White House CEA member: 'Disproportionate beneficiaries' of strong labor market are low-wage workers
White House Council of Economic Advisers Member Jared Bernstein joins Yahoo Finance Live to discuss the state of the economy and who benefits.
Video Transcript
BRAD SMITH: And we want to play a clip from what Fed Chair Jerome Powell had to say prior to getting to our next guest.
JEROME POWELL: We are aware that this is a very different expansion-- as I've said a couple of times-- with higher inflation, higher growth, but a much stronger economy. And I think those differences are likely to be reflected in the policy that we implement.
BRAD SMITH: And joining us now is Jared Bernstein, who is the White House Council of Economic Advisors member. Jared, great to speak with you as always and thanks for taking the time. I want to get your reaction to the announcement from the Fed and what they signaled yesterday with regard to potential future rate hikes coming forth in 2022.
JARED BERNSTEIN: Well, the president spoke about this last week when he said he has full respect for the Federal Reserve, for their independence, and for the extraordinary job they did during the pandemic. And the kinds of discussions they were having yesterday seemed to us very consistent with the kinds of numbers we're seeing today. We have a GDP report that shows the fastest growth in 40 years on top of a job market that has some of the fastest employment growth on record.
And so the goals of maintaining full employment and stable prices are, of course, very much the correct goals for the Federal Reserve. We have great faith in not only the work they've done, but in our slate of five nominees for the Fed, all of whom we believe will be exceptionary purveyors of monetary policy.
AKIKO FUJITA: Jared, let's talk about that strong GDP print we got for Q4. 6.9% is the number we're looking at. We've heard the president stressed over and over that it's not just about growth in the economy, but an equitable growth. And yet when you look at the latest numbers that we got, the jobs report, it points to Black Americans actually seeing unemployment tick up.
We're now at 7.1%. So I wonder how you assess that. Why do you think the president's policies haven't been able to narrow that racial divide?
JARED BERNSTEIN: Well, first of all, your initial point is exactly correct. I've worked with President Biden for a long time, when he was vice president, and his view has always been if GDP is growing, if the stock market is up and it's not reaching middle class families, it's not reaching people in communities of color, something is wrong. I would definitely take issue, though, with the idea that this recovery hasn't reached folks from all corners of life.
Now, we've got to do better. We've got to do more. And the fact that the Black unemployment rate is more elevated than the white rate, obviously, that's been an historical relationship and one that we don't just accept as somehow being a facet of nature. There are many elements to that differential have to do with injustice, inequity, discrimination. And we're working hard on all of those issues. In fact, it's one of our mandates from the president.
But all that said, very important to realize that disproportionately, those who benefit from strong labor markets-- this is kind of my life work before I got here-- the disproportionate beneficiaries are those in the bottom half of the pay scale. And if you look at whose wages are growing the fastest right now, if you look at whose employment opportunities are most robust, you will see it showing up in the bottom half of the income and pay scale-- warehousing jobs, transportation jobs, jobs in services, restaurants, hotels.
Many of those are workers of color. So again, we've got to do better in lowering those racial differentials. That's a key goal of our administration. But it is a mistake to conclude that we haven't been working on that and haven't been accomplishing some of those goals.
BRAD SMITH: What are some of the mechanisms that you're looking to deploy in the future to address that?
JARED BERNSTEIN: I think one of the most important areas is housing. All right, if you want to look at a legacy of discrimination, of exclusionary zoning, certainly housing is one area. Now, building back better has a remarkable slate of housing projects, including some that go directly after exclusionary zoning, which to my mind, is one of the strongest factors that's behind inequitable housing.
Also, one thing we know is that the supply of low-income housing has been a problem in recent-- not just years, but really decades. And we have a full set of plans to deal with that. But, listen, I don't want to get away from the key message of the day.
We just received the strongest growth rate in GDP since 1984. We have unemployment falling faster than it's ever fallen on record. And I just don't want to lose this thread that while those are big, aggregate statistics, the disproportionate beneficiaries of a very tight labor market are persons in communities of color, are low wage workers, are women in sectors of the type I elaborated a minute ago.
So these macroeconomic indicators are very helpful to the very folks we're talking about here. That said, it's necessary but not sufficient. We have to do more than run a hot economy to reach folks who've been left behind.
BRAD SMITH: And so if we're discussing housing, we should perhaps also discuss another area that is a very kind of debt-saddling area of the broader economy, which is the student debt crisis, particularly. And Derrick Johnson, the NAACP president, has continued to say if you can afford to pause student loan payments over and over again, you can afford to cancel it. Is there any acceleration in conversation that would, in fact, address the disparity in economic equality among ethnicities with regard to student debt in the future?
JARED BERNSTEIN: So, first of all the president has consistently talked about his desire to deal with this issue through legislation. And I'm not going to front run him or a very intense, ongoing process, some of which people have heard about because we've talked about some rule negotiations, some rule changes we've made in the area of student debt. But this is a complicated and many-faceted process that we will certainly be ready to talk to you about when we have more to read out.
Right now, let me say that if you're sitting on a student debt, the thing that you need is a good job with a solid paycheck. Now, you also need the kinds of measures around debt forgiveness that, as I mentioned, the president has talked about since the campaign, and we continue to work on those.
But let's not lose sight of how important the backdrop of this historically strong economy is to anybody facing balance sheet issues with debt. And by the way, this is another key point that's getting lost in the mix-- thanks to the American Rescue Plan and the measures therein, including the payments, the checks, including the expanded unemployment insurance, including the child tax credit, household balance sheets, again, particularly those in the bottom half of the scale, household balance sheets, savings accounts, the amount of cash that people have on hand, have been uniquely strong.
And one of the things we saw in this GDP report from this morning is that disposable income, income after tax per capita, is up considerably from last year, up considerably from 2019. And those are indicators that families have more income than they otherwise would have. And I would, again, argue that the prints of the Rescue Plan are very much on that finding.
AKIKO FUJITA: Jared, going back to Build Back Better, how do you use this strong economic print to sell that package? I know the president hosted a number of CEOs yesterday to discuss this very issue. It doesn't feel like the needle is moving in either direction right now, although the president has sort of hinted he's willing to potentially maybe look at breaking up some of the pieces to get something passed. What's the thinking within the White House?
JARED BERNSTEIN: The idea here is that President Biden, Vice President Harris, their policies, along with our colleagues in Congress, have orchestrated one of the most robust economic recoveries from a labor market perspective in our history, from the GDP perspective in 40 years. This is something we've got to keep going.
As I just said in response to questions about racial gaps, such strong macroeconomic growth is absolutely necessary, disproportionately beneficial to people left behind. But it is not sufficient. It is not the whole story.
The president views, correctly, Building Back Better, those measures, whether it's child care, whether it's help with prescription drugs, whether it's help with the cost of health insurance, the cost of education, the cost of housing-- he views those as the kind of policy glue, the policy architecture, the connective tissue that connects a growing economy to the prosperity of the broad middle class to people in communities of color, to those for whom GDP for too long has been a spectator sport.
In order to get those folks in the game, as he often puts it, we need to make sure that a policy agenda like that of Building Back Better is in place to make sure that the benefits of overall growth reach those who've historically been left behind. Now, because of the tight labor market, that's happening. But we've got to do more to ensure that it keeps going.
AKIKO FUJITA: And finally, Jared, a question that I know you have gotten repeatedly-- we're looking at the GDP data today that certainly points to the strength in the economy. But when you look at the headlines, the inflation headline seems to be a little louder right now, with CPI near 40-year highs. A question I asked you your colleague Brian Deese last week as well, but how do you shift the narrative at a time when polls are showing it is about inflation, they're concerned about it, and they're pointing the finger directly at the White House?
JARED BERNSTEIN: Well, I think, first of all, the one thing that we need to recognize, given today's data, is that this increase is real. This increase is adjusted for inflation. Meaning that even in this environment of highly elevated prices, we're posting GDP growth rates that are highest in 40 years. But that doesn't get us out of the woods from the perspective of families who are facing these price burdens in their everyday life-- again, something the president has leaned into every time he's talked about this.
And his dispatching to us, his economics team, including Brian, myself, and others, is to do everything we can on our side-- obviously, the Federal Reserve plays a key role here-- but from our side to help ease the snarls in the supply chain, to help increase competition in overly concentrated industries, to make sure that we quickly and efficiently implement the infrastructure plan, which not only will create good jobs, but will increase the economy's productive capacity.
And that is the key economic foundation between what the president is getting his team to do, both in the near-term with our ports work and our trucking work, in the longer term with our chips work, our computer chips work, and our infrastructure work to increase the economy's capacity, its supply side, to create pathways through a child care program, an elder care program so people can come into the labor market-- caretakers, disproportionately women and moms, can get into the job market.
Those are anti-inflationary measures in the near-term, again, with the supply chain work, and the long-term with the Building Back Better measures. That's the best way to both keep demand strong but make sure it reaches all of the folks who are contributing to it.
BRAD SMITH: Jared, always a pleasure to get some of your time and really get the inner workings of the White House for this conversation and for our viewers as well. So we appreciate you joining us today. Jared Bernstein, who is the White House Council of Economic Advisors member joining us here on Yahoo Finance.
