Commentary

New jobs report just about meaningless

Bob Moon Apr 2, 2010
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Commentary

New jobs report just about meaningless

Bob Moon Apr 2, 2010
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TEXT OF INTERVIEW

Bob Moon: So investors seem encouraged by signs that America is poised for an economic rebound. But just how much stock should we put in these numbers? For more on that, we’re joined by Marketplace commentator Robert Reich, former Clinton Labor Secretary and now a professor at the University of California, Berkeley. Good day to you, sir.

Robert Reich: Good morning, Bob.

Moon: OK, so big corporations have tons of cash, it’s expected that today’s jobs report is going to show some growth. This sure has all the makings that a strong recovery’s in the works, right?

Reich: Well, let’s hope so. The jobs report is going to be just about meaningless, Bob, because March’s job numbers include anywhere from 100,000 to 150,000 Census-takers. These temporary jobs will be gone in six months, so they don’t really reflect the strength of the jobs market.

Moon: You got me scratching my head, though — if the big companies aren’t people with their load of cash, what are they doing with it?

Reich: Well for one thing, they’re buying other companies. There’s a boomlet right now in mergers and acquisitions. But remember, when companies merge, the first thing they usually do is sack employees considered redundant, and that’s not going to help the job numbers. The other thing that the big companies are doing with all their cash is buying back their own shares of stock in order to boost share prices. We’re in the midst of one of the biggest share buy-backs since 2008, but these purchases don’t create jobs, either.

Moon: OK, so what’s going to goose these companies into starting hiring again?

Reich: Ah, that’s the big question. They have to be convinced there is a market for their goods and services. The good news, Bob, is consumer spending is moving upward. The bad news is wage income is still flat — mainly because so many people are looking for jobs, employers are under no pressure to raise wages. It’s sort of a catch 22: if wages stay flat, consumers won’t continue to spend more, because they won’t have the money.

Moon: We’re hearing about this new payroll tax holiday for companies that hire workers. Is that going to be enough of an incentive to kick-start job growth?

Reich: Well, it’ll be some incentive, Bob, but employers get the tax break, remember, only if the person hired has been out of work for at least two months. And it’s only 6 percent of wages, and only for the rest of the year, which is not much of an incentive to hire if you’re not already planning to hire. Look, the biggest problem is that most new hiring is done by small businesses, and small businesses are still in deep trouble. They’re not sitting on lots of cash — in fact they’re still finding it hard to get credit. More important than a payroll tax holiday would be incentives for banks to do more lending to small businesses.

Moon: And what are the odds of that happening?

Reich: Well, I am told the administration is working on it.

Moon: All right, thank you very much. Bob Reich.

Reich: Thanks, Bob.

Moon: Mr. Reich is a professor of policy at UC Berkeley.

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