[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

                              ----------                              


                     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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