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Fed’s Bernanke: Pace of job growth ‘Distressingly Slow’
Federal Reserve Governor Ben S. Bernanke said that US employers have created jobs at a “distressingly slow” pace recently, but the tendency of some of them to “outsource” jobs to low-wage countries isn’t the cause of the weakness in the labor market.In a speech at Duke University in Durham, NC, Bernanke said he has been surprised that jobs have grown so sluggishly since the economy began to accelerate last summer. Since August, nonfarm employers have expanded payrolls by an average of just 60,700 a month. But the sluggishness, he said, is mostly the result of “unprecedented” increases in the productivity of workers, which have allowed employers to expand their output with fewer workers.
“Predicting the timing of a jobs resurgence is difficult,” Bernanke said in prepared remarks. Still, he said, because the recent rates of productivity growth are “unsustainable” and bound to slow, “I continue to believe that steady improvement in the labor market over the remainder of this year is the most likely outcome.”
Meanwhile, he said, Congress shouldn’t attempt to curb job losses by restricting international trade in goods and services. “Outsourcing,” he said, accounts for no more than two percent of the 15 million or so jobs lost each year and is a practice that makes economic sense only for jobs that can be “routinized and sharply defined.” For the foreseeable future, most high-value US jobs won’t fit that category, he said.
“Outsourcing abroad simply cannot account for much of the recent weakness in the U.S. labor market and does not appear likely to be an important restraint to further recovery in employment,” Bernanke said.
Worries over the loss of US jobs to lower-wage countries have become particularly intense of late because “outsourcing” now afflicts even white-collar workers. It became an issue in President George W. Bush’s reelection campaign last month after his top economic adviser, N. Gregory Mankiw, described outsourcing as “a good thing” for the economy. Since then, several lawmakers, including the presumptive Democratic nominee, John Kerry, have proposed legislation to discourage outsourcing.
Bernanke said fears about the consequences of outsourcing have been exaggerated. “The increase in outsourcing abroad - particularly of activities previously considered immune to foreign competition - has led to dire predictions about a wholesale ‘export’ of US jobs in coming years,” he said. “Although globalization will continue to be a force for economic change, the pace is likely to be slower than implied by such predictions.”
“Outsourcing abroad has proved profitable primarily for jobs that can be routinized and sharply defined,” Bernanke said. “For the foreseeable future, most high-value work will require creative interaction among employees, interaction that is facilitated by physical proximity, personal contact, and shared cultural experiences.” As a result, “outsourcing abroad will be uneconomical for many types of jobs, particularly high-value jobs.”
Under the circumstances, Bernanke said, lawmakers should focus their efforts on assisting and retraining workers who lose their jobs and resist the impulse to erect trade barriers. “Attempts to restrict trade through the imposition of tariffs, quotas or other trade barriers are not a good solution,” he said. “Such actions may temporarily slow job losses in affected industries. But they do so by imposing on the overall economy costs that are typically many times greater than the benefits.”
He suggested a “better policy approach”: expand free trade, allow the US central bank to achieve a healthy balance between high employment and inflation, and “help displaced workers train for and find new work.”
“The nation’s trade policies, rather than attempting to restrict trade, should be used to push for even more trade, ” Bernanke said. “By opening markets abroad, trade policy provides greater opportunities for US firms and workers.” (Dow Jones & Company, Inc.)
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