U.S. Economic Outlook

Transcript for: 
U.S. Economic Outlook

MS. SUSAN PAGE

10:06:56
Thanks for joining us. I'm Susan Page of USA Today sitting in for Diane Rehm. Diane is recovering from a voice treatment. There was good news and bad news on the economy last week. The jobless rate dropped slightly, but hiring also slowed. That has renewed concerns about the strength of the recovery. Joining me in the studio to talk about the outlook for jobs in the economy: Jim Tankersley with National Journal and Jerry Jasinowski, former president of the National Association of Manufacturers. Welcome to "The Diane Rehm Show."

MR. JERRY JASINOWSKI

10:07:27
Good morning.

MR. JIM TANKERSLEY

10:07:27
Good morning.

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10:07:28
And, joining us from a studio in Philadelphia, Betsey Stevenson, she's a labor economist and visiting professor at Princeton University. Betsey Stevenson, thank you for being with us.

PROF. BETSEY STEVENSON

10:07:38
My pleasure. Good morning.

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10:07:40
We invite our listeners to join our conversation later in this hour. You can call our toll-free number, 1-800-433-8850. Send us an email at drshow@wamu.org, or find us on Facebook or Twitter. Well, Jim Tankersley, we saw the Fed Chairman Ben Bernanke give a speech in Georgia last night. What did he say?

TANKERSLEY

10:08:02
Well, he was talking in general about financial regulation. But the most important thing, I think, that a lot of economics reporters took from it was that he came out with what he's been saying for a while and sort of doubled down on it, which is that the economy is not out of the woods yet and nowhere close to it. We still have a lot of work to be done to clear of the recession, and that signaled maybe an openness to even more action from the Fed if we perhaps -- and this is where I bring in the tea leaves -- if we see more jobs reports like the one that we just saw.

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10:08:36
Well, in the aftermath of that Friday jobs report, which was, I think, disappointing for everyone, there was speculation that maybe the Fed would feel compelled to do something more. Did he directly address that?

TANKERSLEY

10:08:48
No. And I don't think you will see him directly address that anytime soon. One thing to keep in mind is that the Fed has been a little more bearish on the prospects for the economy in their forecasts over the last few months than other forecasters were. So Chairman Bernanke has seen basically the economy now reverting a little bit to the mean of his forecast. Now, that doesn't mean that he isn't open, because I believe he is, to more monetary stimulus down the line, which, again, will probably happen if we have more and more jobs reports like this one.

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10:09:24
Well, Jerry Jasinowski, interesting study published in The Wall Street Journal yesterday that said that big U.S. companies are now more productive, more profitable, flush with cash, less burdened by debt, and yet it reports that performance hasn't translated into significant gains in U.S. employment. And I think that's surprising and frustrating to so many Americans who are looking for jobs or knows someone who is. Why do we see these good reports from companies, and yet it doesn't translate into good hiring reports?

JASINOWSKI

10:09:54
Well, first of all, I think that the story is accurate, and I think the important thing is to recognize how successfully American companies have come back and become competitive. And in manufacturing in particular, that was unexpected. And it really is quite extraordinary. I was with a group of CEOs over the weekend and the success stories in terms of becoming competitive and how strong they are now is really a very positive development for the economy, one of the few positive developments.

JASINOWSKI

10:10:25
And I think that that is something to really build on. The group of CEOs that I was with, however, said, you know, just as Bernanke has been saying, this is a slow recovery. And they came down with the view that we've got a recovery of about 2 percent for the next year, which is really very submarginal. And I think that the major reason why we're not getting more job improvements is because growth is slow. There are lots of other reasons, and I think we should dissect those.

JASINOWSKI

10:10:57
But, toward the end of our meeting, there was a lot of frustration among the CEOs about the fact that we really have what amounts to two economies: one where people are going like gangbusters in manufacturing in general, and then we've got a very significant number of people who are unemployed. And the unemployment numbers are not improving significantly. So we've got a really -- a major problem inside of a fairly slow growth picture, which is too many people are being left behind.

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10:11:31
Betsey Stevenson, what did you make of the jobs report on Friday?

STEVENSON

10:11:35
Well, I think one of the important things to realize is that the kind of growth that we saw in the preceding five or six months has actually been a little bit faster than what people expected, given the growth rate of the economy. That's been a puzzle people have been thinking about. Why are -- you know, why were we getting such great gains in jobs and such a rapid decrease in the unemployment rate when we really have had very, you know, low GDP growth for coming out of a recovery?

STEVENSON

10:12:06
I think what we've seen -- what we've learned subsequently is that GDP maybe grew a bit faster in Q4 than we -- our initial estimates indicated. So maybe we are growing a bit faster than we thought. But I also think that, you know, perhaps the kind of numbers, like 275, that we saw in January is not the right number to think of as our average right now, but rather we're adding about 200,000 jobs a month. And, certainly, the report we saw on Friday is consistent with that.

STEVENSON

10:12:35
We -- over the last three months, we've had job growth of 212,000 a month, and I think that that's about where we are. If the warm weather had pulled just a few of the jobs from March into January and February, that would explain why we see slightly -- a slightly bigger difference between the gains we saw in January and February and what we saw on March.

STEVENSON

10:13:01
And all of that, put it together, is to say that there was nothing in that report that should change our views about where the recovery is going. We're recovering. We're recovering slower than we would like, and we're not accelerating fast enough out of this recession to get people back to work rapidly.

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10:13:17
So if that's the case, why did the unemployment rate actually go down a tenth of a point in March?

STEVENSON

10:13:23
Well, you have to remember -- now, I'm going to sound like a nerd here, but that wasn't a statistically significant change. So it's very hard for us to measure the precision of changes in the unemployment rates, so I really don't take a change from 8.3 to 8.2 as being a very big deal. Now, that said, if you actually get into the numbers and were to take a look at what drove that, you actually did see there that that did not come from a gain in employment but rather came from decline in people seeking work.

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10:13:59
So people getting discouraged and not even bothering to go out to look for a job because they assume they can't find one.

STEVENSON

10:14:04
Well, again, we actually can't conclude that because it could also be people deciding, you know, I haven't be looking in a while, but I'm not going to start looking this month. We sort of expect there to be a certain number of re-entrance to the labor market every month, a certain number of new entrants to the labor market every month. We actually saw a decline in re-entrance this month.

STEVENSON

10:14:26
So, you know, we can actually conclude that this is people who stopped looking for a big increase and people stopping looking for work, but certainly we didn't see the kinds of increases that we expect to see in terms of people looking for work.

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10:14:42
We saw the stock market go down yesterday, Jim. Does that reflect the judgment about the economic reports we've seen?

TANKERSLEY

10:14:49
If Beth's -- I mean, I totally agree with Betsey, by the way, about taking, you know, all of these statistical ups and downs of unemployment month to month with a grain of salt. Let's triple down on that or exponential down on that for the stock market. It's very hard to predict where the economy is going by the day-to-day fluctuations of stocks.

TANKERSLEY

10:15:05
But one thing that we have seen as a bit of a trend from the market, to keep on the monetary policy tip here for a minute, is it there has been this expectation, some would say an irrational expectation, that the Fed will jump in sooner rather than later with, like, a third round of quantitative easing that certainly seems to have driven some of the increase in stocks' values over the last few months. And so if there's ever a sense day to day that that seems less likely, then the market is setting itself up for a little mini dip as it corrects for, you know, new presumptions of where Bernanke is going.

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10:15:40
Jerry.

JASINOWSKI

10:15:41
Let me add to what Jim is saying and state a little more strongly that the stock market gains, although partly based on fundamentals, are overwhelmingly driven by the Fed's policy of quantitative easing. And then what's happened with the European Central Banks to do the same -- I mean, people have done correlations, and the correlations between whether or not the market goes up or not is almost 80 percent now based on what the central banks are doing and whether or not they're putting more liquidity in the system.

JASINOWSKI

10:16:14
So, in part, we're on a little bit of a sugar high with respect to the stock market as a result of, first, the quantitative easing here and then what's happened in Europe in order to stem their crisis that European Central Bank has had this low interest rate, a cheap money policy, and that's temporarily bailed them out.

TANKERSLEY

10:16:36
And just to build off that for a second, I mean, while we are all very focused on the data coming out here in America, the market is also very focused on Europe. And the news from Europe in the last week or so has not been fantastic. So we have all of these things, which are factors in our own recovery. I mean, there's still real danger to America's recovery from Europe. It's maybe not as big as it was a few months ago, but it's there. And as we get bad news, say, from a bad bond auction in Spain, we look at dips in the market as reactions to that, possibly.

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10:17:08
Well, Betsey, to what degree do you think we're vulnerable to having bad news from Europe really undermine the fragile recovery we see here?

STEVENSON

10:17:18
I think we're absolutely vulnerable to that. I mean, if you look -- you know, a lot of people have looked at the sort of gains that we've had in January and February, the early part of the year, and then looked at previous -- the last couple of years and said, well, are we in some of sort of weird pattern where we have gains in the early part of the year that peter out? And I think that that's really a coincidence.

STEVENSON

10:17:40
What we saw was that we have been vulnerable to things that happen internationally, whether they're natural disasters, whether they're banking crises. I mean, that's what makes it actually so hard to predict what's going to happen with the U.S. economy. And, frankly, that's also what makes it so hard for any politician to actually have a lot of influence over what's going to happen in the U.S. economy.

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10:18:01
But, of course, one of the things that makes people a little anxious now is that the two previous years, we saw kind of good news at the beginning, and then other things happened and things that then did not continue on a good course, Jim.

TANKERSLEY

10:18:13
Right...

STEVENSON

10:18:13
Right. But my whole point was that that's really -- I don't think we should take that as a pattern. I think we should just think about that as the fact that we're vulnerable to all sorts of things. We could see the economy take off. In the next a couple months, we could see it stall due to things happening in Europe or due to things happening elsewhere. Predicting economic growth in any country is extremely difficult business.

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10:18:35
We're going to take a short break. And when we come back, we'll continue our conversation about the outlook for jobs and the economy in the United States. And we'll take your calls and questions, 1800-433-8850. Stay with us.

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10:20:04
Welcome back. I'm Susan Page of USA Today, sitting in for Diane Rehm. And we're joined this hour by Betsey Stevenson, a labor economist and visiting professor at Princeton University. She joins us from a studio in Philadelphia. With me in the studio: Jerry Jasinowski, former president of the National Association of Manufacturers, and Jim Tankersley, a reporter with National Journal.

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10:20:27
We talked about big companies in the United States, which are doing pretty well. What about small business? I noticed there was a report put out this morning by the National Federation of Independent Business that, for the first time in seven months, small businesses have become more pessimistic, I think, concerned in -- according to the report about rising fuel cost. Jerry Jasinowski, do you see a big difference between the fate right now for small businesses and large ones?

JASINOWSKI

10:20:53
No question about it. If you don't have the scale to compete in a global economy -- we now are in a global economy, and you really need that as much as you can have it. It's tougher, and the small firms who've had credit problems all along -- and, of course, they get hit hard by fuel increases. And one of the threats to the recovery, as Betsey was suggesting earlier with respect to Europe, is also rising energy prices, which have been pretty high.

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10:21:21
Jim, who do you see hurt most in the corporate world and in the economy by the rise in fuel prices?

TANKERSLEY

10:21:29
Well, I mean, you can look a lot of areas, right? I mean, airlines are obviously hurt a lot by rising fuel prices, trucking firms. But if you're looking at who is -- has the hardest time sort of hedging against the risk of high cost and dealing with the volatility, not just the rising cost, but the fact that they go up, they go down, they go up, they go down, that's where small businesses really get squeezed because if you're, say, a florist and you have to -- and you're driving deliveries all over town, a huge amount of your cost is going to be just filling up the van every day.

TANKERSLEY

10:21:59
And if that cost fluctuates wildly from month to month, year to year, makes it much harder for you to plan, and probably makes you much more reluctant to hire someone if you're worried that that -- the cost that you would spend on that employee could end up coming back to haunt you because of high fuel prices.

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10:22:15
Politicians often talk about small businesses being the engine of the U.S. economy and the place that really produces new jobs. Is that true?

TANKERSLEY

10:22:22
It totally depends on how you cut the statistics. There are -- the small business administration likes to say, I think, three out of every four new jobs created in this country right now is created by small business. Small businesses also have, you know, high failure rates. And in this economy, we've seen a lot more people strike out for themselves, so these are good things. We want people to be entrepreneurs. We want them to try new things, create new businesses.

TANKERSLEY

10:22:45
We also have, you know, a big -- in particular, with the export economy that we're building now, a large reliance on large firms, who, as Jerry was saying, are positioned to compete in the global economy and take advantage of our infrastructure that way.

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10:22:58
So, Betsey, thinking about the -- I'm sorry. Go ahead.

STEVENSON

10:23:00
Sorry, this is Betsey. I was actually just going to jump in on this, 'cause there's actually been some really good research recently on this issue of small businesses and growth for the economy. And I think what the research shows is that new businesses generate the most new jobs, and new businesses tend to start small. And I think that's where this idea that small businesses are the engines of growth come from.

STEVENSON

10:23:21
But, in fact, most small businesses don't really have a plan to become a big business. In fact, many people are happy starting a small business and keeping it small and being able to have that kind of control over their work environment. And those are important, and I think that they're an important part of the economy, but they're actually not the job creators that they often get made out to be. So I think that's important to keep in mind, and that really just echoes what Jim was saying, that big businesses play an important role in the labor market.

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10:23:50
Jerry.

JASINOWSKI

10:23:51
I just wanted to build on what both of them said, to say that the big firms -- the big global firms are much more creating jobs than people realize because so much of small business sells to big business, and as we go on to this export economy, a lot of small firms are connecting with global big firms and exporting. And then you have an enormous number of service companies that also are tied, particularly the manufacturing, so that, you know, this has been a recovery in which manufacturing's been really strong generally.

JASINOWSKI

10:24:22
And even with a slower job growth, I think we've had 400,000 new manufacturing jobs. And those spill over to services, and they spill over to small firms. So I think that there is something going on here, which is pretty positive, and it's being recognized by the administration. It's being recognized by the candidates, which is that manufacturing is stronger than we thought it would be, more competitive. It's not yet the job creation machine we like it to be, but it's doing better than people thought.

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10:24:52
You know, it's interesting 'cause we've spent decades talking about the decline of the manufacturing sector in the United States. Is the reason it's doing better now because of the global economy?

JASINOWSKI

10:25:02
I think that's a very good place to start because they decided after the Japanese scare and then the Chinese scare that they had to transform their economies, cut their cost, become more technologically driven and go on to emerging markets and begin to export. In this recovery, exports have been the fastest growing part of GDP. That's very interesting. We've not before been that kind of export leader, and we now can compete with anyone. We certainly can beat the Japanese and the Chinese in most manufacturing sectors.

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10:25:40
You know, David Brooks had an interesting column about this point this morning in The New York Times, where he said one reason for this manufacturing boom is the fact that fewer people are required on the manufacturing floor, a lot more robots, another reason why you can see a strong economy without the kind of job growth that we might want to see.

JASINOWSKI

10:25:58
I think that's true and that there are "Star Wars" conditions in a lot of these manufacturing firms. I would point out that about a third of the big companies now have jobs open that they can't fill because our skill levels are not where they should be. And this has been something that has been talked about for the last several years. And I would have to say that one of the ways to really increase the job the growth is to focus on the skill training that we really haven't been very good at compared to the Germans, for example. And I think training leads to better job growth and better income.

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10:26:34
You know, Betsey, we've seen big cutbacks in the federal programs to train workers for new jobs, and I wonder if you are concerned about that. Do you think those programs work?

STEVENSON

10:26:46
So I am very concerned about the fact that we have -- we're spending less than we have in decades on employment services. And I should emphasize these aren't recent cuts. This is, you know, been a long, slow erosion of our employment services, both training and more, you know, basic services to help the unemployed get back to work. You know, there's a lot of debate about what types of training programs work, which training programs work for who. Can we -- is it a good idea to, say, train a 50-year-old displaced worker for a completely different occupation and industry?

STEVENSON

10:27:26
I think we've learned that some things work and some things don't, and so revamping our training system, completely reauthorizing the Workforce Investment Act with an emphasis on evaluation, making it more adaptive to the needs of businesses and communities so that we are able to train workers for the jobs that are out there very flexibly, and cut the programs that don't work and increase the spending on the ones that don't. But this is something that Congress just hasn't been willing to touch during the worst recession we've seen since the Great Depression.

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10:28:01
Jim, I wonder if you think this is something we're going to hear about a lot on the campaign trail this year. President Obama's proposal is very different from the ones we've heard from congressional Republicans.

TANKERSLEY

10:28:10
We're going to hear a ton about it on the campaign trail, and you always do in states like Ohio and Pennsylvania and Michigan, where free trade remains a bit of a bogeyman and where factories have been closing for a long time. But let me tell you what else you're going to hear about on the campaign trail, even if you don't hear about it in these words.

TANKERSLEY

10:28:27
President Obama is going to talk a lot about industrial policy, which has been a bad word in American economics for a while now, in American politics. But, in fact, he's not going to talk about it that way. He's going to talk about the success of the auto bailout. And my colleague Catherine Hollander and I wrote a piece a couple of weeks back about how the auto bailout has sort of provided what the Obama administration could consider a blueprint for successful government intervention to prop up and actually help an industry emerge more competitive, more job-creating.

TANKERSLEY

10:28:57
You're going to hear that a lot from the president. He may not explicitly say, hey, we should bail out everybody. But he is going to say, we should do a lot more for manufacturing so that manufactures broadly can hire the way that Detroit is hiring right now for cars.

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10:29:09
But, you know, Republicans also see, I think, the auto bailout as a good topic for them as an example of an overreaching government, a government that's gotten too big, that's picking winners and losers.

TANKERSLEY

10:29:20
Well, and that's going to be the big fight, right? I mean, and that's going to be a fascinating fight to see. The polling is obviously split, depends on where you are. The bailout is not a majority popular, I don't think, across the country. But the administration believes it has a good story to tell there because they saved what some analyst called a million jobs. They also, though, have this problem of people don't like bailouts. They didn't like the financial bailout. They didn't like the auto bailout. They don't like any idea of the government spending my money to help somebody else, not me.

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10:29:52
Pretty popular in Michigan, the auto state and one of the nation's swing states. Jerry.

JASINOWSKI

10:29:58
Well, I just wanted to reinforce what both Betsey and Jim are saying. I think Betsy made a very important point about training when she said we really have to revamp these programs, cut those that haven't worked and increase funding for others. They need to be focused at the community college level, and they need to be in partnership with business. You can't have Washington deciding what kind of training should be done for manufacturers. You have to have manufacturers deciding those, and they need to do it with community colleges.

JASINOWSKI

10:30:29
So I think we need to invest more in training, but it needs to be intelligent and smart. And so that's point number one. And then I think that this industrial policy question is very tricky, as Jim acknowledged. I happen to think the president was right to bail out the auto industry since it was so central. And what they did, really, was to speed up the bankruptcy. The amount of money put into it was modest. It was nothing compared to what we did with Wall Street. I think as you move into other areas, it's very tricky, and you can make a lot of mistakes, as we've seen.

JASINOWSKI

10:31:02
And I think that if you're going to invest more in particular sectors, they have to be very broad and not try to be too narrow. Therefore, I think that really where we ought to be focusing, in part, is on energy, where there's a lot of potential in this country and where I think further investment of resources is going to pay off big. But let's be careful about trying to pick winners and losers in small markets.

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10:31:29
But, Jerry, I wonder. Well, we see this decline in the federal government investment and job training and retraining programs. Is that something corporations will pick up some of the slack? Will they increase their efforts as the government reduces theirs?

JASINOWSKI

10:31:42
I think they will -- and they should -- and I certainly and others within the business community are arguing that point. I think that there was a time in which we spent much more than we did on training, and we need to do it again.

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10:31:56
I'm Susan Page, and you're listening to "The Diane Rehm Show." We're going back to the phones, take some of your calls, 1-800-433-8850. Betsey Stevenson, do you have a comment you wanted to make?

STEVENSON

10:32:06
Yeah. I wanted to jump in on that question about training because this is something economists, labor economists have studied a lot. And we think about there being two types of training, what we call general training, which is training that can be used at a lot of different jobs, and job-specific training, training that's really for that one job. It's very difficult for firms to pay for general training because you train the person.

STEVENSON

10:32:29
They've got the skills now, and then they can be competed away by another firm who didn't pay for their training. And that's why it really is up to the government to help provide that training because we can't put firms in that kind of vulnerable position where we're asking them to invest in people, and they don't have any real way to tie that person to the job.

STEVENSON

10:32:49
That's the way our labor laws work in the United States. You can't force somebody to work for you. And as a result, it's -- you know, businesses -- it's uncertain. Will they be able to recoup the investment from training someone? It's hard to know. If somebody else offers them a slightly higher wage, they might walk away, and there's nothing they can do to stop that.

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10:33:09
Let's go to the phones first to Lansing, Mich. and talk to Chad. Chad, thank you for giving us a call.

CHAD

10:33:15
Hey, good morning. How are you?

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10:33:16
Good morning.

CHAD

10:33:18
I had a question for your panelists. A lot of you guys, when you talk about subjects like this, focus on, like, Detroit, heavy auto industry, but I come from the agriculture field. And there's a lot of jobs there. I'm going to be graduating here come May, and I had four offers for jobs. And I'm wondering why people don't focus more on the agricultural sector as opposed to, like, the heavy industry.

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10:33:39
All right, Chad. And, hey, congratulations on your graduation and your choice of jobs. Who on the panel could address that question? Jerry?

JASINOWSKI

10:33:45
Well, I think you're absolutely right about agriculture having a lot of jobs. I think probably, along with energy, it's the most job growth area I can think of, and that's because of global expansion, a lot of demand for food. The Fed's policy of focusing on easing liquidity has boosted up the demand for commodities.

JASINOWSKI

10:34:09
And so if you look at John Deere and these other American companies, as well as many small ones, they're booming, and they will continue to boom. This is a long-term cycle. So people who want to focus on where to get jobs, young people, they need to look at the sectors, and obviously certain areas like health care and technology are good sectors, but so is agriculture, so is mining.

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10:34:32
Betsey, how do things look for graduating seniors this year? How -- what's the job market going to be for those young graduates?

STEVENSON

10:34:41
Well, are you talking about seniors in high school, or seniors in college?

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10:34:44
I'm talking about seniors in college, but maybe you'd also address seniors in high school who don't plan to get more training.

STEVENSON

10:34:50
Well, you know, I asked that because there are really important differences. You know, as much as we've hear -- heard a lot of complaining by college graduates about this -- what this labor market looks like for them, we still have, you know, only a 4 percent, 4.2 percent unemployment rate among people with a bachelor's degree or higher. And if you look at people who only have a high school degree, their unemployment rate is almost double at 8 percent.

STEVENSON

10:35:16
So, certainly, this has been a tough time for college graduates. And we also know from a lot of research that when you graduate in a tough economy, when the unemployment is high, you take big wage hits that stick with you for a long time in your career. So this is not to say that they're not getting hurt, but I think most of them do, actually, end up finding jobs, the vast, vast majority.

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10:35:39
So this group of young college graduates who have gotten out into the world of work during the great recession, you're saying that for a lifetime -- or for how long will they see the effects, even if they have a job, the effects on wages?

STEVENSON

10:35:57
You know, it's quite possible that these are permanent lifetime effects. I think that the -- I don't think the research is completely clear for college graduates how long it lasts. But certainly if you look for a decade or more, you see these negative effects on wages. The way to think about it is that, you know, regardless of your training, when you graduate in a bad labor market, you're entering in -- you know, your entry-level job is sort of worse.

STEVENSON

10:36:25
And then particularly a recession that has lasted as long as this one, for people in their 20s, that's when people do most of that sort of climbing up the career ladder, changing jobs, changing firms to get that better position, that higher paid position. Unfortunately, what we've had for people who are, you know, currently in their 20s, have been in their 20s for the last five or six years, is we've had a very static labor market where it's not just that we've had a high unemployment rate, but people haven't been changing jobs.

STEVENSON

10:36:52
So they haven't been getting those opportunities to get a promotion to go to a higher paid position. And that's going to be very hard for them to climb out of that when we finally get out of this. You know, one of the indicators that I continue to look at and we've really not had a lot of improvement on is our quit rate. We need people to feel confident enough in the economy to quit their jobs so that they're creating openings for other people. And it's that churning, that changing jobs that puts everybody into a position where they're most productive and can earn the highest wage possible.

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10:37:24
Hard to imagine anybody feels so confident these days to have a very high quit rate, but that's an interesting thing to look for. We're going to take another short break. When we come back, we'll go back to your calls and questions. We'll read some of your emails. Stay with us.

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10:40:04
We're talking about jobs and the economy on "The Diane Rehm Show." In the studio with me: Jim Tankersley from National Journal and Jerry Jasinowski, former president of the National Association of Manufacturers. And we're joined from a studio in Philadelphia by Betsy Stevenson, a labor economist. Let's go to the phones. Let's go to Cincinnati, talk to Shawn. (sp?) Shawn, thank you for holding on.

SHAWN

10:40:26
Hey, thank you. I got a really simple question or, I guess, a statement, I guess, 'cause it doesn't seem very strange to me at all that, you know, that there's this difference between the profits corporations and hiring right now. If you hire less people, pay them less and charge more for your products, of course, you're going to make more money, you know?

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10:40:55
Shawn, you know, you make a point that we've heard from -- we've gotten a lot of emailers making a similar point. Steve sent us an email, saying, "Isn't the subtext of the job situation the fact that businesses have figured out how to make money without employees?" And another emailer, Rhino, (sp?) writes us from Greensboro, N.C. He says: "During the last several years, employers have found out that they can do all the work that needs doing by making the remaining workers do more for no increase in pay." How fair is that, Jerry?

JASINOWSKI

10:41:24
Well, I think it's a fair question. I think that we really need to look at how we distribute the gains in general. And by that, I mean, profit sharing and gain sharing and other incentive compensation plans, which used to be very popular, should be looked at again. And we need to look at the level of education because, again, a lot of these gain increases -- people who have good educations get very good wages.

JASINOWSKI

10:41:55
And as I said before, most of the firms I know, about a third of them can't find people who have the kind of training they need. Now, having said that, I think you look for other ways to do it, and firms ought to put more of their resources into either training workers or, in fact, in some cases, sharing the profits directly.

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10:42:15
Well, I think that's one of the great frustrations, creates a lot of anger among a lot of Americans that they don't see that kind of effort by big corporations. And I wonder, do you think -- you've mentioned that you've just met with CEOs from big corporations. Is their only obligation to increase the bottom line? Or do they feel some obligation to also share the wealth, to hire people when they need hiring?

JASINOWSKI

10:42:40
Well, I think that they feel an enormous duty to share not just on the wealth issue but the last half of our meeting focused on this whole question of what's the larger cultural and social responsibilities, and people are interested in looking at those as long as they're not put in a way which is silly or naive. That is to say there used to be this notion of social responsibility in a way in which you were going to do this and you were going to do that. We are in a very tough global economy.

JASINOWSKI

10:43:09
The first thing we have to do is compete. But anything we can do to shore up our culture and our community at the same time we compete is essential to do. And there are a lot of companies who are coming back to this country and investing in this country for those reasons. I just happen to see where Timken is building a new steel mill in Ohio.

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10:43:30
Do you see this -- I'm sorry, Betsy. Please go ahead.

STEVENSON

10:43:33
I was just going to jump in and say -- I really do want to just comment on this premise of the question because we -- what we're seeing right now is firms sitting on a lot of profits, for sure, but we're not seeing them produce more with fewer workers. That's the sort of traditional jobless recovery where we have economic growth, but we don't have gains in employment. That's not what we're having here.

STEVENSON

10:43:55
In fact, we had very rapid gains in employment, given the GDP growth that we've had. So we're not seeing firms producing more and more with fewer and fewer workers. The biggest problem we have right now is we need to get firms to be producing more and more, and, hopefully, that's going to come with them hiring more and more workers.

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10:44:13
Well, Betsy, do you see -- I just wonder what kind of social obligation you think most companies feel. Is their ultimate objective just competing more effectively, as Jerry said? Is there any obligation to kind of try to help people who are unemployed use their profits in that way? Is that naive?

JASINOWSKI

10:44:35
I would jump in on what she's thinking about and say it's naive. I think that you should think about how you can compete at the same time you help your community and your workers. I mean, we're in a new world. And this notion that you simply help out people for goodness is, I think, naive. And you can do good things and make money.

JASINOWSKI

10:44:55
And, in fact, you've got companies who are now coming back here, and they're looking at more and more ways to help the community but in ways in which you compete. This whole export phenomena I've talked about is one in which you're competing, and you're, in fact, adding to the jobs in this country.

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10:45:13
Betsy, what do you think about that?

STEVENSON

10:45:15
Yeah. I was going to say what we really want to think about is what can firms do that are going to be good for firms and good for workers. And I give you an example of something, which is a flex time and being more accommodating to families.

STEVENSON

10:45:28
Firms that have actually implemented policies to be more accommodating to working parents to allow workers to have more control over their schedule have actually found that it's reduced costs by reducing turnover. A turnover is very expensive for firms. So that turns out that there are things that firms can do that are beneficial to workers but are also beneficial to the bottom line.

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10:45:50
You talked about, Betsy, about companies sitting on a lot of cash, and you're feeling that they should be investing that, producing more that'll result to more hiring. Why aren't they?

STEVENSON

10:46:03
I think that that's a big question, and I don't actually -- I wouldn't even begin to say that I know the answer. And, obviously, there's some uncertainty about where the economy is going and some uncertainty about their ability, you know, to access capital and what kind of returns that they're going to reap on investments, particularly long-run investments.

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10:46:28
Jim, what do you think?

TANKERSLEY

10:46:29
If you look at the business surveys and then you look at the economic studies that have been done off of them, I mean, this has been the question for more than a year now. And it continues to be a big question. We continue to have record profits and levels on investment that don't match that. You hear from companies a lot of things about the regulatory environment, that they feel like they are overregulated and their taxes are too high. And, if they had less regulation and lower taxes, they would invest more money.

TANKERSLEY

10:46:55
If you look at most of the research that's been done, it suggests a second answer, which is that they're just -- firms just aren't sure that if they hire another worker in the United States and start producing more products that anyone will buy that. I mean, it's not just America. It's Europe. It's a lot of our other trading partners. Even China is going to a slowdown right now. But particularly in America, there is this vicious cycle right now of aggregate demand.

TANKERSLEY

10:47:20
We have not recovered to the demand levels of before the recession, which were largely financed by borrowing, by the way. And because we have not made up that demand gap, we don't see necessarily the demand for the products. Extra products can be turned out from that extra shift at the factory that would require more people, who, if you hire them, would demand -- would have the money, demand more products. So there could be a virtuous cycle here. It just hasn't started yet.

JASINOWSKI

10:47:46
I think that Jim is exactly right about the uncertainty being a major factor. I would just point out, though, that the capital spending done by businesses was 15 percent last year. It's going to be double digit again this year. So companies are building steel mills, and they are spending money on capital. The question is why not more on jobs.

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10:48:06
Let's go back to the phones and talk to Philip. He's calling us from Louisville, Ky. Philip, you're on "The Diane Rehm Show."

PHILIP

10:48:13
Oh, thanks for taking my call. And on that last bit of the discussion, the virtuous cycle is quite interesting because here in Louisville, we're starting to produce the Ford Escape, and that's the new thing. But the investment in capital and people is unequal because Henry Ford, of course, infamously paid people enough to afford to buy the Model T. But the new workers being added on at the Ford plant here would barely be able to afford a home, let alone a Ford Escape, with the wages and benefits they'll be getting going to work.

PHILIP

10:48:52
And there's quite a lot of competition, and quite a lot of people are moving from the Rust Belt to Louisville to take jobs at less than what they were making before Ford didn't take the bailout.

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10:49:04
Mm hmm.

PHILIP

10:49:05
And that's -- the investment in people is not equal into the investment and the potential for profit, and that's where I think, you know, they need to look at investing in people for what they put into the product.

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10:49:19
Philip, great point. Jim?

TANKERSLEY

10:49:22
This is where it's really -- you can really see in the math of some victims here, right. There has been a phenomenon well documented by -- among others, the MIT economist David Autor about the hollowing out, the loss of middle-skill jobs like our caller was just talking about, production line jobs. So we've outsourced or automated a lot of those jobs. And as we've had fewer and fewer of them and we retain a large amount of workers who don't -- aren't necessarily engineers and are too skilled to be janitors, maybe, there's a lot more competition for those fewer and fewer remaining middle-skill jobs.

TANKERSLEY

10:50:01
So that drives down wages. And this is a frustration because then they become less and less of what we used to think of as a middle-class job and closer to a lower-skill job because of that competition, exactly what was just described, of more people moving in, competing for those jobs. And if you have a lot of people willing to do a job for less money, wages are going to fall.

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10:50:21
So, Betsy, not everyone can be a university professor like you. What do you do about these kind of workers in the middle?

STEVENSON

10:50:29
I mean, this has been a major problem for the U.S. economy for a long time. This recession's obviously highlighting it, but, I mean, I agree with everything that Jim said. We've -- we have fewer of these jobs. The fact that there's fewer of those jobs, but still large number of people wanting to do it, is pushing down wages. And, you know, I think, some of the solution -- I don't think you have to be a university professor.

STEVENSON

10:50:52
But some of the solution is to increase the education of our workforce and move them into higher skill jobs because I think that's where we're going to see a lot of growth in the U.S. economy. And then some of the solution is making sure that we have better compensation for workers in the much lower skilled jobs. And so I think we're going to need a combination of that.

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10:51:16
Let's go to Baltimore and talk to Edward. Edward, you're on the air. Thanks for joining us.

EDWARD

10:51:22
Hi. Thanks for taking my call. Actually, my call is similar to the last call about the downgrading of the pay for the jobs. But my question has to do with companies that laid off a lot of highly skilled people in 2008 and 2009. Now, they are hiring back, but they want to hire people at entry level with those skills. And so we're hearing this refrain that we can't find people that have the skills for our jobs.

EDWARD

10:51:50
I just wonder if anybody's looked at how many of those companies that are crying this -- laid off plenty of people who had the skills for those jobs and now don't want to call them back because they are highly experienced and more highly paid and they'd rather have some community college retrain people who have good skills in some other discipline, to start over with their company so that experienced IT people should go back and learn how to be accountants and to take entry-level accountant jobs.

EDWARD

10:52:16
And experienced accounting and should go back and learn how to be IT people and take entry-level IT jobs, for example.

PAGE

10:52:21
Edward, thanks so much for your call. Jerry?

JASINOWSKI

10:52:23
Well, I think that there probably are firms that are doing just what you're saying, but I think the general point of view is that we really need to focus on increasing the skills of people who had skills or people who did not because so much of manufacturing and so much of global business today is a high-skill business, and most of it is focused on community level certifications and things that are less than at the college level.

JASINOWSKI

10:52:49
I mean, we're really talking about people who simply have two years of basic communications, mathematics and things like that, and I think that that is where most companies want to move, and I think that that's where the emphasis should be.

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10:53:06
I'm Susan Page, and you're listening to "The Diane Rehm Show." We're taking your calls, 1-800-433-8850. Betsey Stephenson.

STEVENSON

10:53:14
Yeah. I was just going to say, I mean, if you're looking at -- I think that that phenomenon the caller described is absolutely going on. You know, we hear a lot of firms complaining about not being able to find skilled workers. But there's, you know, a law in economics, which is that if you have a shortage of something, the price for that thing will rise. And I've spent a lot of time looking at wages, and we're not seeing big wage increases for these skills that employers are saying are in short supply.

STEVENSON

10:53:41
What we see is employers wanting to be able to hire skilled workers at lower wages than before. And as a result, they're having a hard time finding people with the skills they want at the wages they want to pay. The other thing we see is that the people who have the longest duration of unemployment and they're having the hardest time getting back into work are older workers and even older skilled workers.

STEVENSON

10:54:05
So that idea that, you know, you're a skilled IT, maybe you should try an entry level in another job -- I don't know if that would work. But I certainly understand that frustration because if you look at a 50-year-old, highly skilled worker with 30 years of experience, a college degree, that's a guy who's actually having a hard time getting back in the labor market right now.

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10:54:23
And why is that? Is it because he's likely to be more highly paid than other people who are looking for jobs?

STEVENSON

10:54:30
There's, I think, a lot of reasons. One is that, yes, he's, you know, has a wage history, a salary history that suggest to employers that he's going to be harder to keep happy. There's -- at the kind of low wages that they want to pay, so, I mean, I don't even think that these workers are turning down low wage offers. I think they're just not even getting them. I think that there's also concern that perhaps they're not going to be as flexible or, you know, easy to sort of change or as able to do -- to work the kind of long hours that someone might want.

STEVENSON

10:55:09
I think there's just a lot of perceptions and stereotypes that make these slightly less desirable workers, particularly if they've been unemployed for six months or longer. But you certainly see that, you know, young workers have the burden of having the highest unemployment rates, and older workers have the burden of having the hardest time finding a job once they lose theirs.

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10:55:29
So we're almost out of time, but let me ask our panel, do you think this recovery is actually on a pretty solid footing? Are you concerned about it faltering? Just very quickly, Jim, what do you think?

TANKERSLEY

10:55:40
It's all relative. I think that it's a recovery. It's OK. It's not the recovery that we need yet.

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10:55:47
Jerry, do you think this is a pretty stable recovery we can count on for the rest of the year?

JASINOWSKI

10:55:51
I think the 2 percent stable recovery we can count on. What concerns me is that these issues of people not being able to get high enough wages means that it's not growing enough. We need higher growth. It's the number one solution to increasing jobs.

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10:56:05
And, Betsey, you're an expert on the labor market. What do you see ahead for the rest of this year in terms of jobs?

STEVENSON

10:56:12
Well, you know, I think forecasting is very difficult. I agree with both the things that Jim and Jerry said. We have a recovery. It's clearly underway, but it's too slow. And we need to accelerate that recovery both in terms of adding jobs and increasing the overall growth of the economy.

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10:56:29
Betsey Stevenson from Princeton, Jerry Jasinowski, former president of the National Association of Manufacturers, and Jim Tankersley, a reporter with National Journal. Thank you all for being with us this hour.

TANKERSLEY

10:56:40
Thank you.

JASINOWSKI

10:56:40
Thank you.

PAGE

10:56:41
I'm Susan Page of USA Today sitting in for Diane Rehm. Thanks for listening.

ANNOUNCER

10:56:45
"The Diane Rehm Show" is produced by Sandra Pinkard, Nancy Robertson, Denise Couture, Monique Nazareth, Nikki Jecks, Susan Nabors and Lisa Dunn. And the engineer is Tobey Schreiner. A.C. Valdez answers the phones. Visit drshow.org for audio archives, transcripts, podcasts and CD sales. Call 202-885-1200 for more information. Our email address is drshow@wamu.org, and we're on Facebook and Twitter. This program comes to you from American University in Washington. This is NPR.
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