A ‘catastrophe’ is coming for economy: Labor Secretary Marty Walsh

There has been a lot of talk about looming layoffs, and by some recent surveying, as many as half of large employers are thinking about labor cost cuts as the economy slows. But U.S. Department of Labor Secretary Marty Walsh doesn’t see the recent job gains reversing, according to an interview at CNBC’s Work Summit on Tuesday.

“I still think that we’re going to have job gains as we move into the end of this year, early next year. A lot of people are still looking at different jobs,” he told CNBC’s Kayla Tausche at the virtual event. “We saw a lot of moving around over this last course of the year. People leaving jobs, getting better jobs, and I’m not convinced yet that we’re headed towards that.”

For the Federal Reserve, some level of higher unemployment is necessary to cool an economy that has been bedeviled by persistent inflation. Unemployment, at 3.5% now, went down in the last monthly nonfarm payrolls report. The Fed is targeting unemployment of 4.4% as a result of its policy and higher interest rates.

“We definitely have to bring down inflationary pressures,” Walsh said at the CNBC Work Summit, but he added that the way to do it isn’t layoffs.

A House inquiry released on Tuesday found that the 12 largest employers in the nation including Walmart and Disney laid off more than 100,000 workers in the most recent recession during the pandemic.

Walsh said in a slower economy, the federal government’s infrastructure act will support job growth in sectors including transportation. “Those monies are there. … if we did have a downturn in the economy, those jobs will keep people working through a difficult time.”

In the battle against inflation, Walsh said moving people up the income ladder is a better way of helping Americans make ends meet than laying them off.

“I think there’s a way to do that by creating good opportunities for people so they have opportunities to get into the middle class, and not enough people in America are working in those jobs, quite honestly. … I think there’s a lot of Americans out there right now that have gone through the last two years, a lot of concern in the pandemic, they were working in a job maybe making minimum wage, maybe they had two or three jobs. Really I think the best way to describe what is a middle class job is a job you can work, one job, get good pay, so you don’t have to work two and three jobs to support your family.”

From a policy perspective, Walsh expressed disbelief that a higher federal minimum wage remains a contentious issue on Capitol Hill.

“It shocks me that there are members in the building behind me, if you can’t see the building behind me it’s the Capitol, that think that families can raise their family on $7-plus, on the minimum wage in this country,” he said.

But Walsh conceded that legislation to increase the minimum wage, which was held up in the Senate, has an uncertain future ahead of the midterm elections.

Here are a few of the other major policy issues the Labor Secretary weighed in on at the CNBC Work Summit.