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On 5/7/2021, during news brief, Treasury Secretary Janet Yellen dismissed concerns that sweetened unemployment benefits contributed to a slowdown in hiring last month, instead suggesting that a lack of child care and fears of contracting COVID-19 were the reason for the worse-than-expected April jobs report, which was the biggest miss in history.
Republican lawmakers were quick to blame the $1.9 trillion coronavirus stimulus bill, known as the American Rescue Plan, that Democrats passed without a single GOP vote in March for the lackluster report. That measure expanded unemployment benefits by $300 a week and sent a third $1,400 stimulus check to most U.S. households. Montana and South Carolina are among the states ending the expanded unemployment benefits for residents next month. “I don’t think that the addition to unemployment compensation is really the factor that’s making a difference,” she said, adding: “Caregiving responsibilities are still important reasons people are unable to return to work…Concerns about the pandemic and the health consequences I think remains a factor for many.”
A recent Bank of America analyst note suggested that Americans who earned less than $32,000 before the crisis began would be better off in the near term collecting jobless benefits rather than working.
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Psaki: Hey. Hi, everyone. We were a little early today. I apologize for that. Okay, so good afternoon and happy “Jobs Day.” Today I’m honored to have Secretary of the Treasury Janet Yellen join me here.
Secretary Yellen has almost 50 years of experience in academia and public service. She’s the first person in history to have led the White House Council of Economic Advisers, the Federal Reserve, and the Treasury Department.
Her scholarship has focused on a range of issues pertaining to labor and macroeconomics. And her work on efficiency wages with her husband, George Akerlof, showed that firms that offer better pay and working conditions tend to be rewarded with higher morale, reduce turnover, and greater productivity.
In 1994, President Bill Clinton appointed Dr. Yellen to the Federal Reserve Board of Governors. Three years later, he named her Chair of the White House Council of Economic Advisers.
In 2004, Secretary Yellen began her third tenure at the Federal Reserve, this time as President of the Federal Reserve Bank of San Francisco. From that post, she spotted a worrying economic trend: a bubble in home values — a bubble in home values. When the housing bubble popped in 2008, Secretary Yellen helped manage the resulting financial crisis and recession.
And in 2010, President Obama appointed her Vice Chair of the Federal Reserve before nominating her to succeed Fed Chair Ben Bernanke as the nation’s top central banker.
She can take a couple of questions. As always, I will be the bad cop. And again, thank you, Secretary Yellen, for joining us.
Sec Yellen: Thank you, Jen. And hello, everyone. It’s a pleasure to join you this morning. I’ll be pleased to take your questions, but first I thought I’d spend a few minutes on the state of our labor market.
When our administration took office, our economy was in a state of crisis. Our most pressing concern was providing a lifeline for Americans suffering under the weight of the pandemic. Our solution was the American Rescue Plan, which the President signed back in March. It was designed to provide enough relief for Americans to make it to the other side of the pandemic with the foundations of their lives intact: providing nutrition for hungry families, rental assistance for those at risk of eviction, and a lifeline for businesses on the brink.
We knew it would be a long road back to recovery. That’s why the legislation provided lasting support rather than just a few months of relief. We knew this would not be a 100-day battle. And today’s jobs report underscores the long-haul climb back to recovery.
But let me be clear: The 266,000 jobs added in April represent continued progress. We’ve added an average of over half a million jobs during the past three months. And we saw a promising growth of 331,000 jobs in leisure and hospitality, which includes the restaurants and bars that have been so badly battered by this pandemic.
We should also be encouraged by the ongoing expansion of the labor force. It’s a promising sign of our economy winning out over the pandemic. Last month, the labor market expanded as more people reported they are looking for work, hours are increasing, and the share of workers forced into part-time jobs is declining.
Indeed, we’ve made remarkable progress. After all, one year ago, we learned we’d lost over 20 million jobs in one single month. I believe we will reach full employment next year.
But today’s numbers also show that we’re not yet finished. As our economy continues to heal, it’s important to consider ways in which we can build back better, and one of those ways is removing barriers to higher labor market participation. Even though we’re seeing sustained job growth now, more jobs ultimately will require more individuals to participate in the labor market.
As you know, the topline unemployment rate you see doesn’t include the many millions of Americans who were not seeking work, and progress here is critical.
When I first came to Washington in the early ’90s, a higher percentage of American women worked than almost any other developed nation. Out of the 22 wealthiest countries, we ranked sixth in the labor force participation. By 2010, America fell to 17th. By the eve of the pandemic, women’s labor force participation was hovering somewhere near where it had been in the late ’80s and early ’90s.
Male labor force participation has fared even worse. A smaller percentage of men are working now than at any point in the last 70 years.
There are many drivers of these trends. But as my colleagues at the Council of Economic Advisers have pointed out, an undeniable one is a lack of support for people as they raise children and care for older relatives. Our policymaking has not accounted for the fact that people’s work lives and their personal lives are inextricably linked, and if one suffers, so does the other. The pandemic has made this very clear.
Between February and April of 2020, 4.2 million women dropped out of the labor force, in large part due to an unexpected caregiving burden. Nearly 2 million have not yet returned.
The challenge before us is to help these 2 million women to return to the labor market, but to help the millions of other workers who left prior to the pandemic to do the same. It’s a core reason that, last week, President Biden proposed the American Families Plan. The plan offers up to $8,000 to pay for childcare and make sure kids from lower-income families can attend for free. It offers universal pre-K to three- and four-year-olds, and it provides up to 12 weeks of paid family and medical leave.
With today’s jobs numbers, I’m confident we will have a strong, prosperous economy this year and in 2022. But what about the rest of the decade and the years beyond? Our country’s long-term economic health depends on whether we invest in American families and workers, and I’m very hopeful we will.
Let me stop there. And I think I have to take some questions.
Treasury Janet Yellen April jobs report: unemployment benefits, inflation 5/7/2021 https://t.co/6YEGLU2jmf
— HYGO News (@HygoNews) May 8, 2021
Psaki: Alex.
Question: So President Biden suggested that the increase in unemployment benefits has not affected the jobs report, but the Chamber of Commerce and some business leaders are arguing that it’s easier for people to stay home; they’re receiving more money than they would for them to go back to work.
So what’s your response? How do you explain the slowdown in hiring that we saw in this jobs report? And is there talk about reducing that unemployment benefit in the future to get people back in the work — back to work?
Sec Yellen: So, first of all, I’d note that the jobs report is a little bit stronger than the headline numbers might suggest on the hiring front.
The number of people working part time for economic reasons, namely involuntary part-time work, that number declined by 600,000, and hours — average hours of work ticked up by a tenth. So, that means that an extra margin in which — in which employers are able to boost their labor is by adding to hours of existing employees, and that those employees want that extra work. They were involuntarily working part time.
You know, the labor market is volatile from month to month, and I think the best thing is to average through and say we’ve been creating over 500,000 jobs a month, on average, over the last three months.
Look — but, you know, it’s clear that there are people who are not ready and able to go back into the labor force. Many children are back in school — school, but not on a regular schedule. It’s a challenge for parents to manage schedules where one child is in school a couple of days a week and another child is in school some different days during the week.
So caregiving responsibilities and absence of childcare are still important reasons why people are unable to return to work. You know, concern about the pandemic and the health consequences, I think, remains a factor for many.
You know, I don’t think that the additional — the addition to unemployment compensation is really the factor that’s making a difference. There’s no question that we’re hearing from businesses that they are having difficulty hiring workers. Although over 300,000 workers, I’d point out, ha- — were added this last month in leisure and hospitality, which is the most badly affected sector.
But, you know, when we look across states or across sectors or across workers — and if it were really the extra benefits that were holding back hiring, you’d expect to see that in — either in states or for workers or in sectors where the replacement rate due to UI is very high, you’d expect to see lower job-finding rates. And in fact, what you see is the exact opposite.
You know, we’ve had a very unusual hit to our economy, and the road back is going to be somewhat bumpy. We have to expect that there are a variety of bottlenecks that are also relevant. So we’ve just seen motor vehicle production shut down in some places because of a shortage of semiconductors. There was a loss of jobs there this month. There were setbacks in the lumber industry because of shortages there.
So, you know, starting up an economy again, trying to get it back on track after a pandemic in which there are a lot of supply bottlenecks is going to be, I think, a bumpy process. But I really don’t think the major factor is the extra unemployment.
Question: Madam Secretary —
Psaki: Oh, go ahead, Kelly.
Question: Were you surprised, Madam Secretary, about the number? Because we’ve heard so much about a pent-up demand, a desire to get back; we’ve seen vaccinations rise; and we know that some of the funding in relief packages targeting businesses is in the bloodstream now. So, were you surprised by the number? And how much of a change would you anticipate as the summer season and the reemergence continues?
Sec Yellen: Well, I believe that we’re going to — the recovery will remain on track, and it may be bumpy from month to month for a variety of factors. You know, there are often quite large revisions to months as well.
There is data — two days before this, the ADP data that suggested over 700,000 jobs would be created, unemployment insurance claims had gone down. So, if I had had to write down a number as my best guess, it would have been higher. But I’ve watched data for a long time, and I know that it is extremely volatile. There are often surprises and temporary factors, and one should never take one month’s data as an underlying trend.
Besides — remember I said the — the — actually what happened is stronger, I think, than the headline number looks.
Question: Madam Secretary —
Question: And do you see — do you see the relief money in the bloodstream of the economy now making a difference?
Sec Yellen: Oh, absolutely. I mean, we saw very robust spending — consumer spending — in the first quarter of the year. The stimulus checks getting out there stimulated a surge in spending. We’re seeing services begin to pick up from very low levels.
I think there’s absolutely no question in my mind that the money that the ARP has put out there and will continue to put out there in the coming months is going to boost spending.
And as things open up with further success with vaccinations in the pandemic, people are going to go back to eating out and traveling and doing all the things that they did. And I — I absolutely expect to see continued progress in the probably bumpy. And there is —
You know, look, we’re still down net 8.2 million jobs from where we were in February of 2020. That is a big hole, and we’re going to hit back, but, you know, it’s going to take a little while.
Psaki: Steve.
Question: Thanks, Jen. Madam Secretary, what’s your advice then to the employers who say they are having difficulty hiring workers? One suggestion has been made to perhaps raise wages. But if businesses have to compete with plussed-up unemployment benefits, won’t that result in an increase in consumer prices and touch off an inflationary cycle that so many experts have been worried about?
Sec Yellen: Well, I really doubt that we’re going to see an inflationary cycle, although I will say that all the economists in the administration are watching that very closely.
As my colleagues have said — the CEA put out a blog post on this — we expect somewhat higher inflation over the next several months for a variety of, essentially, technical reasons because of something called “base effects” that, in year-over-year comparisons right now, the months in which prices fell the most are moving out of the average, and that leaves us with a number — with the months in which they were rebounding toward more normal levels. But that’s — that’s a transitory thing, not something that’s associated with a buildup in wage — in wage pressures.
I mean, with respect to wages, the best data that we have suggests that wage growth has really not picked up meaningfully. And in areas where you do see some pickup — for example, this month, in services, there was a pickup in wages — but still, that’s an area where wages actually fell at the beginning of the pandemic. And, you know, we’re seeing a revival not back yet up to normal levels.
So, you know, in — in areas where wages are more flexible, they fell a fair amount. As the economy revives, we expect to see a return to more normal levels. But I don’t think we’re seeing meaningful upward pressure through — throughout much of the economy, but we’ll watch that very carefully.
Question: Madam Secretary —
Psaki: Sal- — I was going to call on you, Saleha. Go ahead.
Question: Thank you. Madam Sec- —
Psaki: And then she’s going to have — sorry. This is going to have to be the last one. And she’s always welcome back any time — I think, it’s safe to speak for all of you.
Go ahead.
Question: Madam Secretary, is there any more that you can share on how long Treasury’s extraordinary measures on the — extending the debt limit may last? There were some comments yesterday from the agency, but if there’s anything more you can share on that.
Sec Yellen: So all I can really tell you is that the debt ceiling comes back into effect on July 31st, and there are a series of so-called “extraordinary measures” that are ordinary in the sense that they’ve been used many times in the past.
But it’s exceptionally challenging this time to try to figure out just how long those measures are going to last, in part because of higher and more volatile spending in revenue numbers associated with the state of the economy and the pandemic.
So we’ve evaluated a range of scenarios, and we are concerned that there are scenarios that would give a very limited amount of additional time through the use of extraordinary measures, but I can’t really be more precise than that.
Question: You don’t know if it’s into October or further?
Sec Yellen: I — I’m just saying near — there are scenarios in which so- — you know, sometime during the summer, wi- — the extraordinary measures would run out.
Psaki: Thank you, Secretary Yellen, for joining us.
Sec Yellen: My pleasure. Thank you, Jen.
Psaki: Thank you.
Question: Thank you very much.
Sec Yellen: Thanks.