Saturday Morning News

Robert Reich Discusses the State of the American Economy

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KYRA PHILLIPS, CNN ANCHOR: Rising oil and gasoline prices have workers thinking twice about the daily commute, rising interest rates have prospective home buyers thinking twice about making that commitment, and a tight labor market has Congress thinking twice about raising the minimum wage.

Here to talk about all of this is former Clinton administration Labor Secretary Robert Reich. He joins us this morning from our Boston bureau.

Good morning, Mr. Secretary.

ROBERT REICH, FORMER LABOR SECRETARY: Well, good morning, Kyra. How are you this morning?

PHILLIPS: Very good. Glad to have you with us.

All right, if the economy is so strong, yet we keep having -- or hear from Greenspan, saying we need to quell our excitement, we need to calm down, we need to be careful, why?

REICH: Greenspan is worried about inflation. He is worried that because the labor market is so tight right now, down to about 4 percent of all workers are looking for jobs -- that's as tight as it's been in 35 years -- he's worried that that is going to raise waged and, therefore, ultimately raise prices. And we'll have that awful "i" word, that inflation to contend with in the future.

PHILLIPS: Yes, it definitely scares us all. right, let's talk about the tight labor market. Why are we seeing this? Is it because productivity is high and corporations are more efficient?

REICH: Well, corporations are obviously more efficient, Kyra. Also, there's a lot of demand. Consumers are buying a lot of things. The stock market is good, housing prices are going up. People feel very good. And, therefore, they are going into debt, consumer buying continues to be and set record levels, and when consumers are buying so much, that means there have got to be a lot of people to make things and also to serve consumers, hence we have a great deal of employment and very low unemployment.

PHILLIPS: OK, let me ask you this: If you were the labor secretary right now, how would you handler the tight labor market at this moment? What would you do? REICH: Well, if I were labor secretary right now -- and again, the government doesn't have all that much to do in terms of relieving the tightness of the labor market. Certainly, what the executive branch or Congress could do is ease the transition for people, provide better job training, better educational opportunities so people who are in the retail segment -- restaurant, hospital, hotel workers who are earning maybe $7, $8 or $9 or $10 an hour -- they could get training and, therefore take a technical job that may pay $15 or $20 an hour.

We know that there are a lot of vacancies. There's a great need for what might be called "technical" workers, who have technician-type skills.

PHILLIPS: OK, and turning to the stock market, let's get back to there just for a moment. More disposable income -- it seems like people do have more right now. So this in turn, of course, would lead to more investing and a stronger stock market, correct?

REICH: And this is exactly what's worrying Alan Greenspan and the Federal Reserve board. They're going to be meeting in 10 days, Kyra, and they're going to be making a decision as to whether to raise short-term interest rates. And if they do that, it could mean that the entire bubbling economy, this buoyant economy, will slow down considerably.

PHILLIPS: And my final question, it used to be the Dow that we followed, now the Nasdaq, incredible numbers. Could this be the bellwether of the economy?

REICH: Well, the Nasdaq traditionally has more technology stocks, and that is the new economy. The new economy is software, it's technology, it's increasingly going to be genetic and molecular technology. All of those new technology stocks are doing better. The old economy stocks, Procter & Gamble and everybody else, the old brand names, they are doing worse.

I think a lot of investors are beginning to see that the new economy is essentially taking over the old economy. All of those old businesses are becoming -- well, they're dependent more and more on technology to deliver their goods and services and to create the goods and services in the first place, and , therefore, that's where you want to be. You want to be with technology, you don't necessarily want to be with the old brands.

PHILLIPS: That's true. And a lot of people are.

Former Labor Secretary Robert Reich, thanks for being with us this morning.

REICH: Well thanks, Kyra, bye-bye.

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