Jan. 16, 2011, 12:11 p.m. EST
Job-growth prospects better: Summers
Many construction jobs are gone, while IT sector is back: Summers
By Ronald D. Orol, MarketWatch
WASHINGTON (MarketWatch) — The prospects for the beginning of significant U.S. employment growth and reduction in unemployment are improving, a former top Obama administration official said Sunday.
“The foundation for prosperity, growth and profitability in the U.S. today is far stronger than it was two years ago,” Lawrence Summers, former chief economic adviser to President Barack Obama, told Fareed Zakaria on CNN.In a wide-ranging interview about the deficit and jobs, Summers argued that output improvements historically precede employment improvement. Summers was the director of Obama’s National Economic Council between January 2009 and December 2010.
Summers said that as demand increases, companies first ask employees to do more, then offer them overtime and finally hire more people.
“You look at the statistics, the flow for the last couple months has been a good deal more favorable than it had been,” Summers said.
The jobless rate in the U.S. is 9.4%, according to a December employment report. It is expected to remain significantly high, above 8%, for at least two more years. Read about how applications for U.S. jobless benefits is rising.
Summers acknowledged that as the U.S. economy comes out of recession, some jobs that have been lost are not going to come back while others will come in new places. Summers argued that the overbuilt housing sector created an unsustainable large number of jobs for workers in construction.
“Now we have this tremendous drop in demand for construction workers. For a certain class of man that hasn’t gone to college, [construction jobs] are a substantial part of employment so we are going to have problems in that sector for quite some time to come,” Summers said. “But I think the most important thing we can do is to raise the level of demand in our economy so as to create more output.”
However, Summers expressed optimism about growth in the information technology sector.
“What’s happening in information technology, which was so dramatic in the 1990s, little more quiescent in the middle of this decade is taking off again with the iPad and all that’s happening with mobile devices,” he said.
Looking at the deficit
Summers sought to deflect criticism that Obama has failed to do enough to limit the growing U.S. budget deficit. He argued that priority of the administration over the past two years has been to get the economy growing.
“He’s [Obama] used his first two years to lay a foundation for growth to pick up. If we had attempted deficit reduction as the first step, the likelihood is we would be looking at a much weaker economy and as a consequence is we’d be looking at much larger debt problems.”He argued that policymakers create another type of deficit when they fail to invest sufficiently in the U.S. infrastructure.
“We run a budget deficit when we spend more than we earn and have to borrow. We also run a deficit when we allow our infrastructure to run down and we don’t repair it because in the same way we pass a burden onto future generations. That’s something we [have been] doing in this country for a long time,” Summers said.
Ronald D. Orol is a MarketWatch reporter, based in Washington.
