginning to see inflation get back to a normal range, around 2 percent.
I do want to come back to something that you have touched on, Secretary Yellen, and I know it's something you have spent a lot of time thinking about and focusing on, and that is inequity, inequality in this country, the enormous gap between the 1 percent and the other 99 percent, the wealth gap in this country.
What are the one or two things that you, that the Biden administration can do to address this? And is one of them, frankly, the federal minimum wage, which just had to be pulled out of the COVID relief package?
Well, I think the minimum wage is part of addressing those inequities.
And President Biden is strongly committed to a $15 minimum wage. It looks like, because of Senate rules, it can't be included in this package. But it's something he's going to be pressing for in other legislation going forward.
But when we have recovered from the pandemic, that's an important first step. But we need to do a lot to rebuild the American economy and to address the inequities that you mentioned, and also to address the grave threat of climate change. And so we're working on another package.
We could call it a recovery package, or sometimes a Build Back Better package, which will be oriented toward long-term improvements, addressing racial inequality, creating good jobs, repairing our infrastructure, putting in place the investments we need to address climate change, education.
We know early childhood education is so important for good outcomes for individuals, and labor force development training, community colleges, investment in R&D, make our economy more competitive and make sure that the supports are available in the form of paid leave and child care that will enable people to get into the labor force.
Secretary Yellen, a question about the debt.
President Biden inherited a huge debt for this country. What he — the decisions that he and other presidents are making mean that it's going to be even more huge in years and decades to come. We're seeing dire forecasts from the Congressional Budget Office, from other organizations.
How concerned are you about this and about what it means for the next generation in this country?
Well, we must have sustainable federal finances on a long-term basis.
But I think we have more fiscal room than you might imagine from looking at a number measuring the size of the debt or its size relative to the output of our economy. But the spending that we're doing now is arguably helping our debt path by getting our economy back on track.
I think it would be a false economy, even in terms of the debt path. You know, when you allow the economy to be weak, there's less tax revenue and there's more spending that's needed for safety net expenditures. And so it just isn't the case that our failure to spend a dollar to help people would lower the debt that much.
So, I think that would be a false economy, even from a fiscal prudence standpoint.
Secretary Yellen, thank you very much for joining us. We appreciate it.
My pleasure. Thank you, Judy.
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