The infrastructure and reconciliation bills 'will be a big deal for the economy': Economist Mark Zandi
Mark Zandi, Moody’s Analytics Chief Economist, joined Yahoo Finance Live to discuss the state of the economy and latest JOLTS data.
ADAM SHAPIRO: Help us understand this jobs number, the job positions and the JOLT report. Almost 11 million positions. What's good about this? What's bad about this, especially as we consider the impact if an employer has to pay more in wages to get people?
MARK ZANDI: Well, I think it's encouraging. We have 11 million, or close to 11 million, open positions, and we have close to 9 million folks that are unemployed or underemployed. So logic dictates that with time and as we work through some of the impediments created by the pandemic, that those open positions will get filled. We'll see lots of job creation. And the path forward is a pretty upbeat one, pretty optimistic one.
Of course, that's what's wrong with it. We've got to iron out all of the reasons why people aren't coming back to work quickly, and there are many. And they all revolve around the pandemic, which is with the Delta variant raging here and creating more havoc. So people are fearful to go back to work because they might get sick. They might be sick themselves. They have to take care of sick family members or friends. We have parents that are still trying to get back on the job because they've been taking care of their kids who've been online. Lots of different reasons that all need to be worked out. So the good news, and the overriding reason for optimism, is there's a lot of open job positions, and that means we're going to get a lot of job creation down the road here.
- So Mark, does that mean that maybe the jobs miss, the report that we got on Friday, the jobs number, that maybe that won't have that big of an impact on the Fed's taper timeline if you take a look at the number of job openings, almost 11 million, and your spin on it being that it's actually pretty positive here for the economy going forward?
MARK ZANDI: Yeah, that'd be my take. I think, though-- I'm sure their view is that the Delta variant and its impact on the economy will fade looking down the road a few weeks, a couple of months. We'll have these waves of the pandemic, and it'll do damage, slow things down. But cutting through all of that, the pandemic is still steadily winding down. The job market will get back to normal, and we'll see a lot of job creation.
So I don't think they're going to change their script because of the weak August employment number. Now, having said all that, of course, this pandemic can go in lots of different directions. We don't know. So if Delta infections get worse, more people are hospitalized, it becomes more disruptive, then they'll change their script. But right now, I think they've got a script that they're going to stick to and suggest that they're going to start winding down their quantitative easing, their bond buying, by the end of this year.
ADAM SHAPIRO: What's the famous quote? That's my story, and I'm sticking to it. Mark, what should we pay more attention to-- the talk of a quick taper-- Bullard spoke today talking about a potential end to taper, stop it all by mid-2022-- or should we pay attention to the upcoming fights in the next couple of weeks in Congress over raising the debt ceiling and the different spending bills?
MARK ZANDI: You know, as an economist, I'd say both. We got to pay attention to all of the above. But I think much more important is what's going on in Congress and the debates and discussions around that large reconciliation bill. It feels like, though, we're going to get a deal. It's just a question of how big a deal. You saw Joe Manchin, the senator from West Virginia, who's more cautious about the size of the package, came out and said he'd go for $1.5 trillion. You might have noticed the package that's before Congress right now is $3.5 trillion.
So you do the arithmetic. We're going to get a package of something like $2.5 trillion. That's on top of the $500-billion infrastructure package that is bipartisan that probably will get through. So about $3 trillion-- that's pretty significant, and it will be a big deal for the economy-- not this year. But as you make our way into 2022, particularly towards the end of '22 going into '23, that's when all of this additional support will start to kick in.
And I do think by then, the economy probably will need it, because all the fiscal support that's in place now will be gone by then, and the economy will be growing much more slowly. So a little bit more juice towards late '22 going into '23 would be very helpful. And of course, these packages are more about growth in the long run, supporting productivity gains and labor force participation. So I think it would be particularly helpful to the economy, both in the near term and longer run, if they got a package that is somewhere around $2.5 trillion.
- Mark, from your perspective, I guess, in order for it to help the economy going out a couple of years, what needs to be included in the infrastructure package, or more so the reconciliation bill? Because that's really what's up for debate and exactly how large it needs to be. You're saying it could come in around $2.5 trillion, I guess. What is necessary, and what needs to be included in that?
MARK ZANDI: Yeah, well, the public infrastructure bill-- that's the bipartisan bill, that's the 500-- to be more precise, $550 billion over 10 years-- I think that's really important. I think everyone gets that. That's why it's bipartisan. That would help businesses be more competitive and help long-run productivity growth. And we certainly could use even more given the fact that we've been under-investing in public infrastructure for several decades. So I think that's a slam dunk. We need that.
On the social infrastructure-- that's the reconciliation package that's being debated-- I think in terms of longer-term growth, it's very important to invest in education, early childhood education, community colleges. There's no reason why people should stop learning after K through 12. The economy is demanding higher-skilled workers, and we need to educate our workforce.
I think child care, elder care-- those are also quite important because they help with labor force participation. Participation, particularly by lower-income women in the United States, is very low. And that's because the cost of taking care of children and elderly parents is very high. And this would free those folks up so that they could go to work, and that would help long-term growth.
And I have a soft spot for housing. Particularly in the current environment, we have a very severe affordable housing shortage. You can see it in rent. You can see it in house prices. Very hard on lower-middle-income households. We need more housing. And there's a big part of this package goes to increasing the supply, particularly of affordable rental housing where the shortage is particularly severe. So those are the things I would focus on. Every one of the aspects of the plan, like climate change and all the other things, I think, are also important. Don't get me wrong. But if I had to pick three things, those are the three things I'd focus on.