Summers, Hubbard Clash on Economic Outlook Following Jobs Report
Former U.S. Treasury Secretary Lawrence Summers said the January jobs report shows the economy is “on the right road” while Glenn Hubbard, an adviser to Republican presidential candidate Mitt Romney, said he’s skeptical about the meaning of the latest numbers.
“Unlike many of the favorable past reports, if you look beneath the surface of this one almost every indicator within it is favorable,” Summers said yesterday on ABC’s “This Week,” where he appeared with Hubbard, dean of the Columbia Business School.
Employers added 243,000 jobs in January, the biggest gain in nine months, and the unemployment rate fell to 8.3 percent from 8.5 percent in December, the Labor Department reported last week. The improvement exceeded the most optimistic forecasts in a Bloomberg News survey of economists.
Hubbard, who was chairman of the Council of Economic Advisers under Republican President George W. Bush, said the decline stemmed from fewer people looking for jobs while the rate of underemployment remains high. Administration policies have stood in the way of the recovery, he said.
“There needs to be a serious debate on what we can do in tax policy, in health care, in regulation and financial reform to actually create jobs,” Hubbard said. He also called on the administration to address long-term funding of entitlement programs.
Build on Momentum
Summers, director of the National Economic Council under Democratic President Barack Obama until last year, said the administration needs to build on the momentum of the easing unemployment.
“We are in the presidential election season when the stakes are high and sometimes facts get twisted or dumbed down in order to put the candidates in a better light,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “Growth accelerated strongly over the last three months and that’s a fact when looking at Friday’s employment report.”
The drop in the jobless rate reflected a 381,000 decrease in unemployment at the same time 250,000 Americans entered the labor force.
The portion of the population counted as participating in the workforce declined in January to 63.7 percent from 64.0 percent in December. In December 2007, at the start of the recession, 66.0 percent of the population held jobs or were actively seeking employment.
“Job growth at the start of 2012 is strong and broad-based across industries,” he said. “The decline in unemployment rate is for real as it is driven largely by a surge in employment.”
Summers said the economy will face heightened risks if Congress fails to extend the payroll tax cut and unemployment insurance. A U.S. House and Senate panel is negotiating a way to maintain the payroll tax reduction, which expires on Feb. 29, through 2012.
Administration officials offered a guarded public response to the report last week, with nine months to go before the November election and the U.S. economy still vulnerable to risks such as a worsening of the European debt crisis.
Obama said that while too many people in the U.S. still don’t have jobs, the data show “the economy is growing stronger.”
Romney, 64, upon winning Nevada’s caucus on Feb. 4, attributed the drop in joblessness to the “innovation of the American people in the private sector,” saying Obama could take no credit.
Douglas Holtz-Eakin, president of the American Action Forum and former economic adviser to U.S. Republican Senator John McCain’s 2008 presidential bid, said yesterday unemployment will go up before it comes down permanently.
“We got one month’s good news in the labor market, that’s great, but the truth is the debt is bad and the recovery is not very strong,” Holtz-Eakin said on CNN’s “State of the Union.”
Alice Rivlin, senior fellow at the Brookings Institution and former vice chairman of the Federal Reserve, said on CNN that the key to the U.S. economy’s future is for congressional Republicans and Democrats to work with the president to address the country’s long-term debt.
“Gridlock is the greatest threat, much greater than anything else that could happen to our economy,” she said.
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