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Krueger: Job market recovering, more work remains

David Brancaccio May 4, 2012

David Brancaccio: Today the government released its employment report for April. While the unemployment rate ticked down to 8.1 percent,only 115,000 new jobs were added to payrolls for the month, well below forecasts. Joining me from Washington is Alan Krueger, the chair of the President’s Council of Economic Advisers. Mr. Kreuger, thanks for joining us.

Alan Krueger: Good morning.

Brancaccio: What do you make of these numbers today?

Alan Krueger: I take a step back whenever we get the jobs report and try to look at the numbers in the context of other data that are coming in and also recognize that the monthly numbers tend to be volatile and they’ll be revised over the coming months. That said, today’s report is further evidence that the economy is continuing to heal from the deep recession that started at the end of 2007. We’ve now had 26 months in a row of private sector job growth. So far this year, over 800,000 jobs have been added. We’re moving in the right direction. We’re moving in a better direction, but much more work remains to be done given how deep the hole was when the president came to office three years ago.

Brancaccio: Many people are describing the numbers today as mediocre. Is that unfair?

Alan Krueger: As I said, the numbers are volatile. There are signs of strength here. For example, manufacturing. We’ve now added almost half-a-million manufacturing jobs. So the numbers are going to go up and down. What’s important is that the recovery has been resilient, confidence didn’t decline in spite of a spike in gasoline prices earlier this year. So I think this is a sign that we’re weathering the headwinds that may be coming our way and that we’re headed in a better direction.

Brancaccio: When you take a look at the household survey, the unemployment rate, the headline figure 8.1 percent, some people might characterize that as a three-year low. But isn’t it true that the rate dropped because so many people are so discouraged by the crummy labor market, they’ve given up looking for work.

Alan Krueger: No, again those numbers — particularly from the household survey — bounce around from month to month. The unemployment rate has dropped from 9.1 percent in August to 8.1 percent last month in April, a full percentage point decline. That is due primarily to more people finding work, nearly three quarters of the drop in the unemployment rate is a result of more people moving into jobs. We’re focused on trying to continue the recovery in the job market. The job market is recovering, but it has a ways to go before it’s recovered.

Brancaccio: I saw a Federal Reserve official thinking that the natural rate of unemployment these days — meaning the best we could do — is now up at 6.5 percent and you and I went to school, and they used to say 5 percent. Does that worry you, that notion?

Alan Krueger: If you look at our forecasts, we do expect the unemployment rate to continue to come down. It’s come down faster than we had forecasted when we did our budget forecast back in November. I expect we’ll continue to make progress and I don’t see why there’s any reason we can’t expect the unemployment rate to eventually come back down to the levels you were taught were the natural rate.

Brancaccio: Alan Krueger, chair of the President’s Council of Economic Advisers, thank you very much.

Alan Krueger: Thank you, David.

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