Labor Secretary: April's Unemployment Rate Indicates Need For Tax Cut

By Jim Burns | July 7, 2008 | 8:27 PM EDT

( - America's unemployment rate went up in April to 4.5 percent from a March rate of 4.3 percent, prompting Labor Secretary Elaine Chao to urge passage of the Bush tax cut by Congress soon.

Chao said in Washington Friday, "For years, we have treated this economy like the goose that laid golden eggs; we have taxed it too much and regulated it too much, and it's catching up with us. We need to give the economy room to breathe, and the first essential step is the president's tax cut, a strong, permanent cut that will return more money to the private sector to buy goods and invest."

The manufacturing and service sectors both experience the largest employment declines, a total loss of 223,000 jobs during April, according to the Labor Department.

"The skills gap continues to be reflected in the unemployment numbers, as high-skilled sectors like management, health care, engineering and insurance posted small but steady job gains, while the 'temp' worker market suffered a loss of 108,000 jobs, the largest ever," said Chao.

People without a high school diploma are experiencing unemployment rates that are 4.3 percentage points higher than those with college degrees, according to the Labor Department.

But for government employment, the news was good, the Labor Department said. Government employment continues to expand at all levels - another 38,000 jobs were added in April.

Rep. Jim Saxton (R-N.J.), chairman of the congressional Joint Economic Committee said Friday the April unemployment rate means that "changes in monetary and tax policy" need to be made.

"The Fed has recognized the slowdown in the economy underway since last summer and has moved to reduce short-term interest rates. Further reductions would be appropriate. The Fed actions this year to lower interest rates will improve the prospects for sustained economic growth later this year and into the next," Saxton said in a statement.

Saxton added, "Congress appears to be making progress in addressing the high tax drag currently burdening the economy. It appears likely that bipartisan tax legislation to reduce the burden of taxation on the economy will be enacted in the near future. While this action will not make the economy turn on a dime, it will improve the long-run growth potential of the U.S. economy."

House Democratic Leader Richard Gephardt (D-Mo.) is against a tax cut as well as the whole Republican budget deal.

"Republican leaders were trying to deprive the American people of resources for education and other high priorities. They jettisoned the agreement reached in the Senate that devoted more resources to education and a Medicare prescription drug program.

And they tried to go back to the president's original blueprint -- a massive tax cut weighted in favor of the wealthiest Americans that left no room in the budget for anything except tax cuts," Gephardt said on Capitol Hill.

"If President Bush and his supporters in Congress were truly committed to bipartisanship," Gephardt said, "we could have avoided last night's farce. This is no way to run the House. It's no way to run a country. This Congress can do better. The country deserves better. The American people deserve better -- a more honest, more sensible, more legitimate discussion of choices that will have an impact on our country for many years to come."

Meanwhile, the Washington-based Employment Policies Institute urged Congress Friday to reconsider plans to hike the minimum wage because of the April unemployment rate.

EPI's chief economist Richard Toikka said, "These economic facts should serve as a wakeup call to the United States Congress. While economic stimulus through tax cuts are welcome, the first directive to politicians is to do no harm. Present calls to hike the national minimum wage ignore these worsening realities and will undoubtedly increase hardship in many regions of the country."

Toikka added, "Furthermore, persons who are unable to get off welfare during the boom times will fall farther down the list of potential new-hires, below the large number of recently laid-off skilled workers. Since the reform of the welfare system in 1996, welfare recipients who are approaching the end of their lifetime benefits have dramatically fewer options in times of recession. The negative effects of a hike in the national minimum wage will be borne disproportionately by these most vulnerable citizens."

Last February, House Democratic Whip David Bonior (D-Mich.) and Sen. Edward Kennedy (D-Mass) introduced legislation to raise the minimum wage. Spokespersons for both men said Friday they still favor an increase.

"It's been almost five years since Congress and the president last approved a minimum wage increase. It's been so long that workers have lost virtually all the gains they made from it. The real value of today's minimum wage is now 24 percent below what it was in 1979 and 30 percent below what it was in 1968. The bottom line isn't only that minimum wage workers need a raise, they've earned a raise," Bonior said on Capitol Hill.

The Bonior-Kennedy proposal calls for a three step, $1.50 increase in the minimum wage. The first step would be 60 cents, thirty days after enactment; the second would be 50 cents effective January 1, 2002; the third would be 40 cents effective January 1, 2003.