The Council on Foreign Relations hosted the Stephen C. Freidheim Symposium on global economics, featuring a conversation with Jason Furman, chairman of the Council of Economic Advisers at the White House, and Robert E. Rubin, co-chairman of the Council on Foreign Relations and former secretary of the U.S. Treasury, on the state of the U.S. economy.
Below are snippets from the comments Furman made in response to Rubin (and audience) questions:
The strongest segment of investment we have, actually, is in R&D. And R&D is the largest as a share of our economy it’s ever been. So that’s actually—you know, if you want reasons to be excited about the future, that would be one of them...
It’s all on the private side, not on the public side. So our research is falling as a share of GDP. Private research is rising as a share of GDP.
If you look at the job tenure of a millennial today, someone between, let’s say, 18 and 30, it’s actually slightly longer than someone from age 18 to 30 a generation ago.
Something we don’t understand super well is some impediments in terms of, you know, zoning rules have gotten tighter; occupational licensing—that, you know, if you want to be a security guard in Michigan, you have to train for a year to do it, and someplace else you might need to train for a week. It used to cover just a small fraction of the economy. Now it covers 25 percent.
Right now, if you look at the prime-age population, 25 to 54, it’s falling. You know, it used to be growing at more than a percentage point a year. So just our demographic structure isn’t going to be able to generate the same total growth rate as a couple decades ago.
On labor force participation, we know a lot more on the female side—flexible workplaces, childcare, the tax penalty on secondary earners, set of things like that. For men, it’s much more vexing that you’ve seen it—the labor force participation rate decline for 60 years. And you know, I don’t think I fully understand why and thus can’t fully tell you what to do about it.
I think we have slack in the labor market, but I think we are, you know, getting a lot closer to being there. We all know the official unemployment rate is 5.0 percent. That that’s a little bit below where it was on average in the previous business cycle. And so, you know, if that’s what you’re looking at you’d think we were basically fully healed. If you look at broader measures, the broadest official statistic is what’s called the U-6. And that adds in discouraged workers. It adds in a broader group who don’t say they’re discouraged. They’re not looking for a job. But if a job came along they say they’d probably take it. And it adds in people who are working part time for economic reasons, someone who wanted a full-time job but they only have a part time one.
That rate is now 9.8 percent. It’s falling really rapidly. It’s seven-tenths lower than where it was just four months ago. It’s a bit higher than it was in the previous business cycle, but only a bit. So I think those part timers have, you know, more room. Some of the discouraged workers, a lot of them are coming back, but there’s some more room there. The big question here is the participation rate. The participation rate is about three and a half percentage points below where it was before the recession. And how much of that do you think will come back? Nearly two percentage points of that is just we have an older population. And so the baby boomers are retiring. That’s perfectly expected, perfectly, you know, fine and not something we would think would reverse itself. The question is that remaining fall in the labor force participation rate. How much of those people will come back?
You know, my observation that I said before that the male labor force participation rate had fallen every year since the 1960s makes me think it’s a little bit more of an underlying trend. You know, put another way, in the year 1999 or 2000, you could have looked at the U.S. economy and made the assertion that we had not yet recovered from the 1991 recession because the employment population rate for prime age men in ’99 and 2000 was lower than what it had been in ’89 and 1990. That would have been a nonsensical statement to say that in 1999 we hadn’t recovered from that shallow recession eight years earlier. You know, tells you something about the metric that would have led you to make that nonsensical statement then. You don’t necessarily, you know, want to use that metric now.