David Ignatius of the Washington Post on Moscow and President-elect Donald Trump, then, questions for Attorney General nominee Republican Senator Jeff Sessions.
Candidates vying to be the Republican presidential nominee for 2012 square off tonight in a debate in New Hampshire. They’ll cover a wide range of topics, but for many voters the economy remains the key issue. Last week the stock market took another plunge, the sixth consecutive week of decline, and in many parts of the country the number of people looking for work remains alarmingly high. There are some relatively bright spots: Texas, for instance, leads the country in the net number of new jobs created over the last two years. A look at the kinds of jobs being created today, where and why.
- Susan Lund director of research, McKinsey Global Institute
- Jim Tankersley reporter, National Journal
- Richard Fisher president, Federal Reserve Bank of Dallas
- Mark Zandi chief economist of Moody's Analytics and author of "Financial Shock" and the forthcoming book, "Paying the Price."
MS. DIANE REHMThanks for joining us. I'm Diane Rehm. Economists at the Dallas Federal Reserve calculate that about 37 percent of the net new jobs in the last two years have been created in Texas. New York and Pennsylvania are second and third. Joining me to talk about the kinds of jobs being added to the economy and just where these are, joining us from Philadelphia, Mark Zandi. He's chief economist of Moody's Analytics and author of "Financial Shock."
MS. DIANE REHMHere in the studio, Jim Tankersley, a reporter for National Journal, and Susan Lund, director of research for McKinsey Global Institute. Before we begin our conversation with them, joining us now, by phone, is Richard Fisher. He's president of the Federal Reserve Bank of Dallas. Good morning to you, sir.
MR. RICHARD FISHERGood morning.
REHMCan you tell us...
FISHERThank you for having me on the show.
REHMIndeed, our pleasure. Can you tell us about the net new jobs growth in Texas?
FISHERWell, the numbers that we provided are American jobs created since the recovery began. And using, Diane, the series that the Bureau of Labor Statistics put together state by state, our economists went through, and we added the jobs created in the state of Texas out of the 722,200 jobs created nationwide. And in Texas, 265,300 of those jobs were created. That's net new jobs. New York was second with 98,200 and Pennsylvania with 93,000.
FISHERSo they were the big job creators and...
REHM...what kinds of jobs are these?
FISHERWell, what's interesting -- I can only speak about my Federal Reserve district, which is Texas principally. But the growth was in professional business services. That's about 23 percent, I think, of the total jobs added. Health care, about 30 percent, almost 31 percent. And against the stereotypes that you have probably (word?) about Texas, energy and trade together account for about 11 percent.
FISHERWe've been fortunate with the technology we sell to the rest of the world from here in the energy area and, of course, with a lot of gas drilling for natural gas. But it's really coming to professional business services. And one of the points I'd like to make -- and Mr. Zandi and others are much more expert on this than I am, but what's interesting about this is we have the same monetary policy which I work on at the central bank at the Federal Reserve.
FISHERWe have the same interest rates. We have the same federal rules and regulations. I think the lessons we're learning here is whatever the state is doing -- and it has its drawbacks like every other state, but somehow it's taking the fuel that the Federal Reserve has provided -- I like to say there's gas in the tank, but it's figured out how to put it into the transmission mechanism and move the economy forward.
FISHERNow, having said all that, we want to create more jobs. And I think the point is, what are the right incentives? It appears that in Texas, principally -- since that's between 37 percent and, Diane, in another series, 45 percent of net job creations since the recovery began, it appears the transmission mechanism here is working. So the question is that -- what's the difference? What incents people to invest here in job creation as opposed to elsewhere? And we're still trying to analyze that.
REHMI gather that Texas, number one, has no state income tax, no Right to Work laws, open global trade, and they reformed tort system so that that's driven litigation cost to record lows. And you also limit mortgage borrowing to something like 80 percent of an appraised value of a home. I would assume that all of that may contribute to job growth.
FISHERI think those were clearly the factors. I think you nailed it on that front. Also remember that we have wide open space here. We have modern infrastructure. And it's a new place. I'm looking outside my window of my office here. I would guess roughly two-thirds of the buildings downtown Dallas were built in the last 30 years. This is a new place. And it's also an open competitive society, and it's very pro-business.
FISHERSo, now, the negatives are, in some people's views, poor social services. Like everywhere, we have very poor elementary and other education. But something is working here, and what seems to be working here is job creation. And that's the way you get to prosperity. And whatever -- all the things you mentioned, plus other incentives here -- this is a pro-business environment.
REHMOkay. Well, let's just take a look at the downside for just a moment. The -- Texas has the lowest high school graduation rates in the country, as well as the highest poverty rates in the country. So what does all that mean in the long run when you balance, as you say, the job growth with what's happening to the people beneath that line?
FISHERWell, I think that's for sociologists to determine. Again, I'm just noting that there's been a lot of job creation here. If people have jobs, they feel more comfortable with their future. They can do more with their jobs in terms of educating their children and also leading their lives and taking care of themselves. At a minimum, you want to have job creation. Now, depending on your social philosophy, you can get into these other issues.
FISHERI would argue that almost anywhere in the United States, our education system has become inferior, particularly at the primary and secondary levels. We don't have many tier one universities here as opposed to, say, Massachusetts, New York and California. And all these things are clearly, depending on your social view, drawbacks or in need of improvement or somehow haven't deterred the state from growing.
FISHERBut our job as central bankers is just to know what's going on with the economy. And all we can tell you is that jobs have been created here and in a greater proportion than elsewhere in the country, even though, again, we have the same monetary policy, the same interest rate, the same dollar. So I would hope that over time, the job creation here in the state of Texas would lead to greater prosperity, meaning the benefits that are derived also from higher education, graduation rates and so on. We're not alone though, Diane, in terms of having a poor education system.
REHMSure. Right. And finally...
FISHER(unintelligible) in America...
REHM...I wonder what all this could mean for Gov. Rick Perry as he, perhaps, considers moves toward a run for president.
FISHEROh, I will stay away from that with a 1,000-foot pole because I'm a Federal Reserve official. We don't get involved in politics, Diane, so I'm not even going to venture a guess on that front.
FISHERThis is Texas...
REHMThanks so much for joining us. Richard Fisher, president of the Federal Reserve Bank of Dallas, we'll talk to you again.
FISHERDiane, thank you so much.
REHMThank you. And let's turn to you now, Jim Tankersley. What do you see as the biggest drivers of job growth in Texas?
MR. JIM TANKERSLEYWell, I think it's important to step back just for a second and talk about why different states grow at different rates. And this is something that the Federal Reserve actually has studied quite a lot in the past. Some researchers at the Federal Reserve Bank of Cleveland did a 75-year study of which states grow better and faster. This came out a few years ago, and they came out with two driving factors, the only two driving factors.
MR. JIM TANKERSLEYOne was innovation, which they measured in patent production per capita, and the other was education level. Now, several things didn't matter at all, and they're some of the things you mentioned earlier. Tax policy, infrastructure, government spending levels, all of those things were -- even things like sunshine were not factors in how much a state grows over time.
MR. JIM TANKERSLEYSo while there are probably some important factors at play in Texas -- and like President Fisher said that their researchers are trying to figure out what those are for right now for this very limited slice of time -- over time, the big drivers are education and innovation. And it's important for states to keep their eyes on that ball.
REHMSo one would be concerned then with education rates, graduation rates from high school at one of the lowest levels in the country about beyond this very slice of time?
TANKERSLEYAbsolutely. So you'd be concerned about that over time. You would also be concerned if your universities weren't turning out the sort of marketable research, which, by the way, the University of Texas system does do quite well. So that is a plus side for the state of Texas. But, overall, yeah, you don't want to get caught with an education system that's not turning out the sort of folks who can create the sorts of businesses that can keep your economy growing.
REHMJim Tankersley, he's a reporter for the National Journal. Turning to you, Susan Lund, what is your response?
MS. SUSAN LUNDWell, the McKinsey Global Institute released a report last week called "An Economy That Works." In it, we did a survey of 2,000 companies across the U.S. and interviewed over 100 private sector leaders and public sector leaders, as well as educators. And this issue of education and skill mismatch is quite important, we found.
MS. SUSAN LUNDToday, it's ironic that despite a 9 percent unemployment rate, 40 percent of the companies we interviewed and surveyed said that they are having trouble filling positions. So it's not only the quantity of college graduates and associate degrees we produce, but it's also what they're studying.
REHMAnd when you say what they're studying, what is it that they're studying that's not preparing them for the job market?
LUNDWell, the well-known gaps are in computer science, engineering, math and science. At the current trends, for instance, we project that the country is going to have twice as many kids studying business and social sciences as these very important technical degrees. But our interviews also show it's not just at the college level. Also at the community college level, we heard about a lack of nutritionists, some blue-collar skills like welders and electricians as well.
REHMSo we're back to what kids want to study and what business needs. Susan Lund is director of research for McKinsey Global Institute. When we come back, we'll hear the views of Mark Zandi. Stay with us.
REHMAnd as we talk about job growth or the lack thereof across the country, joining us now is Mark Zandi. He's chief economist of Moody's Analytics. He's author of "Financial Shock" and the forthcoming book, "Paying the Price." Good morning to you, Mark.
MR. MARK ZANDIGood morning, Diane.
REHMGive us a picture of jobs nationally.
ZANDIWell, it's tough. We lost 8.5 million jobs, peak-to-trough, in the recession. And since job growth resumed back in early 2010, a little over a year ago, we've gotten almost 2 million of those jobs back, so we're still well, well shy of where we were. The good news is we are getting some job growth. And while it's not a straight line, it does appear that the job growth is accelerating. It's still not what we need.
ZANDIWe need to see much better job creation across more industries and regions of the country, but at least we're moving, I think, at this point, in the right direction.
REHMNow, balancing this issue of job growth in Texas, here's an email from Richard in Fort Worth who says, "Before anyone crows about Texas adding so many jobs, it should be pointed out Texas also have one of the largest budget deficits of any state. Thousands of teachers' jobs are going to be cut, along with services to the poor, infirm and children. If Texas has done so well, why is this true?" Mark Zandi, can you respond?
ZANDIWell, I think that's correct. Texas does have very significant fiscal problems. It was able to weather the storm and avoid significant cutting for the last couple years because the state did receive a fair amount of fiscal stimulus money, and that was used to help fill the budget hole. But, of course, as we know, the aid to state and local governments through the fiscal stimulus is now over.
ZANDIAnd so states, like Texas and many others, are having to work really hard to balance their budget. And, of course, in Texas, like in many other states, there's very little interest in raising taxes. So the only way to fill that budget hole is to cut spending, and that means cutting jobs and cutting a lot of teacher jobs. And, like in many parts of the country, Texas is now going through that process.
ZANDIOne problem that Texas has is the structure of its tax code. It doesn't have an income tax. Many states that do are now enjoying much stronger tax revenue growth. Like, for example, California and New York, which were so hard hit during the recession, are now enjoying the benefits of having -- taxing personal income because we've seen incomes improve, particularly among high-income households that are taxed at higher rates.
ZANDIBut Texas isn't enjoying that. And that's why, at the current point in time, they're not enjoying that kind of revenue growth, and their budgetary problems are more severe.
REHMMark Zandi, chief economist of Moody's Analytics. We are going to open the phones shortly, 800-433-8850. Send us your email to firstname.lastname@example.org. Join us on Facebook or Twitter. And to you, Susan Lund, here's an email from Linda in Houston, Texas. She says, "Texas leads in creation of minimum wage jobs. I'm a professional project integration engineer. I've been unable to find work."
REHM"I'm going on my ninth month of unemployment. I've looked in Houston, Austin, San Antonio. NASA released me last September. Thousands of teachers are to be released due to Gov. Perry's incompetence," she says, "and we will all be fighting over those minimum wage jobs."
LUNDWell, my heart goes out to Linda, and it's certainly a struggle for the many Americans looking desperately for work right now. When you take a step back and look at what the long-term brings, we can talk about which states have created jobs over the last few months. But what matters is, really, the coming years as the economy gets back on track. So we calculate that the U.S. needs to create 21 million jobs over the next decade.
LUNDThat's both to bring the currently unemployed like Linda back into the workforce, but also respond to the fact that we've still got kids coming out of the education system. And the labor force is growing. Now, to get there, when we look sector by sector at where those jobs are going to come from, we find that only in the most optimistic scenario does the economy create that number of jobs.
LUNDHowever, it is achievable. The U.S. economy is remarkably robust and has created jobs at that pace in every decade, except the last one. So as recently as the 1990s, we saw job creation of this. So there's a question about how do we get back to something resembling the economy of the 1990s' sustainable demand and innovation?
TANKERSLEYWell, and I think it's important to note here a couple of things. First off, just like Susan said, there are so many folks still out of work -- 14 million Americans. And even in Texas with the surge in job creation that President Fisher was talking about, they still have about an 8 percent unemployment rate, which is very high, less than the national rate, but still very high.
TANKERSLEYBut the second point here is that we are in this hole in large part because the last decade was so weak historically -- the weakest since World War II -- for job creation, only 7 million net jobs created before the recession hit. And then when the recession hit, those were all wiped out. So even before the great recession, we saw the weakest eight-year span of job creation that we had seen since World War II.
REHMWell, then how can we come to any kind of an optimism with regard to creating 20 million in the next decade, Linda?
LUNDWell, there are many ways this can happen. A key to it will be innovation. And when we look across sectors of the economy, you see a lot of factors lifting demand. So the big job creation sectors are likely to be the health care sector, business services, which covers a wide range of other jobs.
REHMWhat does that mean?
LUNDBusiness services covers everything from administrative assistance up to architects and engineers.
REHMWhat about the janitors?
LUNDIt also includes the grounds maintenance and janitorial crews. Travel and leisure is another big potential job creator. That's mainly food and accommodation. And, of course, manufacturing, construction and retail remain important sectors of the economy. But when you look sector by sector to say, can the U.S. economy do it? There's -- there are many reasons for optimism. Now, our conclusion was that business as usual won't get us there.
LUNDSimply waiting for the economy to return to robust growth and waiting for the invisible hand to create the jobs is not likely to get there. And we need to address some of the fundamental long-term issues in the U.S., including the skills mismatch, innovation, helping U.S. workers benefit from the robust global economy.
REHMMark Zandi, with the skills mismatch of the kinds of jobs we see created, many of which are at the minimum wage level, are you as optimistic as Susan is about getting us up to that point of creation of 20 million new jobs?
ZANDIYou know, I'm optimistic. I think that the main source of growth for jobs in the future over the next 10 years, over the next 20, will be in industries that produce things for export. We will sell what we produce to the rest of the world. And some of those industries are pretty obvious. We export lots of things in the aerospace industry, computer technology, sophisticated instrumentation, machinery, materials, agricultural products.
ZANDIYou know, those are things that we've been -- we export, and we've been exporting for many, many years. And, by the way, if you're a manufacturer that survived what we went through, you have to be doing something right. You have to be very, very competitive. You have to have a market niche or both. And I think we're going to start exporting things that we've been doing well for many years and are very good at -- services.
ZANDISo that would include accounting services, legal services, management consulting services, financial services, educational services. And these are industries that are very labor-intensive. They employ a lot of people, and they employ the kinds of people that we produce, our comparative advantage, our skill and educated workforce. So I think we will be able to do this, and I think we will do this.
ZANDIWe always have. History, I think, is on our side. And I do, you know, it's not going to be easy, and it's going to take time. And it's not going to happen next year or the year after, but I think when we look back 10 years from now, we will create the kind of jobs that we need.
REHMMark, what about the issue of the manner in which college students are being educated today? Are they being educated in preparation for the kinds of needs the workforce is after?
ZANDIYeah, Diane, you put your finger on a very key point. And I did say I think we're going to create jobs in industries that employ very skilled and educated workers. And if that's going to come to pass, we need to create those skilled and educated workers. It's not going to happen by itself. And so we have to invest in our educational system and get more creative about that. So let me just give you an example.
ZANDIThere are companies that now are going to universities and saying, listen, I will give you money to pay for faculty, to pay for buildings, you know, whatever you need to educate kids that I can employ. And to ensure that that happens, I'd like to be part of the curriculum process. I'd like to let you know what you need to teach these kids so that I can employ them. And I think this is happening in different parts of the country. It's still in its infancy.
ZANDIBut I think this is a way to solve that -- the problem that we have, funding for our schools and also educating our kids in the right way for the kinds of jobs that are going to be created in the future.
REHMAt the same time, Jim Tankersley, one wonders where the thinkers of tomorrow will come from, those who wish to study Socrates and Plato and think about the classics and how they might influence the world of tomorrow, not just the mechanical world but the world of thought.
TANKERSLEYYeah, absolutely, and, I think, it's important to note this -- and I'm not just saying this is as a poli-sci major undergrad -- but it's important to note that not everyone's going to be an engineer. And, maybe, folks who are going to go on to found software companies or this sort of the next generation Internet companies that we can't even imagine now aren't going to have strict engineering disciplines in their undergrad or graduate years.
TANKERSLEYBut I will tell you one thing where a lot of very advanced and innovative thinkers are who we really can capture both -- to create jobs now and to create jobs in the future. That's overseas. High-skilled immigrants could be a real key to America's economic resurgence, both educating them in the United States. We have the greatest university system in the world, and that's something we can sell.
TANKERSLEYThat counts as an export. We can sell those services to immigrants. But, also, let's -- if we keep them in the United States, they'll create the companies here that will turn into the next Facebook, the next Google, whatever.
REHMBut doesn't that...
ZANDIDiane, can I...
REHMOr wouldn't that replace those young people who were born here looking for education, looking for jobs?
TANKERSLEYI mean, I just -- I don't think that the economy is finite like that. I think that there's plenty of room in this economy for entrepreneurs of all stripes.
REHMAnd you're listening to "The Diane Rehm Show."
ZANDIDiane, can I...
REHMWe have lots of callers. We'll open the phones now, 800-433-8850. First to Dallas, Texas. Good morning, Tony. You're on the air.
TONYGood morning, Diane. I have -- listening to the panel, I have a question and an observation. The observation is that I'm -- I work for the city government. And so the question is related to that. They discussed how local governments play in to this mix of, you know, job creation and funding budgets. What I'm seeing -- I'm a librarian, and we have 65 public computers. And on a daily basis, we have people coming in who need assistance with resumes.
TONYWe're talking, you know, really, three-quarters of those computers in use on a daily basis. We had a entry level, part time, 12-hour-a-week job that was open, and we had almost 100 applicants for that job. So, to some degree, I don't see on the ground the kind of job creation that the panel is talking about. Maybe it's just that because I'm in Texas, I don't see how bad it is elsewhere. But if they could discuss that, I would appreciate it.
LUNDThere's no question that there's a lot of unemployment out there. And as we just heard, even in Texas, the unemployment rate is 8 percent, which is quite high. It's also particularly tough in state and local governments right now. While the economy, overall, was adding jobs, government jobs are actually declining because of the budget issues we've heard about.
REHMBut, surely, Mark Zandi, that last month's job report of the creation of only 53,000 jobs, whereas the hope for goal was something like 250,000 jobs, had to be quite a shocker to everyone.
ZANDIYeah, it was a surprise, and it was disappointing. You know, I think it goes to the point that the economy is still very fragile, and it's not moving in a straight line. And if anything goes wrong, it has a very significant effect on the job market. And a couple of things have gone wrong so far this year, the most obvious being the surge in energy and food prices. I didn't anticipate that we'd be paying $4 for a gallon of regular unleaded, you know, back late April, early May.
ZANDIIt's come down a little bit since then, but it's still very elevated. And that's a very pernicious hit to the economy, and I think that's reflected in the jobs data. So it's not going to be a straight line, but I do think, in general, for the most part, we are making progress, and we're moving forward. American companies are in very good financial shape. Their profits are very strong -- not all companies.
ZANDIWe have to make a distinction between the big, midsize companies and the smaller companies. But, in general, their balance sheets are very strong. They've reduced their debt. Combine that with the low rates, and they're in very good financial shape. In my mind, it's really no longer a question of can businesses hire more. It's really a question of willingness. It's confidence. It's sentiment.
ZANDIAnd, you know, I think, given the severity of what we went through, it's not surprising that business people, like all the rest of us, are still very nervous and anxious. And, again, if anything goes wrong, they're going to freeze. So it's not going to be a straight line, but I do think we're making progress. And just one other point, back to the caller, I'm not arguing -- and I don't think anyone else is -- that the job market is good. It's not. It's bad. It's tough.
ZANDIAnd no one is arguing that this is going to get solved quickly. This isn't going to turn around next year or the year after. We're talking a longer run over the next decade or two. I think we need to be optimistic, and I think we should be optimistic that we have what it takes to create the kind of jobs that will employ our people and bring unemployment down to where we'll feel comfortable with it.
REHMMark Zandi, chief economist of Moody's Analytics. We'll take a short break. When we come back, more of your calls, your email. I look forward to hearing from you.
REHMAnd we're back, talking about where jobs are being created in the country. You heard earlier from a very senior official out in Texas where jobs are being created. Here in the studio, Susan Lund of McKinsey Global Institute. Jim Tankersley, he is reporter for the National Journal. On the line with us from Philadelphia is Mark Zandi, chief economist of Moody's Analytics. Here's an email that asks -- it's from Pat in Lake Wood, Ohio.
REHMShe says, "Had some of the tax incentives been removed that were a boom to outsourcing? Someone pointed out a country needs to manufacture things that can't just move paper without slowing the outsourcing of work. It's got to be tough to keep opportunities for work." Mark Zandi.
ZANDII'm not aware of any tax policy changes that would significantly affect the phase of outsourcing. Nothing comes to mind quickly with regard to that. But I think it's fair to say that the outsourcing is much less prevalent today than it was five or 10 years ago. And the key reason is that American companies are much more competitive, that they've worked very hard to raise productivity levels, get their cost structures down.
ZANDITheir margins are now quite wide. And so they're very, very competitive globally. And if you mix in the fact that the U.S. dollar, the value of the dollar has fallen, in my view, in a reasonable, orderly way, particularly against the currencies of emerging economies who five, 10 years ago were the key source of the outsourcing. You know, India, in particular, would be a good case in point.
ZANDISo you combine the softer dollar with more competitive, highly productive companies. I think American companies are in good shape globally. And, in fact, we're starting to see a lot of global companies expand, instead of shop, in the United States because it is such an attractive place to be. And that it's another reason for some optimism that we will see better job creation going forward.
LUNDOne of the interesting trends we see happening is, indeed, the slowing or even reversal of off-shoring. Many companies tell us that depending on the service, especially if it's customer facing, like sales or a call center, they're finding it competitive to move operations back to lower cost parts of the United States, not Manhattan or Silicon Valley, but places like Texas or the middle of the country, and that, combined with rising wages aboard, the balance, indeed, as Mark has said, is shifting back in favor of producing more in the United States.
TANKERSLEYWell, I think that's exactly right what Susan just said about -- China is, for example, less cost competitive with us now because they don't -- their wages are going up. So we have -- we're getting some of that competitiveness back. But here's the other thing that -- the sort of full circle of globalization.
TANKERSLEYI was in Indiana this fall for a piece on how companies, towns in -- towns in Indiana are recruiting companies from China to come and open factories in Indiana with the idea being that it costs less for them to build, produce and distribute it from Indiana for the American market than it would be from China to ship it over because, in large part, of the rising fuel costs for shipping.
REHMInteresting. Here's a comment from David in Jacksonville, Fla., "New jobs don't pay as well. They're all in the service sector." Susan.
LUNDWell, wages are an important factor, and it's hard to see wages increasing when you've got such high rates of unemployment. When you look at the national data, you do see that real incomes are rising slowly, faster than inflation. In large part, this reflects, though, that people are actually working more hours.
REHMNow, here's an email from Jackie who says, "I'm listening to yet another panel talk about the skills gap of today's job seekers. This is nonsense. Experienced engineers and computer scientists are losing their jobs to overseas immigrants." Mark Zandi.
ZANDIWell, I think both is going on. I mean, clearly, there is a weak demand from businesses for workers. And so your caller or emailer is correct that there's just a lack of jobs. It has nothing to do with the skill mismatch. I mean, when you have a 9.1 percent of unemployment rate, that goes well beyond skill mismatching, so I completely concur with her perspective and her view.
ZANDIHaving said that, I do think that there is an element of this that does reflect a job skill mismatch, that we aren't educating our kids and our children in a way that they can find jobs readily in this marketplace. And so I think both things are going on, and both things are a problem that we need to address.
REHMJim Tankersley, we talked earlier about Texas. But what's behind the job growth in some of the other states that are picking up jobs, such as South Dakota, New York, Pennsylvania, even here in Washington, D.C.? I mean, everything seems to be on track.
TANKERSLEYWell, here in Washington, D.C., we have the federal government which continues to be a very good and powerful force for hiring people. And for -- not just for actual people who work for the government, but for contractors and the private sector. The other thing you have in D.C., though, is the strongest housing market in the nation, where other -- in the Case-Shiller Index, 19 of the top 20 went down over the last year.
TANKERSLEYWashington went up. And that means more money for people to spend, a stronger economy. And that's fundamentally different than South Dakota, Pennsylvania, New York, which are getting job gains, in part, because of natural gas fracking, the sort of the new ways of extracting natural gas which has created a bit of a jobs boom across those states.
REHMSusan, what about states like California, Arizona, Florida? They are still suffering from this housing bust.
LUNDThere's no question that the housing boom and bust played into the level of unemployment we're seeing today. Texas, it may be noted, had much less of a housing boom and bust than other states, in part, because they had stricter mortgage lending laws that prevented some of the...
LUND...equity extraction. But there's no question that places in the Southwest and the South who are still suffering from massive housing bust have much higher rates of unemployment when you look across the country.
REHMAll right. To Marissa. She is on I-70 in Illinois. Marissa, I hope you're pulling over.
MARISSAOkay, I'm pulling over.
MARISSAI know it's kind of irrelevant to the way the conversation veered, but this goes back to what Mark was saying earlier in terms of education and innovation and kind of the future of our economy. I come from the millennial generation. I just finished my Teach For America corps membership. I'm on the way to Colorado for my master's in Education Policy.
MARISSAAnd I just think -- I'm talking on behalf of the millennial generation and kind of our attitude on, you know, they -- we believe the only way to save America is American people. And my mother's a Filipino immigrant. And I just feel like, yes, I know, I think that there is a hope in our economy, and I agree. Like, we're willing to take the low-paying jobs, and we're willing to rebuild our country.
MARISSAAnd I think that it's important when we have this dialogue because education and innovation are the two things, I think, that define my generation. And so when you're looking at the future of America and what we hope to achieve with our economy, I think it's exciting.
MARISSAAnd it's something to be excited about when you think about what, you know, what type of people are composed of when you think of the people that are willing to wake, stay up 'til 3 a.m. to write lesson plans for inner-city children in New Orleans. You know, we -- like, I'm really excited about our economy's future.
MARISSAI really -- I think it's important to kind of remind ourselves the kind of people we're dealing with here in America, and that, you know, the millennial generation exists here in America.
MARISSAAnd I want to just kind of speak on behalf of that.
REHMI'm glad you did, Marissa. That was such a passionate and welcomed statement to so many who feel that, you know, we're headed nowhere right now. But what about that millennial generation, Susan?
LUNDWell, hats off to you, Marissa.
REHMI should say.
LUNDAs a mother of two school-age children, we applaud you teachers. But I think what Marissa is saying points to a deeper fact about America. And it's what's made the American economy dynamic in the past. And that's the entrepreneurialism that you see in this country, and people willing to try to innovate, do new things. One of the problems over the last few years has been the slow rate of new business creation, in part because of the financial crisis.
LUNDNew companies can't get funding they need. And you see a sharp decline in the rate of new business formation. If we can get that back on track and let American entrepreneurs continue to thrive and start new companies, it would be a big boon to job creation.
TANKERSLEYI was up in New Hampshire this winter. It has one of the lowest unemployment rates in the country. And I was just -- I talked to a lot of folks who run businesses there. I just asked why. Why is hiring here so much better? And they said, basically, it's really easy to start a business here. It's easy to start a business. And we have local community lenders who can fund them and who weren't as impacted by the financial crisis as the big banks.
TANKERSLEYAnd those seem like two small things. But to everyone I talked to, they were huge factors in driving the job growth of a state with a less than 5 percent unemployment rate.
REHMThere's something else going on here that seems counterintuitive, and that is that productivity hasn't gone down. Mark Zandi, how do you account for that?
ZANDIWell, in fact, you know, if there's any good that comes out of losing 8.5 billion jobs -- and as I said, that's what we lost peak-to-trough in the recession -- it's that that reflects an increase in productivity, right. So these businesses were panicked in the recession. It was -- they thought, a matter of survival, they had to reduce their cost structures and raise productivity, and that's what they did.
ZANDIAnd so, you know, the -- it's very hard on all of these folks that lost their jobs and clearly very hard on all of us. But if there's any good that comes out of it, these companies are now very productive, metal tested, very profitable and poised for stronger growth. And, hopefully -- and if it's (unintelligible) that the hopes will come true, that they'll step up and now start to hire more people.
ZANDIThat's what we need to see. That's what's happened historically. And that's what I expect to happen going forward.
REHMBut how does that productivity stay the same? Is it that employers are asking employees to do more than they did prior? To the -- go ahead, Mark?
ZANDIYeah, well, productivity is increasing. Right now, the rates of growth are fairly consistent with what we've seen historically. That -- and that's the result of a number of things. One thing is that businesses invest. They invest in things that try to raise the productivity of their workforce because that goes right to the bottom line. It improves profitability and gets their stock price up.
ZANDIBut it also goes to what you articulated, and that is asking workers to work more efficiently, not that they work more hours -- that wouldn't raise productivity, at least not appropriately measured -- but work more efficiently and more effectively. But it's a combination of things that they're using to get those productivity levels up. And productivity always rises, and, ultimately, that's the fodder for the growth in our living standards.
ZANDII mean, if we aren't more productive, we're not going to be -- our wealth and living standards aren't going to grow. That's the key.
REHMAnd you're listening to "The Diane Rehm Show." Let's go to Ann Arbor, Mich. Good morning, Sarah.
SARAHGood morning, Diane.
REHMHi there. Go right ahead.
SARAHHi. Okay. So what does your panelists -- I think it was the gentleman from Moody's that suggested that it's a good idea for companies to fund university programs that will encourage students to study things that are interesting for these companies. But I think that what we're seeing is that they're requiring Ayn Rand to be on the curriculum. And the Coke Foundation, for example, wants to -- and (word?) actually rejected 60 percent of the job applicants for positions that it funded for professors.
SARAHSo I'm really concerned that what's actually happening is a threat to academic freedom. And if we're going to make it so that, okay, the corporations can decide what is studied at universities, then it's all going to be what's good for them, you know, climate change denial, et cetera.
REHMWhat do you think about that, Mark Zandi?
ZANDIYeah, it's a good point. I'm not at all advocating that universities and community colleges cede the curriculum to these -- to companies. But I do think they need to develop partnerships with companies that to be effective, to be relevant to our economy, they need to keep abreast of what's going on in the business community. And there's no better way of doing this.
ZANDIAnd moreover, as we know, every university in our country is struggling to balance their budgets. They're cutting. And this is a way to help them with their funding and financing.
REHMBut there has got...
ZANDIBut you're right. I'm not arguing cede the curriculum.
ZANDIYou know, I -- I'm -- but I'm arguing, let's develop a partnership.
REHMRight. There's got to be a line beyond which universities and businesses do not go, Jim.
TANKERSLEYI absolutely think academic freedom is critical. Otherwise you're not going to get the sort of innovative, critical thinking that you want both in the business and in the overall society that we live in.
TANKERSLEYBut I would say this. There's a difference between trying to work, say, at a community college with your local advanced manufacturers to make sure that the skills you're offering there are training people to do the actual work that's done in, say, an advanced LED lighting plant, like the president is visiting today in North Carolina, versus allowing a corporation basically free rein over an economics department.
REHMSo over the next 10 years, Susan, you see tourism manufacturing as the biggest job growers?
LUNDWell, actually, it's some of the service sectors of the economy. So health care has a potential to be the biggest job creator. You have a combination of an aging population and the expansion of insurance coverage to previously uninsured people. And this increases a demand for health care services. Now, there are innovative new ways in which we could both slow down health care spending costs, which are a big national concern, but still create jobs.
LUNDAnd this is by providing health care services in different ways sometimes than we do today.
REHMAnd, Jim Tankersley, finally, how do you believe that the candidates, tonight, are going to deal with this issue of jobs?
TANKERSLEYI think you're going to hear very little about the sort of skill and education issues that we've been talking about from most of this panel. And I think you're going to hear a lot about cutting government spending, cutting taxes. That is the job platform for the Republican candidates, almost to a person.
REHMAnd the Democratic platform?
TANKERSLEYIf the president -- the president seems convinced that he does not need to do more major things right now to boost jobs growth and that the economy is on a path toward better job creation.
REHMJim Tankersley, reporter for the National Journal, Susan Lund of McKinsey Global Institute, Mark Zandi, chief economist at Moody's Analytics, thank you all so much. And thanks for listening. I'm Diane Rehm.
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