Federal Reserve Chair Janet L. Yellen, second from left, visits with attendees before giving a speech on economic outlook and monetary policy on June 6 in Philadelphia, Pennsylvania.

Federal Reserve Chair Janet L. Yellen, second from left, visits with attendees before giving a speech on economic outlook and monetary policy on June 6 in Philadelphia, Pennsylvania.

On Monday, Federal Reserve Chairwoman Janet Yellen indicated that the Fed would not raise short term interest rates this month. Before last Friday, it was widely predicted they would do just the opposite. But a disappointing employment report – just 38,000 new jobs added in May – meant a change in plans. In her speech, Yellen acknowledged that last month’s job numbers were “concerning” but she also offered a generally optimistic assessment of the economy pointing to what she sees as many bright spots. Diane and her guests discuss the state of the U.S. economy.


  • David Leonhardt Editor, The Upshot, a New York Times website covering politics and policy.
  • Jim Tankersley Economic policy correspondent, The Washington Post; editor of the "Storyline" policy blog.
  • Nell Henderson Global central banks editor, The Wall Street Journal.

Economic Outlook: What Should You Watch This Summer?

What will make or break the economy this summer? The Washington Post’s Jim Tankersley sat down after our show to talk about three things to watch.



  • 10:06:53

    MS. DIANE REHMThanks for joining us. I'm Diane Rehm. In a speech yesterday in Philadelphia, Fed chair Janet Yellen indicated there would not be an interest rate hike this month after last Friday's disappointing jobs report. Here to discuss Yellen's speech and the state of the U.S. economy, Jim Tankersley, economic policy correspondent at The Washington Post, Nell Henderson, global central bank's editor at The Wall Street Journal.

  • 10:07:25

    MS. DIANE REHMJoining us from the studios of NPR in New York City, David Leonhardt, editor of "The Upshot" for the New York Times. And I'm sure many of you will want to join the conversation. Give us a call at 800-433-8850. Send an email to drshow@wamu.org. Follow us on Facebook or Twitter. And welcome to all of you.

  • 10:07:55

    MS. NELL HENDERSONNice to be here. Thanks, Diane.

  • 10:07:55

    MR. JIM TANKERSLEYThank you.

  • 10:07:55

    MR. DAVID LEONHARDTThanks, Diane.

  • 10:07:56

    REHMThank you. Jim Tankersley, as much as reporter tried to pin Janet Yellen down yesterday, they couldn't do it. What kind of message did she send?

  • 10:08:10

    TANKERSLEYI think she sent us a purposefully mixed message, which is what central bankers are so often good at. But the message was stressing really two things. The first was that the U.S. economy still is on what she would characterize as on an optimistic path. It's improving. It's gotten better and she still thinks it's going to get better and heal to the degree which the Fed can start to raise interest rates more.

  • 10:08:36

    TANKERSLEYBut the second is, there's been some new clouds on the horizon. This new jobs report has been concerning, she called it and that allowed her to basically take a rate hike this month off the table. And she wanted to make sure we knew that the Fed's not going to move until its sure that those clouds are passing and not massing.

  • 10:08:56

    REHMNell Henderson, talk about that jobs report and how it sort of shaped not only Janet Yellen's thinking, but our own thinking as we look at the economy.

  • 10:09:13

    HENDERSONWell, there's no way to say it other than to say it was very disappointing, very bad on many levels. It was the slowest job growth in six years. Only 38,000 new jobs added. The unemployment fell to a six year low of 4.7 percent, but that was entirely because hundreds of thousands of people dropped out of the labor force, that is they gave up looking for work.

  • 10:09:37

    HENDERSONAnd it -- they also revised down the labor department's estimate for how many jobs were added in April and May so it really kind of recast our perception of what was happening with the economy this year. You know, for the last five years in a row, we've had pretty lousy first quarter growth. The economy really slumps and then it rebounds in the spring. And the Fed thought that that was pretty much what we were seeing this year.

  • 10:10:04

    HENDERSONIn the spring, the consumer spending seemed to be up, retail spending, auto spending, the housing market's doing a bit better. But that jobs report really kind of rewrites the narrative and I like the metaphor Jim used. It created these clouds of uncertainty and the Fed really doesn't know are these clouds going to pass and the sun's gonna come through the summer with a really nice rebound and maybe a rate hike in September or is this a sign of a more serious slump in the economy.

  • 10:10:37

    HENDERSONYou know, economists say don't put too much on any one report, but the jobs report really is one of the most comprehensive reports we get from the government. They survey 146,000 business establishments. They survey separately 60,000 households. And they get us a pretty broad picture of what's happening and so this report really was very troubling.

  • 10:11:01

    REHMAnd David Leonhardt, I gather you are going to start writing an op-ed column for the New York Times later this year. Is your focus going to be primarily the economy?

  • 10:11:18

    LEONHARDTI wouldn't say primarily. Probably a mix of the big domestic issues. Certainly the economy, education, politics and then also I'm hoping to write a lot about the stuff of daily life, transportation, work like, parenting.

  • 10:11:32


  • 10:11:32

    LEONHARDTIn addition to things like the Federal Reserve.

  • 10:11:34

    REHMTell me what your take was on Janet Yellen's response.

  • 10:11:39

    LEONHARDTWell, Diane, I'm gonna do one of these same on the one hand on the other hand things that...

  • 10:11:44

    HENDERSONYou should be an economist, David.

  • 10:11:44

    LEONHARDT...Janet Yellen -- so I'm a fake economist. So I think we shouldn't make too much of any one jobs report. The margin of error on a jobs report is 100,000 either way, which is just a fancy way of saying that it's an estimate and maybe job growth was actually 100,000 higher than they reported or 100,000 lower. It happens with some regularity that we get a weak jobs report in the middle of an economic expansion.

  • 10:12:12

    LEONHARDTMost of those weak jobs reports, when they get better information in later, when they get more survey data, when they get more information, the weakness disappears. And when you look back historically, the weakness isn't there. And the same thing could happen this year. When we look back at this May 2016 five years from now, we might never see this slowdown. That is what happens most of the time.

  • 10:12:35

    LEONHARDTMay had some funny things going on, including a strike at Verizon that may have temporarily lowered it, but it was a really weak report. And so it's just one data point or it's just one report with a bunch of weak data points, but it was really weak. And here comes the on the other hand. The worrisome thing here is that the Fed, first, under Ben Bernanke and now under Janet Yellen, has really made only one mistake over the last five years.

  • 10:13:03

    LEONHARDTAgain and again, it has been too optimistic. It has thought we were coming out of the terrible aftermath of the financial crisis and it was too slow to cut rates and has been too quick to want to raise them. And financial crises do terrible damage. And so the worry here is that once, again, the Fed is looking at the economy with rose-colored glasses and this jobs report is a reminder that they just shouldn't be too quick to raise interest rates.

  • 10:13:32

    REHMSo you're calling what Janet Yellen and prior to her, Ben Bernanke, have done was a mistake, this time as well as previous times in terms of either lowering or raising interest rates?

  • 10:13:56

    LEONHARDTI think that -- I don't know that the raising of the rate before was a mistake. I think the talk that the Fed gave earlier this year -- we now know, in fairness, with the benefit of hindsight, was just a little too bullish about the economy and it was clear that on multiple times -- Bernanke, we should be clear, did heroic and really just unbelievably strong work in 2007, 2008, 2009, responding to the crisis.

  • 10:14:21

    LEONHARDTIt's arguably the single best response to a financial crisis that any central bank has ever done in modern history. So I'm being a little hard on him here. But then, after 2009, he and his colleagues were just too quick to want to see the economy improving. And my concern here is that although Yellen is traditionally thought of as a dove, which means that she doesn’t want to raise interest rates too quickly, my concern here is that the Fed, in recent months, once again, may have been too quick to say, ah, now we can go back to raising rates.

  • 10:14:52

    LEONHARDTAnd this jobs report seems to increase the odds that the economy has some real problems. It doesn't make it the most likely situation, but it increases the odds.

  • 10:15:02

    REHMI want to go back to the numbers on that jobs report. I just found myself wondering how many people have literally taken themselves out of the jobs market because they wanted to retire, that the age level has reached a point where you're having more and more people step out of the jobs market and that that may have had some weight here.

  • 10:15:39

    HENDERSONThat's, of course, part of what's happening over the long term.

  • 10:15:42


  • 10:15:43

    HENDERSONLabor force participation, the share of the adult population that's either has or seeking a job peeked in 2000 and has been declining since then, in large part, because of the aging of the population. You've got the baby boom generation now moving, you know, into, you know, collecting Social Security. Unquestionably, however, the crisis and the recession moved a lot of people out of the labor force that probably would've wanted to stay in a bit longer.

  • 10:16:09

    HENDERSONLook how long you're enjoying your job. There are lot of people, I think, who would've preferred to stay in the labor force quite a bit longer, maybe part time, but just got knocked out. And there have been stories -- my colleague, Ben (word?) had a great story recently about the scars that people suffer during downturns when they lose their job. It's very hard to get back in the labor force, particularly if you're older.

  • 10:16:30

    HENDERSONParticularly, at a time of rapid technological change. You know, either you feel or the employers perceive that you're behind the times on skill sets. People suffer from depression, higher rates of divorce and I think it's unquestionable that the recession accelerated that process and there are some number of people who might come back into the labor force.

  • 10:16:55

    HENDERSONOver the last year, we saw some uptick. It's a big unusual for so many people to drop out in one month. As David pointed out, any one month, there's not one thing that happened in May that would drive so many people off the road. I think that the real question for the Fed is Janet Yellen really wants to get unemployment low enough for long enough that it will encourage people to come back, that it will create a tight enough labor market that employers will raise wages and offer more money and encourage people to come back into the labor force.

  • 10:17:27

    HENDERSONI think that is the thing that we all want to see, the Fed wants to see. And the Fed's going to be very cautious about raising rates because they don't want to short circuit that process.

  • 10:17:37

    REHMNell Henderson, global central bank's editor for The Wall Street Journal. Jim Tankersley is economic policy correspondent at The Washington Post and David Leonhardt of the New York Times. We are going to take your calls, your comments. I look forward to speaking with you.

  • 10:20:01

    REHMAnd welcome back as we look at the economic outlook, especially in this year of a very important presidential election. Three people are with me. Joining us from the NPR studios in New York, David Leonhardt of The New York Times. Later this year he'll be writing an op-ed column for The New York Times. Nell Henderson is with The Wall Street Journal. Jim Tankersley is editor of the "Storyline" policy blog at The Washington Post. And we do invite your questions, comments, 800-433-8850.

  • 10:20:53

    REHMSo, Jim Tankersley, you've been reporting on how uneven the economy looks. Talk about that.

  • 10:21:02

    TANKERSLEYSure. Absolutely. When we think about this recovery, aside from just the headline numbers we're talking about -- things have gotten better, unemployment has gone down, jobs have been created -- we have to look at how it has not -- that has not happened evenly across the country. And particularly, we've seen some big geographic disparities. There's an enormous concentration of economic activity in the biggest cities in America, the biggest, most innovative cities in America. They've roared past the jobs that they lost during the recession. They've made them all up and added millions more...

  • 10:21:31


  • 10:21:31

    TANKERSLEY...at the top 100 metro areas. Everybody else combined just barely passed back -- getting back to where they were before the recession. And it's even more dramatic when you look at business formation, which I've been writing about recently. Two-thirds of the counties in America, the rural counties in America, the smallest ones, actually lost businesses during this recovery.

  • 10:21:52

    REHMSo how do you account for all that?

  • 10:21:55

    TANKERSLEYSo this is census data. But it's, essentially, you tally up the number of establishments in a county and you see if they've gone up or down. And from 2010 to 2014, in two-thirds of these rural counties, which are less than 100,000 people, there are fewer -- there were fewer businesses in 2014 than in 2010. And this is a time, again, of national growth, of national recovery and of a time when there's been relatively strong growth in business establishments in the, like, top-20 size counties -- the sort of 20 most innovative counties in America.

  • 10:22:29

    REHMSo, Nell, considering that, that has really very important implications for this election.

  • 10:22:38

    HENDERSONWell, sure, because I think a lot of what you're seeing in the electorate this year is this anger that's being channeled into the anti-establishment candidates over the unevenness of the recovery, but also the fact that there are a lot of people that have just been left behind. That, you know, if you look since 2000, I just read the median household income for all of America is down 7 percent. So the median is the halfway point. It means half above and half below. So that means more than half have lower household incomes now, adjusted for inflation, than in 2000. And I think that's a shock to a lot of Americans who expect...

  • 10:23:16

    REHMAnd what about costs?

  • 10:23:18

    HENDERSONWell, okay, that's adjusted for inflation. And inflation -- we've had very slow inflation since the...

  • 10:23:23


  • 10:23:23

    HENDERSON...the recession of course. I think, the other flip side of that is very low wage increases. And if we could pull back the lens a little bit -- we're focused a lot on the economy this year and what it means for the election -- you know, if you pull back, the economy's been very weak. There's been a very fragile recovery since the recession. And there are some signs of economic weakness really dating back to about 2000 -- very slow labor-force growth, very slow productivity growth. And, in part, this year you're seeing this frustration boiling over, that things aren't getting better for a lot of people.

  • 10:23:59

    HENDERSONAnd, you know, you hear some of the rhetoric on the campaign trail. And it's interesting, you know, normally this time of year in a presidential election year, we'd all be talking about how the state of the economy is going to help the incumbent or hurt the incumbent. If it's a good economy, it's going to help the incumbent's party or vice versa. This year, there are people speculating that one thing that might be holding back businesses from investment might be uncertainty about the election.

  • 10:24:26

    HENDERSONYou've got two candidates, in Sanders and Trump -- and I'm not critiquing their policies -- but they clearly are campaigning against the establishment and, by implication, establishment orthodoxy in terms of economic policy. They're both criticizing trade, free trade. Hillary Clinton is even criticizing Obama's Asian-Pacific Trade Agreement. Trump wants less financial regulation and Sanders wants a lot more. So it's plausible that if you're a business and you're thinking about whether to expand and hire -- particularly, say, your business involves exports -- you might think, you know, there's such a wide range of outcomes...

  • 10:25:05


  • 10:25:06

    HENDERSON...why not just wait until next year to buy...

  • 10:25:07

    REHMWait until it's over.

  • 10:25:09

    HENDERSON...to expand my factory or to hire?

  • 10:25:11


  • 10:25:11

    HENDERSONWhy not just hold off for now?

  • 10:25:13

    REHMDavid Leonhardt, do you want to jump in on this uneven geographic recovery and the possibility that many, many hiring groups are waiting for the election to be over?

  • 10:25:31

    LEONHARDTYeah. I mean, I think the -- I think -- I'm not sure they're (unintelligible) we've now seen them waiting for years to invest. So they were waiting in -- they've been waiting for much of the last decade. And it is true we have an election. And I absolutely agree with Nell that the uncertainty around this election seems, in some ways, bigger than other elections. But the waiting isn't new.

  • 10:25:53

    LEONHARDTAnd so my sense is that the bigger force that is introducing pause into businesses is just the slowness of the economy. That if you're a business and you're not sure how much people are -- how much money people are going to have and how much they're going to spending, and wages, as Nell pointed out, have been flat for 15 years, that just injects a lot of uncertainty into it.

  • 10:26:13

    LEONHARDTI think the uneven nature of this recovery is really important. I think that we really do have these much healthier metropolitan areas, where people tend to be more educated, where the education systems are doing quite well, where job growth has been not great but it's been decent to pretty good. And then we have large parts of the country that are hollowing out in some ways. And these tend to be places with lower educational attainment, with schools that don't do as well, both K-12 and colleges, where we have a lot of college dropouts and people who start community colleges and don't finish. And those places are having a really hard time producing jobs in an era of technology and globalization.

  • 10:26:59

    LEONHARDTAnd it's worrisome to see just how much disaffection there is...

  • 10:27:03


  • 10:27:04

    LEONHARDT...in this country outside of the major metropolitan areas.

  • 10:27:07

    REHMHere's an email from Peggy, Jim Tankersley. Are people hired through H-1B visas counted in the jobs report? More and more companies are using them, says Peggy.

  • 10:27:24

    TANKERSLEYWell, I'm not sure that we can say more and more companies are using them, since there are a limited number of them. And this is one of the things that the Silicon Valley firms, for example, have been lobbying on for years as part of immigration reform, they want more. So...

  • 10:27:38


  • 10:27:39

    TANKERSLEYBecause they want to bring in higher-skilled workers from other parts of the world who -- their argument is, if the best and brightest workers in the world want to work here, we should give them the ability to do so. And that will improve our output, our products, our everything.

  • 10:27:55

    REHMSo are they counted in the jobs report?

  • 10:27:58

    TANKERSLEYYeah. They are counted. People who are employed, I believe -- and correct me if I'm wrong, Nell -- are counted here. But they're not an appreciable difference, I think, in the flow of this report, because those visas fill up so quickly.

  • 10:28:11

    TANKERSLEYI do want to, if it's okay, to just step back on something that David said. Explain maybe why it's so dangerous to an economy to have such a divergent recovery like this. There's too big things I'd focus on. One is that the type of worker who's being left behind is easy to see. It's a blue-collar worker. It's someone with less education. Someone who used to work in manufacturing or do something else with, often, his hands. And that is very much the profile we're seeing right now of a disaffected Trump voter and, to a lesser extent, Sanders voter, and where a lot of the economic frustration is coming from in the country is blue-collar workers without college degrees.

  • 10:28:50

    TANKERSLEYThe second reason to worry about it is that if we pack all of our economic activity in cities, where it's really expensive to live, you're making it hard for people to access opportunity. So you could make an argument, well, if all the job growth's happening in Silicon Valley or New York, everyone should move there. But it's really expensive to live there.

  • 10:29:09

    REHMYeah, you bet.

  • 10:29:09

    TANKERSLEYAnd so everyone can't move there. And the returns -- your quality of live doesn't go up as fast if you move there for opportunity, because you're paying so much more in housing. And this ends up being a deterrent to people moving to where we want them to be to be most productive in the economy. So it would be better for us if we had more diverse opportunities around the country.

  • 10:29:30

    REHMWell, I was going to ask, Antoine Van Agtmael wrote a book talking about technology on the rise in many areas where manufacturing has gone down, that there are new opportunities, that there are new kinds of jobs for people who have previously been in those manufacturing situations. Do you not see that happening, Nell?

  • 10:29:59

    HENDERSONI guess my impression is that the jobs that are being created in many areas, including manufacturing, tend to require more skills than in the past. I mean, I've interviewed a lot of people who used to be able to, with just a high school education, get a really decent factory job and support their whole family and go on a vacation and to buy a boat and buy a house. And those jobs are gone. And the manufacturing jobs that are being created now require trigonometry or, you know, computer skills, or more.

  • 10:30:28

    HENDERSONAnd it's -- one of the, you know, the difficulties in terms of trade is this idea that, okay, in the past we thought the benefits will be widely spread and the harm will be narrowly concentrated. We can help the people who are harmed. We'll retrain them. We'll give them unemployment insurance when they lose their jobs. We'll give them some, you know, new, you know, computer coding classes or something. And it just hasn't worked for a lot of people.

  • 10:30:54


  • 10:30:55

    HENDERSONAnd I think that's also some of the frustration, is a lot of people who keep -- and then you look at the whole student debt story, which a whole other hour-long conversation, a lot of people who were encouraged, let's say, okay, improve your skills. Go get, go to one of these schools and get a credential. And we'll lend you lots of money. And then either they dropped out, they couldn't finish...

  • 10:31:13


  • 10:31:14

    HENDERSON...they couldn't do it. Or maybe they got the degree and they didn't get a job out of it and then they've got all this debt.

  • 10:31:20

    REHMAnd, David, here's an email from Marian who asks, how much has automation played a part in the economy? She says, I drive by empty store after empty store and know that online retail has taken over. Where or how will people make money?

  • 10:31:47

    LEONHARDTWell, the good news is, is that automation has always, for a few hundred years, been with us. And there have always been concerns that it was going to make human labor obsolete. And so far those concerns have never come to pass in any long-term way, right? The classic example is the automobile put a lot of horse and buggy makers out of work. But it's not as if those people and their descendents never worked again, right? The economy found new things for them to do.

  • 10:32:20

    LEONHARDTAnd so over time, particularly if we're in an economy in which people are getting more education, there should be new and great things for people to do. That's why we are so much wealthier than we were a hundred years ago, even though we have so much more automation than we did then. The worrisome thing now -- and I'll, and with a little bit of optimism here -- but the worrisome thing now is again to come back to the statistic that Nell used that is so important, we've basically had 15 years with, for many people, very little or zero wage growth. And so it feels as if some combination of automation and global trade and the slow gains in education have raised worries that there does seem to be something that's a little different this time.

  • 10:33:07

    LEONHARDTThe reason for optimism is that -- setting aside this one last jobs report -- the economy really has done better over the last few years than it did. Before coming on, I just looked up what had happened to inflation-adjusted wages -- so this is after you subtract rising prices -- for the typical weekly worker in the private sector in this country. And during President Obama's first term, that worker's pay essentially didn't budge. It was 0 percent raise. It just went up with prices. During his second term so far, that wage has gone up about 4 percent or on the order of 1 percent a year. Which isn't bad. It's not great, but it isn't bad. And so there are some reasons to think that we are not doomed to a disappointing economy forever.

  • 10:33:57

    LEONHARDTI'd just like to have some more evidence of that and some fewer jobs reports like the one we just had.

  • 10:34:04

    REHMAnd you're listening to "The Diane Rehm Show." And let's open the phones. We'll go first to Brett in Louisville, Texas. You're on the air.

  • 10:34:23

    BRETTHi, Diane.

  • 10:34:24


  • 10:34:24

    BRETTYeah, I'd like to -- I love your show. I want to preface this by saying, we just talked about education, but my -- I have a degree in electronics. My wife has two bachelors, a master's and is working on her doctorate. And our household income over the past decade -- the top line has basically stayed stagnant, but the bottom line has actually drastically decreased. And I'm wondering where people are getting these numbers from. Because it's like, when I just look at health insurance, you know, we used to pay $300 a month for really good insurance. And now we are over $1,500 a month in insurance payments. And it's -- I don't know where they're getting their numbers from, but that is a huge hit to our bottom line.

  • 10:35:09

    REHMBrett, is that all in health insurance?

  • 10:35:14

    BRETTYes, ma'am. My wife is an educator here in Texas. And Texas is rather notorious for cutting education spending. And they've done it through cutting benefits and...

  • 10:35:23

    REHMI see.

  • 10:35:24

    BRETT...and teachers. So it's gone from...

  • 10:35:25


  • 10:35:26

    BRETT…$300 out of pocket to well over $1,400, $1,500 a month now. And it's terrible insurance now. And I don't know where -- I think these people live in fantasyland or something. It's like...

  • 10:35:39

    REHMNell, do you want to comment?

  • 10:35:41

    HENDERSONWell, I really -- I sympathize. I very much sympathize.

  • 10:35:44


  • 10:35:45

    HENDERSONYou know, and I think this goes also to some of the frustration you're seeing out there is that, if you, kind of three pillars of feeling like you're in the middle class is being able to own a home, have health insurance and afford education for your kids. And a lot of people, you know, lost equity or lost their homes in the crisis. A lot of -- they're paying a lot more for health insurance. And a lot of people are really struggling with higher education expenses for their kids. And I think it's really shaken a lot of people who thought a middle-class existence was supposed to be much more economically secure than this feels.

  • 10:36:20

    REHMWhat do you think, Jim?

  • 10:36:22

    TANKERSLEYI mean, I have great sympathy for the caller. And I think, you know, the last 16 years, as David and Nell have both pointed out, have been brutal for the American worker. And actually, if you date back and you take out the bubble from the '90s, basically median household income is the same today as it was in 1989. I mean that's -- we went up in the '90s and we crashed back down. And then we've had a bad decade and a half. And the frustrations that the caller is venting about -- rising health care prices, about, what Nell was saying about housing prices and education prices -- these are true things.

  • 10:36:57

    TANKERSLEYThey've been offset to some degree by a slow increase or decrease in consumer prices. Food costs less now than it used to and, like, to eat out, for example, if you think about it as an inflation. And certainly, like, we pay less today for tennis shoes than we would have.

  • 10:37:15

    REHMJim Tankersley of The Washington Post. Short break here. When we come back, more of your calls, your tweets, your emails. I look forward to speaking with you.

  • 10:40:01

    REHMAnd welcome back. Here's an email from Steven, who says after 34 years at my last job, I've been out of work for almost four years and am still looking. Am I being counted as looking? David Leonhardt?

  • 10:40:24

    LEONHARDTWell there's the technical definition of unemployment. Jim or Nell will correct me if I get the days wrong here. It essentially says you have to have looked in the last month, actively looked for a job. So the question is do -- would someone like that, who's (unintelligible) the Labor Department that they have looked for a job in the last month. If they haven't, they wouldn't be officially counted as unemployed.

  • 10:40:51

    LEONHARDTBut one of the worrisome things about the long-term economic trends that we've been talking about has been the real rise in the unofficially unemployed, and so when the economy -- well, when the economy was growing, as it has been for the last few years, back in the 1960s, it used to be that prime-age men, men between 25 and 54, 95 percent of them had a job. And the other five percent were some mix of officially unemployed or retired or in school.

  • 10:41:22

    LEONHARDTAnd now that figure is closer to 87 percent. So there really are a large number of men who are not working and not officially counted as unemployed, and many of them would like to be working if they could find good paying work. 1

  • 10:41:41

    REHMAnd that leads me to a caller in Syracuse, New York. Dan, you're on the air.

  • 10:41:49

    DANYes, thank you. I think you're doing a good job of illustrating why Trump is so popular. I think the working middle classes are demoralized and disgusted. The jobs reports are continually revised downward after a month. It looks like the message in the Fed are bought and paid for by Goldman Sachs alum, Paulson, Geithner, Bernanke, rewarded $750 billion for the fraud. The Fed gives free money to big banks on the back of taxpayers, which is fueling the next bubble, auto loans and credit cards.

  • 10:42:15

    DANPeople perceive Trump speaks without this spin controlled by Goldman Sachs. If you think Trump was tough on Mexican and Muslims, wait until he goes after the Wall Street cabal.

  • 10:42:25

    REHMWhat do you think, Nell?

  • 10:42:25

    HENDERSONI think he's expressing the frustration we're talking about.

  • 10:42:28

    REHMYeah, of course.

  • 10:42:30

    HENDERSONMy point on -- Ben Bernanke never worked for Goldman Sachs, but I think he's -- you know, he's expressing, you know, part of what we're talking about. You know, going back to Jim's point about the uneven recovery, you know, a lot of this anti-elite feeling is focused at the people who live on the coast, as Jim was saying. And these are the people who have seen their incomes rise, who have seen their home prices rise, even through the recent years, and who are running the parties and running the media and running the government and who are very -- oftentimes very sympathetic but aren't feeling the same pain that's being felt out in the rest of the country.

  • 10:43:06

    TANKERSLEYAnd I would say very quickly, one interesting thing that the caller has just illustrated is there is this perception, I believe among many Trump supporters, that he would get tougher on Wall Street. He has also proposed to get rid of the new regulations on Wall Street that have been passed since the crisis. Now you can argue about whether the regulations have been effective, but under President Trump, if we take him at his word for what he would do, we would have fewer regulations on Wall Street than we have now.

  • 10:43:33


  • 10:43:34

    LEONHARDTI do think it's worth pointing out that Trump actually does quite well among higher-income Republicans, as well. So Trump's base of support so far, we've just had primaries, is not simply the working class, and it's pretty clearly only the white working class. There are large numbers of working-class Asian-Americans, African-Americans and Latinos who so far have shown no interest in supporting Trump.

  • 10:44:03

    LEONHARDTAnd so Trump's, Trump's support really does come from a mix of working-class and relatively high-income white Republicans. And so I think we want to be a little bit careful about exaggerating how much support he actually has among the working class.

  • 10:44:21

    REHMAll right. A caller in Louisville, Kentucky. Hi, Randall, you're on the air.

  • 10:44:27

    RANDALLGood morning. In December of 2011, two Ph.D. students with the University of Missouri, Kansas City, put out a paper estimating the Federal Reserve bailout commitment being in excess of $29 trillion. Now we're five years, five-and-a-half years out from -- or four-and-a-half years out from that at this point. I'm sure the number has only gone up. This is rarely included in discussions about the economy, and I'm curious why that is and what your panelists may think the effect of in excess of $29 trillion having been provided from the Federal Reserve has been on the economy overall.

  • 10:45:11


  • 10:45:13

    HENDERSONWell, I'm a little confused of what you're saying. If you're talking about the bailouts, in terms of injecting money into financial firms during the crisis, all of the money has been paid back, and the Treasury ended up making a profit, I believe, on all of the financial rescues that were undertaken during the crisis. If what you're talking about is the Fed expanding its balance sheet, pumping money into the economy to keep interest rates low, that was part of its strategy to help stabilize the economy and bring down unemployment after the crisis.

  • 10:45:41

    HENDERSONAnd they did that by buying bonds and, you know, as a result, you know, little by little the economy has been kind of climbing back from the hole it was in. But I'm not sure -- you know, that money doesn't have to be paid back. That's not like a debt to the -- that the Fed owes anyone.

  • 10:46:02

    REHMAll right, and many people want to know what impact does the uncertainty over the election have on the economy, on spending, buying or selling homes, on hiring. What do you think, David?

  • 10:46:20

    LEONHARDTI think -- you know, I think there has been this mysterious lack of interest from businesses in building new factories and buying new equipment and hiring new workers, and we are not years and years into that. It stretches all the way back to George W. Bush's administration. And so as I was starting to say before, I'm a little wary of saying, well, it's because of Obama, or it's because of Bush, or it's because of Trump, or it's because of Clinton.

  • 10:46:54

    LEONHARDTIt's now been going on so long that it seems to be about something larger than any one election cycle. And I'll be honest. I don't know completely what it is about. But I don't think it's mostly about this election.

  • 10:47:09

    REHMJim, what about productivity? We've heard lots and lots about that. How is that figuring into the whole economic outlook?

  • 10:47:24

    TANKERSLEYIt is one of the concerns that Janet Yellen flagged yesterday about the economy, and it's a thing that I think economists are just starting to really try to disentangle what's happening. Typically over time, the U.S. worker gets more productive. Thanks to technology, thanks to new innovations and how we do things, your typical worker is able to do more in her time on the job now than she was 10 years ago.

  • 10:47:49

    REHMOr is she being forced to do more?

  • 10:47:51

    TANKERSLEYWell, it may be both.

  • 10:47:51


  • 10:47:53

    TANKERSLEYBut she...

  • 10:47:54

    HENDERSONIf she's a journalist.

  • 10:47:54

    TANKERSLEYRight. But she has new tools at her disposal that allow her to improve her output, let's just say, to be vastly over -- you know, making it much simpler than it needs to be. The problem is that in recent -- in the recent quarter, productivity has gone down. It's usually productivity goes up, now it's gone down, and this is a trend that economists are worried about, and it has all sorts of implications.

  • 10:48:20

    TANKERSLEYFalling productivity would mean bad things for growth, and it would mean very bad things for wages because usually the best way to get more money is to produce more, you know, show yourself to be more valuable to your employer and help your firm produce more, make more, do things more. So if we're seeing less productivity, that's bad for the economy overall, it's bad for people's pay going forward, and it's a thing that the Fed and others are trying to figure out what in the world is going on here.

  • 10:48:48

    REHMYeah, how does one account for a lowering of productivity?

  • 10:48:55

    HENDERSONIt is a big debate in economics right now. There are -- there's sort of a school of thought that in -- all the best innovations have been discovered already, we're never going to get a big boom like we got from the creation of electricity, harnessing electricity, or, you know, all the progress we made in the 20th century, all the low-hanging fruit of innovation has been plucked already.

  • 10:49:18

    HENDERSONAnd then there are people who say, well, wait a minute, we're going to have self-driving cars, and we're going to, you know, figure out how to use our phones better, and we're going to have another productivity boom ahead of us. What Yellen said yesterday is that she believes there were some big -- some big damage that was done by the recession and that we are seeing the lingering effects of that and that these kind of headwinds will wane over time.

  • 10:49:42

    HENDERSONAnd so among them is the hit to business investment, to R&D spending, research and development, and to startups, and that once we get further and further out from the recession that those effects should wane and that we should see productivity pull back up again, grow more rapidly. But, you know, it's been seven years since the recession ended.

  • 10:50:05

    REHMAnd some people say that what's happening now even predates the recession.

  • 10:50:10

    HENDERSONYes, yes, productivity growth has been much slower, basically you could go back at least until 2000 and probably before then.

  • 10:50:18

    REHMHere's an email from Nicholas, who says factories moved overseas, destroyed work for non-college workers. Why isn't the federal government creating a massive infrastructure program to employ engineers, laborers, architects to not only do roads but update schools and water systems and create a national high-speed rail network with all cars and parts made in the U.S.? I think that's a question for the U.S. Congress, David.

  • 10:50:58

    LEONHARDTYes, there's a pretty simple answer to that question. Democrats want to do that, and Republicans don't. And so Republicans control the House and the Senate, and so I don't know whether Democrats want to do a massive infrastructure program, but they certainly want to do a significant one.

  • 10:51:16

    REHMBut what's the -- what's the reasoning behind the Republicans not wanting to do it? It is money, or is it politics?

  • 10:51:27

    LEONHARDTWell, it's a combination of both. I mean, if you ask do we have the money as a country, yes, we do, particularly if we made cuts elsewhere. I mean, one of the worrisome things to me about our society is we are very -- we have been very good at protecting spending on safety net programs for middle- and upper-income people. And so if we're being honest about it, our safety net has moved more toward being a safety net for the middle class and the upper-middle class, particularly the elderly middle class and upper-middle class, and we have done less to invest in things like roads and schools and things that in the future might bring growth.

  • 10:52:07

    LEONHARDTWe could probably afford it without even making those other cuts, but that's the way our government has changed.

  • 10:52:13

    REHMHere's an email from Claire, who says many older folks like me had to leave the workforce to become fulltime caregiver to an ailing spouse. It's almost impossible to get back in at the earning level I had after five years of caregiving. My job was secure, but I had to retire. Is that tracked in the jobs report in any way?

  • 10:52:45

    LEONHARDTWe don't -- we don't have good information, I think, from the jobs report on folks with that level of detail, they left to be a caregiver, they come back. We do have, you know, data on people who have left the workforce and then re-enter, and we have data on the long-term unemployed, people who have been looking for jobs for a really long time, like one of the previous callers was. But this is going to be a growing concern, I think, as the population ages and something that we're going to need to spend more time on from a policy standpoint.

  • 10:53:20

    REHMAnd you're listening to the Diane Rehm Show. All right, let's go to Kim in Silicon Valley, California. You're on the air.

  • 10:53:31

    KIMGood morning. Yeah, I just wanted to share some thoughts. I spent my entire career working in the high-tech and medical device manufacturing industry, so about 20 years. And productivity I'm not seeing is on a decrease. I work in this industry. It's definitely on an increase. I (unintelligible) or not executive but management-level employees (unintelligible) in engineering, they constantly move, and they move, you know, sometimes even every six months because they get better job offers in terms of pay. It's an ongoing cycle.

  • 10:54:24

    KIMAnd there was a comment made about, you know, how people can only get hired if they have degrees, and I don't see that, either. Half of the engineers I work with do not have degrees. They have a lot of experience, (unintelligible) but a degree engineer is not required in these industries. And I see more and more companies opening up. There's a lot of financial investment being implemented in these industries, which...

  • 10:55:02

    REHMYeah, that's one thing I wanted to ask about is how much investment we're seeing right now. Earlier, Nell, you indicated that, you know, people are waiting. They want to know who is going to be in the White House, who is going to be making the rules, regulations more or less. How is that working?

  • 10:55:29

    HENDERSONWell, I think to David's point, maybe we can't put too much on the election, but this whole idea of business investment is very important for workers. It sounds like something the business is doing, but if you think about it, you know, economic growth is very self-reinforcing. So if I'm a business, and I sense there's strong demand, and I buy more equipment, buy -- build another factory, I'm going to have to hire a whole bunch of people to work there, and they're going to have to go out, and they're going to have higher incomes and have to buy clothes to go to work, and they're going to have to get a car and fill it up with gas and go out to get lunch, and it creates more demand. And then some other shop's going to pop up and service that demand, and it has this sort of self-reinforcing virtuous cycle.

  • 10:56:08

    HENDERSONThe same thing can happen going downward, that if you're a company, and you see lackluster demand, and you think okay, there's -- maybe I don't want to expand, maybe I want to cut back a little bit. So then I let go some workers, I cut back on the overtime shifts, they have less money to spend. Falling demand means some other business isn't going to expand. And, you know, the real question is kind of over the long term, are we -- I guess, you know, Larry Summers has called it secular stagnation. Are we in a long slog period of very low demand that we just kind of can't pull ourselves out of?

  • 10:56:44

    REHMIs that what you think?

  • 10:56:44

    HENDERSONI'm not an economist. He's a, you know, a brilliant Ph.D. economist. I'm just a journalist, so I report on it.

  • 10:56:50

    REHMAnd how about you, Jim? What's your outlook?

  • 10:56:53

    TANKERSLEYI tend to be pessimistic about the economy, but I do think -- and I do think there's evidence that there's a global demand shortfall that policy needs to cure. But I also think that there -- I would rather be in the U.S. economy's position right now than any other advanced economy in the world.

  • 10:57:10

    REHMAll right, we'll leave it at that, Jim Tankersley of The Washington Post, Nell Henderson of The Wall Street Journal and David Leonhardt of the New York Times. Thank you all so much.

  • 10:57:23

    HENDERSONOh, a pleasure, thanks, Diane.

  • 10:57:25

    TANKERSLEYThank you.

  • 10:57:25

    LEONHARDTThank you, Diane.

  • 10:57:26

    REHMMy pleasure, and thanks, all, for listening. I'm Diane Rehm.

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