[Acosta:] The nation's unemployment rate held steady at 9.5 percent in July. The numbers out today point to a still anemic job market. The private sector added just 71,000 jobs, and that was offset by a loss of temporary Census positions. The result, a net loss of 131,000 jobs. Joining us to talk about the story behind the numbers, Professor Thomas "Danny" Boston from the Georgia Tech Department of Economics. And thank you very much for joining us. Appreciate it. Thank you, Danny.
[Prof. Thomas "danny" Boston, Georgia Tech Department Of Economics:] My pleasure. Sure.
[Acosta:] So, disappointing but not unexpected?
[Boston:] Not unexpected. The economy has actually been growing, really, as you mentioned,,kind of anemically over the last quarter, 2.4 percent. So that's not generating a lot of jobs. And when we look at the numbers, although the unemployment rate remained the same, there were these other factors that were more troubling. That is, we're not creating as many private sector jobs as we thought. We want it to be at least 30 percent above what we actually created. And so there are some challenges there.
[Acosta:] And what are the challenges? I mean, how do we turn this thing around? Because this has been pretty flat for a few months now.
[Boston:] It has been. It has been. Well, there are a lot of challenges. You know, we just can't move the economy forward. Part of the problem, I think, is we're caught in what John Maynard Keynes, who was one of the most famous economists of all time, called a liquidity trap. And we can think of that really as a cash trap.
[Acosta:] Right.
[Boston:] And so the healthiest sector in the economy is the corporate sector. Their profits are going great. But right now they're sitting on $1.8 trillion in cash, not hiring anymore, not spending a lot of money in investment. That hurts. That doesn't create jobs.
[Acosta:] Yes. And we know corporations are not going to just hire people out of the goodness of their heart. They're going to hire people who make good business sense. So what's it going to take for those big Fortune 500 companies out there to start hiring people in droves, get people back to work?
[Boston:] Well, right now they're being driven by expectations, the uncertainty of what's going to happen in the future.
[Acosta:] They just took a big haircut.
[Boston:] Right. Right.
[Acosta:] When the markets crashed.
[Boston:] Right. And they are not going to go back there again. When they went through the last recession and ran out of cash, almost went into bankruptcy and they're making sure that they have as much cash as possible. So we have to do something to reassure them, but the other part of that is that the low interest rate, this interest rate now short-term rates are like a quarter of a percent, almost zero.
[Acosta:] Exactly.
[Boston:] Those rates are conducive to corporations borrowing as much as they can and holding it for as long as they can, and that's what that whole liquidity trap is about.
[Acosta:] So do you think if the Fed started raising interest rates slowly but surely, that that might prompt a little spending, a little spending of that cash
[Boston:] Well, you know
[Acosta:] while it's still cheap?
[Boston:] Yes, it's interesting. I'm thinking that, but if I say it, it will sound like heresy and I will be drummed out of the economics profession.
[Acosta:] Exactly.
[Boston:] But it's not helping. It's conducive to doing exactly what it's doing, and we're not getting money to individuals who need it for example, small businesses and consumers because their credit profile is so bad. And so it creates a lot of problems. And the other problem is that while the Fed is trying to convince all of us in the corporate sector that the economy is performing well, how can you be convinced when you're sitting back looking at an interest rate of near zero. That's like a used car salesman trying to sell you a car deeply discounted.
[Acosta:] Well, and that is what I have been and a lot of folks have been talking about with this economy with the last several months, is that we've almost run out of tricks in terms of getting this thing going again. But appreciate your time, Danny. Thanks for talking to us.
[Boston:] Great.
[Acosta:] Danny Boston breaking it down for us and helping us make some sense out of it. I wish we could make more sense out of it.
[Boston:] Yes, I do, too. Hopefully things will look better next month.
[Acosta:] All right. Thanks for your time. Appreciate it.
[Boston:] Thank you.
[Acosta:] Well, later this hour, expecting President Obama to react to the new jobless numbers. He's touring a small business in Washington right now, and we will bring you his remarks live.