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The strong labor market is a big reason for the resilient economy

LEILA FADEL, HOST:

Today's jobs number report has largely confirmed expectations and showed a solid growth. The U.S. added 187,000 jobs in July, while the unemployment rate fell slightly to 3.5%. It's this strong labor market that has kept the economy afloat while inflation has been cooling bit by bit. Meanwhile, the Federal Reserve keeps inching closer to its goal of 2% inflation, which is fueling optimism for a soft landing for the economy. Former U.S. Labor Secretary Robert Reich joined me earlier this morning, before the jobs numbers were released.

So in your view, does the U.S. still need to worry about a potential recession at this point?

ROBERT REICH: Well, there's always, always the need to worry about a possible recession. But what is...

FADEL: Yeah.

REICH: ...Very interesting right now is that it looks like we may actually have a - what's called a soft landing. That is, we're bringing inflation down without an inflation. This is something that a lot of economists thought could not be done. The record in the past has not been terribly good on this score, but it looks like it is going to happen.

FADEL: So if a soft landing happens, what does that mean for Americans who are struggling because of rising inflation, rising prices, wages that can't keep up?

REICH: Well, it's good news on all counts. It's kind of a "Goldilocks" situation in terms of the economy...

FADEL: OK.

REICH: ...Because it means that inflation is down. And, of course, we know it already is way, way down. It's around 3% relative to what it was a year ago, which is 9%. But, also, it means we're not going to go into recession. It means the jobs are not going to be lost. There's not going to be a real problem with the - an economic downturn overall. Now, we're going to know more later this morning as to what happened in July. But most people, including myself, looking at July job numbers are fairly optimistic.

FADEL: I wanted to ask how the Federal Reserve has been able to steer what might become a soft landing.

REICH: I think the Federal Reserve has had the aid of the Biden administration's major investments - that is, the investments in everything from infrastructure to semiconductors to wind and solar energy manufacturing. All of that has given the economy a positive tailwind, so even if the Fed is slowing the economy by raising interest rates, that tailwind is guaranteeing that the landing will not be a crash landing.

FADEL: You know, it's - it can feel confusing because this week we've had these sort of two competing economic narratives. We're expecting, as you mentioned, some good news in the labor market. But earlier this week, we saw the credit rating agency Fitch strip the U.S. of its triple-A status because of political dysfunction in this country. How does that - being stripped of that triple-A status - impact the U.S. and its economy?

REICH: Well, it's not going to directly impact the United States, and it doesn't seem to have any impact in the - in any of the economic indicators. It is a suggestion that at least one credit rating agency is nervous, presumably because there is a lot of political dysfunction in this country. But, again, what's interesting to me is that notwithstanding all of the divisiveness, we have a Fed - a Federal Reserve Board - that has managed to raise interest rates without leading to, so far, recession. And at the same time, we've got a lot of major investments in infrastructure, semiconductors, wind and solar energy, manufacturing and antitrust enforcement. We've got a lot of things going on at the same time that are pro the economy, that are making the economy stronger and that are offsetting the higher interest rates in terms of slowing the economy. So this is where the "Goldilocks" is coming from.

FADEL: You know, you're talking about the administration's handling of the economy for the most part, and it sounds pretty good, but polls show that many Americans don't approve of President Biden's handling of the economy. How would you rate the performance, and why do you think most people don't see it as good?

REICH: I think, Leila, this is the best economy I have seen in, well, about 30 years. I think most Americans don't see it that way because in terms of their personal economy, they may not yet feel the benefits of all of the public investments that have been made. There's still a kind of a nervousness and a - oh, a kind of trauma - post-trauma - effect from the pandemic and the recession that came just after the pandemic and then the inflation which came just after the pandemic.

FADEL: And when do you think people will start feeling the effects of all this?

REICH: I would say probably - if I were a betting man, I would say within three months.

FADEL: Former U.S. Labor Secretary Robert Reich, thank you so much for your time.

REICH: Thank you, Leila.

(SOUNDBITE OF HEATER FANZ'S "LEVWA") Transcript provided by NPR, Copyright NPR.

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