[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-402


 
                 THE EMPLOYMENT SITUATION: OCTOBER 2003

=======================================================================

                                HEARING

                               BEFORE THE

                        JOINT ECONOMIC COMMITTEE

                     CONGRESS OF THE UNITED STATES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                            NOVEMBER 7, 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 Statement of Members


Senator Robert F. Bennett, Chairman..............................     1
Representative Pete Stark, Ranking Minority Member...............     2

                                Witness

Statement of Hon. Kathleen P. Utgoff, Commissioner, Bureau of 
  Labor 
  Statistics, Accompanied by Kenneth V. Dalton, Associate 
  Commissioner, Office of Prices and Living Conditions; and John 
  M. Galvin, Associate Commissioner, Employment and Unemployment 
  Statistics.....................................................     4

                       Submissions for the Record

Prepared statement of Senator Robert F. Bennett, Chairman........    29
Prepared statement of Representative Jim Saxton, Vice Chairman...    30
Prepared Statement of Representative Pete Stark, Ranking Minority 
  Member.........................................................    30
Prepared Statement of Commissioner Kathleen P. Utgoff, together 
  with Press Release No. 03-675, entitled, ``The Employment 
  Situation: October 2003,'' Bureau of Labor Statistics, 
  Department of Labor............................................    35
Response of John M. Galvin, Associate Commissioner, to 
  Representative Baron Hill......................................    60


                       THE EMPLOYMENT SITUATION: 
                              OCTOBER 2003

                              ----------                              


                        FRIDAY, NOVEMBER 7, 2003

                     Congress of the United States,
                                  Joint Economic Committee,
                                                   Washington, D.C.
    The Committee met at 9:30 a.m., in room SD-628 of the 
Dirksen Senate Office Building, the Honorable Robert Bennett, 
Chairman of the Committee, presiding.
    Senators present: Senators Bennett, Sessions, Reed and 
Sarbanes.
    Representatives present: Representatives Saxton, Ryan, 
Putnam, Stark and Hill.
    Staff present: Donald Marron, Ike Brannon, Jeff Wrase, 
Colleen Healy, Melissa Barnson, Chris Frenze, Robert Keleher, 
Rebecca Wilder, Wendell Primus, Chad Stone, Daphne Clones-
Federing, Nan Gibson, Josh Shakin, and Rachel Klastorin.

        OPENING STATEMENT OF SENATOR ROBERT F. BENNETT, 
                            CHAIRMAN

    Chairman Bennett. The hearing will come to order. Good 
morning to all and welcome to today's employment hearing.
    Like virtually every other economic statistic reported in 
the past month, the employment numbers released today are 
definitely good news for the American worker.
    No matter how you cut it, the economy is adding new jobs at 
a rapid pace and will likely continue to do so for the 
foreseeable future.
    The official payroll statistics indicate that the U.S. 
economy created 126,000 new jobs in the month of October, the 
third month in a row that payroll employment rose. The revised 
numbers now indicate that 125,000 jobs were added in September 
and that even August, previously reported as negative, is now 
considered to have been positive.
    The unemployment rate declined to 6 percent. The household 
survey reported that employment increased by an astounding 
441,000 in September, and according to the household survey, 
our economy has now essentially replaced all of the jobs lost 
during the 2001 recession, and the number of jobs is now at an 
all-time high.
    Now I understand that we're going to be talking about 
payroll survey numbers. But I want to continue to examine the 
question of the disparity between these two surveys.
    As I have looked at it, I have found that, historically, 
they've been very close together and the divergence began 
during our recent economic difficulty. And I would like to talk 
about why and what might be done to reconcile these two 
conflicting messages.
    I believe that today's employment numbers, along with the 
steep drop in new jobless claims and the large increases in 
productivity and output, indicate quite clearly that the U.S. 
economy is returning to a period of strong growth.
    The Bureau of Labor Statistics reported yesterday that 
productivity grew at an annual rate of 8.1 percent in the third 
quarter of 2003.
    Now some of my colleagues tend to gnash their teeth at the 
high productivity growth of late, lamenting that firms are 
learning how to do without workers. However, our experience 
over 30 years tells us that periods of rapid increases in the 
productivity capacity of our economy are almost always 
accompanied by low unemployment.
    Increasing the standard of living and employment at the 
same time requires healthy productivity growth.
    Now it's too easy for the party in power to take the blame 
when the economy slows. And for that reason, it is all too 
tempting to take all the credit when things turn around.
    I'm sure there are some who will insist that today's 
numbers are a consequence of Arnold Schwarzeneggar's having won 
in California.
    [Laughter.]
    But in reality, the government holds little sway over the 
business cycle, despite what some may think or desire.
    Our economy floundered in the middle of the year 2000, in 
large part, due to a hang-over from the high-tech boom, likely 
abetted by a rise in interest rates. The stagnant economy was 
prolonged by the 9/11 disaster, resultant uncertainties in the 
Middle East, high energy prices, and various scandals in 
financial markets.
    That our economy steadily expanded in the face of so many 
potentially calamitous events in succession is a testament to 
the ability and dedication of the American worker, as well as 
to our economic system.
    This is not to say that government cannot spur the economy. 
I'm one who believes that the Bush tax cut enacted in 2001 
undoubtedly softened the blow of the events that befell the 
economy and served to make the recession shallower than it 
otherwise would have been, and that the tax cuts passed this 
year provided some needed impetus at the right time.
    Dr. Utgoff, it's always a pleasure to have you visit us, 
but we especially enjoy it when you come bearing good news.
    So we welcome you to the Joint Economic Committee and look 
forward to hearing your testimony.
    Mr. Stark, we'd appreciate hearing from you.
    [The prepared statement of Senator Bennett appears in the 
Submissions for the Record on page 29.]

        OPENING STATEMENT OF REPRESENTATIVE PETE STARK, 
                    RANKING MINORITY MEMBER

    Representative Stark. Thank you, Mr. Chairman.
    I find myself in the uncomfortable position of trying to 
make a sow's ear out of a silk purse this morning.
    [Laughter.]
    You are to be congratulated on the good news. We're not so 
far from Halloween, so I watched George the Lesser hop out of 
an airplane in his pilot's suit and say, ``The war's over.''
    I now expect him to put on his pinstripe suit, get out of a 
limousine and say, ``The Depression is over.''
    We'll see if he's any more accurate on the state of the 
economy than he was on the war.
    We did create some jobs in the last couple of months. And 
you forgot to mention, I think, that the recalculation showed 
that even perhaps September's numbers were better than we had 
previously thought. And without switching to the household 
numbers, it looked good.
    We're still facing a trillion dollars' worth of debt. We 
still have in San Jose, California, and in the Silicon Valley 
area, for instance, 300,000 highly skilled computer workers, 
programmers, out of work.
    Now, it's one thing to say--``Great, fellas. You can go and 
get 20 hours a week at Wal-Mart.'' Of course, without benefits 
and, if Secretary Chao has her way, without union 
representation. But that's what's happening.
    The good jobs aren't there.
    High productivity--you're saying, yes, they're making 
stuff. But they're making it in Asia, and then they're bringing 
it back here.
    It isn't so much that we're bringing the Indo-American 
workers over from India. We're now shipping the whole nine 
yards, the company and the factory and the workers, back to 
India, importing the stuff here, and our guys are out of work.
    And the penultimate area is the South. It should be your 
territory.
    The Republican owners of the textile mills have figured out 
that shipping the textile jobs overseas is closing their 
plants.
    And yes, it gives us cheap T-shirts at Wal-Mart. But it 
also gives us pretty cheap jobs.
    So we've got still about 9 million unemployed. We've got 
almost 5 million people who are employed less than full time 
and would like to work full time. 45 million people without 
health insurance, about 12 or 13 million of which are children.
    Half of the people in America are earning less in the 
aggregate than the top 1 percent are earning. And if, Mr. 
Chairman, interest rates go up, which I think they'll have to 
do to refinance the trillion-dollar debt, then the housing 
market goes in the tank and we've got real problems.
    And I'm happy to accord credit for creating these jobs. 
It's not enough. It's the worst job creation record since 
Herbert Hoover. But to not recognize the dangers is what scares 
me, to not have an exit plan. We've done that once in a 
different kind of war.
    But to not recognize the danger of this swelling deficit 
and to know that it could really destroy the lives of many 
people if the real estate market, for instance, tanks, is 
what's missing.
    Credit where credit is due and, as I say, I hate to be the 
skunk at the picnic, but I certainly would like us to be 
concerned about the almost 15 million people, 14 million 
people, who are under- and unemployed.
    Thank you.
    [The prepared statement of Representative Stark appears in 
the 
Submissions for the Record on page 30.]
    Chairman Bennett. I'm tempted to respond.
    Representative Stark. Oh, c'mon.
    Chairman Bennett. And I shall resist the temptation.
    Representative Stark. C'mon, c'mon.
    Chairman Bennett. We're here to hear Commissioner Utgoff. 
We can have these debates back and forth, perhaps during the 
question period, or maybe even another forum.
    Commissioner, we appreciate you being here and look forward 
to hearing what you have to say.

      OPENING STATEMENT OF HON. KATHLEEN P. UTGOFF, Ph.D. 
         COMMISSIONER, BUREAU OF LABOR STATISTICS U.S. 
    DEPARTMENT OF LABOR, ACCOMPANIED BY KENNETH V. DALTON, 
ASSOCIATE COMMISSIONER, OFFICE OF PRICES AND LIVING CONDITIONS; 
  AND JOHN M. GALVIN, ASSOCIATE COMMISSIONER, EMPLOYMENT AND 
                    UNEMPLOYMENT STATISTICS

    Commissioner Utgoff. Thank you, Mr. Chairman, and Members 
of the Committee. I appreciate this opportunity to comment on 
the labor market data we released this morning.
    Non-farm payroll employment rose by 126,000 in October, 
following increases in August and September that totaled 
160,000, after revision.
    I would note that the payroll survey estimates for the 
prior 2 months are always subject to revision as we receive 
reports from additional survey respondents. This increase in 
payroll employment over the last 3 months contrasts with 
declines in the February-July period that averaged 85,000 per 
month.
    Several service industries added jobs in October. 
Manufacturing employment continued to decline, although at a 
slower pace than earlier in the year. The unemployment rate, at 
6.0 percent, was essentially unchanged over the month.
    Professional and business services added 43,000 jobs in 
October, with gains in many of its component industries. 
Employment in temporary help services continued to rise and is 
up by 150,000 since April.
    Employment in private educational services grew by 23,000 
in October. Job gains over the last 3 months have more than 
offset declines that occurred in June and July.
    Over the year, employment in private education expanded by 
56,000. Health care and social assistance added 34,000 jobs, 
with noteworthy gains in doctors' offices and in child daycare 
services.
    In the leisure and hospitality sector, employment in food 
services and drinking places rose by 23,000. Job growth in food 
services has picked up in recent months; since July, employment 
has increased by 57,000. Within retail trade, food stores added 
13,000 jobs in October. Employment in food stores was boosted 
by the hiring of additional workers in anticipation of strike.
    Employment in construction was little changed over the 
month, but the industry has added 147,000 jobs since its most 
recent trough in February. In October, employment in credit 
intermediation decreased by 10,000, reflecting the decline in 
mortgage refinancing activity.
    Manufacturing job losses continued in October. Declines in 
the sector have moderated in recent months, particularly in 
durable goods manufacturing. In October, both the factory work 
week and overtime were unchanged.
    After posting a small increase in September, employment in 
air transportation fell in October. Since reaching its most 
recent peak in March, 2001, the industry has lost more than 20 
percent of its jobs.
    Average hourly earnings for production or non-supervisory 
workers, at $15.46, were essentially unchanged in October. Over 
the year, average hourly earnings rose by 2.4 percent.
    Looking at some of the measures from our survey of 
households, the October unemployment rate of 6.0 percent was 
about the same as in September. The jobless rates for all the 
major worker groups showed little change over the month. About 
8.8 million persons were unemployed, of whom 2.0 million had 
been without a job for 27 weeks or longer.
    Employment as measured by our household survey rose over 
the month.
    In summary, non-farm payroll employment rose by 126,000 in 
October. Since July, employment is up by 286,000. The 
unemployment rate, at 6.0 percent in October, 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. 03-675, appear in the Submissions for 
the Record on page 35.]
    Chairman Bennett. Thank you very much.
    I do want to get into the question of the disparity between 
the household survey and the payroll survey. And I want to make 
it clear to everybody that these are not competing surveys from 
competing think tanks.
    This is not Brookings versus Heritage. This is not the Cato 
Institute versus the Citizens for Tax Justice, each one going 
out and doing its own analysis.
    They both come out of BLS. They're both done by the 
organization over which you preside. And I'm not challenging 
the validity of either one, understanding the methodology. But 
I'm trying to find out what can be done to change the 
methodology so that they come into some kind of coordination 
between the two.
    Because, as I said, historically, they've run pretty much 
together. They started to diverge around the time of the 
economic difficulty we've just gone through, and they tell very 
different stories.
    So it's to the interest of everybody that we try to 
understand why they are diverging, see what can be done to not 
necessarily bring them together, but to come up with some kind 
of understanding of exactly what is going on.
    If I could share with you an example that came out of Bob 
Woodward's book on Alan Greenspan, called ``Maestro.'' I'm not 
sure how many people have read it.
    But in that work, Woodward records how Chairman Greenspan 
became convinced, looking at all of the data, that the way the 
Federal Reserve Board was calculating productivity numbers was 
wrong. And he said to the various economists and technicians at 
the Fed--``Your productivity number has got to be wrong. 
Productivity has got to be going up.''
    And they said, ``No. Productivity is clearly going down. We 
are measuring it in the way that it has always been measured 
and it is going down.''
    And in a phrase that I have heard the Chairman use often, 
he said, ``That violates the laws of mathematics. Productivity 
cannot be going down and the equation that produces the other 
numbers still work because we've got the final number out of 
the equation and the other numbers connected to it dictate that 
productivity has to be going up.''
    And so, in an effort described in the book as an 
economist's version of the Manhattan Project, they went into 
their methodology and discovered that the Chairman's instincts 
were correct, that their method of measuring productivity, 
however time-honored it may have been, was wrong, and that the 
overall information with respect to the economy did indeed 
dictate that productivity had to have been going up in the 
period and they had to change their ways of measuring it.
    Now I tell you that because I think it might be instructive 
here on this question of the payroll survey versus the 
household survey.
    What are we missing? How can we account for the disparity?
    Now I understand that the household survey picks up 
agricultural jobs which the payroll survey misses. The 
household survey picks up the unemployed, which the payroll 
survey misses. But the gap is too big to be filled with those 
two numbers.
    If there's a statistical problem--that is, statistical 
noise in one or the other of surveys, or both--we ought to do 
what we can to try to fix that. We ought to do what we can to 
try to eliminate that noise.
    Some have suggested as they've looked at this that the gap 
is partly due to immigration. That is, the household survey 
picks up illegal aliens who are in the country and working in 
situations where they would not be on payrolls.
    I think there may be some of that, but that number can't be 
large enough to explain the disparity in the surveys.
    A very quick anecdote that I would share with you.
    Flying back from Utah this last time, my seatmate on the 
airplane and I got into a conversation. She described her 
employment situation. She was one of those software engineers 
that Congressman Stark has talked about who lost her job.
    She was flying first-class to Washington on a platinum 
medallion status, obviously very much involved. And I said, 
``What do you do now?'' And she said, ``Well, now, after I lost 
my job working for a large company, I got together with a few 
other software engineers. We formed a small company. We've got 
a niche that we're operating in. I'm earning more money now. 
I'm busier now. I'm flying to Washington every week on a 
lucrative consulting agreement with the government and doing 
far better than I did before.''
    But the firm that was formed that she's involved with now 
does not show up in the payroll survey in any way. And she 
would not say that she's at Wal-Mart selling T-shirts. She'd 
say that this was the greatest thing that ever happened to her.
    I don't know how many of those firms there are out there, 
little firms that fly under the radar screen of the payroll 
survey.
    And so, just quickly, could we have a discussion about what 
can be done to try to reconcile the differences between these 
two surveys?
    And once again, I stress--these are not ideological surveys 
being pushed by two different think tanks. These are both 
surveys carefully constructed and managed over time by the 
Bureau of Labor Statistics which in previous eras did not 
diverge that much, and now are diverging a great deal.
    Can we discuss this? Have we got any ideas as to which one 
comes the closest to telling us what's really happening in the 
economy and what methodology might have to be changed in either 
or both to bring them back to a range where you can explain the 
differences between the two of them?
    Commissioner Utgoff. Mr. Chairman, first I'd like to point 
out that the payroll and the household series have behaved 
differently.
    In the late 1990s, the payroll series grew faster than the 
household series. The BLS and the Census Bureau have undertaken 
a thorough review of that period to try to explain the 
differences so that it might shed some light on the current 
period.
    It's difficult to understand, but we really couldn't 
explain a good portion of those differences. Some of them were 
due to the factor that you talked about, the immigration factor 
that was under-estimated in a recovery period.
    It may in fact be that in a slow labor market, immigration 
and new jobs through immigration have been over-estimated.
    But I can't tell you that we can explain all the 
difference. As you know, there are different surveys. They 
measure different things. But when they're adjusted for that, 
they still show different patterns since November and we really 
can't explain a good deal of that difference.
    Chairman Bennett. Not to inject partisanship into this, but 
you understand how the two surveys get used in political 
oratory, with some saying that the one survey demonstrates that 
we've got a terrible job market and the other survey 
demonstrates that we have replaced all of the jobs that were 
lost in the recession.
    That's a fairly significant statistical gap that needs to 
be filled in some way or another.
    I'm glad to hear that you're working on trying to deal with 
it and I look forward to hearing the results of your efforts at 
some future time.
    Congressman Stark.
    Representative Stark. Thank you, Mr. Chairman.
    Commissioner Utgoff, thank you once again for being with us 
and I guess thank you for brightening the Republicans' day.
    I did want to ask you just----
    Chairman Bennett. Can we at least say that all Americans 
are probably happy about this, including a few Democrats?
    [Laughter.]
    Representative Stark. Well, no. That's the problem, Mr. 
Chairman.
    As I was going to say, at the beginning of the recession, 
in March, 2001, correct?
    Commissioner Utgoff. Yes.
    Representative Stark. I believe there were 132\1/2\ million 
people employed.
    Is that correct?
    Commissioner Utgoff. Yes.
    Representative Stark. And how many people are employed 
today?
    Commissioner Utgoff. A little over 130 million.
    Representative Stark. Two-and-one-half million fewer people 
employed. And how many months of job growth at the level we had 
last month would it take us to get back to the pre-recession 
employment level?
    I've got an answer here. Let me make it quickly.
    Commissioner Utgoff. OK. I know roughly, but your answer--
--
    Representative Stark. You tell me first.
    Commissioner Utgoff. No, I don't have that calculation.
    [Laughter.]
    Representative Stark. I've got 19 months. Is that about 
right?
    Commissioner Utgoff. OK. That's about right.
    Representative Stark. So we've got a long time, Mr. 
Chairman, to go before we get back to where we were.
    Now, just a little bit off the subject, but not completely.
    In my other life, I worry about something obscure called 
TANF. And you keep some figures about unemployment among women 
who maintain families. And again, what my numbers show is that 
while we had 710,000 unemployed women who are maintaining 
families back in November of 2001, we're up now--and we even 
went up in October over September--but up to 781,000.
    That's not a big change, but I think those are ballpark 
figures.
    My question is, where we're requiring under TANF women to, 
or TANF recipients, most of whom are women, to work 40 hours, 
which is kind of an elusive number because there aren't many 
40-hour jobs, a lot of 37, aren't we putting pressure on the 
labor market in an area where very fragile families--that's my 
editorial description of women who are working to maintain 
families--isn't that putting pressure on their finding jobs by 
pushing the welfare beneficiaries to work longer hours in the 
private market?
    Commissioner Utgoff. Well, as the economy improves, it is 
likely that employment for all groups will improve, 
particularly for groups that are having labor market problems.
    That is their best situation, is to have an improved labor 
market.
    Representative Stark. OK. I guess I wish you'd said, if the 
economy improves.
    But how many jobs--and I know this is an area in which you 
would still call this experimental or tentative data. But is it 
not correct that whether or not the JOLTS program has been 
determined to be accurate and technically correct, that we had 
fewer jobs open at the end of August--I think 3 million is the 
number--and that prior to that, we had something like 3\1/4\ 
million jobs?
    Can you give me a little estimate? How many jobs are out 
there that are open, and has that gone up or down?
    Commissioner Utgoff. Yes, Mr. Galvin will answer that. He 
has the figures.
    Representative Stark. OK.
    Mr. Galvin. Our JOLTS survey showed about 3 million 
vacancies in our latest data point, August, 2003. That's down 
from about 3.2 million a year earlier.
    This is a very short series. We've only been putting it 
together since December 2000.
    Representative Stark. I'll give you the disclaimer. I know 
that this is a very new and tentative figure that you're 
keeping and I didn't mean to--but it's interesting, and mostly 
interesting not so much in the change from 3.0 to 3.3, where, 
if you're learning, there's a learning experience on how to get 
this.
    But the fact that somehow, we've got 9 to 10 million people 
that we're trying to cram into those 3 million jobs. And that 
to me is like trying to pour a quart of milk into an eight-
ounce cup.
    Something doesn't fit. If we've got 3 million vacancies out 
there and 9 million people, not to count the unemployed, the 
part-time employed, we've got a shortage of jobs.
    Is that right? Does that make sense?
    Mr. Galvin. Well, again, we don't have much experience with 
the relationship between these levels of openings and the 
relationship of the employment levels.
    Representative Stark. But if that's right, then we're short 
6 million jobs somewhere, roughly.
    Right? We've got roughly 10 million people looking, or 9.8, 
and you've got roughly 3 million openings, as I look at it--
this is hypothetical, but doesn't that say that we've got about 
three times as many people unemployed as we have jobs 
available, if your figures are right?
    Mr. Galvin. That's the relative size of the numbers. There 
will always be some search unemployment, people, when they 
leave jobs, will take some time to find other jobs.
    Representative Stark. There's entropy in the system. I 
understand that.
    But I just wanted to get some order of magnitude here. So 
that a couple hundred-thousand jobs doesn't make a real big 
dent in that discrepancy of somewhere around 6 million jobs.
    And that, Mr. Chairman, is what I was alluding to in my 
opening remarks, is that there doesn't seem to be a program, 
other than tax cuts, to deal with the 6 million people, or, if 
poetic license, 5. But a big number of people who are looking 
for work for whom openings don't exist.
    Thank you.
    Chairman Bennett. Thank you.
    Mr. Ryan.
    Representative Ryan. Thank you.
    Commissioner, I wanted to go back to the difference between 
the two surveys because that, too, is very fascinating to me. A 
couple of questions.
    Since the household survey counts the self-employed and the 
payroll survey seems not to do that, is the payroll survey 
missing a significant development in the labor markets? 
Question number one.
    Question number two: compared with the results of all the 
other indicators we've been getting over the past week--and 
we've gotten quite a few, and most of them are pretty good--
which employment survey, in your opinion, has been more 
consistent with other economic indicators as they interact with 
those?
    Commissioner Utgoff. The question about self-employment, we 
know from the household survey, we know how many people are 
self-employed, and you can correct for that in comparing the 
household and payroll series.
    Self-employment has been up about a half-million, a little 
more than half-a-million over the last year. And that accounts 
for much of the difference over the last year.
    But the difference since November 2001 has been greater 
than that when the economy started at the trough of the 
recession. It's more difficult to explain the difference since 
then.
    Representative Ryan. Would self-employment be the largest 
piece of the puzzle, so to speak, to explain this anomaly, this 
huge divergence between these two indicators, or these two 
measurements?
    Commissioner Utgoff. In the last year, that's been the most 
discrepancy.
    Representative Ryan. OK. What about a trend? Or looking at 
the other indicators, which one seems to be a little more 
consistent with the other indicators?
    And do you see a trend emerging now that we have September 
and October data, which seem to be moving very much in the same 
direction, building momentum? Do you see a trend emerging?
    Commissioner Utgoff. The BLS measures current conditions.
    Representative Ryan. I know.
    Commissioner Utgoff. We don't really predict what future 
conditions will be.
    Representative Ryan. And you're not willing to take note of 
something that looks to be like a trend?
    Commissioner Utgoff. There have been 3 months of job 
increases.
    Representative Ryan. OK. Manufacturing--that's the other 
quick question, while I still have some time.
    Now the big knock that you hear rhetorically between the 
payroll survey and the household survey is it's really people 
losing their jobs in manufacturing and going over to the 
service sector.
    I think that pretty much describes what some people are 
saying.
    Is there evidence of that?, number one. Number two: are the 
manufacturing sector employment losses unique to this country, 
or is it indicative of a worldwide trend that's occurring in 
many countries around the world where factory employment and 
manufacturing employment is down, perhaps due to productivity?
    So is it a unique trend to America or is it a worldwide 
trend? And is the claim valid that the difference between these 
two surveys indicates that people working in higher-paying 
manufacturing jobs are losing those jobs and going to service 
jobs? Whether they're higher- or lower-paying, we don't know.
    But is there a lot of validity to that claim?
    Commissioner Utgoff. No, that wouldn't be correct because 
the payroll survey picks up people in both the manufacturing 
and in the service industries.
    So that a shift would not affect the total numbers.
    Representative Ryan. That's helpful. Thank you.
    What about worldwide versus America trends?
    Commissioner Utgoff. A decline in manufacturing employment 
has been widespread throughout the developed countries.
    Representative Ryan. So the decline is worldwide. Is that 
pretty much a productivity story?
    Commissioner Utgoff. Yes, the decline in manufacturing 
employment for many developed countries is a productivity 
story.
    Representative Ryan. OK. I think that's all I have.
    Chairman Bennett. Senator Reed.
    Senator Reed. Thank you very much, Mr. Chairman.
    Thank you, Commissioner. How does the current level of non-
farm payroll employment compare to the level at the start of 
the recession in March, 2001?
    Commissioner Utgoff. It's roughly 2.4 million jobs.
    Senator Reed. Less, today.
    Commissioner Utgoff. Yes.
    Senator Reed. And we've been now about 31 months in 
declining jobs.
    So today's news is good news. But the question I think we 
all have is, is it sufficient to begin replacing simply the 
jobs that we've lost over these last 31 months? Just as 
importantly, are we potentially generating new jobs because of 
new entrants into the labor force?
    I think Secretary Snow talked about 200,000 jobs a month, 
which is a revision downward of his previous suggestion. We 
grew about 124,000 jobs this month.
    Commissioner Utgoff. 126,000.
    Senator Reed. 126,000. So we're falling short of enough 
jobs to begin to basically fill the gap.
    Is that correct?
    Commissioner Utgoff. Yes.
    Senator Reed. So it's good news. But in context, we've got 
such a long way to go to rebuild employment, that we're not 
over the hump yet by any stretch of the imagination, even by 
Secretary Snow's calculations.
    Is that accurate?
    Commissioner Utgoff. Well, Secretary Snow's calculations 
would be that about 200,000 jobs a month is more than is needed 
to reduce the unemployment rate. You need about 125,000 to 
about 150,000 jobs a month to reduce the unemployment rate.
    Senator Reed. And we had 126,000 new jobs, so there's a 
slight reduction this month. This month.
    Could you comment on the participation rates, the trends, 
because information that I have suggests that there is a 
growing number of people not participating in the labor force, 
therefore, not being counted as unemployed technically, but 
certainly not with employment.
    Can you comment on that?
    Commissioner Utgoff. Well, participation rates have 
declined about 1 percent since the peak of the cycle.
    Participation rates tend to weaken during a recession and 
then tend to strengthen during the recovery period.
    Senator Reed. But as these participation rates strengthen, 
and correct me, then you have more people looking for jobs. And 
essentially, that could be a break on the unemployment rate 
going down.
    Am I correct, as more people enter the force?
    Commissioner Utgoff. Well, when the economy is at a level 
state, an increase in the participation rate will tend to put 
upward pressure on the unemployment rate.
    But the relationship is if jobs are growing faster than the 
labor force is growing, then the unemployment rate will still 
decline.
    And what you see in practice is that during periods of 
recovery, employment increases faster than the labor force. And 
the reverse in a recession.
    And during the late 1990s, for instance, there was a strong 
increase in the participation rate and the unemployment rate 
went down.
    Senator Reed. Do you anticipate that happening in the 
months ahead? Do you have any sense of that?
    Commissioner Utgoff. No.
    Senator Reed. And that's because you haven't sampled it or 
because the data is unclear, or you don't do it?
    Commissioner Utgoff. The BLS does not make projections.
    Senator Reed. Well, again, I think this is good news today. 
But the struggle is not over. We have a long way to go to 
replace 2\1/2\ million jobs that were lost in the last 31 
months.
    And there are still some variables, one of which is the 
participation rate, which is unclear yet. You look backwards, 
but you don't look forward.
    And so, again, I think we should take some comfort from the 
numbers, but not satisfaction that the job is done.
    I guess the other question I would raise in terms of--what 
would the unemployment rate be if the participation rate had 
stayed the same rather than changed?
    Would we have had higher unemployment numbers?
    Commissioner Utgoff. That's unclear because the people who 
participate in the labor force, you have to ask how many of 
them become unemployed and how many of them go straight into 
employment.
    So you really can't say what the unemployment rate would be 
if the participation rate stayed the same.
    Senator Reed. And the final question, the reports of 
significant productivity increases, which raises perhaps in my 
mind--it might not be accurate in terms of the statistics or 
the models--sometimes it's the result of a replacement of 
workers by machines, computers, et cetera.
    If productivity grows dramatically, does that take the 
pressure off hiring? Does that mean that companies, because of 
mechanization, computerization, new techniques, that they can 
still have impressive gains in their bottom line without hiring 
more people?
    Commissioner Utgoff. In the short run, productivity can put 
downward pressure on jobs.
    But in the long run, productivity increases are what's 
needed for economic growth and for employment growth.
    So it's a question of whether we're talking about the 
short-run or the long term.
    Senator Reed. How would you define the short run?
    Commissioner Utgoff. In the matter of years.
    Senator Reed. Years.
    Commissioner Utgoff. Yes.
    Senator Reed. So that there is the possibility, unclear 
yet, that because of the significant productivity increases, 
which might be driven by capital investment rather than 
employment, that that could be another downward pressure on 
employment.
    Commissioner Utgoff. That's correct.
    Senator Reed. Thank you very much, Commissioner. Thank you.
    Chairman Bennett. Mr. Putnam.
    Representative Putnam. Thank you, Mr. Chairman.
    I'd like to follow up on the productivity line. To what 
degree do we attribute the gains in productivity to structural 
changes in the economy like the continued advances in 
information technology, the continued automation of 
manufacturing?
    And to what degree are they more temporal than structural 
in that people are fearful of their jobs so that there is some 
angst and therefore, this emotional productivity that is 
derived that is not sustainable, to what degree are the 
productivity gains structural versus temporal?
    Commissioner Utgoff. I can't answer that question. I have 
no data to answer that question.
    Representative Putnam. We don't know, then, we don't have a 
good sense then of what is driving these productivity gains.
    Commissioner Utgoff. Well, there have been strong increases 
in output and it has been suggested that this was due to a 
heavy investment in IT technology in the late 1990s.
    Representative Putnam. The IT technology has been something 
that you and Mr. Greenspan and others have attributed 
tremendous productivity gains to for a number of years now.
    Do you have a sense of how long we can ride that wave? How 
long will the IT improvements continue to fuel the 
productivity?
    Is that a long-term structural increase in productivity 
that will be with us for some time, or are we on the backside 
of the IT productivity curve and we need to find the next big 
thing?
    Commissioner Utgoff. I really can't answer that question. 
But I would note that business investment has been up.
    Representative Putnam. OK. What's the regional nature--is 
there a regional nature to the employment numbers?
    And if you would elaborate on who's winning and who's 
losing? And is there a regional nature to the productivity?
    Commissioner Utgoff. We don't have regional measures on 
productivity. But the changes in employment have been 
widespread throughout the country.
    Mr. Galvin. I'll search for that.
    [Pause.]
    Representative Putnam. While you're doing that, give me 
some sense of the historical unemployment average since World 
War II.
    What is the average unemployment rate in this country in 
the post-war economy?
    Commissioner Utgoff. Can I get back to you on that?
    Representative Putnam. I'm striking out here. Give me this 
sense.
    There used to be a number that was considered an 
unemployment rate that was largely considered full employment.
    Has that number shifted over the last several decades?
    Commissioner Utgoff. Well, for a while unemployment rates 
in the area of 5 percent were considered what you would call 
the natural rate of unemployment.
    The experience in the late 1990s has called that into 
question.
    Representative Putnam. But up until the mid-1990s, that was 
largely considered the natural number.
    Commissioner Utgoff. Yes.
    Representative Putnam. And the unemployment today is what?
    Commissioner Utgoff. 6 percent.
    Representative Putnam. 6 percent.
    Commissioner Utgoff. Yes.
    Representative Putnam. So a percent over what, until 
recently, may have been considered the standard natural 
unemployment rate in the country.
    Commissioner Utgoff. Right.
    Representative Putnam. Thank you. Have you had any luck, 
Mr. Galvin?
    Mr. Galvin. Well, I've got the unemployment rate with me 
back to 1956. I don't have averages over that period.
    You asked for the long-term unemployment average back to 
World War II.
    Representative Putnam. Well, the 1950s will do. You're 
still way beyond my time, so----
    [Laughter.]
    Mr. Galvin. 1950s, it was in the 4.2 percent vicinity in 
1956.
    Representative Putnam. OK. And let me go back to the 
Commissioner, if I may, just for a final question.
    Does your household survey, and this is something that the 
Chairman and Mr. Ryan have gotten into extensively. Do you feel 
that it adequately captures independent contractors and the 
self-employed and the budding small businesses?
    Is it really an adequate model to capture those folks?
    Commissioner Utgoff. It does capture those categories of 
workers.
    Representative Putnam. OK. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Bennett. Mr. Hill.
    Representative Hill. Thank you, Mr. Chairman. Thank you, 
Commissioner, for being here.
    I want to get into some of the ways of how you conduct your 
household survey.
    Can you kind of explain how you do it? Do you contract it 
out? Do you do it in-house?
    Commissioner Utgoff. The Census Bureau conducts a survey of 
households under contract to BLS.
    Representative Hill. What kind of questions are you asking?
    Commissioner Utgoff. There are a number of questions on the 
survey.
    Did you search for work in the last 4 weeks? If not, do you 
want a job? And it just goes through many categories of labor 
force status.
    Representative Hill. And what's the sample?
    Commissioner Utgoff. The sample is about 60,000 households 
a month.
    Representative Hill. OK. I want to get into what--by the 
way, Mr. Chairman, I am encouraged by this data here. I'm one 
Democrat who hopes that this economy is going to be recovering.
    I'm from Indiana. And we've lost a lot of jobs in my 
District. And in particular, we've lost a lot of manufacturing 
jobs.
    In your survey, as Congressman Ryan was talking about 
earlier, we have had a loss in this last month of manufacturing 
jobs.
    And the question I have for you, do we know what kind of 
jobs these are, these manufacturing jobs, that have been lost 
and we are continuing to lose?
    Commissioner Utgoff. The manufacturing losses have been 
throughout subsectors of the manufacturing industry. They have 
been, for part of this last 2 years, concentrated in durable 
goods, and in other things like textiles.
    Representative Hill. OK. The reason why I ask you about how 
you conduct your survey, do you ask questions as to what kind 
of manufacturing job a person had that they lost?
    Commissioner Utgoff. The payroll survey, the other survey, 
goes to employers. And they are classified under a system that 
tells you what industries they are in so that you can group 
them and describe them.
    So we don't ask the people what industries they're in. We 
ask the employers.
    Representative Hill. OK. What I'm trying to get at, 
Commissioner, is I'm trying to determine whether or not these 
manufacturing jobs are going to come back.
    Is there any way when you're asking your questions, can you 
determine whether or not there is the possibility--what I'm 
trying to get at, are these permanently lost jobs or are they 
jobs that some day we can regain?
    Do you have any idea when you're asking your questions?
    Commissioner Utgoff. The BLS doesn't project activities in 
the future. But I can say that since the 1950s, and even before 
that, manufacturing's share of employment has declined fairly 
steadily.
    Representative Hill. And you said earlier that this is not 
unique just to the United States, that this is worldwide.
    Commissioner Utgoff. In most developed countries.
    Representative Hill. How about non-developed countries?
    Commissioner Utgoff. Well, in some non-developed countries, 
manufacturing has increased.
    Representative Hill. Could you cite some of those 
countries?
    Commissioner Utgoff. We don't produce information on 
manufacturing or any other jobs in developing countries.
    Representative Hill. OK.
    Senator Sarbanes. China, obviously, one would think. Just 
the man in the street would say China, wouldn't he?
    Representative Hill. Yes, they would.
    Commissioner Utgoff. Well, the conventional wisdom and the 
anecdotal evidence seems to be that China has had a very large 
increase in manufacturing jobs.
    Senator Sarbanes. Right.
    Commissioner Utgoff. But again, we don't measure those.
    Representative Hill. Commissioner, what I'm trying to get a 
feel for is these jobs in manufacturing that are being reported 
lost every month, I'm trying to get a feel for whether or not 
they are ever going to be coming back. Or are they lost 
forever?
    And what I take it, and in your data that you collect, you 
can't make that determination.
    Commissioner Utgoff. No, our data is for current and 
previous periods.
    The long-term trend has been that manufacturing as a share 
of employment has gone down.
    Representative Hill. OK. Congressman Ryan was also talking 
about the shift from manufacturing jobs into the service 
sector, that people who have lost their manufacturing job that 
are now in the service sector.
    Do we have any idea what difference in wages that person is 
experience? Is it a decrease in wages? An increase in wages?
    Do you ask that question in your surveys?
    Mr. Galvin. We do not track on a current basis employees 
from one job to another job. We could get you information after 
the hearing about average salary levels in the service sector 
versus the manufacturing sector.
    Representative Hill. OK. Thank you, Mr. Chairman.
    [Response of Mr. John Galvin to Representative Hill appears 
in the Submissions for the Record on page 60.]
    Chairman Bennett. Senator Sessions.
    Senator Sessions. Mr. Chairman, I'll pass.
    Chairman Bennett. All right.
    Senator Sarbanes.
    Senator Sarbanes. Well, thank you very much, Mr. Chairman. 
Commissioner, welcome. It's nice to see you again.
    I want to take just a moment to address the subject you 
were addressing with Congressman Putnam on the concept of 
NAIRU, the Nonaccelerating Inflation Rate of Unemployment.
    A number of people don't accept that concept, including 
Alan Greenspan, who has testified about that at some length.
    And the figure has been all over the lot, depending on 
who's invoking it, and for what purpose. But it's very clear 
that in the recent past, we experienced 4 percent unemployment 
without an inflation problem. And that led everyone to sort of 
revise their views. And of course, the Chairman of the Federal 
Reserve spoke at great length about the marked increase in 
productivity.
    The Humphrey-Hawkins bill had a 4-percent unemployment 
rate. So it was premised on the view that we could get down to 
that rate before we encountered an inflation problem.
    Everyone said, oh, it can't be done, and then of course, we 
did it.
    And I just want to put that into the history bank, as it 
were, because the recent past, at least, and earlier times, 
going back some number of years, have had unemployment down in 
the 4-percent range without an inflation problem.
    So if one adopts this concept, and I'm not arguing for 
adopting it, I just want to address it--the non-accelerating 
inflation rate of unemployment--that would suggest that we 
could go down to 4 percent and not get an inflation problem.
    I just want to add that for the record.
    Now I want to address this morning the long-term 
unemployment situation, which is an issue I'm quite interested 
in because it directly relates to whether we should extend 
unemployment benefits again, as we have done in previous 
economic down-turns, and whether the increase in jobs we see 
this month is adequate to, in effect, put that problem on the 
shelf.
    My own strongly held view is that it is not, and I want to 
try to walk through this problem with you.
    We define the long-term unemployed as those unemployed for 
more than 26 weeks and continuing to look for work.
    Is that right?
    Commissioner Utgoff. That's right.
    Senator Sarbanes. How many such individuals were there in 
October?
    Commissioner Utgoff. It was about 23 percent of the 
unemployed, 2 million persons.
    Senator Sarbanes. 2 million.
    Commissioner Utgoff. A little more than 2 million.
    Senator Sarbanes. How many long-term unemployed workers 
were there a year ago?
    Commissioner Utgoff. 1.7 million.
    Senator Sarbanes. So we've gone from 1.7 to 2 million 
unemployed.
    In January of 2001, how many long-term unemployed were 
there?
    Commissioner Utgoff. 660,000.
    Senator Sarbanes. So since January of 2001, we've gone from 
660,000 long-term unemployed--people out of work for more than 
26 weeks and looking for work--and we're now at 2 million.
    Is that correct?
    Commissioner Utgoff. Yes.
    Senator Sarbanes. So the number has tripled over that 
period of time.
    Commissioner Utgoff. That's correct.
    Senator Sarbanes. OK. Now, what percentage of the total 
unemployed who are looking for work are long-term unemployed 
workers?
    In other words, if we take the unemployed workers, people 
looking for work, what percentage of that are long-term 
unemployed?
    Commissioner Utgoff. 23 percent.
    Senator Sarbanes. 23 percent. What was that percentage a 
year ago?
    Commissioner Utgoff. 20.5 percent.
    Senator Sarbanes. So it's gone from 20.5 percent to 23 
percent since last year.
    Is that correct?
    Commissioner Utgoff. That's correct.
    Senator Sarbanes. Now, historically, that's a pretty high 
figure, isn't it?
    Commissioner Utgoff. Relatively, yes.
    Senator Sarbanes. And it's been fairly high over most of 
this year, hasn't it?
    What's the figure roughly been over the course of this 
year?
    Commissioner Utgoff. It's been in the low 20s, 22 to 23.
    Senator Sarbanes. I've been informed that the last time the 
figure of long-term unemployed was this high for such a 
continuous period--in other words, 21-, 22-, 23-percent--was 20 
years ago, in 1983.
    Would that be correct?
    Commissioner Utgoff. Yes.
    Senator Sarbanes. Now what's the median duration of 
unemployment for all unemployed workers?
    Commissioner Utgoff. 10.3 weeks.
    Senator Sarbanes. The median duration of unemployment for 
all unemployed workers?
    Commissioner Utgoff. Is 10.3 weeks.
    Senator Sarbanes. You're giving me the median or the 
average?
    Commissioner Utgoff. I was giving you the median. The 
average is 19.1 weeks.
    Senator Sarbanes. OK. 19.1 weeks. And how long has it been 
above 19 weeks, the average?
    Commissioner Utgoff. Since April.
    Senator Sarbanes. And am I correct that we have to go back 
about 20 years to find comparable figures in terms of the 
average duration of unemployed, for all unemployed workers?
    Commissioner Utgoff. Yes.
    Senator Sarbanes. Would you take issue with me if I was to 
say that the issue of the long-term unemployed is as serious 
now as it has been in 20 years?
    Commissioner Utgoff. Yes. The percent of the unemployed who 
are out of work for 27 weeks or longer has increased and is 
approximately the way it was in the early 1980s.
    Senator Sarbanes. Mr. Chairman, I've gone through this step 
by step because I think it's very important to understand these 
figures.
    I still remain very seriously concerned about the condition 
of the long-term unemployed. I think we picked up some jobs and 
I'm pleased to see that.
    The rate has dropped a tenth of a point.
    Have you seen any sign that people are coming back into the 
labor market? We have this phenomenon, apparently, that when 
unemployment goes up, people drop out of the labor market.
    But when they think that employment is picking up again, 
they come back into the labor market. As a consequence, the 
unemployment rate may in fact go up or not go down markedly, 
even though we're picking up jobs because more people are 
coming back in looking for jobs.
    Do you see any signs of that phenomenon?
    Commissioner Utgoff. The participation rate tends to weaken 
in a recession and then to strengthen in a recovery.
    Senator Sarbanes. Right.
    Commissioner Utgoff. An increase in the participation rate 
might put pressure on the unemployment rate.
    But what you can see over the long term, as an economy 
recovers, that employment increases faster than the labor 
force. So you see increasing participation with a declining 
unemployment rate.
    Senator Sarbanes. Right.
    Commissioner Utgoff. As we saw in the late 1990s, where the 
participation rate increased, but the unemployment rate went 
down as well.
    Senator Sarbanes. Yes. Do you see increases in the 
participation rate taking place yet?
    Commissioner Utgoff. No, we do not see any increases in the 
participation rate.
    Senator Sarbanes. Do you anticipate that there would be 
increases in the participation rate on the basis of past 
history?
    Commissioner Utgoff. Yes. I would say that in a recovery 
period, participation rates tend to increase.
    Senator Sarbanes. So that the job production you will need 
in order to bring down the unemployment rate would be greater 
in order to encompass or accommodate an increase in the 
participation rate.
    Would that be correct?
    Commissioner Utgoff. Yes.
    Senator Sarbanes. Thank you very much, Mr. Chairman.
    Chairman Bennett. Thank you.
    Senator Sarbanes. Obviously, as we discuss extending the 
unemployment insurance issue, I'll be referring back to these 
figures.
    Chairman Bennett. I understand that and I think it's a 
useful exercise to go through because this recovery, while it 
looks very strong in some of the macro numbers, still has some 
problems connected with it in the areas that you are 
describing.
    Commissioner Utgoff, to continue to flog the same horse 
because I want to have as accurate numbers as possible, is it 
possible that the productivity rate is overstated, because if 
the payroll survey is too low--and we're talking about the gap 
again--but if the payroll survey is too low, that would 
artificially change the equation and suggest that the 
productivity number is too high.
    Commissioner Utgoff. That's correct, if the payroll survey 
were incorrect.
    Chairman Bennett. So if we start to get increased jobs, 
even though the productivity number is higher than the GDP 
number, wouldn't that suggest that there has to be some 
mathematical adjustment to the payroll number?
    I'm back to the Greenspanesque example of these are all of 
the parts of the equation. And typically, you say if 
productivity is higher than GDP, you're going to lose jobs. And 
GDP has to be higher than productivity in order to create new 
jobs.
    But if we're in a situation where the productivity number 
is higher than the GDP number, and we're still creating jobs, 
doesn't that say that the payroll number has to be adjusted?
    Commissioner Utgoff. Well, it would also depend on the 
hours.
    But in general, you need more GDP growth than productivity 
growth to create jobs.
    Chairman Bennett. Yes. But I'm saying, we've had this last 
quarter where the GDP number was 7.2. We've got a productivity 
number of 8.1, which would suggest a loss of jobs. And yet, for 
the last 3 months, we've had an increase in jobs.
    Commissioner Utgoff. But that's for----
    Chairman Bennett. A very short period of time. I 
understand.
    Commissioner Utgoff. The quarter that's covered is before 
the job growth began.
    This is for the third quarter.
    Chairman Bennett. Yes. But the increase in jobs was in 
August, September and October. And that's the third quarter.
    Don't I have that right?
    [Pause.]
    It's July, August, and September. OK. Well, the July 
increase was the smallest increase we have. So, OK.
    So we have August and September. So all right. So you're 
saying, third quarter, August and September, you've still got 
to get October's numbers. And the GDP numbers, you do have 
October's numbers.
    Commissioner Utgoff. No. I'm saying that there was not a 
complete overlap between the 3 months where employment 
increased and the quarter from which productivity and GDP were 
measured.
    Chairman Bennett. So there's 1-month difference.
    Commissioner Utgoff. Yes.
    Chairman Bennett. Yes, OK.
    Senator Sarbanes. On-the-job numbers or on the productivity 
and GDP growth numbers?
    Commissioner Utgoff. The job numbers are more current than 
the GDP and productivity numbers.
    Senator Sarbanes. OK. Thank you.
    Chairman Bennett. Yes, all right. Jobs fell in July, grew 
in August, September and October.
    Commissioner Utgoff. Yes.
    Chairman Bennett. OK. And August, September and October are 
the third quarter.
    But you're saying the GDP numbers are lagging? Help me 
understand this. I thought I had it and then----
    Commissioner Utgoff. July, August and September are the 
third quarter.
    Chairman Bennett. OK. Sure. Sorry about that. All right.
    Let's talk about the manufacturing sector. You said that 
unemployment--pardon me--employment in manufacturing has been 
going down historically now for half a century or so.
    Commissioner Utgoff. Yes.
    Chairman Bennett. Not only in the United States but 
throughout the developed world.
    Commissioner Utgoff. It hasn't been going down 
consistently. But what I said was that manufacturing, as a 
share of total employment, has been going down steadily since 
the 1940s or 1950s.
    Chairman Bennett. OK. But output has been going up.
    Commissioner Utgoff. Yes, over that period.
    Chairman Bennett. So the long-term trend is that employment 
as a share of the economy has been going down while output has 
been going up.
    I think that's important to note because the employment has 
not been going down because the jobs have been exported. The 
employment has been going down in the long-term trend because 
productivity has been going up.
    And whether it's robots or computers or simply better 
management, just-in-time inventories, things of that kind, 
we've been continually as a society squeezing costs out of 
manufacturing and seeing the output go up with fewer and fewer 
workers.
    And of course, long term, that's a trend we want to 
encourage.
    When I discuss this sometimes with student groups, I say, 
if you look at history, at one point in our country, when 
Thomas Jefferson was President, agriculture was almost the 
entire economic activity of the country, with manufacturing 
being a very small percentage.
    Agriculture has continued to shrink in terms of the amount 
of employment in agriculture, and yet, our output in 
agriculture has gone up very dramatically as we become more and 
more efficient in the way we farm.
    And agriculture now as a percentage of jobs is a relatively 
small part of the economy. But agriculture, as part of GDP, 
continues to be a very significant factor.
    And I think it's a sign of the growth and maturity of an 
economy that the same thing that happened to agriculture is now 
happening to manufacturing. And it's becoming a smaller 
percentage of the economy, but the overall output continues to 
go up as we become more and more efficient.
    And when people say, yes, but service jobs are flipping 
hamburgers at McDonald's, service jobs are writing software for 
Microsoft at six figures a year.
    And that is part of the reason why the manufacturing sector 
continues to go through the changes that it does.
    Do you have any reaction to that?
    Commissioner Utgoff. I think your analogy between farming 
and manufacturing is a fair one.
    Chairman Bennett. Thank you.
    Mr. Ryan.
    Senator Sarbanes. Do you have any figures, Commissioner, 
that verify how much of the loss in manufacturing jobs is 
because of the increase in productivity and how much of it is 
because manufacturing jobs have moved overseas and the products 
that we used to produce here are now being produced over there 
and imported into the country?
    Do you have any analysis on that?
    Commissioner Utgoff. No, we don't have any such analysis.
    Senator Sarbanes. So we don't know how much is from--at 
least you don't know how much is from one cause as opposed to 
the other cause.
    Commissioner Utgoff. No.
    Chairman Bennett. Mr. Ryan.
    Representative Ryan. I was very interested in the last 
dialog that the Chairman just had. I want to just go down the 
same path, if I could.
    Third-quarter growth, July through September, gave us 7.2 
percent economic growth. The productivity numbers are from 
when, exactly?
    Commissioner Utgoff. Same time.
    Representative Ryan. Same time, right?
    Commissioner Utgoff. Yes.
    Representative Ryan. OK. So the rule of thumb is you have 
to outpace the growth in productivity with GDP to get jobs back 
in the economy.
    That's pretty much a general rule of thumb.
    Is it not the case at the beginning of an economic 
expansion that productivity is typically over-estimated because 
firms are expanding and they're working more hours. The 
denominator and the productivity formula is usually under-
valued because that's not being caught up in the payroll survey 
or in the other surveys?
    Isn't it the case that, in the beginning of an expansion, 
you don't capture all of the additional jobs or the additional 
hours worked? And so, you actually over-estimate productivity 
in some cases.
    Therefore, the required level of economic growth that is 
needed to get jobs back into the economy may indeed have to be 
lower than what we currently expect.
    Is that not typically a trend?
    Commissioner Utgoff. We have no evidence about any 
consistent problem in estimation.
    Representative Ryan. OK. Let me ask it this way, then.
    When we're measuring productivity, we do output divided by 
workers and the hours that they work.
    Correct?
    Commissioner Utgoff. Yes.
    Representative Ryan. OK. And when we're seeing that jobs 
are increasing, when we have economic growth at a level that 
appears to be lower than the level of productivity, that begs a 
few questions, does it not, as to whether or not the required 
level of economic growth to get jobs back into this economy is 
sufficient or not?
    So doesn't it beg some questions about what really is the 
productivity number in this economy, given that the first 
numbers on productivity are so high that you would think that 
we have to grow even faster than we are to add jobs. But when 
we're actually adding, according to the payroll survey, 126,000 
jobs to this economy in this last month, it raises a question 
about whether in fact, productivity growth may not be as high.
    I hope that productivity growth is high because that's very 
good for the long-term standard of living for this country. 
It's good for wages. It's good for our standard of living in so 
many ways.
    But my basic question is, is the Greenspan theory playing 
itself out here that our productivity numbers may not be as 
high, given that we are really producing some jobs now at these 
rates?
    Commissioner Utgoff. The productivity numbers when we 
publish them at first are the best job that we can do with 
available information.
    I'm not aware of any consistent revisions that would 
indicate the pattern that you're talking about.
    Representative Ryan. OK. And do you not see any unique 
behavior in these statistics that suggests that? Not a trend, 
but do you see anything different?
    Mr. Galvin.
    Mr. Galvin. Our numbers show from the productivity program, 
non-farm business output rose 8.8 percent in the third quarter, 
which is slightly higher than what GDP rose in the third 
quarter.
    Representative Ryan. I know it's not an apples-to-apples 
kind of a thing. But it seems that, with the kind of growth 
rate that we're getting in GDP, and the productivity gains--
ideally, we want high GDP and high productivity, which will get 
us really good jobs, and a very much higher standard of living.
    And it seems that that is exactly what's occurring right 
now. Would that be an accurate statement?
    Commissioner Utgoff. Both the economy and the productivity 
numbers are growing.
    Representative Ryan. All right. Well, I won't go down this 
road any more, but I'd like to talk with you another time about 
getting deeper into these statistics to see what the 
productivity story is, in fact, and the link between GDP and 
productivity and what is that magic intersection of the numbers 
to produce jobs in this economy?
    Commissioner Utgoff. We be happy to answer your questions.
    Representative Ryan. Right. Thanks.
    Chairman Bennett. Mr. Putnam.
    Representative Putnam. Pass, Mr. Chairman.
    Chairman Bennett. Senator Sessions.
    Senator Sessions. Thank you. Thank you, Mr. Chairman, and 
it is great to be here.
    Certainly, productivity I've always thought was good. And 
we definitely believe that increased jobs is good. So when you 
have them both, that's better than the alternative, I think, 
Mr. Ryan, for sure.
    I was looking at the Reuters article about first-time 
unemployment claims, which I think is pretty stunning to me, 
looking at the numbers.
    They report that initial claims--that is, somebody who's 
lost their job and made their first claim for unemployment--
fell in the week of November 1st, 43,000 to 348,000, which 
results in, it seems to me, about a 12-percent decline in 
first-time claims for unemployment.
    Have you discussed that earlier today?
    Commissioner Utgoff. No, I haven't.
    Senator Sessions. Of course, that pays off, does it not, in 
the weeks and months to come.
    In other words, if a person making those unemployment 
claims, they may be on unemployment for months before they get 
another job.
    But if you have a net kind of drop, what would you share 
with us about that? How do you see those numbers and the 
importance of them?
    Commissioner Utgoff. To smooth out the series because it 
has variation in it, you look at the 4-week moving average of 
the claims.
    That tends to be a leading indicator of the unemployment 
rate.
    Senator Sessions. This is a pretty hard number, is it not? 
In the surveys, people can complain about it. But do you have 
confidence in the accuracy of these reported claims for 
unemployment compensation, that seems to me to be a hard number 
that's not much dispute about.
    Commissioner Utgoff. Well, the BLS does not collect those 
numbers.
    Senator Sessions. But they come from states.
    Commissioner Utgoff. Yes.
    Senator Sessions. Who maintain the unemployment 
compensation payments.
    Commissioner Utgoff. Yes.
    Senator Sessions. Well, it seems to me that those numbers 
are based on actual checks being paid by the states and ought 
to be accurate, and I've heard little dispute about it.
    I think that's good news.
    And I won't beat the dead horse about the good news of 
productivity and job increases. That means, it seems to me, at 
least it means that something good is happening if you can 
sustain a 7-percent or more productivity increase and also a 
nice job increase at the same time.
    Jobs are critical to us, Mr. Chairman, and there are a lot 
of things that impact that. We think about them. If we allow 
energy prices to continue to soar--we have an energy bill right 
now that will allow some things to happen--I think we could 
contain the cost of energy increasing productivity.
    We have some efforts to reduce litigation costs on American 
industry that's at least double or more than that of the rest 
of the world.
    We've got environmental costs that we hold very dear. But 
if we're passing laws or regulations that impose environmental 
costs that are not producing benefits for the environment, then 
that is a burden on our productivity that makes us more 
difficult to compete in manufacturing around the world.
    Fair trade is important. I think we've not always been 
effective in insisting on fairness in trade.
    I'm concerned about immigration. Illegal immigrants are 
here by the millions and they take jobs. And the numbers I saw 
in the paper today, there were 2.3 million, I believe, 
immigrants in 2001 and half of those were reported to be 
illegal.
    I don't know if those numbers are correct or if they're 
being confirmed. But that does take jobs out there.
    And of course, the tax burden on private industry is 
significant.
    I am really intensely interested in the job question. I 
think Americans need to be able to have a decent job and we 
need to ensure that we take policies that protect that. The 
unemployment rate is not extraordinarily high by the worst of 
times.
    Six percent--I guess it's dropped down to six now. That's 
still too high. So we're concerned about it.
    And Mr. Chairman, you've been doing an excellent job with 
these hearings. I'm so sorry I was tied up in this Medicare 
conference this morning. I'm trying to get some information on 
that bill, that I could not be with you.
    We appreciate your leadership and your insight into these 
numbers.
    I thank you again and yield my time back.
    Chairman Bennett. Thank you. I'm going to turn to Senator 
Sarbanes again. But I've just come across some information that 
I think would answer a question that the Senator has raised.
    This is a report that appeared in The Wall Street Journal 
on the 20th of October of this year.
    ``Factory Employment Is Falling Worldwide'', is the 
headline. Study of 20 big economies finds 22 million jobs lost. 
Even China shows decline.
    This is very interesting. Quoting from the article, it 
says:
    Contrary to conventional U.S. beliefs, research found that 
American manufacturing workers weren't the biggest losers. The 
U.S. lost about 2 million manufacturing jobs in the 1995 to 
2002 period, an 11-percent drop.
    Brazil had a 20 percent decline. Japan's factory workforce 
shed 16 percent of its jobs, while China's was down 15 percent.
    The Director of Global Economic Research at Alliance, 
Joseph Carson, says that the reasons for the declines are 
similar across the globe. Gains in technology and competitive 
pressure have forced factories to become more efficient, 
allowing them to boost output with far fewer workers.
    Indeed, even as manufacturing employment declined, said Mr. 
Carson, global industrial output rose more than 30 percent.
    And here is the chart that shows the countries that lost 
the most and the countries that gained the most. I am 
interested that the country that gained the most manufacturing 
employment in the period of 1995 to 2002 was Spain, with 24 
percent increase, followed by Canada, with 22 percent increase.
    Then the Philippines with 6.9, Taiwan, 4.7, Mexico, 1.1 
percent, Malaysia, 1 percent, the Netherlands, 0.9, Australia, 
0.3.
    India is the median at zero.
    And then the losses start: Italy, France--France lost 1.9, 
Germany, 5.6, Sweden, 6.9, the United States, 11.3, South 
Korea, 11.6, Russia, 11.7, the United Kingdom, 12.4, China, 
15.3, Japan, 16.1, and Brazil, 19.9.
    This is a very interesting survey that perhaps challenges 
conventional wisdom in both parties and in the media at large.
    And I will be happy to share the hard copy with Senator 
Sarbanes or anyone else who is interested.
    Senator Sessions. Mr. Chairman, on that point, it sounds 
counter-intuitive, but if we develop new technology so that 90 
people can do what 100 did the previous year, I'll ask your 
wisdom on this. It appears what happens is that those 10 people 
don't do nothing. They do something productive. Whereas before, 
if you could do it with 90, then they really weren't productive 
because the work could be done for less people.
    And that tends to produce growth in the economy, it 
appears. I've never quite understood it, but it surprises me 
how we continue to down-size our work force all over America 
and it's more productive. But the net result is our 
unemployment rates are not exceedingly high by historical 
terms.
    Chairman Bennett. Well, Senator Sarbanes has pointed out 
that the historical number is kind of in the eye of the 
beholder and it has historically been all over the place.
    Senator Sessions. Well, on the percentage basis of 6 
percent----
    Chairman Bennett. I was taught in college that 6-percent 
unemployment was full employment. And we've demonstrated that 
that is not true.
    I think your point, Senator Sessions, about the people who 
lose their jobs don't do nothing, they go off to some place 
else, is very clear.
    And I go back to my analogy about what happened in 
agriculture and what's happening in manufacturing.
    Senator Sessions. That wrestles with those numbers in 
manufacturing. And then it transfers work to the service 
sector, which is sometimes bad for people, that the payment may 
not be as good as it had been. And that certainly has occurred.
    And some things develop well for them. They do 
exceptionally well.
    Chairman Bennett. I should, in the spirit of full 
disclosure, point out that there are those who dispute the 
numbers I've just quoted.
    Particularly, and understandably, Jerry Jasinowski, 
President of the National Association of Manufacturers, says 
these numbers are not right. There are other economists that 
support them.
    But I find it an interesting study that should be part of 
this conversation.
    Senator Sarbanes, did you have a second round?
    Senator Sarbanes. Mr. Chairman, before Senator Sessions 
leaves, I ought to just note that these people who he said lost 
their jobs and then went off and did other things, one of the 
other things they do is they become part of the long-term 
unemployed.
    So it all depends on the context of your economy.
    In January of 2001, we had 660,000 people, long-term 
unemployed, out of work for 27 weeks or more.
    Now we have 2 million. We had 1.7 million a year ago. So 
that's one of the places they go to, regrettably, I might say.
    Mr. Chairman, I just wanted to draw out of the Commissioner 
a few more figures before we close out here this morning.
    How many people are working part-time for economic reasons?
    As I understand, we have 8.8 million unemployed. Is that 
correct, what you would categorize as unemployed?
    Commissioner Utgoff. Yes, 8.8 million people are 
characterized as unemployed.
    Senator Sarbanes. All right. Now, how about those working 
part-time for economic reasons? How many of them are there?
    Commissioner Utgoff. 4.8 million.
    Senator Sarbanes. 4.8 million. And do you have any estimate 
on how many have dropped out of the labor force, or what's a 
reasonable number that might flow back into the labor force?
    Commissioner Utgoff. We do not predict how many people 
would come back into the labor force.
    Senator Sarbanes. Well, what's the participation rate right 
now?
    Commissioner Utgoff. It's 66.1 percent.
    Senator Sarbanes. And what was it 2 or 3 years ago?
    Commissioner Utgoff. It's declined a percentage point since 
the peak, March of 2001.
    Senator Sarbanes. And a percentage point translates into 
how many people?
    Commissioner Utgoff. Today about 1.5 million.
    Senator Sarbanes. 1.5 million. You calculate a different 
unemployment figure, as I recall, factoring in all of the 
various groups that are left out of the standard unemployment 
figure.
    I know that part-time for economic reasons is one of those. 
Is there another category, other categories?
    Commissioner Utgoff. There's another category of 
discouraged workers.
    Senator Sarbanes. How many of those are there?
    Commissioner Utgoff. 239,000.
    Senator Sarbanes. What's the unemployment rate when you 
take in all categories into account?
    Commissioner Utgoff. You mean all the categories that you 
talked about?
    We have discouraged plus marginally attached workers. Then 
you have the unemployed for part-time.
    Senator Sarbanes. Right. If you factor all of that in, what 
do you get as the unemployment rate?
    Commissioner Utgoff. This is not seasonally adjusted, but 
it was 9.5 percent.
    Senator Sarbanes. 9.5 percent. Has it been running above 10 
percent this year, or is that generally where it's been?
    Commissioner Utgoff. In the last 3 months, it's not been 
above 10 percent.
    Senator Sarbanes. It's not been above 10 percent.
    Commissioner Utgoff. No.
    Senator Sarbanes. OK. Thank you very much.
    Now, Mr. Chairman, I'd like to put one other question. A 
number of years ago, we worked hard, a number of us in the 
Congress, to get the BLS new quarters there down at the 
railroad station.
    My question is, has that worked out OK? Are you 
appropriately situated in terms of your physical environment?
    And second, is the budget you're getting from the OMB and 
the Congress adequate to your challenges? Or do you feel that 
you're really in any significant way constrained, fiscally 
constrained in terms of carrying out your responsibilities?
    Commissioner Utgoff. First, the Postal Square building is a 
beautiful building and we're very happy to be there.
    As you know, the BLS was scattered throughout town before 
that. It's much better to have everybody in the same building 
and the building is a very nice building.
    Senator Sarbanes. OK. Good. It's close to the Congress, 
too.
    Whether that's a plus or minus, I don't know.
    [Laughter.]
    Commissioner Utgoff. We walk up here.
    [Laughter.]
    Senator Sarbanes. And what about your budget?
    Commissioner Utgoff. Our budget has been adequate. We have 
not had any significant decreases in our budget.
    Senator Sarbanes. Do you have enough resources to do what 
you have to do?
    Commissioner Utgoff. All of us could do more things with 
more resources. But we are funded to do the research and data 
collection that we have done in the past.
    Senator Sarbanes. All right. There aren't any upgrades and 
revisions in indices or other measuring tools used by the BLS 
that you think need to be really addressed that would require 
some sort of plus-up in your resources in order to get that 
done?
    We're always confronted with updating the various series 
that you use. Where are you on that front?
    Commissioner Utgoff. In every one of our surveys and on our 
reports, we always see things that we could do to make them 
better, and we have had some new initiatives funded in recent 
years. That's adequate to keep us doing the work that we have 
been doing.
    Senator Sarbanes. Thank you, Mr. Chairman.
    Chairman Bennett. Thank you very much. We appreciate your 
patience as we wrestle with these issues here on the Committee.
    The hearing is adjourned.
    [Whereupon, at 11:05 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 employment hearing. Like 
virtually every other economic statistic reported in the past month, 
the employment numbers released today are definitely good news for the 
American worker. No matter how you cut it, the economy is adding new 
jobs at a rapid pace and will likely continue to do so for the 
foreseeable future.
    The official payroll statistics indicate that the U.S. economy 
created 126,000 new jobs in the month of October, the third month in it 
row that payroll employment rose. The revised numbers now indicate that 
125,000 jobs were added in September. The unemployment rate declined to 
six percent.
    The household survey reported that employment increased by an 
astounding 441,000 in September. According to the household survey, our 
economy has now essentially replaced all of the jobs lost during the 
2001 recession and the number of jobs is now at an all-time high.
    I believe that today's employment numbers, along with the steep 
drop in new jobless claims and the large increases in productivity and 
output, indicate quite clearly that the U.S. economy is returning to a 
period of strong growth.
    For instance, the Bureau of Labor Statistics reported yesterday 
that productivity grew at an annual rate of 8.1 percent in the third 
quarter of 2003. Some of my colleagues tend to gnash their teeth at the 
high productivity growth of late, lamenting that firms are learning how 
to do without workers. However, our experience in the last 30 years 
tells us that periods of rapid increases in the productive capacity of 
our economy are almost always accompanied by low unemployment. 
Increasing our standard of living and employment at the same time 
requires healthy productivity growth.
    Today's data remind us again of the ongoing divergence between 
total employment as measured by the two surveys conducted by the BLS. 
While the payroll survey reports a decline of roughly 750,000 payroll 
jobs since the end of the recession in November 2001, the household 
survey still reports nearly one-and-a-half million newly employed 
workers since then. I encourage the BLS to continue researching this 
discrepancy and welcome any additional information you might provide us 
on this topic.
    It is too easy for the party in power to take the blame when the 
economy slows, and for that reason it is all too tempting to try to 
take all the credit when things turn around. In reality, government 
holds little sway over the business cycle, despite what some may think 
or desire. Our economy floundered in the middle of the year 2000 in 
large part due to a hangover from the high-tech boom, likely abetted by 
a rise in interest rates. The stagnant economy was prolonged by the 9/
11 disaster and the resultant uncertainties in the Middle East, high 
energy prices, and the various scandals in the financial markets. That 
our economy steadily expanded in the face of so many potentially 
calamitous events in succession is a testament to the ability and 
dedication of the American worker as well as to our economic system.
    That is not to say that government cannot spur the economy. The 
Bush tax cuts enacted in 2001 undoubtedly softened the blow of the 
events that befell the economy and served to make the recession 
shallower than it otherwise would have been, and the tax cuts passed 
this year provided some needed impetus at the right time.
    Dr. Utgoff, it is always a pleasure having you visit us, but we 
especially enjoy it when you come bearing such good news. Welcome to 
the Joint Economic Committee, and we look forward to hearing your 
testimony.

           Prepared Statement of Representative Jim Saxton, 
                             Vice Chairman

    It is a pleasure to join in welcoming Commissioner Utgoff once 
again before the Joint Economic Committee.
    Today's employment report is good news for American workers. 
Payroll employment increased 126,000 in October, while the September 
increase was revised upward to 125,000. October marks the third 
consecutive increase in payroll employment after accounting for the 
revised increase in August. The household measure of employment 
increased by 441,000 in October, while the unemployment rate slipped 
one-tenth of a percentage point to 6.0 percent. The improvement in the 
employment data reported today reflects the progress made in emerging 
from the economic slowdown of recent years.
    The economic weakness that began with the bursting of the stock 
market and technology bubbles early in 2000, followed by recession, 
terrorist attacks, and wars, now appears to be over. Although the 
economy has shown great resilience in recent years, the unusual 
combination of shocks, and the investment-led nature of the economic 
slowdown, made the timing of the recent economic acceleration highly 
uncertain.
    Consecutive declines in business investment had undermined economic 
growth since the fourth quarter of 2000. However, data from recent 
quarters show that investment and economic growth is on the rebound. 
The provision of tax relief in 2003, including the boosting of write-
offs for investment, is widely credited for the recent strength of the 
economy. The 7.2 percent growth of GDP in the third quarter of 2003 
indicates that this policy of tax relief has worked as intended. Recent 
increases in both ISM indexes, durable goods orders, and construction 
show that the economic expansion is broadly based.
    As has been noted previously, the best prospect for job growth is 
created by a strong economic expansion. As the economy continues to 
grow as predicted by the Blue Chip Consensus forecast, it is reasonable 
to expect sizable employment gains into the future. Several quarters of 
healthy economic growth through next year, as the Consensus forecast 
suggests, should bring sustained and significant growth in employment 
and opportunity for American workers.

                               __________

           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' October employment situation 
continued to paint a disappointing labor market picture. The 
unemployment rate was essentially unchanged at 6.0 percent. And by any 
meaningful measure, the jobless recovery drags on. When we need a few 
hundred thousand jobs a month, only 126,000 payroll jobs were added in 
October. Nearly 9 million Americans remain unemployed--with over 2 
million out of work for 6 months or more.
    This level of job creation, while better than expected, is probably 
not strong enough to keep up with the growing labor force, let alone 
erase the enormous jobs deficit any time soon. With this rate of job 
growth, it will still take another 19 months to climb out of the jobs 
hole we're in. The Democratic staff of the JEC has estimated that, 
because the labor force is growing, somewhem between 135,000 and 
170,000 jobs per month need to be added to payrolls just to keep the 
unemployment rate from rising--that's only to maintain the status quo, 
not reduce unemployment.
    Treasury Secretary John Snow recently predicted that about 2 
million payroll jobs, or roughly 200,000 jobs per month, would be 
created over the next 12 months. This represents a substantial scaling 
back of expectations from what the Administration was predicting 
earlier this year, and it implicitly concedes that President Bush's 
record on job creation is going to be the worst of any President since 
Herbert Hoover.
    In October, President Bush tied his father's dubious record as 
payroll jobs failed to return to their pre-recession level 31 months 
after the recession began (Chart 1). In fact, this is the only 
administration since Hoover's with a decline in total payroll jobs 
(Chart 2). We are in a deep hole in terms of job creation, and one that 
is far worse than in past business cycles (Chart 3). President Bush is 
presiding over the most persistent jobs slump since the 1930s, and he 
will smash--by a wide margin--the modern (post World War II) record for 
job creation futility currently held by his father.
    Indeed, if Secretary Snow's estimate of 200,000 jobs per month 
proves to be on target, the non-farm payroll deficit of 2.4 million 
jobs will not be erased until October 2004.

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        Prepared Statement of Kathleen P. Utgoff, Commissioner, 
                       Bureau of Labor Statistics

    Mr. Chairman and Members of the Committee, I appreciate this 
opportunity to comment on the labor market data we released this 
morning.
    Non-farm payroll employment rose by 126,000 in October, following 
increases in August and September that totaled 160,000, after revision. 
I would note that the payroll survey estimates for the prior 2 months 
are always subject to revision as we receive reports from additional 
survey respondents. The increase in payroll employment over the last 3 
months contrasts with declines in the February-July period that 
averaged 85,000 per month. Several service industries added jobs in 
October. Manufacturing employment continued to decline, although at 
slower pace than earlier in the year. The unemployment rate, at 6.0 
percent, was essentially unchanged over the month.
    Professional and business services added 43,000 jobs in October, 
with gains in many of its component industries. Employment in temporary 
help services continued to rise and is up by 150,000 since April.
    Employment in private educational services grew by 23,000 in 
October. Job gains over the last 3 months have more than offset 
declines that occurred in June and July. Over the year, employment in 
private education expanded by 56,000. Health care and social assistance 
added 34,000 jobs, with noteworthy gains in doctors, offices and in 
child day care services.
    In the leisure and hospitality sector, employment in food services 
and drinking places rose by 23,000. Job growth in food services has 
picked up in recent months; since July, employment has increased by 
57,000. Within retail trade, food stores added 13,000 jobs in October. 
Employment in food stores was boosted by the hiring of additional 
workers in anticipation of strikes.
    Employment in construction was little changed over the month, but 
the industry has added 147,000 jobs since its most recent trough in 
February. In October, employment in credit intermediation decreased by 
10,000, reflecting the decline in mortgage refinancing activity.
    Manufacturing job losses continued in October (-24,000). Declines 
in the sector have moderated in recent months, particularly in durable 
goods manufacturing. In October, both the factory workweek and overtime 
were unchanged.
    After posting a small increase in September, employment in air 
transportation fell in October. Since reaching its most recent peak in 
March 2001, the industry has lost more than 20 percent of its jobs.
    Average hourly earnings for production or non-supervisory workers, 
at $15.46, were essentially unchanged in October. Over the year, 
average hourly earnings rose by 2.4 percent.
    Looking at some of the measures from our survey of households, the 
October unemployment rate of 6.0 percent was about the same as in 
September. The jobless rates for all the major worker groups showed 
little change over the month. About 8.8 million persons were 
unemployed, of whom 2.0 million had been without a job for 27 weeks or 
longer. Employment as measured by our household survey rose over the 
month.
    In summary, non-farm payroll employment rose by 126,000 in October. 
Since July, employment is up by 286,000. The unemployment rate, at 6.0 
percent in October, was about unchanged.
    My colleagues and I would be glad to answer any questions you might 
have.

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