Summers: Good jobs report provides own stimulus
Updated at 11:20 a.m. ET
A former economic official in the Clinton and Obama administrations said on "CBS This Morning" Friday that a better-than-expected jobless report for the first month of the year will add to the nation's psyche a boost of confidence, which he calls "the cheapest form of stimulus."
Lawrence Summers, who served as President Clinton's Treasury secretary and President Obama's director of the National Economic Council, told Erica Hill, Gayle King and Charlie Rose that the economy's addition of 243,000 jobs in January, which lowered the unemployment rate to 8.3 percent, was a positive sign.
"One of the pieces of advice I've always given, to President Obama and others, is that confidence is the cheapest form of stimulus and that confidence coming in is gotta be a good sign, and as more people get hired, you know, economies are about spirals," said Summers. "You can have a vicious cycle where people are losing their jobs, incomes are falling, spending is falling, that means incomes are falling, or you could have a virtuous circle where incomes grow, spending increases, more people get jobs, income increases, and there are signs that we're moving much more towards that virtuous circle from that vicious cycle."
Even though the nation's rate of unemployment still has a long way to go before reaching the so-called "full employment" rate of around 5 percent, the U.S. has made progress in the past three years, Summers said.
"I do think that we really are recovering," said Summers, "that unlike in parts of Europe, where the economy is declining, in the United States the pace isn't everything we would want it to be, but the collapse that President Obama inherited really has been contained, and, albeit not as rapidly as we'd like, we are on an upwards path."
Summers said that the economy has shown similar signs of hiring in the past two winters but were then followed by slower periods of employment.
"Improvements in the unemployment rate, job creation, these are all positive things," said Summers, "and there is a fair amount of evidence that pace has picked up over the last few months. Whether that will continue, whether we'll have another disappointment, uh, no one can know, but it's certainly better when the numbers are coming in a little ahead of expectation than when the numbers are disappointing."
Overall, Summers said, the devastating effects of the economic collapse remain untouched.
"Make no mistake, Charlie, we still have a real jobs deficit in this country," said Summers. "We have a growth deficit in this country. We are still several- we are still millions of jobs short of where we should be. The level of incomes in the country are probably a trillion dollars short of where they should be."
Above, watch Lawrence Summers' complete analysis of the economy
© 2012 CBS Interactive Inc. All Rights Reserved.