New Economic Survey on U.S. Job Growth and Federal Policy

11:30 A.M. EST

Real Audio of Briefing

MR. BOOKBINDER: Good morning, and welcome to the Foreign Press Center. Today, we have a very special program. We have Mr. Rick Weddle, who is the Chairman of the International Economic Development Council, as well as the President and CEO of the Greater Phoenix Economic Council.

Mr. Weddle, as you know, is going to be talking about a new economic survey on U.S. job growth and federal policy. Mr. Weddle will make some opening remarks, and then we'll throw it open to questions. During the question and answer period, please wait for the microphone, then introduce yourself and your news organization. I'll also remind you, of course, to turn off your cell phone.

I just want to make the point that Mr. Weddle is a private expert on this subject. His organization is not funded by the U.S. Government, it's not a government organization -- just wanted to make that clear.

Okay. So, again, thank you all for coming, and let's begin.

Please, Mr. Weddle.

MR. WEDDLE: Good morning. I want to thank everybody for being here this morning, and I'll begin by reviewing some of the highlights of the survey, and then be able to respond to your questions at the conclusion.

I do represent two organizations. The organization I work for every day is the Greater Phoenix Economic Council, and that is a nonprofit organization that serves Maricopa County in the Greater Phoenix region, for the purposes of job creation and capital investment to improve incomes for our citizens.

I also have the pleasure of chairing for a two-year period, the International Economic Development Council or IEDC, as you'll see in the materials, and that is the largest organization of economic development professionals in the U.S. and Canada. We have some members from Europe. We have 4,000 members in all 50 states and several Canadian provinces. And the survey that you're about to review is a survey of membership that we conducted during the second week of October, and we received 912 responses or a 24 percent response rate.

The purpose of the survey was really to begin to understand from -- as we would say in the U.S. -- Main Street's perspective, from the local community's perspective, some of the economic challenges that we are facing and have faced for the past several years. Some of these challenges are the competitiveness, the functional competitiveness of U.S. regions and communities; the current economic recovery that we're going through that we seem to be referring to increasingly as a jobless recovery -- so the economy has improved but in our hometowns across the country we have yet to see serious and sustained job growth; the local and regional implications of globalization, something that you're quite well aware of, and the pace with which those globalization issues have surfaced; and then finally, some structural changes in the U.S. economy that we see that converge to make us think that this is not a cyclical problem we're in, but rather a structural problem -- that the convergence of these issues coupled with the reality that technological advances are enabling productivity growth to be such that it's restraining job growth overall.

So we asked a series of questions in the survey. We asked these economic development practitioners to give us their opinions with regard to economic conditions in their community and the country overall, the outlook for the next six months, how satisfied they were with efforts at state and federal levels to get the economy on the right track, what are some of the challenges they have faced, what are some of the negative impacts on job growth in the past few months, and some of the potential impacts in the next several months going forward. And then finally, how they feel about whether or not the effort on the part of the federal government is sufficiently aggressive to help stimulate job growth in the future.

Let me review some of the findings. Fundamentally, we are an optimistic bunch in that 62 percent of us feel that our economy in our regions and our communities is either somewhat good or good. But only 46 percent felt that the U.S. economy was somewhat good or very good. But clearly a majority -- well over 50 percent -- believed that the economy will be improving within the next six months.

The professionals surveyed and the respondents were not very pleased, I would say, or not very satisfied, with efforts at their state level or the federal level to get the economy going in the right direction. But it's somewhat of a mixed bunch with 52 percent not satisfied with the efforts only on the point of the federal government.

The most pressing problem that we've had to deal with, according to the survey respondents, in terms of job growth locally and regionally has been the impact of state and local budget conditions. The downturn has led to revenue stress or revenue failures in many of our states, in many of our cities. Certainly, that's true in Arizona, where I live. And so that has been one of the biggest drains on the job growth picture.

Following that, there are a series of concerns that economic development practitioners have with regard to the shifting of manufacturing and service jobs offshore, as we would refer to it in the U.S.; increasing global competition from developing countries that have lower cost structures and very rapidly expanding markets and standard of living creating opportunities for sales; industry and corporate restructuring; certainly, some concerns over our current engagement in the war with Iraq and terrorism.

But the most interesting finding we found in that was the extent to which local economic developers found that the federal tax reductions and stimulus package has not, as of yet, been something that has led to job growth in our cities and our counties. About 80 percent of the respondents indicated that they felt that it had either had little or no impact or had, in fact, been a negative impact. We believe that that could be linked to the overarching concern that our communities have over their state and local budget conditions, which has been a problem for them.

Regarding impacts on job growth going forward, the survey indicated convincingly by about 70 percent that felt that the most significant thing that could be done to improve long-term economic and job growth in this country would be to invest in education. Invest in education K through 12, but also university education and university research.

There were a number of recommendations or a number of comments regarding the investments needed in public infrastructure and in job training programs to get workers retrained, and so that those workers that have been displaced through the downturn will be able to return to productive employment.

Just as we felt that, as the survey felt, that the tax stimulus had not done enough to create job growth, we also made an interesting finding that, as a group, the economic development practitioners were summarily opposed to protectionist trade policies. In fact, 60 percent of our respondents felt that protectionist international trade policies and/or tariffs would have little or no impact on job growth in their communities and in their states, and we found that to be an interesting point of agreement.

Going forward, the survey of economic challenges suggested that the overwhelming majority, 86 percent of the respondents, felt that the federal government should, in fact, do more and become more aggressive to help communities build an environment in which they can be competitive in the world economy.

So if I could summarize what I think the key points of the survey were, is that our outlook for the future is that we're quite positive, albeit patient; that we believe much more can be done with regard to federal response to help communities grow and increase their employment base; that the tax cuts, while good, are probably too blunt an instrument to use when we're dealing with some very finely grained, complex trends dealing with technologically advanced globalization, movement of jobs offshore, and educational needs in our communities; and that most importantly, what we think the federal government could do is help invest resources in education -- invest resources in people through education and job training programs so that they will be able to return to full employment, but also invest in university research and development so that we can create the new ideas, the new companies, and the new industries that will replace some of these jobs that we have lost during the recent downturn.

We proposed that we would be taking these findings and meeting in St. Petersburg, Florida, in January, in a leadership summit of economic development practitioners, and hopefully beginning to frame some more specific policy recommendations that we would hope to be prepared by March of next year to have dialogue back in Washington with the legislative summit that we'll be holding in March of next year.

That really highlights the summary of our findings. It was the first such survey that we have done. We hope to do it on an annual basis. It's important to note that all 50 states were represented and that half of our respondents represented local governments, cities and towns. About a third represented regional economic development entities, so we feel it was a very broad-based survey, a large response, and fairly accurately depicts the viewpoint of economic development professionals across the country.

I'd be glad to respond to questions.

MR. BOOKBINDER: Okay. We'll open it up now. And let me remind you, please wait for the microphone, identify yourself and your news organization.

Okay, gentleman in the glasses with the gray shirt.

QUESTION: Good morning. Joe Banales from the Spanish News Agency EFE. I have two questions, but first one. Ten years ago before the NAFTA came into effect, opponents were mentioning something that they called, "Race to the Bottom," that you'd open a race to the bottom where the cheap labor is. Ten years later, do you think that is actually what is happening in the world?

MR. WEDDLE: That's a good question. I don't think that's what's happening. I think what we have seen is, our world has become much smaller. You know, the things we're seeing now with regard to movement of American jobs to lower-cost operating locations has been going on in this country for the last several decades.

Two decades, 20 years ago, I was working in the southern United States in the Carolinas, and we were seeing a lot of jobs move from New York, New England, Upper-Midwest to the South because they could accomplish lower labor cost, business-friendly environments.

What's happening now on a global scale is nothing more than what's been happening in this country for 30 years. I don't see it at all as a race to the bottom. I see it as just our world becoming smaller and more connected. And that there necessarily will be different segments or different niches in there.

We have to respond to these changes in a progressive and positive way.

MR. BOOKBINDER: Okay, from Germany, please, in the front.

QUESTION: Michael Backfisch, German Business Daily, Handelsblatt. You said that your organization is quite positive about the further development of the U.S. economy, but I cannot yet see why, because we have growth and we had considerable growth the last quarter, 7.2 percent. But when does it affect, also, the labor market?

So far we have an increase of productivity, which means that the output is increased but more workers are laid off. And when do you have a turnabout?

MR. WEDDLE: Well, that's a good point. It could be that maybe those of us who work every day to try to create jobs, we just try to be as optimistic as we can because it has been a very difficult time. But we believe, I think, by the middle of next year that there are enough indicators to suggest that we'll begin to see positive job growth in the community.

Let me give you an example from the greater Phoenix region. Over the last couple of years, we have increased our employment base by 1 percent. So we have started growing, and started growing jobs. That's about 15,000 jobs in my community. So that's the good news. The bad news is, that's not as fast as we were growing. We were creating about 50,000 jobs a year in the greater Phoenix region. So we're below trend, but I think most economic developers are beginning to see the early stage indications of some up-tick. It's going to be slow, and they're going to be different jobs. And I think that's what this survey suggests, is that these may be different jobs. They're not old jobs coming back, but new jobs being created. And that's why the importance of education is so great -- and that retraining is so significant in that regard.

MR. BOOKBINDER: Okay. Xinfu Zhu, in the middle here.

Yes.

QUESTION: My name is Xinfu Zhu from Chinese media. And could you forecast the economic growth next year? And do you think that will be good enough for President George Bush to win election? Thank you.

MR. WEDDLE: Well, I think that we are going to see -- as I said, I think we'll see employment pick up next year, about the middle of the year, second quarter, somewhere between second and third quarter -- it's almost always slower than you would like for it to be. We have seen good growth. As you've indicated 7.2 percent in the last quarter overall in GDP, but that's -- it's very questionable that that is sustainable. My sense is we'll probably see growth somewhere in the neighborhood of 3 percent next year and, which is going to be not so strong that we're going to see very, very heady job growth.

On the question of whether or not that is sufficient for the election, the reelection of the President, I think there's too many moving parts, it's too dynamic, and there's too many other issues for me to even be able to opine a thought on that.

MR. BOOKBINDER: Okay. Brian Yang, NTV, in the blue shirt.

QUESTION: Brian Yang from NTV. I have two parts of a question. One is, the third quarter of the GDP growth is 7.2 percent, and President Bush said it's because his tax cut package and his stimulus package. But you said, well, the tax cut has not yet had any, you know, positive results. So you have any reasons why you believe the tax cut was -- the stimulus package has not yet any result -- positive result? And also, regarding the job loss in U.S. job market, can you say that it is because the competition from developing countries, especially the Chinese, you know, low, caused little bit export to a U.S. market, and also the currency reevaluation? Thank you.

MR. WEDDLE: Good questions. I think that the President is correct, and I think we're correct. And I don't think those two questions are necessarily opposed. I mean, the tax cut did have obvious stimulus effect on spending -- consumer spending -- and that did, in fact, result in the growth in the third quarter that was rather dramatic.

But that doesn't mean that that has been translated to employment growth in our cities and towns across the country. Jobs are a lagging indicator, and almost always would come much later down the road if we could sustain those rates of growth. So I think we're both correct in our assessments. We're just looking at two different sides of the same coin.

With regard to the recent job losses, I think there are a convergence of a number of reasons. Certainly globalization is a piece of that and movement of jobs offshore is a piece of that. But also, we would be remiss if we didn't note that at the end of the dotcom boom, we in this country had developed tremendous overcapacity in some industries, in some sectors -- in telecommunications and others -- that just had to be wrung out.
That overcapacity had to be wrung out -- it was not sustainable. And then we also had serious dislocations in some parts of the country due to the transportation curtailments after 9/11 and the problems that occurred with the, kind of, the beginning parts of the war on terror.

So it's really a perfect storm, if you will. A lot of factors have contributed to the job loss and that's why we have to take a multi-faceted approach to respond to it.

MR. BOOKBINDER: Mr. Aida in front, with Kyodo News.

QUESTION: I am Hiro Aida with Japan's Kyodo News. Regarding this job growth thing -- well, my question might be a little bit -- or it may involve skepticism about the statistics. But did you ask any question to local officials about, well, the impact of illegal immigrants in -- on the job -- the official job growth rate?

Well, they may have absorbing some kind of job unofficially or in the underground economic way, the jobs here. So do you any -- well, the statistics or reactions or the probe into the officials', local officials' reaction to that?

MR. WEDDLE: That's a good question. We did not have a question that directly addressed the immigration issue or its implications on employment. And so, I'm sure that's something that we may want to add the next time we do the survey.

MR. BOOKBINDER: The gentleman in the back.

QUESTION: Thank you. Jose Lopez of the Mexican News Agency. It seems that a clear majority of people are unsatisfied with the government efforts to keep the economy going. But at the same time, as you said, 56, 54 percent have a positive outlook for the next six months. So what is your reading of these?

Do you think that the people lost confidence in the federal government ability to improve the economy, and whatever improvement that comes will come from the regional and state level, especially since 64 percent of the respondents said that the federal tax stimulus has had little or no impact in their life?

MR. WEDDLE: Yeah. I think what I interpret from those data points are that when the respondents said they are not satisfied with the current level of efforts, you have to take that in the context -- these are people who work every day trying to create jobs and employment in their communities. And I think what they're saying is that they need more help. They want more help.

So they're satisfied with the level of support that they have been receiving. And so it's not that they have lost confidence at all. I wouldn't think that that would be an accurate characterization. It would be almost like when you're dealing with crime, the policemen on the frontlines of dealing with crime are always wanting more help and need more help, so that it's a big problem that you can't overcome.

So I don't think that they have lost confidence at all. In fact, I think the fact that they are optimistic about improvement in the next six months suggest just the contrary.

QUESTION: They are less satisfied with the state efforts than with the federal effort. So how do you square these things?

MR. WEDDLE: Well, it's probably because they're closer to that. I think they're closer to their state efforts and they have a -- maybe a more awareness of what is being done at the state level than at the federal level.

MR. BOOKBINDER: Mercedes Andrei here with Business World.

QUESTION: You already introduced me, Joe. Thank you.

What do you think about the Free Trade Agreements that were signed with Singapore and Chile? It appears that a couple of Singaporean companies have already moved to the states and have started to create jobs. So can you give us an outlook about how these instruments would create jobs in the U.S.?

MR. WEDDLE: You know, I am not an expert on those specific agreements, and so I'd be guarded in my comment on that. But as a general rule, I think the report suggested that we believe that protectionist kinds of trade agreements are not positive and we said that the majority were opposed to that. And so as a group, the professionals would be in favor of freer trade that enables markets to be open and companies to access those markets. And I think you'll see movement both ways -- jobs one way and jobs back the other way. So I think that it's obviously an implication of those trade agreements.

MR. BOOKBINDER: Yes, let's go to this gentleman.

QUESTION: Jyri Raivio, newspaper, Helsingen Sanomat, Finland. A clarification first. These 100-plus respondents, are they people like you who sort of promote economic growth in their areas, or are they activists and then a question: Is Secretary Snow's 200,000 jobs a month goal achievable?

MR. WEDDLE: The profile of the respondents is that they are fundamentally people like me, my peers. They are people who work either for local city governments, county governments, or nonprofit organizations trying to work locating companies, helping companies grow and expand, helping to redevelop inner cities. So they're really people at the frontline of economic development in this country. And so they work with business leaders, but they are not typically businesspeople themselves. And I hope that the goal of 200,000 jobs a month is realistic.

MR. BOOKBINDER: Okay, please, right in front.

QUESTION: I'm Karen Henricksson with the Swedish Daily Svenska Dagbladet. You mentioned new jobs. Could you elaborate a little bit what does that mean, and what are new jobs, and how much will they pay?

MR. WEDDLE: That's a very good question. Let me just give you an example. The greater Phoenix region, where I work, we are a very strong dominance in semi-conductor, in electronic components. And so, obviously, what's happened in the semi-conductor industry, we have seen some job losses in that, as some of the production has shifted to other locations.

Over the past couple of years, we have invested heavily in educational improvements. We committed $9 billion over a 20-year period to improve education, and $1.5 billion over that same period to fund university research, which enabled us, last year, to put together a $100 million package to track the International Genomics Consortium and the formation of the Translational Genomics Institute.

So now we're in the business of shifting a portion of our economy from chips and semi-conductors to DNA sequencing, genetic research, and the development of compounds that will help make customized therapies to help cure diseases that are currently not nearly able to be treated so well.

So when I'm talking about new jobs, I think our communities have to find ways to participate in creating news jobs in industries that maybe we haven't even invented yet that are on the front-end, and those will be good jobs. They'll be good jobs because there will be a high level of scientific content or knowledge content in the jobs, but there will also be a lot of technical jobs associated with it.

And for every scientist in our genomics research area, there needs to be 15 lab techs to support that person. And so our community colleges are helpful in creating opportunities for those people also.

MR. BOOKBINDER: Okay. Yes, Brian.

QUESTION: Can you tell us, from your own experience that the increased productivity in the U.S. is -- how much -- how many part of it are from fewer people to do the more work of the increased, like education level?

MR. WEDDLE: Yeah. That's a good question. And I don't know that anyone has empirical information on that, but the productivity gains from probably a blended mix of technology advances, more educational level, but also fewer people and also probably, some of us just working longer hours, too.

MR. BOOKBINDER: Okay. Are there any other questions for Mr. Weddle?

Yes, please, in front.

QUESTION: Yes, just the fact that we need more investment in education, but the plain truth is that nobody has money. So where does the money come from, because the budgets are scaled down everywhere -- on the federal level, on the state level.

And, secondly, you said that by the middle of next year we'll have -- the economy will pick up. Is there also an indicator that business investment will improve, which is a decisive indicator? Have you found anything in that respect?

MR. WEDDLE: Good questions. I'm not sure that I agree completely with the "there is no money" question. In Arizona, we have found that our citizens have been willing to approve special taxes, providing those taxes that were dedicated towards education and important things, so it's a question of priority. And what we have found is that our citizens, when given the opportunity, have been willing to support higher levels of investment in the future in those kinds of things. And so it may be that we have to work a little harder to find the resources to make those investments in that regard.

And your second question was -- repeat that.

QUESTION: Business investment.

MR. WEDDLE: Business investment. In our country we have a lot of overcapacity, and I don’t think we'll see strong business investment in facilities until the factory utilization rates get up to higher levels and so that will also be a lagging indicator.

MR. BOOKBINDER: Okay. Are there -- is there a final question or -- that was the final question. Excellent.

I thank you all for coming today. I thank Rick Weddle for the excellent presentation.

MR. WEDDLE: They should look on our website: www.gpec.org/iedc and we'll be posting the full study on there.

Thank you very much.

MR. BOOKBINDER: And thank you all for coming. Thank you.