The Cycle | March 08, 2013
>>> s.e. is not here. we miss her. the wall street numbers are on track to set another record today!
>> just an hour before the closing bell after a week of records on the jobs front, today's first friday of the month numbers blew away expectations. can i gate bomb? no? okay. 236,000 jobs were added in february. the unemployment rate now stands at 7.7%. that's the lowest since, like, 2008 or something. never mind 7.7% still too part and part of the reason it is at 7.7% and not 10% is a low, low labor participation rate . we have mccain and graham supporting the president. instead of fellow republican rand paul and the drones. we have paul ryan lunching with the president. and sequester seems to have as krystal said on this program, sped up talk of a grand bargain to save the country, the world and the milky way as we know it. now, even though it's snowing, let's get back to the numbers. that's the good news. if it is the first friday of the month, that means bernstein and marici are here to sell more copiers. jared , first to you, we bring back the music to say is it happy days , really? are they here again or what?
>> first of all, it is the second friday of the month. just --
>> you know, jared -- jared , we don't need your specificity here. okay? let's go to peter now.
>> i just -- i know you're all about the facts. no. it's a generally -- it's generally a strong report. you did mention that the decline in unemployment from 7.9% last month to 7.7%, it ticked down .2 of a percent. one tenth is small the labor force got smaller. and job growth was broad across most industries. construction had a big month. personal services . once again, government declined by 10,000 jobs but really it's a report that shows some acceleration in job growth . the big question to my mind, will we seep up the underlying pace? if we do, it's a better economy for people disconnect from the recovery so far. of course, there's a sequester out there pushing back the other way.
>> all right. peter , are you going to be happy to be here or nitpick everything i say like jared ?
>> you guys and the numbers.
>> this shows that, you know, the president said that sequester was going to color every number going forward. the stock market is blasting through records day after day . we have the fantastic jobs report according to jared . sequester must be good for the country. you got to put the republicans in charge. they've got the right path.
>> oh wow! big words there. peter , let's just put another thing to you because there's a huge racial disparity and the numbers baked in. unemployment for white people and asians less than 7%. unemployment for black people almost double that. hispan hispanics, well over 9%. don't we have to get past that to get to the better economy, as well?
>> i think it's the reverse. if we have a better economy, we keep having jobs numbers like we have been getting the last four months. we had one low month out of four and then starting to get a tighter labor market , higher wages and pulling these people back in and giving them opportunities to walk up the ladder. i would point out that we have had these kinds of disparities over time in both republican and democratic administrations and they largely reflect differences in job skills in this day and age. i don't know that the discrimination is a large component in it anymore. as much as it is just the fact that there are --
>> well, peter , peter .
>> hold on.
>> we have seen the studies where blacks and whites go up with the same resume and blacks are half as likely to get a call-back as white people . we know that's still part of it.
>> okay. i'll grant you that but what i'm getting at is if we have a better economy given the skill sets that the folks have, the percentage of high school graduates, drop-outs, percentage of college graduates, the disparity will mean somewhat less. a strong economy benefits lower skilled workers more than the very wealthy like, you know, the jamie diamonds. they got paid through the cycle despite what happened.
>> you know, jared , i want to pick up on that point. talking about with the sequester, okay. look. we have number that is basically don't cover the period after the sequester went in to effect which was last friday. we have as we mentioned in the opening a revived talk of a grand bargain. it doesn't do anything for jobs. it cuts some spending and raises some taxes and closes loopholes and wondering when you look at the sequester going in to effect right now, the affect on gdp , washington still only really talking about the grand bargain and not jobs. do you think there's -- what do you think the momentum is on this.
>> i think it's a great point and hung up with talks about tax reform and budget deficits we forget for most people the deficit is the jobs deficit and not the budget deficit in the immediate term. look. you know, i didn't say this was a fantastic report. i think it's a solid report. a good one. it shows momentum in the right direction. but it's a matter of whether that momentum can be sustained. now, the sequester isn't in these numbers yet. these are from february, remember. and so, the consensus is that the sequester's going to take half a percent off gdp growth and half a million jobs. if we're growing at 2.5% or 3%, it's not good but we can afford that. growing at 1.5% or 2%, this's the difference between unemployment ticking up further or getting better. so, what i guess i'm trying to say is i guess this hope this report suggests the sequester coming off of a higher base, the economy doing better than expected and so when we shave half a point off it, it won't hurt as much.
>> i would point out --
>> go ahead, peter .
>> it's easy to harp on sequester but according to cbo, that's $42 billion in spending between now and october. the tax increase of january subtracted $150 billion from folks' pockets. that should have a much larger effect. we had the robust jobs numbers in february, two months in to that process. i think if we can afford $150 billion in taxes we can afford $42 billion in spending cuts.
>> peter , one of the things you wrote holding back hiring were increased business regulations, mandates from obama care, dodd -frank you reference specifically and i'm looking at the fact wall street is breaking records . corporate profits at all-time highs as a percentage of gdps and wages at an all-time low as a percentage of gdp and seems corporations are doing okay and not holding back hiring.
>> depends on who you ask and talking about. banks laying people off. financial sector is contracting. smaller banks having a lot of trouble coping with dodd -frank even though they had lit toll do with the financial crisis . the regulations are too burdensome. i'm not against right regulations but we made them terribly burdensome. i would like many democrats favor a structural solution of breaking up the big banks , deregulating the smaller banks and easing back so they have more room to run and competition. with regard to corporate profits, these large companies that define wall street , 80% of the equity traded is the s&p 500 , you know, earn more than 50% of their profits abroad. making a lot of money in china and elsewhere in asia and that's also driving this profitability.
>> jared , what do you make of both right now in the short term but also this is a longer term trend of corporate profits going up and becoming a larger share of gdp and wages stagnant and go down? where does that trend come from and how do we reverse it?
>> first of all, that's not a particularly new story. it has a lot to do --
>> it has a lot to do with the inequality of income or wealth or wages that's been an important and disturbing factor in the economy for a few decades. what we're seeing here is an economy that once again is bifurcated. what growth achieved and the economy is growing since the second half of 2009 . i think all that regulation stuff from peter is just a bunch of hand waving and absolutely no evidence that there's anything to that at all.
>> i'd like to address this.
>> wait a second. let me finish. however, the growth has clearly been doing an end run around middle or low income people. when i look at today's report, when i was trying to say before is that if this kind of momentum comes up and moves the unemployment rate down, then you'll see more people with more bargaining power , perhaps claiming more of that growth but this is a symptom of a lot of factors that have been boosting inquality for a couple of decades.
>> i would like to talk about the factors. for one is mismanagement of globalization. i got my tenure writing about how to make free trade agreements work but blue collar workers put at an unfair competitive disadvantage.
>> i agree with that.
>> dodd -frank creates disadvantage. the large banks handle regulations so we're seeing smaller banks putting themselves up for sale to bigger banks that tends to concentrate power, create big bonuses on wall wl and deny small businesses loans for jobs for kinds of people to benefit. not a matter of free trade or not. whether we regulate or not but it's getting it right and unfortunately this administration like the last administration and the one before it comes in with a program. they put their program in place. what they don't seem to be able to do well is make adjustments, take in the thing that is work and keep them and push aside and remove the things that aren't working quite as well.
>> jared , jared , let me -- let me just get you to weigh in on one more thing. the president proposed increasing the min maum wage. nancy pelosi also supports a bill to increase the minimum wage to $10. would that be a boost to the economy? would that be a good thing to do right now is.
>> i think it would be a good thing to do for low-income workers. low-wage workers. i don't make an argument it has a lot to do with boosting the economy. there's something to it because they tend to spend the money but it has a lot more to do with what we are talking about, claiming the fair share of the growing economy has been significantly diminished way before dodd -frank had anything to do with it and part of it is raising the minimum wage to help in that regard.
>> all right. i love it when nerds fight. peter and jared , thank you very much.
>> thank you.
>> take care.
>>> up next, is that a bomb in your pants? whoa! tsa taking heat yet again. should go outside in the snow and cool off. "the cycle" rolls on. it's a snowy friday in march. [