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Jobs Keep Growing. How Soon Should The Fed Stop Helping?

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Jobs Keep Growing. How Soon Should The Fed Stop Helping?


Jobs Keep Growing. How Soon Should The Fed Stop Helping?

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.


And I'm Audie Cornish. And we begin this hour with this hopeful sign for the U.S. economy. Employers added 195,000 jobs in June. That's the latest word from the Labor Department and the report was stronger than most analysts predicted. It suggested there is more wind in the sails of the recovery. Still, the job gains were not enough to push down the unemployment rate, which remains at 7.6 percent.

More now from NPR's Chris Arnold.

CHRIS ARNOLD, BYLINE: This latest jobs report is encouraging to many economists because the stronger job growth doesn't appear to be just a one month blip. The prior two months were also revised upwards, above 190,000 for both April and May, so that's three months of more robust job growth.

PAUL EDELSTEIN: Well, it looks like the labor market is quite a bit stronger than we initially assumed.

ARNOLD: Paul Edelstein is director of financial economics at IHS Global Insight.

EDELSTEIN: That's despite some of the headwinds that are coming from overseas and from the federal sequester. So it looks like the economy is just doing better than we thought.

ARNOLD: That said, the mandatory federal cutbacks as a result of the sequester are costing the country at least some jobs. John Challenger heads up Challenger Grey & Christmas, that's a firm that helps laid-off workers find new jobs. His company's been tracking some of the sequester-related cuts.

JOHN CHALLENGER: Over 10,000 of those job cuts have been made so far this year. And they're coming from all areas of the economy - prisons, schools. We saw this month a uranium enrichment plant cut jobs because an Energy Department grant had been pulled back. Defense and aerospace is feeling the job cuts there.

ARNOLD: Still, the job growth in the private sector now appears to be strong enough that some people worry that the Federal Reserve might start to pull back on its efforts to boost the economy. Fed officials recently signaled that they're considering a pull-back or a tapering of that support if the economy continues to improve. And markets have been nervous because they're uncertain as to when the Fed might act. Paul Edelstein.

EDELSTEIN: Easing monetary policy has been a major plus for the economy over the past nine months or so. I'm concerned that they may have stumbled more recently by talking about tapering because then markets don't believe that the Fed is committed to these policies and they'll be less effective.

ARNOLD: For example, mortgage interest rates rose after the Fed began talking about those. If rates kept rising a lot more, that might slow the housing recovery. But other experts disagree. Martin Feldstein is an economist at Harvard and the former top economic adviser to President Reagan. He actually would like to see the Fed pull back on its efforts, which, he says, aren't having that much of a positive impact on the economy now anyway.

MARTIN FELDSTEIN: But it's increasing the risks in the economy because interest rates are so artificially low that more and more investors are taking risks that could hurt the economy as they unwind.

ARNOLD: Feldstein and others worry that low interest rates push people to chase higher returns in shakier investments. And that can lead to bubbles in the price of stocks and certain types of bonds. That's not to say that Feldstein thinks that the U.S. economy is off to the races and doesn't need any help at all. Quite the opposite. He says the latest jobs numbers are a good sign and the housing market has been a bright spot lately. But...

FELDSTEIN: The rest of the economy is really very weak.

ARNOLD: Feldstein says, for example, overall GDP growth remains quite sluggish. For its part, the Obama administration is certainly happy to see the better-than-expected jobs numbers. Alan Krueger is the president's top economic advisor.

ALAN KRUEGER: I think today's report is part of a picture of a recovery that's gaining traction, but the president is not satisfied given how deep the hole is.

ARNOLD: Over the past year, the number of long-term unemployed has fallen by a million people. But that still leaves 4.3 million Americans looking for work who've been unemployed for more than 6 months. Chris Arnold, NPR News.

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