[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 108-269
THE EMPLOYMENT SITUATION: AUGUST 2003
=======================================================================
HEARING
BEFORE THE
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
__________
SEPTEMBER 5, 2003
__________
Printed for the use of the Joint Economic Committee
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Robert F. Bennett, Utah, Chairman Jim Saxton, New Jersey, Vice
Sam Brownback, Kansas Chairman
Jeff Sessions, Alabama Paul Ryan, Wisconsin
John Sununu, New Hampshire Jennifer Dunn, Washington
Lamar Alexander, Tennessee Phil English, Pennsylvania
Susan Collins, Maine Adam H. Putnam, Florida
Jack Reed, Rhode Island Ron Paul, Texas
Edward M. Kennedy, Massachusetts Pete Stark, California
Paul S. Sarbanes, Maryland Carolyn B. Maloney, New York
Jeff Bingaman, New Mexico Melvin L. Watt, North Carolina
Baron P. Hill, Indiana
Donald B. Marron, Executive Director and Chief Economist
Wendell Primus, Minority Staff Director
C O N T E N T S
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Opening Statements of Members
Senator Robert F. Bennett, Chairman.............................. 1
Senator Jack Reed................................................ 3
Representative Jim Saxton, Vice Chairman......................... 4
Representative Pete Stark, Ranking Minority Member............... 5
Witnesses
Statement of Kathleen P. Utgoff, Commissioner, Bureau of Labor
Statistics, Accompanied by Kenneth V. Dalton, Associate
Commissioner, Office of Prices and Living Conditions; and John
Galvin, Associate Commissioner, Employment and Unemployment
Statistics..................................................... 6
Submissions for the Record
Prepared Statement of Senator Robert F. Bennett, Chairman........ 21
Prepared Statement of Representative Jim Saxton.................. 21
Prepared Statement of Representative Pete Stark, Ranking Minority
Member......................................................... 22
Spiegel Online interview with George A. Akerlof, Professor of
Economics, University of California, Berkeley submitted by
Representative Stark........................................... 24
Prepared Statement of Commissioner Utgoff, together with Press
Release No. 03-467, entitled, ``The Employment Situation:
August 2003,'' Bureau of Labor Statistics, Department of Labor. 29
Questions submitted by Senator Bennett to Commissioner Utgoff.... 58
Response of Commissioner Utgoff to questions submitted by Senator
Bennett........................................................ 60
Response of Commissioner Utgoff to questions asked by
Representative Saxton.......................................... 65
THE EMPLOYMENT SITUATION: AUGUST 2003
----------
FRIDAY, SEPTEMBER 5, 2003
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The Committee met, pursuant to notice, at 9:35 a.m., in
Room 628, Dirksen Senate Office Building, the Honorable Robert
Bennett, Chairman of the Committee, presiding.
Present: Senators Bennett, Reed, and Sarbanes;
Representatives Saxton, Stark, and Maloney.
Staff Present: Donald Marron, Tim Kane, Colleen Healy, Gary
Blank, Melissa Barnson, Rebecca Wilder, Chris Frenze, Brian
Higginbotham, Nan Gibson, Bob Keleher, Rachel Klastorin,
Wendell Primus, Matthew Solomon, Chad Stone.
OPENING STATEMENT OF SENATOR ROBERT F. BENNETT, CHAIRMAN
Senator Bennett. The Committee will come to order. I will
begin by warning our witnesses that Congress is getting in the
way of the Committee's work. There's usually safety in
scheduling a Friday morning hearing because the House isn't
usually in session on Friday morning, and the Senate very often
is not. This morning the House is holding a vote. It started at
9:15. And the Senate just started a vote, which I will have to
go respond to within the next few minutes.
Mr. Saxton, who is the Vice Chairman of the Committee, is
on his way, we're told. We're never quite sure in the
Congressional world what ``on his way'' really means in terms
of time.
But I will make my opening statement. I hope someone out
there is listening or watching when there are no members of the
Committee here to respond, but the witnesses at least will be
here.
I understand Mr. Stark is on his way, and that he too has
an opening statement. So we will do our best to maximize the
amount of time when members are here and hope that at some time
after about 10:15 or so everyone can be here and everyone can
participate.
During the month of August, when the Congress was out of
session, the economy was very much in session. It not only kept
operating, it kept improving, and many measures suggest that
the economy may in fact have fully turned the corner, and that
the recovery, which has been so sluggish, has now achieved
traction, as the politicians like to say.
This morning, we're going to face the interesting
statistics that we have from the Bureau of Labor Statistics.
The unemployment rate declined slightly but not significantly
in a statistical fashion from 6.2 percent to 6.1 percent.
However, the payroll survey indicates that although
unemployment--as a percentage--declined, 93,000 jobs were lost.
The thing that I want to get into in this hearing is the
fact that there is a discrepancy between the household survey,
which is used to determine the unemployment rate, and the
payroll survey, which is used to determine how many jobs are
lost.
The chart that I'm now displaying here takes as its
beginning point November of 2001. That date was chosen because
it is the official date of the end of the recession according
to the Bureau that makes decisions as to when recessions start
and end.
If you take the payroll survey, which is the lower line in
red, there's been a steady loss of jobs since the end of the
recession. That is the number that is most commonly reported in
the press. However, if you take the blue line, which is the
household survey, that indicates that in fact, since the end of
the recession, a number of jobs have been added.
Now for the uninitiated that don't understand the
difference between the payroll survey and the household survey,
one of which I was until my staff prepared me for this hearing,
the payroll survey is conducted by calling businesses and
asking them if they have added to or subtracted from their
payrolls.
The household survey is taken by calling people at home and
saying, do you have a job? That's an over simplification of the
methodology but is straightforward enough for our purposes.
The two should be the same, if they are both accurate. The
fact that they are as widely divergent as that chart indicates,
says that we need to probe behind the raw numbers and get more
information as to what is really going on.
I would hope that the Commissioner, the Bureau of Labor
Statistics, Kathleen Utgoff, who is with us this morning, can
help us understand this. I'm not coming at this, Commissioner
Utgoff, in any way in an adversarial situation. I'm coming at
it with the desire to achieve some understanding.
Those of us who are, at least by our job description,
policymakers, need to be sure that we are acting on the best
possible information and the most accurate statistics we can
have. So it is a bit of an anomaly that today's news reports
that the unemployment rate declined while the number of jobs
went down.
If we take the household survey as our benchmark, then we
can say the unemployment rate declined while the number of jobs
increased.
The first statement, the unemployment rate goes down while
the number of jobs decreases, is counterintuitive. It doesn't
mean it's wrong but it's counterintuitive.
The second statement that says the unemployment rate goes
down, and the number of new jobs created goes up, feels like
it's the more accurate one.
I would hope in this hearing we can have a discussion of
that in some depth, and get an understanding of how these
surveys are conducted, how the Bureau of Labor Statistics might
enlighten us as to why the disparity between the two, and get
us on the track of having a clearer picture of what's really
going on with the job information.
One other point that I would make is that these numbers,
that is, employment numbers, are always a lagging indicator of
economic health. The tendency on the part of a business man or
woman, when the economy starts to go soft, is to delay laying
people off as long as possible in the hope that the soft
figures are simply a one-time anomaly and not a signal of
things to come. So unemployment stays low even as the economy
starts slipping into a recession.
Conversely, when the economy starts coming out of a
recession, and we are in a recovery, as we are now, business
people are loath to make new hires until they're absolutely
sure that the recovery is going to be strong. Once again, the
unemployment number is always the last indicator to change and
turn in the direction of the other economic statistics that are
before us.
With that information, at least as I have it before us,
that concludes the things that I want to discuss in an opening
statement. The five lights are on telling me that I'd better
get to the floor, and Senator Reed, who has been the Vice
Chairman of this Committee, is here and is trustworthy, so I'm
happy to turn it over to him.
Senator Bennett. I'm fairly sure that he would have a
somewhat different view than the one I've just expressed but
I'm willing to hear it.
Senator Reed.
[The prepared statement of Senator Bennett appears in the
Submissions for the Record on page 21.]
Senator Reed. I'm going to make a brief statement, Mr.
Chairman, and then I'm going to vote also. May I make a brief
statement?
Senator Bennett. Absolutely, and we'll go over together.
OPENING STATEMENT OF SENATOR JACK REED
Senator Reed. Thank you very much, Mr. Chairman.
Thank you, Commissioner, for joining us this morning.
It seems that this report is more bad news. Unemployment
was essentially unchanged and still at recessionary levels. The
Chairman did point out that employment tends to be a lagging
variable, but there are some indications that there are
structural changes going on which might suggest that
unemployment might not come back as robustly in the next few
months, even if there is an expansion of the economy. That's
something I think we hopefully can touch upon in our questions.
Nearly 9 million people are unemployed in August, even
though I do feel, as the Chairman does, that this might be the
last indicator that changes. For most families it's the first
thing they look at. Can they get jobs, can their children get
jobs? Are jobs still being shed in their communities? I think
it's terribly important.
What I think is also of significance in these numbers is it
appears that payroll employment plunged again. As the
protracted slump in payrolls continues intact really to become
the most extensive, really, since the 1930s. Payroll employment
shrank by 93,000 jobs, for the seventh consecutive month.
Indeed, government payrolls shrank. I would suspect that is a
combination of federal, state, and municipal because I noted
today that the federal workforce is the largest it's been in
over a decade because of security considerations primarily.
These payroll declines where pervasive factory payrolls are
down for the 37th consecutive month. I met with a manufacturer
yesterday from my home state of Rhode Island, and he pointed
out that the company is doing pretty well but they're not going
to be hiring. In fact, they expect to be making more money in a
year with fewer people.
These are some of the changes I'm sensing out in the
communities as I talk to people. I note also the productivity
numbers for manufacturing were significantly higher, yet
employment is declining. So we're looking at some very
significant changes that affect whether or not people have
jobs.
Again, one other number that I think is significant, total
weekly hours recorded on private, non-farm payrolls which some
would say is the most influential monthly indicator of the
economy's health, fell by .1 percent in August. This is not
good news for people who are looking for work and who are
looking for that sort of sense that there is a recovery. We're
sort of in the initial phases, I think it could go either way.
But if there is a recovery, without jobs, then we're not doing
our part to give people the opportunity to work.
I thank the Chairman for his comments. Thank you.
Senator Bennett. The hearing will stand in recess.
[Recess.]
OPENING STATEMENT OF REPRESENTATIVE JIM SAXTON, VICE CHAIRMAN
Representative Saxton. [presiding.] It's a pleasure to join
in welcoming you again before the Joint Economic Committee.
The August unemployment data reflects the past weaknesses
in the economy. Payroll employment declined by 93,000 including
a 44,000 drop in the manufacturing sector. Meanwhile, the
unemployment rate slipped to a level of 6.1 percent.
The data show that the consecutive monthly declines in
manufacturing employment account for most of the unemployment
losses in recent years. These declines began in the second half
of 2000. Measures of manufacturing output and activity indicate
that the manufacturing sector started contracting about that
time.
The other indicators show that an economic slowdown was
underway in 2000. In the wake of the bursting of the stock
market bubble in the first quarter of 2000, business investment
and economic growth also fell sharply in the last two quarters
of 2000.
As Joseph Stiglitz, President Clinton's Chairman of the
Council of Economic Advisers said, ``the economy was slipping
into recession even before Bush took office and the corporate
scandals that are rocking America began much earlier.''
Although the economy has been expanding since the end of
2001, the pace of economic growth has been disappointing until
very recently.
The weakness of business investment after the bursting of
the stock market bubble has been a major drag on economic
growth. Fortunately, President Bush and the Congress succeeded
in lowering the tax burden on the struggling economy and
providing important incentives for business to invest.
Data released in the last several months indicate that the
long-awaited rebound in business investment has finally begun
and second quarter GDP is much stronger than expected at 3.1
percent.
Many economists expect that a period of strong economic
growth will emerge over the next several quarters. A sustained
period of such economic growth is what is needed to expand
payrolls once again and this must remain the top priority of
economic policy.
Let me turn, at this point, to Mr. Stark to any comments he
may have at this time. Then we'll turn to the Commissioner.
[The prepared statement of Representative Saxton apprears
in the Submissions for the Record on page 21.]
OPENING STATEMENT OF REPRESENTATIVE PETE STARK,
RANKING MINORITY MEMBER
Representative Stark. I'd like to thank the distinguished
Vice Chairman. It's a joy to be with one of the few Republicans
in the whole world who doesn't have a miserable record, and
it's a pleasure to be here with you this morning.
I'd like to also thank the Chairman in absentia. I know
he's voting and will be with us shortly.
And welcome, Commissioner Utgoff. Thank you for testifying
today. I'd hope to have Dr. George Akerloff, an economics
professor from Berkeley, here. He was quoted as saying that the
president's fiscal policies is a form of looting and his
economic policies are the worst in our 200-year history. And I
thought we could talk about that a little. But I'll just submit
an interview that he did for the record, if I may, Mr. Chair.
The Bureau of Labor Statistics August report continued to
paint a disappointing labor market picture. While the
unemployment rate was essentially unchanged at 6.1 percent, the
jobless recovery drags on as another 93,000 payroll jobs were
lost in August. Nearly 9 million Americans remain unemployed
with nearly 2 million out of work for 6 months or more.
I'd refer you to chart one. Probably I'm the only person in
the room who was there when that left hand negative column
occurred, and I'm still here when the little red column on the
right occurs. But basically this Administration belongs in what
we're going to call the job loss hall of shame. It's the only
Administration in 70 year, since Herbert Hoover, with a decline
in private sector jobs.
Now we'll go to chart two, since the 1930s. The longest
it's taken to recover private sector jobs lost in recession has
been 33 months. This is during the original Bush 1990 to 1991
recession, and subsequent jobless recovery. As you can see, the
current slump is just dragging along and not catching up.
In order for the current president not to surpass the
achievement of his father, the economy would have to create
818,000 jobs a month between now and the end of the year, a
rather unlikely piece of job creation. The one job that's been
created, as a result of the president's policy, is a new
Assistant Secretary of Commerce to focus on manufacturing. But
the collapse of manufacturing jobs is a serious problem that
requires our serious attention, not a cynical campaign
offensive.
A much better way for the Administration to show their
concern for the unemployed in the near term would be to provide
additional weeks of and broadened coverage of the unemployment
insurance benefits.
We've lost 3.3 million private sector jobs since President
Bush took office and there are still no signs of a jobs
recovery. The unemployment rate is not anticipated to fall
quickly from its current level. The Congressional Budget Office
[CBO] expects that the unemployment rate will average 6.2
percent, its current level--for the calendar year 2003 and
2004.
I learned this morning that in Iraq, we're paying 120 bucks
a month to the unemployed Iraqi military to keep their economy
moving. And here we are with millions of people who get no
unemployment benefits in our country. It just doesn't seem
right.
The Congressional Budget Office [CBO] also says the record
of unemployment growth over the past 2 years has been even
worse than in the jobless recovery of 1991 to 1993. I hope,
Commissioner, you'll be able to characterize the current
jobless recovery and put it into the proper historical context
for us.
Thank you, Mr. Chairman. I look forward to your testimony,
Madame Commissioner.
[The prepared statement of Representative Stark appears in
the Submissions for the Record on page 22; a Spiegel Online
interview with Dr. Akerloff appears in the Submissions for the
Record on page 24.]
Representative Saxton. Commissioner, thank you for being
with us. The floor is yours. We are anxious to hear your
testimony this morning.
OPENING STATEMENT OF KATHLEEN P. UTGOFF, COMMISSIONER, BUREAU
OF LABOR STATISTICS, ACCOMPANIED BY KENNETH V. DALTON,
ASSOCIATE COMMISSIONER, OFFICE OF PRICES AND LIVING CONDITIONS;
AND JOHN GALVIN, ASSOCIATE COMMISSIONER, EMPLOYMENT AND
UNEMPLOYMENT STATISTICS
Dr. Utgoff. Mr. Vice Chairman and Members of the Committee,
thank you for this opportunity to comment on the employment and
unemployment data that we released this morning.
The unemployment rate, at 6.1 percent, was essentially
unchanged in August. Non-farm payroll employment declined by
93,000 over the month. Manufacturers again made substantial job
cuts, and employment in several other industries continued to
trend down. On the positive side, employment continued to trend
up in health care and construction.
Manufacturing employment fell by 44,000 in August. Job
losses continued to be pervasive, with some of the more notable
over-the-month declines occurring in textiles and apparel, wood
products, and electrical equipment. In the past 3 years, some
2.7 million manufacturing jobs have been lost, including a
decline of 431,000 this year. In August, the factory work week
was unchanged at 40.1 hours.
Within the information sector, the telecommunications
industry continued to shed jobs. Employment in this industry
has declined by 212,000 from its peak of 1.3 million in March
2001. Other sectors in which employment continued to trend down
over the month were wholesale trade and transportation and
warehousing.
Offsetting some of these losses, employment in the health
care industry resumed growth, after showing little change in
July. Health care has added over a quarter of a million jobs in
the past twelve months.
Construction sector employment was up by 19,000 in August
and has increased by 122,000 over the past 6 months. Temporary
help employment continued to trend up, although the increases
in July and August were notably smaller than the gains in May
and June.
Average hourly earnings increased by 2 cents in August,
following a 5-cent increase in July. Over the year, hourly
earnings have risen by 2.9 percent.
Turning to data from our household survey, the number of
unemployed persons and the unemployment rate were essentially
unchanged over the month. The long-term unemployed continued to
make up a little more than one-fifth of the jobless.
The civilian labor force was little changed over the month.
Over the year, the number of persons marginally attached to the
labor force was up. The subset of these persons who cited
discouragement over job prospects as their reason for not
searching for work also rose over the year. In August, they
numbered half a million.
As a side note, I would like to point out that the
blackout, which affected parts of the northeast and midwest,
beginning August 14th, occurred during the survey periods for
both our payroll and household surveys. While this event caused
significant disruptions to economic activities, it is unlikely
to have had any effect on the employment estimates from either
of our surveys.
In the establishment survey, persons paid for any part of
the pay period that included the 12th were considered employed.
In the household survey, persons who worked any part of that
week, as well as those who were prevented working because of
the blackout, were also considered employed.
Business closings resulting from the blackout did reduce
the number of hours people worked. However, some people
received pay for the hours not worked, and the payroll survey
measures hours paid rather than hours actually worked.
In addition, the blackout required some workers to put in
extra hours, and other workers made up the time they lost.
Thus, while the net effect from the blackout on payroll hours
estimates cannot be quantified, it is likely to have been
small. In fact, the measure of average weekly hours was
unchanged over the month.
Before closing, I would like to comment on employment
trends as measured by the payroll and household surveys, an
issue that has been receiving some attention recently. I know
the Chairman talked about it in his opening statement.
Since November 2001, the NBER-designated trough of the most
recent business cycle, payroll employment has fallen while non-
agricultural wage and salary employment from the household
survey has been essentially flat. That's a slightly different
measure than the one that was on the original graph, because we
take out agricultural workers and self-employed workers who are
not included in the payroll survey. So we try to make them more
comparable.
Some observers have speculated that the household survey
provides a better indication of the trend in employment at and
around points in the business cycle. It is our judgment that
the payroll survey provides more reliable information on the
current trend in wage and salary employment. The payroll survey
has a much larger sample than the household survey--400,000
business establishments covering about one-third of the total
non-farm payroll employment. Moreover, the payroll survey
estimates are regularly anchored to he comprehensive count of
non-farm payroll employment derived from the unemployment
insurance tax records.
To summarize the August data released today, payroll
employment declined over the month, and the unemployment rate,
at 6.1 percent, was about unchanged.
Thank you.
My colleagues and I would be glad to answer any questions
that you have.
[The prepared statement of Commissioner Utgoff, together
with Press Release No.03-467, entitled, ``The Employment
situation: August 2003,'' appears in the Submissions for the
Record on page 29.]
Representative Saxton. Commissioner, thank you very much.
Commissioner, let me start with a question. Recent data on
GDP growth, investment, durable goods orders, and other
indicators show that the economy is in fact accelerating.
That's great news.
Some forecasters are projecting growth, as a matter of
fact, for the third and fourth quarter in excess of 5 percent.
That's optimistic and America is very pleased to see those
kinds of projections.
However, isn't it the case that labor market indicators
often lag behind improvements in the economy?
Dr. Utgoff. That's true.
Representative Saxton. I had my staff look at this point,
Commissioner. Maybe you can just verify these facts for us.
We've had a number of recessions and we have identified four
major recessions. One in the early 1970s, one in 1981-1982,
another recession in 1990-91 and the most recent recession.
They all have one characteristic with regard to labor
statistics. That is that following the official end of the
recession, in 1971, for example, it appears, from information
that we have here, that there was no significant diminution of
the unemployment rate for approximately 18 months.
At the close of the official end of the 1980 recession, it
would appear that there was no significant diminution of the
unemployment rate for 18 months.
At the close of the 1991 recession, it would appear that
the unemployment rate actually accelerated--went up--for the
better part of 2 years.
And so with the end of the most recent recession in
November 1991, we continue to see the same kind of pattern that
was exhibited in 1970-71, 1980-81, 1991-92, and again in this
recession. Would you speak to those four recessions and verify
or say whether or not what I'm reading into these statistics is
correct.
Dr. Utgoff. As you mentioned before, the unemployment rate
is a lagging indicator and I can't verify the exact numbers
that you gave. In general, post-recession movements in the
unemployment rate differ historically.
Representative Saxton. So you wouldn't take exception with
the examples that I gave over those four decades of unfortunate
slow economic times, recessions?
Dr. Utgoff. Let me get back with you and check exactly
those numbers. I don't have them here with me today. We will
get back to you as soon as possible to verify those.
Representative Saxton. Thank you. Let me go on to another
issue. As the economic outlook improves, many businesses will
tend to be conservative about hiring decisions and delay
expanding their workforce until they are certain the economic
rebound will be sustained. Isn't this a typical pattern that
we'll be expecting to see in the current situation?
Dr. Utgoff. Yes. Employers tend to add hours and temporary
help workers before they add employees.
Representative Saxton. In addition to that, isn't it also
true that in the current set of economic circumstances, one of
the positive issues that we have seen develop is a dramatic
increase in productivity?
Dr. Utgoff. Yes. Productivity has been very high.
Representative Saxton. So in addition to the uncertainties
that always seem to follow a recession, the follow-on to this
recession also includes an element of increased productivity
which would tend to diminish somewhat the necessity to rehire
laid off workers.
Dr. Utgoff. That's correct.
Representative Saxton. Thank you. I'll go on to another
issue. In recent weeks, some people have realized that the
manufacturing employment decline is the main factor behind the
overall decline of payroll employment in recent years.
First of all, hasn't manufacturing employment tended
downward for several decades, independent of economic
conditions?
Dr. Utgoff. That's correct.
Representative Saxton. In recent years, isn't it true that
economic employment has been on a downward trend since 1998?
Dr. Utgoff. Yes.
Representative Saxton. Wasn't the most recent expansion
peak in the manufacturing employment actually reached in 1998,
and we've been in a continuous decline since 2000?
Dr. Utgoff. I think there's been about 37 months of
continuous decline, so that would be roughly in--let us look at
that up for you.
Representative Saxton. Go ahead.
[Pause.]
Dr. Utgoff. Mr. Galvin tells me that the most recent peak
was in July 2000.
Representative Saxton. So the decline has been underway
since July of 2000?
Dr. Utgoff. That's correct.
Representative Saxton. With the release of today's data,
can you tell us how well the two surveys are tracking one
another?
Dr. Utgoff. Over the last year, they've been tracking each
other fairly closely. In the prior year, from November through
November, they had diverged.
Representative Saxton. I know Chairman Bennett is
particularly interested in this point, and he'll be back soon.
I think I'll stop there and he can pick up on this issue when
he feels like it.
[Laughter.]
I heard your great interview on television this morning,
Mr. Chairman, and we just began to touch on the issue of why
the household and the payroll survey don't seem to be tracking
each other. But inasmuch as you're interested in that issue, I
was just saying that I would leave that for you.
Senator Bennett [presiding.] Thank you very much. I
appreciate your indulgence while we voted. Has Mr. Stark been
heard from as the ranking member?
Representative Stark. More than you'll ever want.
[Laughter.]
Representative Saxton. Mr. Stark read his opening statement
but has not asked questions yet.
Senator Bennett. Then let's go directly to Dr. Utgoff.
Dr. Utgoff. I've already made it.
Senator Bennett. So we are on the question period. You've
just completed yours. You've not completed yours. Have you
given an opening statement or been heard from at all?
Representative Maloney. I just have questions.
Senator Bennett. Do you want to flip a coin?
Representative Stark. Why don't I ask a question. Do you
want to make an opening statement?
Senator Bennett. I did, unimpeded by any wisdom from the
minority side.
Representative Stark. I said in my opening statement that
it's nice to be with a few of the Republicans in this world who
don't have miserable records, and I'm just happy to be here
with you this morning and thank you for calling the hearing.
The question basically follows from what Representative
Saxton was discussing. Let's see if I have this straight.
We're 29 months after the start of the recession, and in
July the number of private sector jobs was more than 3 million
lower than it was when the recession began. Jump in here and
correct me if I'm wrong.
Today's report doesn't change that very much. So this,
according to my figures, is the largest job deficit that has
lasted so long after the start of a recession since the 1930s.
I was here then so I know that; none of the rest of you were.
Senator Bennett. Don't be too sure.
[Laughter.]
Representative Stark. More than a million jobs have been
lost since November of 2001, which is, I guess, when the
recession officially ended. So I made the statement that no
other post- or business cycle recovery has had such persistent
job losses, and that this job slump is worse than the jobless
recovery following the 1991 recession, and basically doesn't
look like the typical patterns we've had in the past.
Am I correct that there's nearly a gap of 3 percent between
the private payroll employment at the beginning of the
recession and now? And when was the last time in your knowledge
that we had a gap that large, this late after the start of the
recession?
Dr. Utgoff. I think it's usual for me to divide the period
you're talking about into the recessionary period, and the
post-recessionary period.
It is the post-recessionary period that has been very weak,
and we continue to have job losses, 21 months after the end of
the recession, which is greater than previous recessions.
Representative Stark. Since the 1930s?
Dr. Utgoff. Yes.
Representative Stark. So I'm just making the bad news
worse. Thank you. Mr. Chairman, I'm at a loss for what else to
ask.
Senator Bennett. Senator Reed discussed this whole thing as
well when he was here. I don't want to put words in his mouth,
but as I understand it from his questions, or from his
comments, whether or not there's something structural going on
here, we are in a new economy. There are arguments as to what
that term means, and there are many definitions of it, but we
have the example in the second quarter of 2003. Productivity
went up 6.7 percent, which is an absolutely--that's the number
that sticks in my mind. I don't know if that's exactly right.
Dr. Utgoff. It's 6.8.
Senator Bennett. Productivity went up 6.8 percent. Now, my
memory says, from what I learned in college, that if
productivity went up 6.8 percent, GDP would have to grow at 7
percent in order to create new jobs.
There's no way in the world GDP is going to grow at 7
percent with productivity that high. I don't expect the
productivity number to stay that high, by any means, but even
if we have productivity at--pick a nice sounding number of 3.5
percent, and GDP is growing at 3 percent, which, historically,
is pretty good growth, doesn't that mean even though GDP is
growing at 3 percent, we are shedding jobs?
Dr. Utgoff. Yes, in general, the economy has to grow faster
than the rate of productivity growth.
Senator Bennett. All the indications are that the economy
is now growing quite rapidly. The very strong numbers out of
the second quarter of 2003 have led to higher forecasts for the
third and fourth quarters and for 2004.
But if productivity continues to be this high, we will have
the situation of a very robust and strongly-growing economy
without creating new jobs, and that does indicate, as Senator
Reed probed, some structural changes in the economy.
I know this is not your job, but do you have any
observations about what might be happening in a structural way,
that would give us numbers that are different from those that
we have seen in the old industrial economy, as compared to the
new information economy?
Dr. Utgoff. I don't have any exact figures, but we do know,
for instance, the manufacturing industry, where there has been
the bulk of the job losses, has become much more capital-
intensive, and is really a different kind of an industry than
it was 10 or 20 years ago, much more capital-intensive, with
higher productivity.
Senator Bennett. Can we go back to the chart that I put up
in my opening statement and get a comment from you about the
difference between the Household Survey and the Payroll Survey,
and any kind of guess on your part or any statistical work that
is being done in your Bureau as to which of those numbers is
the more accurate?
Dr. Utgoff. As I said in my statement, when you weren't
here, we did try to address this in the statement. In general,
we believe the Payroll Survey is a much better measure of
trends in the economy, because it is a much bigger sample.
The Household Survey is for 60,000 households. The Payroll
Survey is for 400,000 business establishments, and it covers a
third of all workers.
But can I add a few things that will put that graph in
perspective?
Senator Bennett. Sure.
Dr. Utgoff. One of the things is that the Household Survey
data shown, are unadjusted for a one-time change in the
population that was given to us by Census and that we include
in our numbers, so you have to adjust that, and it would bring
employment figures from the Household Survey down somewhat.
The two surveys are very different. A big difference in
them is that the Household Survey includes agricultural workers
and self-employed, and the Payroll Survey does not do that.
If someone works two jobs, they would be included twice in
the Payroll Survey and only once in the Household Survey. So
what we try to do regularly is make this an apples-to-apples
comparison and do the adjustments.
For the last year, if you make those adjustments, there's
been very little difference between the Household and Payroll
Surveys. There was a difference in the previous year, but in
the past year, they've tended to move together; they've been
very close.
Senator Bennett. When you say ``very close,'' are they very
close on job loss or are they very close on job gain? That's
the big problem here.
Dr. Utgoff. The difference is about 150,000 job loss.
Senator Bennett. In other words, the Payroll Survey, to
take what you just said, the Payroll Survey is 150,000 jobs
better when you make the adjustment? That is, there are 150,000
more jobs than there would otherwise be?
Dr. Utgoff. No. The difference between the two surveys is
that one is a slight loss, and the Payroll jobs in the last
year were down 560,000.
Senator Bennett. Right.
Dr. Utgoff. When you adjust for all the differences I
talked about and a few additional ones, the Household
employment was down by 425,000, so that the difference is
between 100,000 and 200,000.
Senator Bennett. About 140,000 difference?
Dr. Utgoff. Yes.
Senator Bennett. I think it's important that we pursue
trying to get as accurate as we can. The reason I focus on the
Household Survey is that that's the survey you use to come up
with unemployment figures.
Dr. Utgoff. Right.
Senator Bennett. So there is a bit of a disconnect in the
news--and I talked about that on this morning's television
interview--in that the methodology you use to come up with the
6.1 percent figure for unemployment is the Household Survey.
Then in the news reports as to the specific number of jobs
lost, they then switch to the Payroll Survey, so you're always
getting the two laid side-by-side before an unsuspecting public
that thinks they're working off the same database, and, in
fact, they are two different databases.
I understand there's more statistical noise in the
Household Survey than there is in the Payroll Survey, and I
think the Household Survey probably is the more erratic of the
two. But that then raises the question, why don't you use the
Payroll Survey for the unemployment number?
Dr. Utgoff. Because it's only people on the payroll. We
count the number of jobs that are on the payroll of employers.
We don't have a similar estimate of people who are unemployed,
so we don't have the ratio. All we know is jobs that are paid
for.
Senator Bennett. All right, the bottom line, as I am
hearing, is that the Payroll number, in terms of actual job
loss, is probably more nearly correct than the Household Survey
number, but it's always artificially lower than reality,
because there are always people who are self-employed, and
there are always people in the agricultural sector, and while
you are double-counting those who have two jobs in the Payroll
Survey, the number that would come from the Household Survey is
greater than the duplication. Is that a fair summary of what
you're telling me?
Dr. Utgoff. That's correct.
Senator Bennett. I think that's useful. My time is up.
Ms. Maloney.
Representative Maloney. Thank you, Mr. Chairman. Thank you
for your testimony. By all accounts, Labor Day was not a happy
day for roughly 9 million jobless Americans.
And, sadly, with the news that you're giving us today, the
Labor Department shows that we are losing even more jobs,
93,000 last month, the largest job loss since March. My
colleague, Representative Saxton, and others, have pointed out
that some indicators are that the economy is improving, yet
it's a jobless recovery.
As my colleague, Mr. Stark, pointed out, since President
Bush took office, the number of unemployed Americans has grown
by 3.2 million, and that this is the most dismal record since
Herbert Hoover.
We've been talking about the different surveys. There is
yet another survey out, the one from the Census Bureau, the
American Community Service Survey. That estimates that the
unemployment rate in 2002 was 7.4 percent, which, of course,
was much higher than the standard measure, than the one that
we've been given with the Household and Payroll Surveys.
Do you understand what the discrepancy is between the
American Community Survey and these other surveys? Why is the
American Community Survey two points higher, roughly?
Dr. Utgoff. They're very different surveys. The survey that
we use to calculate the unemployment rate is the Current
Population Survey. People actually go to the household. The
American Communities Survey is a written response from filling
out a form, from the respondent, and there are other
statistical differences between them.
But perhaps the most important is that the American
Communities Survey does much less probing about the reasons for
being unemployed than the BLS Household Survey. The ACS has
tended to show higher unemployment rates than the BLS for the
last several years.
Representative Maloney. Not going into the reasons for the
survey would not account for why the number is 2 percent
higher. If they ask a person, are you unemployed or not, and
the statistic that they're handing out is how many people are
unemployed, they're just saying who's unemployed. They're not
saying why they're unemployed.
I think you need to look further as to why there's such a
huge difference between the two.
Dr. Utgoff. Well, we are measuring, in the official
unemployment rate, the people who are engaged in an active job
search. That means that they have done something actively in
the last 4 weeks to seek a job.
In the American Communities Survey, there's much less
probing, so that you don't know whether there's an active job
search or something like just opening the newspaper during the
week.
Representative Maloney. But if you're unemployed and you
want to work, and you've been trying to get a job, maybe for a
month you haven't been looking, you're so discouraged. The main
point is that that person is unemployed, so I would think
that's giving an accurate assessment of who's not working.
Dr. Utgoff. Right. That is why we publish a different range
of unemployment rates beside the, quote, official one. We have
an unemployment rate that includes discouraged workers; we have
an unemployment rate that includes marginally attached workers,
plus workers who are involuntarily working part-time.
You may want to look at some of those other measures to
compare to the ACS.
Representative Maloney. When you include those working
part-time and those working that are marginally attached, as
you said, in other words, those that are under-utilized in the
labor force, what is the number then? I would assume it would
be nearer to the American Communities Survey.
Dr. Utgoff. It's higher; it's 10 percent.
Representative Maloney. Ten percent? Well, it's
discouraging, these unemployment numbers, and they appear to
not be improving. I thank you for your testimony.
Do you have any idea why certain economic indicators are
improving in our country, yet the unemployment, the jobless
rate, continues to rise rather dramatically to 10 percent when
you consider the under-utilized and the marginally attached,
part-time workers?
Dr. Utgoff. I think it's been pointed out that the
unemployment rate often is a lagging indicator. It tends to
improve after other economic signs have improved.
Representative Maloney. Thank you. I hope it improves.
Senator Bennett. Senator Sarbanes.
Senator Sarbanes. Thank you very much, Mr. Chairman.
Commissioner, welcome; we're pleased to have you here this
morning.
I want to focus first on the long-term unemployed, which, I
understand, is defined as those who have been unemployed for
more than 26 weeks and continue to look for work. How many
individuals are in this category?
Dr. Utgoff. We'll get that number for you. It's about 22
percent of the unemployed.
Senator Sarbanes. Do you know what the percentage of long-
term unemployed was a year ago? I understand just over 18
percent. Would that be right?
Dr. Utgoff. A year ago, it was 18.5.
Senator Sarbanes. Now, are the 22 percent, long-term
unemployed?
Dr. Utgoff. Yes.
Senator Sarbanes. I gather that it's been above 21 percent
now for quite a continuous period of time.
Dr. Utgoff. For the last 3 months.
Senator Sarbanes. I had it above 21 percent for 7 months.
Dr. Utgoff. I'm sorry, it's been since January. I was
looking at the chart wrong.
Senator Sarbanes. It's been above 21 percent?
Dr. Utgoff. Yes.
Senator Sarbanes. My understanding is that the last time
that the percent of unemployed, long-term unemployed, was this
high for so long, was in the recession in 1983 and 1984; is
that correct?
Dr. Utgoff. We will try to get that number for you.
Senator Sarbanes. I'm looking at a table of yours, the U.S.
Department of Labor, Bureau of Labor Statistics Percent
Unemployed 27 Weeks and Over. That table seems to indicate that
the last time we went through such a sustained period of long-
term unemployed was throughout 1983 and just into 1984.
Dr. Utgoff. Yes, that is right.
Senator Sarbanes. What's the number of unemployed
Americans, as you reported to us this morning?
Dr. Utgoff. 8.9 million.
Senator Sarbanes. How many unemployed Americans were there
in January, 2001?
Dr. Utgoff. Just a moment, we'll look that number up.
Mr. Galvin. 5,951,000.
Senator Bennett. Five million.
Mr. Galvin. In January of 2001.
Senator Sarbanes. So, in about 2\1/2\ years, we've seen an
increase of 3 million in the number of unemployed Americans; is
that right?
Mr. Galvin. Yes.
Senator Sarbanes. We have also seen the number of long-term
unemployed, those out of work for 26 weeks or more--they still
have to be continuing to look for a job to be included in that
category; is that right?
Dr. Utgoff. That's right.
Senator Sarbanes. So if they're long-term unemployed but
drop out of looking for a job, we cease to count them for this
purpose?
Dr. Utgoff. For unemployment, yes.
Senator Sarbanes. Is that generally a feature that happens
when you have this long a period of job loss, that people drop
out of the labor market?
Dr. Utgoff. The number of what we call discouraged workers
has increased.
Senator Sarbanes. What are the dimensions of that increase?
Mr. Galvin. The number of discouraged workers has gone up
from January 2001, that you anchored it at earlier, 301,000, up
to 503,000 this month, so an increase of about 200,000.
Senator Sarbanes. I wasn't quite clear in your answer to
Congresswoman Maloney's, I thought, very perceptive question.
If we count everybody into the unemployment rate, in other
words, the people working part-time who want to work full-time,
but can't get full-time work, and we have people who want to
work, but have dropped out of the job market because they're so
discouraged, are there other categories of people that have
been dissuaded from being in the labor market or being counted?
Dr. Utgoff. We have two measures: One is marginally
attached, which is anyone who's looked for a job in the last
year but is not currently looking; then a subset of that is
what we'll call discouraged workers. Those are workers who have
stopped working for economic reason. Other workers stop looking
for work because they have transportation problems or because
they have childcare problems or something like that.
So you have discouraged workers and then a larger category
of marginally attached workers.
Senator Sarbanes. Then you have people working part-time
who want to work full-time. Has that figure gone up as well?
Mr. Galvin. I'm sure it has.
Dr. Utgoff. It's gone up in the last year. We can look at
it since the recession began, but it's increased in the last
year.
Senator Sarbanes. If all of those factors are brought into
the calculation of the unemployment rate, what would the
unemployment rate be?
Dr. Utgoff. If you include everyone who is working part-
time for economic reasons and all the marginally attached
workers, then the unemployment rate would be 10 percent.
Senator Sarbanes. Ten percent. Now, it's my understanding
that we've experienced considerable job loss just over the
course of this year; is that correct?
Dr. Utgoff. Yes. I can look that number up for you. I
believe it was in my testimony. It's 437,000 this year.
Senator Sarbanes. Job loss?
Dr. Utgoff. Yes.
Senator Sarbanes. The Baltimore Sun, in a recent editorial
entitled ``Job Loss Recovery,'' stated about this time, 29
months after the onset of the last recession, and 21 months
after its official end, employment ought to be expanding. But
this recovery remains uniquely scarred by outright job losses.
Would you regard that as an accurate comment on the
situation?
Dr. Utgoff. Yes.
Senator Sarbanes. As I understand it, since January, 2001,
we've lost--total employment has fallen by 2.7 million; is that
correct?
Dr. Utgoff. Since March, the beginning of the recession,
we've lost 2.8 million jobs.
Senator Sarbanes. And 3.3 million, I gather, in the private
sector, so it's been a worse experience in that arena.
Dr. Utgoff. That's correct.
Senator Sarbanes. Mr. Chairman, I know my time is up, and
I'll just draw this to a close. I simply want to make this
observation: The Washington Post reported today that President
Bush, ``Acknowledges that despite a number of favorable signs,
job growth remains stubbornly sluggish.''
I just want to say that this does not seem accurate to me.
Sluggish job growth would, in fact, be an improvement over what
we've been experiencing. We actually have had job loss, not
sluggish job growth.
Thank you.
Senator Bennett. Thank you, Senator.
Back to the point that I was making with the Commissioner,
during this period, we have had unusual and unprecedented
increases in productivity, and the rule--apparently iron rule
is that the GDP has to grow faster than productivity in order
to create jobs.
In the second quarter when we had productivity growth of
6.8 percent, in order to have job growth in the second quarter,
we would have had to have had GDP growth of around 7 percent,
which, of course, is virtually impossible.
Senator Sarbanes. That's a pretty staggering productivity
growth figure, is it not?
Senator Bennett. It is.
Senator Sarbanes. Commissioner, is that out of line?
Dr. Utgoff. It's on the high end of productivity growth.
Senator Sarbanes. It certainly is; it's right up there
close to the very top; isn't it?
Dr. Utgoff. There have been other periods with stronger
growth, including last year at over 9 percent, but that is--
you're right; it's at the top.
Senator Bennett. As Senator Reed indicated in his opening
statement and questions, there may very well be something
structural going on here in terms of changes as a result of the
new economy and the technology boom. As the Commissioner
indicated, we're getting much more capital-intensive
manufacturing than we ever had before, where we get very high
productivity and that means the whole job situation changes.
Senator Sarbanes. If you're long-term unemployed and you're
looking for a job and can't get a job, have used up all your
unemployment, you're worried about how to support your family.
There's not much comfort if you say to do, these productivity
numbers are going off the chart.
Senator Bennett. There's no question about that.
Senator Sarbanes. They are in a tough jam. So we may have
to revise other aspects of the system, including unemployment
insurance.
Senator Bennett. That could well be so. And if you were in
the old economy where you tightened the lug nut on the assembly
line, now, all of a sudden, a robot does that and you don't
have the skills. There's a training problem here, as well as a
structural situation.
Let me ask you, Commissioner Utgoff, if you have any
statistical information to share on this: One of the trends
that is very strong in manufacturing is the outsourcing of
functions that used to be taken care of by people on your
payroll, for example, janitorial, accounting, and security.
You used to hire your own night watchman, and now you hire
a security company, and statistically, this moves the job from
a manufacturing job to a service job. As we try to get a handle
on the number of manufacturing jobs that have been lost, do you
have any view as to what percentage of those job losses in
manufacturing might, in fact, be simply a job transfer from the
manufacturing sector to the service sector by virtue of an
outsourcing movement?
Dr. Utgoff. It's certainly a phenomenon that has occurred.
I can't give you any quantifiable estimate of what that effect
has been.
Senator Sarbanes. Could I interrupt?
Senator Bennett. Sure.
Senator Sarbanes. This is an interesting point, I think. In
other words, if I'm a manufacturing plant and I contract out
all of my jobs--now, I don't know if that's possible--but would
I have succeeded in shifting manufacturing jobs in service
jobs.
Dr. Utgoff. That's correct.
Senator Bennett. For example, Senator, if I'm a
manufacturing plant and I say that the one thing I do really
well is make engines, so I'm going to concentrate on making
engines, and I'm going to hire somebody else to do my
accounting, a different firm to--as the House did at one point
here, contracted out the food service to Marriott, so there
were no more House of Representatives employees serving food;
they were all Marriott employees. So you could say the House
payroll had gone down, but the number of people still on the
property was the same.
So a manufacturing plant could say I'm going to contract my
food service, I'm going to contract my security, I'm going to
contract out my janitorial, and I'm going to contract out my
accounting. The number of manufacturing jobs shrinks
dramatically from a statistical point of view, but in terms of
the number of people actually working at the plant, they're
probably the same number of bodies.
Senator Sarbanes. How do you classify a job as being
manufacturing?
Dr. Utgoff. By the principal activity of the establishment,
so that janitorial services, that would be part of business
services and maintenance. Then a job in a factory where people
are on a production line, and their managers, would be
classified as in the manufacturing industry.
Senator Sarbanes. Then if I'm a manufacturer, are my
janitors counted as manufacturers or as service people?
Dr. Utgoff. If they work for the manufacturer and they are
on the manufacturer's payroll, they count in manufacturing.
Senator Bennett. That's part of the analysis. I guess, out
of this hearing, what I hope you would take away, is that there
is an intense desire to slice the data, perhaps more thoroughly
than has been habitually done as we try to get a clearer
understanding of what is really happening in the economy.
Because if what is really happening is, indeed, that there
are structural changes that require policy changes, pointing to
a different view of how we approach things here on Capitol
Hill, that is obviously a very valuable thing for us to know.
If, in fact, what is happening in the economy is simply
that the old forces are unchanged, but they're simply slower
now, that's also something that we need to know as we make
policy decisions about such things as unemployment insurance,
to which Senator Sarbanes has referred.
My own hunch is that we are seeing some fairly significant
structural changes in the way the economy works, as we move
into the information age and away from the dominance of the
industrial age. The more we can understand this phenomenon, the
better we in the Congress can react to those new realities.
So, help us with your surveys, with your analysis of who is
in which category and what needs to be done. We thank you for
your service.
Senator Sarbanes. Mr. Chairman, just to get a good read on
where we are right now, it's my understanding that the initial
claims for unemployment have gone back up. Do you have those
figures?
Dr. Utgoff. The initial claims for unemployment insurance?
Senator Sarbanes. Have gone back up over 400,000; is that
correct?
Dr. Utgoff. That's correct.
Senator Sarbanes. We had gone below the 400,000 figure for
a period, but it's back up now again; is that correct?
Dr. Utgoff. Yes.
Representative Maloney. Senator, if I could also add to
your very thoughtful comments about structural changes that may
be taking place in our economy, the bottom line, whether you're
working for a service industry or an information industry or
manufacturing, the bottom line is the number of unemployed.
That number keeps going up, even though there are some
signs of improved economic indicators. I know that BLS also
does a survey on job openings. Is that not correct? I'd like to
ask the Commissioner this: In the surveys that you do of new
job openings and labor turnover surveys, is it not correct that
the unemployment problem is lack of jobs? That survey is not
showing that the jobs are there for the unemployed, which then
really supports the Senator's statement that the jobs aren't
there for the people to get, so, therefore, we should help them
with unemployment insurance.
There is an argument that if you give them unemployment
insurance, they won't look for a job, but if your statistics
are showing that the jobs are not there in the first place,
then there's a basic problem for the people that are looking
for a job.
I wish you would comment, please, on the Labor Department's
results on the Job Openings and Labor Turnover Survey, which I
believe did not show many jobs were available. Is that correct?
Could you give us the data on that?
Dr. Utgoff. Let me get Mr. Galvin to answer this. He's an
expert on that question.
Mr. Galvin. Our Job Openings and Labor Turnover Survey
measures job vacancies, hires and separations. In its most
recent report, which is, I believe, for June of this year, it
reported a vacancy level of around 3 million jobs, 3 million
positions.
Representative Maloney. So then I think it's correct to
conclude that the unemployment problem is lack of jobs. The
jobs aren't there; is that correct, Mr. Galvin?
Mr. Galvin. That level compares to the unemployment level
of 8.9 million.
Representative Maloney. It's lack of jobs. Thank you.
Senator Bennett. Thank you very much for your service. We
look forward to hearing from you again about all of these
concerns. The hearing stands adjourned.
[Whereupon, at 10:55 a.m., the hearing was adjourned.]
Submissions for the Record
=======================================================================
Prepared Statement of Senator Robert F. Bennett, Chairman
Good morning and welcome to today's hearing on the employment
situation.
While many in Washington took the month of August off, the economy
managed to keep operating, even improving. Indeed, many measures
suggest that the economy may have finally turned the corner. Economic
growth in the second quarter exceeded 3 percent, and many forecasters
anticipate further acceleration this quarter. Worker productivity and
wages continue to grow.
These developments have sparked increased optimism about our
economy and anticipation that economic growth will soon translate into
resumed job growth.
Unfortunately, the Bureau of Labor Statistics--the BLS--reports
today that payroll employment continued to decline in August, falling
by 93,000 jobs. Manufacturing continued its declines, losing 44,000
jobs. However, the unemployment rate declined slightly from 6.2 percent
to 6.1 percent in August.
It may not be widely known that these figures come from two
different surveys. The BLS surveys households to determine the
unemployment rate, while it surveys employers to determine payroll
employment. These surveys have some significant differences. For
example, the household survey picks up the self employed and small
emerging businesses that may be overlooked by the establishment survey.
These surveys appear to tell very different stories about
employment since the end of the recession in November 2001. As
illustrated in the chart that I've brought, the household survey
indicates that the number of employed people has increased by 1.4
million since the end of the recession. The payroll survey, in
contrast, indicates that roughly 1.1 million jobs have been lost over
that period.
The disparity between these two BLS surveys is worth further
examination. While some of the disparity in data may reflect
methodological differences between the two surveys, it may also be that
the data illustrate a marked change in the makeup of the American
workforce.
One of our goals at the JEC is to promote accurate and timely data
so that policymakers, businesses, and citizens can make better economic
decisions; for that reason, I am eager to explore this subject.
In that regard, I think it important to recognize Commissioner
Utgoff and the dedicated staff at the BLS for several enhancements to
its data. Since our last hearing, the BLS completed an overhaul of the
payroll survey using more up-to-date definitions of the different
sectors in our economy. With the ongoing shift to a service economy--
today more than 82 percent of the American workforce is in the service
sector--this change helps to bring the new economy into better focus.
Furthermore, I understand that the BLS will soon begin to release a
new data series on ``Job Creation and Destruction.'' I expect that
these new data will shed much needed light on what's happening behind
the aggregate employment numbers on which we usually focus. With new
data, we can better understand the dynamics of job creation--in sectors
new and old--that drive our economy.
Commissioner Utgoff, we welcome you again to the Committee and look
forward to your insights.
__________
Prepared Statement of Representative Jim Saxton, Vice Chairman
Commissioner Utgoff, it is a pleasure to join in welcoming you
before the Joint Economic Committee.
The August employment data reflect the past weakness in the
economy. Payroll employment declined by 93,000, including a drop of
44,000 in the manufacturing sector. Meanwhile, the unemployment rate
slipped to a level of 6.1 percent.
The data show that the consecutive monthly declines in
manufacturing employment account for most of the employment losses in
recent years. These declines began in the second half of 2000. Measures
of manufacturing output and activity indicate that the manufacturing
sector started contracting about the same time. Other indicators showed
that an economic slowdown was underway in 2000.
In the wake of the bursting of the stock market bubble in the first
quarter of 2000, business investment and economic growth also fell
sharply in the last two quarters of 2000. As Joseph Stiglitz, President
Clinton's Chairman of Economic Advisers has said, ``the economy was
slipping into recession even before Bush took office, and the corporate
scandals that are rocking America began much earlier.''
Although the economy has been expanding since the end of 2001, the
pace of economic growth has been disappointing, until recently. The
weakness of business investment after the bursting of the stock market
bubble has been a major drag on economic growth.
Fortunately, President Bush and the Congress succeeded in lowering
the tax burden on the struggling economy, and providing important
incentives for business investment. Data released in the last several
months indicate that the long-awaited rebound in business investment
has begun, and second quarter GDP was a stronger than expected 3.1
percent. Many economists expect that a period of strong economic growth
will emerge over the next several quarters. A sustained period of such
economic growth is what is needed to expand payrolls once again, and
this must remain the top priority of economic policy.
__________
Prepared Statement of Representative Pete Stark,
Ranking Minority Member
Thank you Chairman Bennett for holding this hearing. I would like
to welcome Commissioner Utgoff and thank her for testifying here today.
The Bureau of Labor Statistics today announced that the
unemployment rate rose to 5.8 percent in February and that payrolls
plummeted by 308,000--more evidence that this economy is simply not
delivering the jobs it should.
Today, there are 8.5 million unemployed Americans, and about 1.6
million additional workers who want a job but are not counted among the
unemployed. And there are another 5 million people who work part-time
because they can't find full-time work. Long-term unemployment remains
high, with 1.9 million Americans having been unemployed for more than
26 weeks--that's 22 percent of the unemployed.
Unfortunately, the President is not really helping unemployed
workers. The President's father was far more compassionate. During the
last recession, President George H.W. Bush had a UI program that was
much more generous at the start and then extended it twice because
unemployment remained stubbornly high long after the recession was
over.
My question is: Will this Administration support another federal UI
extension to help hard-pressed families? There are a million people out
there who have exhausted all federal and state unemployment benefits
and are still out of work--workers who would have received extended
benefits during the last recession. While the current President Bush
proposes large tax cuts that will permanently help the wealthy, he
makes no provisions in his budget for extending temporary UI benefits
or restoring assistance to the one million unemployed workers
struggling to heat their homes, feed their families, and find new jobs.
Significantly more workers have exhausted their temporary federal
benefits than over a comparable period in the last downturn. Today,
regular state program exhaustions are still rising. Therefore,
temporary federal UI benefits will need to be extended until exhaustion
rates come down considerably. The federal UI program in the last
recession lasted for 19 months while regular state program exhaustions
declined back toward non-recession levels.
The President must think that the problem is that people are being
too picky about what job they take, because he proposes to create so-
called ``Personal Reemployment Accounts'' that will provide bonuses for
people who get back to work more quickly. But with 2.5 million fewer
private sector jobs today than when the President took office--there
are just too many workers chasing too few jobs. PRAs are no substitute
for extending federal UI benefits--and doing so would be like robbing
Peter to pay Paul a bonus.
The Administration's assaults on assistance to unemployed workers
include cuts in job training totaling $600 million (relative to 2002)
for fiscal year 2003 and further cuts for youth employment programs
totaling $700 million for fiscal year 2004; no additional funding for
the Workforce Investment Act; and abdicating federal responsibility for
the UI system.
Helping unemployed workers should be part of any plan to get the
economy moving again. The proposals of House Democratic Leader Pelosi
and Senate Democratic Leader Daschle would provide immediate stimulus
to put people back to work as quickly as possible. The President should
work with Democrats to put these plans into action immediately.
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