We’re seeing ‘extraordinary recovery’ in the labor market: White House Economist
Joseph LaVorgna, the Chief Economist at the National Economic Council, speaks with Yahoo Finance’s Alexis Christoforous and Brian Sozzi about the July jobs report and pace of the economic recovery.
Video Transcript
ALEXIS CHRISTOFOROUS: Want to get back to our top story, and that is the July jobs report. Nearly 1.8 million jobs added last month. That was better than expected. The unemployment rate ticked lower to 10.2%.
Joining us now from the White House is Joe LaVorgna, White House Special Assistant to the President and Chief Economist of the National Economic Council. Joe, good to have you here, and welcome to Yahoo Finance.
JOE LAVORGNA: Thank you.
ALEXIS CHRISTOFOROUS: You're making your--
JOE LAVORGNA: Thank you.
ALEXIS CHRISTOFOROUS: --debut here. Tell us, what is the White House's reaction to this report? What does it tell us about the recovery in the labor market?
JOE LAVORGNA: The recovery in the labor market has been quite extraordinary. In the last three months, the nonfarm employment is up 3 point-- sorry, 9.3 million. That is a huge number. And the unemployment rate, which peaked at just under 15%, is now down to 10%, as you alluded to. It was only a few months ago that many forecasters thought that would go up to 20%.
We were confident at the time given the policies the president put forward and were enacted, such as things like the Paycheck Protection Program, among others, would be very-- would be very positive at getting job growth back. That's what-- that's what's happened, and expectations certainly have been surpassed. And my guess is that this progress we've made will continue and perhaps even accelerate.
BRIAN SOZZI: Joe, job growth has slowed month over month. What do you expect job growth to do in the back half of the year?
JOE LAVORGNA: The slowing, I think, to me is very misleading because it has slowed, but it's not to say that it won't reaccelerate for a couple of reasons. Number one, these data are preliminary, and we could see very large revisions. In fact, if you looked at the ADP earlier this week, what wasn't reported was that you had almost a 2 and 1/2 million upward revision to the prior month.
Moreover, if you look at temporary hiring, which is a forward-looking indicator of labor demand, that was up almost 150,000 two months in a row. So it's very hard to say what the next report's going to look like, but just to assume because we've had some very good numbers that surprised everybody we're supposed to look for a big deceleration, that may not happen.
ALEXIS CHRISTOFOROUS: Joe, does today's report make the case for more government stimulus? And I mean at the level we had it, meaning it would include that $600 a week in additional unemployment benefits?
JOE LAVORGNA: To me, this-- I'm looking at this as totally separate. I mean, the president wants to do as much as he can to help the country. That's what we're supposed to do.
The data looked great. We thought the data would look good. That's what's happening. And, you know, I'm hopeful we'll get more stimulus. But the economy is on the right track. And as far as where negotiations go, that's outside my line. But I'm very encouraged by what I see in the data.
BRIAN SOZZI: Joe, I've followed your career for some time on Wall Street. What do you think of Joe Biden, some of the proposals that he has put forward to jump-start the economy? What do you think that would do to the stock market?
JOE LAVORGNA: Well, look, if you raise taxes, effectively double the capital-gains tax rate, I mean, I've got to think that's going to lead to a pretty sizable set of tax-loss selling just to take the fact-- to just take account of the fact that your rate's going to go up a lot. So that in and of itself could cause a bear market.
But just generally speaking, if you're going to tax labor and capital and hurt capital formation in the process and weigh on productivity growth, that's going to hurt wage growth for a lot of middle-income earners. I mean, one of things about this recovery, what we saw before the pandemic, was very strong wage growth, especially in the bottom half of the labor pool. And if you do things that are very antigrowth, antibusiness, that's going to really make for a very bad set of complications. So let's say it's not going to be good.
ALEXIS CHRISTOFOROUS: You know, Joe, there are now about-- even with the job gains we've seen over the past three months, there are still about 13 million fewer jobs than in February, and some of those jobs, Joe, are just not going to come back because some businesses will just be unable to reopen. What does that mean for the overall economy in 2021?
JOE LAVORGNA: I'm going to take a little bit of issue with the jobs not coming back. I mean, you got to remember, the jobs so far have been a lot stronger than people thought. The medicine is making some serious progress, and therefore I think it's very difficult to say what jobs won't ever come back. In fact, we're finding out now that there's a lot of new jobs in industries that are perhaps being created because of this pandemic and the fact people have been very innovative.
So, to me, the point is you have to create the best environment, the best set of circumstances to get the economy moving higher. And it seems to me the president, which did a phenomenal job in getting the economy moving and getting capital expenditures trending higher and productivity growth, et cetera, that now we're going to do that again, and that's really what matters.
So I don't-- I don't want to be a pessimist and say, well, these jobs aren't coming back. We simply don't know. Many of them have come back, and my guess is many more in industries that haven't even existed yet.
BRIAN SOZZI: Joe, based on what we're seeing in the economy in terms of job creation-- GDP has been under severe pressure. What Mitch McConnell has put forward, a $1 trillion stimulus plan, do you think that's enough to jump-start the economy?
JOE LAVORGNA: Look, the economy is already jump-started. If we get more, that's even better. It's an insurance policy, but the economy looks great. I mean, we're looking at GDP this quarter of 20%. I mean, when Director Kudlow mentioned that a few months ago, I don't think many people on the private side thought that was possible, and that's the kind of growth we're looking at. And if you get basically 20% second-half growth this year, which is very doable-- it's not very different from where CBO has their estimate-- and you're looking at 5% growth next year, we're going to recoup almost all-- we will recoup all of the lost output this year, which again comes back to the point about job growth.
I mean, those 13 million jobs or so that aren't there-- I actually think it's a little bit-- a bit lower than that. You know, we're going to get a lot of those jobs back if we stay on the course that the president's laid out, a very progrowth, probusiness policy that's going to really create job growth and income for everyone.
ALEXIS CHRISTOFOROUS: You know, Joe, China is just about the only bipartisan issue in Washington at the moment, it seems. And we know the president coming down hard on Chinese-listed companies here in the US, the Chinese apps TikTok and WeChat. As you wear your economist hat right now, do you see this as the framework for a cold war between the US and China, and what will the implications be for trade between the world's two largest economies?
JOE LAVORGNA: I don't-- I mean, I'm looking at data. I don't want to get into what's happening on the trade and negotiation side. I do think there's probably more bipartisanship than what gets reported. I mean, the CARES Act-- the CARES Act and the CARES Act 2.0 we had in June were basically passed with record bipartisan support. So I think there's probably more good news there than what gets reported, but I don't want to delve into China. That's really not my area of expertise.
