[Joint House and Senate Hearing, 108 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 108-529
THE EMPLOYMENT SITUATION: FEBRUARY 2004
=======================================================================
HEARING
BEFORE THE
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED EIGHTH CONGRESS
SECOND SESSION
__________
MARCH 5, 2004
__________
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Robert F. Bennett, Utah, Chairman Jim Saxton, New Jersey, Vice
Sam Brownback, Kansas Chairman
Jeff Sessions, Alabama Paul Ryan, Wisconsin
John Sununu, New Hampshire Jennifer Dunn, Washington
Lamar Alexander, Tennessee Phil English, Pennsylvania
Susan Collins, Maine Adam H. Putnam, Florida
Jack Reed, Rhode Island Ron Paul, Texas
Edward M. Kennedy, Massachusetts Pete Stark, California
Paul S. Sarbanes, Maryland Carolyn B. Maloney, New York
Jeff Bingaman, New Mexico Melvin L. Watt, North Carolina
Baron P. Hill, Indiana
Donald B. Marron, Executive Director and Chief Economist
Wendell Primus, Minority Staff Director
C O N T E N T S
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Opening Statement of Members
Page
Senator Robert F. Bennett, Chairman.............................. 1
Senator Jack Reed, U.S. Senator from the State of Rhode Island... 3
Witnesses
Statement of Hon. Kathleen P. Utgoff, Commissioner, Bureau of
Labor
Statistics, Accompanied by Dr. John Greenlees, 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........ 17
Prepared statement of Senator Jack Reed.......................... 19
Prepared statement of Commissioner Kathleen P. Utgoff, together
with Press Release No. 04-338, entitled ``The Employment
Situation: February 2004,'' Bureau of Labor Statistics,
Department of Labor............................................ 21
THE EMPLOYMENT SITUATION:
FEBRUARY 2004
----------
FRIDAY, MARCH 5, 2004
United States Congress,
Joint Economic Committee,
Washington, D.C.
The Committee met, pursuant to notice, at 9:40 a.m., in
room SD-562 of the Dirksen Senate Office Building, the
Honorable
Robert F. Bennett, Chairman of the Committee, presiding.
Senators present: Senators Bennett and Reed.
Staff present: Donald Marron, Reed Garfield, Jeff Wrase,
Mike Ashton, Colleen Healy, Wendell Primus, Chad Stone, Matt
Salomon and Daphne Clones.
OPENING STATEMENT OF SENATOR ROBERT F. BENNETT,
CHAIRMAN
Chairman Bennett. The hearing will come to order.
I apologize for the late start. I'm a creature of habit
rather than statistics, and instead of looking at my schedule,
I went to the room where we always go. And discovered that
there was a hearing there, but it was not one that I was
presiding over. I apologize for being late.
We welcome you all to today's employment hearing. We're
pleased again to have Commissioner Utgoff join us to talk about
the employment data that were released just an hour ago.
We've now had 6 months of growth in employment as measured
by the payroll survey, adding 21,000 jobs in February.
The unemployment rate remained steady at 5.6 percent, still
well below its recent peak of 6.3 percent last June, and it
remains below the average of each of the decades of the 1970s,
1980s and 1990s.
So we are seeing some positive growth, but not as strongly
as we'd all like to see.
Now while our focus today is on employment, I'd like to
quickly point out that there are other indicators that show
that the overall economy continues its strong growth.
Business activity in the manufacturing and service centers
remains very strong, as they see their profits and cash flow
continue to improve.
Households continue to benefit from the recent tax relief
and from healthy gains in the housing and stock markets. And
last year's GDP growth averaged 4.3 percent, which is the
strongest in 4 years and well above the average 3.7 percent in
the expansion of the 1990s. And overall, forecasters expect
sustained and robust growth, low inflation, and continuing job
gains.
But today, we are focusing primarily on jobs. And the
number that we got out of February in terms of growth was
disappointing and below that which many forecasters had
expected.
I'd like to continue our discussion on the statistical
anomaly between the payroll and household employment surveys.
As we know, the payroll survey measures jobs reported by
businesses, while the household survey counts responses about
who in the household has a job.
We've seen a large and historically unprecedented gap
between these two surveys. The data on household job growth,
the unemployment rate, and claims for unemployment insurance
all point to a healthier job market. Yet, the payroll numbers
continue to lag behind.
Now this is not just an academic question. If the
measurement tools we are using are flawed, then the policy we
adopt in response to those tools is likely to be flawed as
well.
We must spend more quality time examining this question.
Now, Commissioner Utgoff, you said in your written
statement last month that you preferred the payroll measure and
thought it was tracking the job market well. You also wrote
that, ``BLS will continue to examine the possible sources of
the discrepancy between the two surveys and to search for ways
to test potential explanations.''
I was glad to hear that. We want to probe that more deeply
this morning.
I've spoken to Chairman Greenspan about the efforts of the
Fed to try to account for this discrepancy. And he replied that
the Fed was taking a very serious look at it and felt that it
was a legitimate question for careful analysis.
We would welcome any insight that you might be able to give
us from your own analysis here today.
Now in addition to talking about where we are today with
respect to jobs, I would also like to discuss with you a report
that the BLS recently released on future job growth in the
United States.
Many people are concerned that the future is bleak, that
America is losing high-paying jobs such as computer-related
jobs, to other countries.
It's encouraging to me, therefore, that the BLS report
foresees continued growth in computer-related employment--
adding a million jobs as computer specialists by 2012 and
expanding employment in network systems and data communication
systems by more than 50 percent.
There are those whenever we refer to the service economy
who give images of flipping hamburgers at McDonald's or
greeting customers at Wal-Marts.
It's good to have your information that suggests that that
is not the appropriate image of jobs in the service economy.
BLS projects that many of the fastest-growing jobs will pay
above-average wages.
Of the 30 fastest-growing jobs over the next decade that
you project, for example, 13, or close to half, pay in the top
25 percent of wages and another 6 of the 30 pay above-average
wages.
So these projections provide optimism about the future of
employment in the United States.
Dr. Utgoff, it's always a pleasure to have you visit us and
we look forward to your testimony and a discussion on the
points that I have raised.
Congressman Stark, the Ranking Member of this Committee, is
unable to be with us this morning. So we welcome Senator Reed
in that role. He has served as Vice Chairman of the Committee
in the past, and we're delighted to have him here.
Senator.
[The prepared statement of Senator Robert F. Bennett
appears in the Submissions for the Record on page 17.]
OPENING STATEMENT OF SENATOR JACK REED,
U.S. SENATOR FROM RHODE ISLAND
Senator Reed. Thank you very much, Mr. Chairman. Let me
welcome the Commissioner. Thank you for your testimony today.
This is a very disappointing report. The Bureau of Labor
Statistics' February employment situation shows that the
unemployment rate was unchanged at 5.6 percent because people
are leaving the labor force.
More than 8 million Americans remain unemployed--with
nearly 2 million out of work for 6 months or more. A paltry
21,000 payroll jobs were created--apparently none in the
private sector.
According to the Chairman of the President's Council of
Economic Advisers, we need 125,000 new jobs each month just to
keep pace with the growing labor force.
Job creation is nowhere near what it should be. A year ago,
the Administration estimated that nearly 2 million jobs would
be added in the second half of 2003--510,000 of them due to the
President's tax cut. In fact, only 124,000 jobs were created
during that period.
We got the tax cuts, but we didn't get the jobs.
The current slump is the most persistent jobs recession
since the 1930s. Overall, the economy has lost 2.2 million
payroll jobs since President Bush took office in January, 2001.
And I have a chart over there that describes the relative job
losses.
When you take out growth in government jobs and focus on
just the private sector, the loss is even more staggering--we
are 3 million jobs in the hole since President Bush took
office.
The manufacturing sector alone has lost 2.8 million jobs.
All of this data comes from the BLS's survey of
establishments. Some people want to talk about job growth in a
different BLS survey--the survey of households--but
Commissioner Utgoff has testified here that the establishment
survey gives a more accurate picture of current labor market
conditions.
The Congressional Budget Office and Federal Reserve
Chairman Alan Greenspan also agree that these data are the ones
to look at to assess job loss.
So I hope we can put that debate to rest once and for all.
The 2004 Economic Report of the President acknowledges that
job performance has been disappointing. On page 48, the report
says: Indeed the performance of employment over the past couple
of years has been appreciably weaker than in the past business
cycles. It has lagged even that of the so-called ``jobless
recovery'' from the 1990-91 recession.
At this point, in all previous business cycles since the
1930s, we had already erased all the job losses and were
creating net new jobs.
Clearly, we're not making much progress in eliminating the
jobs deficit. We've been gaining jobs slowly since August, but
at the pace we've seen so far, it would take over 3 years to
erase the current jobs deficit.
Job creation would have to average over 200,000 jobs per
month from March, 2004 to January, 2005, just to erase the
current 2.2 million jobs deficit completely.
We're a long way from that and even farther away from full
employment.
Looking beyond the official unemployment rate, we see many
signs of a weak labor market. Besides the more than 8 million
Americans officially unemployed, another 5 million people want
to work, but are out of the labor force and not counted among
the unemployed.
The unemployment rate would be nearly 10 percent if you
included them and those who are forced to work part-time
because of the weak economy.
The BLS recently reported that nearly 240,000 workers lost
their jobs in January due to mass lay-offs--the highest number
since December, 2002. Job fears drove down consumer confidence
in February. And Help-Wanted advertising, an important
independent measure of labor demand, remains near the lowest
levels since the 1960s.
The Administration has offered precious little relief to
struggling Americans. We have an obligation to American workers
to close tax loopholes that encourage shipping jobs overseas,
restart federal unemployment benefits, modify Trade Adjustment
Assistance to cover more displaced workers, and restore the
President's cuts in education and job training.
It would not be compassionate or sensible to do anything
less.
Thank you.
[The prepared statement of Senator Jack Reed appears in the
Submissions for the Record on page 19.]
Chairman Bennett. Commissioner Utgoff, we welcome you this
morning and look forward to your testimony.
OPENING STATEMENT OF HON. KATHLEEN P. UTGOFF,
COMMISSIONER, BUREAU OF LABOR STATISTICS, U.S.
DEPARTMENT OF LABOR; ACCOMPANIED BY: DR. JOHN GREENLEES,
ASSOCIATE COMMISSIONER, OFFICE OF PRICES AND LIVING CONDITIONS;
AND JOHN M. GALVIN,
ASSOCIATE COMMISSIONER, EMPLOYMENT AND UNEMPLOYMENT STATISTICS
Commissioner Utgoff. Thank you, Mr. Chairman, Senator Reed.
I appreciate this opportunity to comment----
Chairman Bennett. May I? You always have two people with
you. And this time, we have a new person.
Commissioner Utgoff. Okay.
Chairman Bennett. Would you introduce Dr. Greenlees to the
Committee?
Commissioner Utgoff. Yes, I will. This is John Greenlees,
who is the new Associate Commissioner for Prices and Living
Conditions.
And with me again is Jack Galvin, who is the Associate
Commissioner for Employment and Unemployment.
Chairman Bennett. We welcome you both. Thank you for being
here.
Commissioner Utgoff. I appreciate this opportunity to
comment on the labor market data that we released this morning.
Non-farm payroll employment was little changed in February,
up 21,000, as the number of jobs held steady in most major
industries.
Since August of 2003, total payroll employment has risen by
364,000. The unemployment rate was 5.6 percent, unchanged over
the month, but down from its recent peak in June, 2003.
Turning first to our payroll survey data, construction
employment declined in February following an increase of 34,000
in January. Taking a longer view, employment in construction
has trended upward since March of last year; over the period,
123,000 jobs have been added.
Employment in manufacturing basically was unchanged in
February, down 3000. The rate of job loss in our Nation's
factories has moderated quite a bit since last summer. The
improvement has been more pronounced in durable goods.
In fact, employment in a few durable goods industries, such
as fabricated metals and wood products, is up slightly in
recent months.
For manufacturing overall, the factory worksheet edged up
in February to 41 hours, and overtime hours were unchanged at
4.5 hours.
Both measures are up substantially since last summer.
Also within the goods-producing sector, mining employment
continued to trend slowly upward in February; oil and gas
extraction has accounted for much of the recent growth.
None of the major segments of the service-providing sector
showed a significant employment change in February. Wholesale
trade employment was unchanged following 3 months of growth.
Among retailers overall, there has been no net job growth
since the onset of the holiday shopping season last fall.
Employment in a few retail components continued to edge up in
February, notably building material and garden supply stores.
Employment was essentially flat in financial activities in
February, although the securities component continued to add
jobs.
Employment in securities is up by 18,000 since August.
Credit intermediation, which includes mortgage banking, has
lost 22,000 jobs over the same period.
The job total in information was little changed in
February. Employment declines in the industry have eased since
last fall.
As with other industries, this represents somewhat of an
improvement, given that the information sector had lost 15
percent of its jobs between March, 2001 and October, 2003.
There was little employment change in professional and
business services overall in February. Within the sector,
temporary help services added 32,000 jobs over the month.
With the exception of a small decline in January,
employment in temporary help has been climbing steadily since
April, 2003. Over the period, there has been a net gain of
215,000 jobs.
Employment in health care and social assistance continued
to trend upward in February. However, the average gain for the
first 2 months of this year has been about half the average
monthly increase for 2003.
Hospital employment declined over the month, while there
was a job gain in social assistance, largely in child day care
services.
Employment in state government rose by 20,000 over the
month and has trended up since last summer. Over the same
period, employment is down in local government.
Average hourly earnings for private production or non-
supervisory workers rose by 3 cents in February. Over the 12
months ending in February, hourly earnings increased by 1.6
percent.
Taking a look at some of the measures obtained from our
survey of households, the unemployment rate was unchanged at
5.6 percent in February. The number of unemployed persons also
changed very little at about 8.2 million.
Both measures are below their recent highs of June, 2003.
Jobless rates for major worker groups either remained the same
or showed little movement over the month.
The labor force participation rate fell to 65.9 percent in
February, reflecting a steep drop-off in the number of men in
the labor force. The employment-population ratio was down over
the month to 62.2 percent. It held at or near that level for
most of 2003.
The number of persons working part time who would have
preferred full-time employment declined over the month to 4.4
million. It had been at about 4.8 million during the last
several months.
Among those not in the labor force, the number of
discouraged workers--those who have stopped seeking work
because of discouragement over their job prospects--was 484,000
in February, about the same as a year earlier, but well above
the levels that existed prior to the recent recession.
In summary, non-farm payroll employment was little changed
in February as the job totals in most industries held steady,
and the unemployment rate was unchanged at 5.6 percent.
My colleagues and I would now be glad to answer your
questions.
[The prepared statement of Commissioner Utgoff together
with Press Release No. 04-338, appear in the Submissions for
the Record on page 21.]
Chairman Bennett. Thank you very much.
I understand that Senator Reed has another appointment that
would require him to leave early. So I will defer my
questioning to him so that he can have his questions answered
before he has to move on.
Senator Reed. Thank you very much, Mr. Chairman. That's
very gracious. I appreciate it. Thank you.
Thank you, Commissioner, for your testimony.
An issue that has come up in both our opening statements is
which survey is the most accurate or the one most dependable--
the establishment survey or the household survey.
Previously, you have indicated that the establishment
survey is the one that you prefer. I think this is the view
also of the Congressional Budget Office and Chairman Greenspan.
Could you comment upon which survey is the best
representative of employment?
Commissioner Utgoff. What I said earlier was that the
payroll survey was the best for measuring current job trends.
So that if you want to look from month to month or over a
shorter period, the payroll survey is much less volatile. And
so, over a period of time, you want to look at the payroll
survey because it's a bigger sample. It's less volatile. And
because it is tied to a census of employers every year.
Senator Reed. Thank you very much, Commissioner.
Commissioner, again, the numbers that I refer to of the job
losses since 2001, those are accurate numbers from your
perspective?
Commissioner Utgoff. Yes.
Senator Reed. Thank you. The Chairman of the President's
Council of Economic Advisers recently told this Committee that
it takes about 125,000 jobs per month just to keep up with
population and labor force growth.
Does that number seem right to you?
Commissioner Utgoff. Yes.
Senator Reed. Thank you. And how many jobs per month have
been created since August of last year?
Commissioner Utgoff. 364,000.
Senator Reed. Per month, that would be about 60,000?
Commissioner Utgoff. Approximately, yes.
Senator Reed. 60,000. So we're about half of what we need
just to keep up with the labor force growth.
Commissioner Utgoff. You generally need about 125,000 jobs.
Senator Reed. Now one of the issues that's troubling all of
us is the unusually weak job growth so long after the end of a
recession.
In fact, it seems now we're replacing fewer jobs than we
did after the recession of 1990-1991.
Is that correct?
Commissioner Utgoff. Yes.
Senator Reed. And that was the notorious jobless recovery.
So if that was a jobless recovery, what is this? Do you
have any----
Commissioner Utgoff. In the job market, it is a weak
recovery.
Senator Reed. The other factor, too, is that we've had many
workers unemployed for more than 26 weeks. And what percentage
of the unemployed is that, those long-term, more than 26-week
unemployed persons?
Commissioner Utgoff. In February, the percent of the long-
term unemployed as a percent of all unemployed workers was 22.9
percent.
Senator Reed. That is unusually high?
Commissioner Utgoff. Yes.
Senator Reed. Yes. And the average duration for
unemployment, what's the average duration or length?
We have a lot of people who are unemployed more than 26
weeks. But it seems that we have a lot of people who are
unemployed for a long period of time.
Commissioner Utgoff. The average weeks of unemployment in
February was 20.3 weeks.
Senator Reed. 20.3 weeks. Historically, when is the last
time we had seen that? If you have that data, that long a
period of unemployment, on average?
[Pause.]
Commissioner Utgoff. I can't check every year, but I don't
see any recent period where it has been that high.
Senator Reed. So you'd have to go back 10 years or more.
[Pause.]
Commissioner Utgoff. January 1984.
Senator Reed. 1984. Well, again, these are very disturbing
numbers and a very disappointing report.
We're in a situation where we have a huge deficit already
to make up. And then we have new entries to the work force who
are looking for work and the economy is not producing those
types of jobs.
And I would hope that it would cause a serious re-
evaluation of our policies.
Thank you, Commissioner. And again, thank you, Mr.
Chairman, for your graciousness and your kindness.
Thank you.
Chairman Bennett. Thank you. I'm sorry that you can't be
here for the ensuing discussion because I want to get into the
issues that Senator Reed has raised.
There's a recent comment, I believe it's out of the New
York Fed. It's rather rough and global in its comment, rather
than with the precision that you go after statistics.
It is, I think, a straw in the wind to which we must pay
attention.
The suggestion--or, rather, the comment is this. That the
rule of thumb is that whenever we have a recession and then get
into a recovery, we get about 50 percent of the jobs that were
lost in the recession back.
The traditional recession for the industrial age is that
it's an inventory recession. You build up too much inventory.
You recognize that you have done that. You lay everybody off
until you sell off your inventory. And then once the inventory
is gone and you have to start manufacturing again, you bring
everybody back.
That's a vastly over-simplified discussion of what an
inventory recession is.
But the rule of thumb is that in the bringing the people
back, you discover that you can do it more efficiently than you
thought. And only 50 percent of the workers are brought back.
The other 50 percent don't come back because their jobs are
pretty much lost forever, as the business gets more efficient.
And the New York Fed did a statistical analysis of this and
came to the conclusion that that was, in fact, the case, that
after just about every recession, about 50 percent of the job
loss that was caused by the recession, came back in the
recovery.
They said, as nearly as they could tell, in this recession,
however, that ratio was now 75/25. That is, 75 percent of the
jobs that disappeared because of the recession disappeared
forever, and only 25 percent of the workers could be expected
to be called back.
We're seeing extraordinarily high productivity numbers that
would tend to validate that observation.
That is, by virtue of the information revolution--we are in
the Information Age now instead of the Industrial Age--
employers who wrung the inefficiency out of their operation in
response to the recession found that when the time came to hire
people back, by virtue of the information revolution, they
could be that much more efficient than otherwise and their
productivity went very high, and they only needed to call about
25 percent of the workers back.
I lay this out because if it's true, and these are just
indications and guesses, but if it's true, it suggests that
something structural is going on in the economy, and that past
guidelines are not valid.
This is a very important point for the Bureau of Labor
Statistics because we depend upon your statistics to make our
policy, and I don't think we can dismiss it by just saying,
well, historically, we've always accepted this set of numbers.
So we'll continue to accept this set of numbers.
If, in fact, something structural is going on in the
economy, and it's as big a structural change by moving from the
Industrial Age to the Information Age as it was moving from the
Agricultural Age to the Industrial Age, we do need to take a
very careful look at the measures we have used, however
reliable they may have been in the past and however reliable
the construct upon which they are built seems to be.
We nonetheless need to look at them to see if the time has
come when perhaps they need to be changed or even abandoned.
This is the point I made with Chairman Greenspan. And his
response was, we at the Fed are very concerned about the gap
between the household survey and the industrial survey. And we
are looking at it very closely. And his specific response to me
was, Mr. Chairman, we can't tell you what's causing it.
We still don't know.
I find that fairly significant. If we don't know what's
causing an historic anomaly, there is the very real possibility
that something fairly significant and structural is happening,
and I want to know before I abandon the issue.
Now, we put up a chart here. I've charged the staff of the
JEC to look at this. And I will say quickly, they don't know
any more than the Fed knows or you know why this is. But they
have looked at this disparity from a different angle than the
last chart that I showed when you were here.
Before I just showed the gap between the jobs according to
the payroll survey and the jobs according to the household
survey.
Here, the staff has done their best to take the non-payroll
jobs out of the household survey. If they can do that
successfully in their analysis of the statistics, the two ought
to track exactly.
Now we go back to--what is it? 1994? Okay. And you see that
the two do track through the 1990s. And then, in the late
1990s, something happens.
The payroll survey represented by the red line starts going
much higher than the household survey.
Now this is different from the previous charts which
showed--the household survey always shows more jobs than the
payroll survey. But when you take the differences out and try
statistically to make them match, which they do, for the first
5 or 6 years there, then the payroll survey shows significantly
higher than the household survey. And now, they have come back
together again.
I think that is worth the kind of intellectual discipline
that you have at the BLS to take a look at it.
There are those who look at this and suggest that the
household survey may have, in fact, through this period been
the more accurate of the two, and that the payroll survey
overstated the jobs, even though the household survey, when you
take the raw numbers, shows more jobs than the payroll survey.
But you deduct again, just to repeat so that everybody
knows what we've done--if you deduct from the household survey
those jobs that we know are in addition to the payroll survey--
that is, agriculture and self-employed, jobs of that kind--you
deduct those from the household survey and then super-impose
the two of them together, you find an historical anomaly where
they separate, starting in the middle of the 1990s, and they
have not come back together where they historically were until
you get to the present time.
I share that with you not with any firm conclusion, but
with the request that you and your experts take a look at this
and see if we can't really understand if, in fact, something
structural is changing in the economy.
If it is, and I happen to believe that it is, if something
structural is changing, then we need to change the way that we
measure so that we can have more accurate measures.
If we have inaccurate measures and then we as policy-makers
make decisions as to what we have to do based on inaccurate
measures, we're going to make inaccurate policy.
Now, I've taken advantage of the fact that I have no other
Members of the Committee here to take the time to lay that out.
But I would appreciate any response that you or your associates
might have to that whole question.
Commissioner Utgoff. You raise a very serious issue. And we
have that graph on our website and we've been spending a good
deal of energy looking at why that gap exists, why the payroll
survey grew faster during the recovery in the late 1990s and
why the payroll survey declined more in the recent recession.
And we're trying to leave no stone unturned.
But there are some things where we hypothesize that there
may be an effect on the two surveys and that it might be
cyclical. But we just can't measure it.
Let me give you just one example.
And that is undocumented workers, estimates of which have a
big effect on the population controls in the household survey.
They also therefore have a big effect on the household versus
payroll employment gap.
There are some people who believe----
Chairman Bennett. That's Senator Alexander's point, by the
way. He keeps coming at me on that issue.
Commissioner Utgoff. There also are some people who believe
that undocumented immigrants would show up on the household
survey and not on the payroll survey.
There are other people who believe just as strenuously that
it would be the opposite, that illegal immigrants would present
papers to their employers and they would be filed, yet they
would not answer a government worker coming to the household.
And then there are people who believe that net illegal
immigration is going up and net illegal immigration is going
down.
So we've looked at all these theories. But the truth is
that it's extremely hard to measure illegal immigration, and
it's very important to this issue.
So although I say we leave no stone unturned, sometimes we
overturn a stone and we say, that's a possibility, but we just
can't measure it.
Chairman Bennett. I recognize how difficult it is. If it
were easy, we would all have done it by now. And I applaud you
for your persistence in keeping at it because, once again, it's
very important that we have accurate measures.
I'm not challenging any measure that you have given us or
saying that you have not been diligent or you've not been
competent.
I'm just saying that the evidence suggests that there's
something significant going on in the economy that hasn't gone
on before.
If I may, in the context in an election year, I don't think
it has anything to do with who happens to be President. I think
structural changes in the economy come out of the dynamics of
the economy and not out of the politics of who happens to be on
Face The Nation on this particular weekend.
Any other comment on this one before we move on?
Commissioner Utgoff. We will continue to work on this.
We've posted virtually everything we know from our
investigations on our website, so that people can comment and
have additional suggestions.
And all I can say is we will continue to look at this
issue.
Chairman Bennett. Could I get your reaction to the 50/50
versus 75/25 job recall rate?
Does the 50/50 thing sound about right to you?
Commissioner Utgoff. I can't answer that question. But we
do know that over the course of the last few decades, the
people who say that they are on lay-off and expect to be
recalled to work has decreased. And the people who are on
permanent lay-off has increased.
So we do know that there has been a structural change where
just going from your old job and then returning to it is not
the typical kind of unemployment.
Chairman Bennett. Okay. I'm glad to have that observation.
I wouldn't expect you to be able to validate the 50/50, 75/25
speculation that we got out of this other group.
But you have identified a trend.
Commissioner Utgoff. Yes.
Chairman Bennett. That with each succeeding recession now,
the number of laid-off workers who expect to be called back
continues to go down.
Commissioner Utgoff. I haven't looked at the data. I can't
say with each recession. But there is a long-term trend.
Chairman Bennett. Okay. We have a lot of conversation up
here about the loss of manufacturing jobs.
Isn't it true that the trend of the loss of manufacturing
jobs is steady for over half a century, that manufacturing jobs
have been going down for more than 50 years?
Commissioner Utgoff. At approximately the same rate.
Chairman Bennett. At approximately the same rate.
Commissioner Utgoff. Yes.
Chairman Bennett. Again, regardless of who controls the
Congress or who controls the White House.
Commissioner Utgoff. That's right.
Chairman Bennett. A noted economist addressing this issue
in a group where I was present made this comment. He said, ``If
we had been having this conversation in 1904 instead of 2004,
and I had said to you, `69 percent of American workers are
employed on the farm. A hundred years from now, that number
will be 2 percent. We will lose 67 percent of our jobs over the
next 100 years.' '' everyone would have been terrified.
Now, he said, ``The 2 percent that remain in agriculture
produce more food and fiber than the 69 percent produced.'' The
output per farm worker has gone up so tremendously, that with
only 2 percent of our working population involved in
agriculture, we produce more food than Americans consume--in
spite of the fact that obesity is our number-one health
problem. We have to have markets overseas to take care of the
excess food. And we do it with only 2 percent of our workforce.
And that's a demonstration of the vastly increased
productivity of the agricultural worker.
His point was that the same thing is happening in
manufacturing and it is just as inexorable in manufacturing as
it is in agriculture, and no one would want to stop it.
No one would want to say, we're going to freeze the number
of jobs on the farm, not allow anybody to leave the farm and
not allow farm workers to become more productive and not put
new technology into agriculture to produce this kind of
situation.
I make this comment because we're getting much of the same
panic over the loss of manufacturing jobs that he projected we
would have had if someone had made that comment 100 years ago
about the loss of agricultural jobs.
And I can't resist. I was on the television this morning
with this issue being raised, with concern that it is just
awful that we've lost all these manufacturing jobs.
Before I could say it, the interviewer raised this response
with steel mills. There was a time when steel manufacturing was
the backbone of manufacturing in this country. And with the
open-hearth furnaces, we employed a whole lot of people in the
steel mills.
Today, a steel mill that has replaced the open-hearth
furnace has roughly one-tenth of the number of jobs that the
old mill had and produces 5 times as much steel.
And is there anybody who wants to go back to open-hearth
furnaces in the name of need those jobs? I don't think so.
So let's talk about productivity.
Really, that's the driving force behind everything I've
said here, increased productivity of farm workers, increased
productivity of steel workers. Increased productivity is
reducing the number of jobs in manufacturing in a way that
ultimately benefits all of us.
What kind of measures of productivity do you make at the
BLS?
Commissioner Utgoff. We have major sector productivity. We
have productivity for non-farm business, and for the overall
business sector. We have multi-factor productivity. We do some
of these measures for many detailed industries.
Chairman Bennett. Taking the macro number, do you have a
number for productivity growth for 2003?
Commissioner Utgoff. 4.4 percent.
Chairman Bennett. 4.4 percent.
Commissioner Utgoff. That's right.
Chairman Bennett. In my opening statement, I said that the
GDP growth in 2003 was 4.3 percent. Rule of thumb says,
therefore, we should have lost jobs in 2003.
Isn't that true?
Commissioner Utgoff. Yes.
Chairman Bennett. Did we lose jobs in 2003?
Commissioner Utgoff. Over the year, it looks like we gained
about 122,000 jobs.
Chairman Bennett. Okay. 122,000 jobs is pretty anemic. And
if Senator Reed were here, he would say that that's a
disgraceful record.
There's no question that in historic terms, that's not good
for a recovery.
Commissioner Utgoff. Can I correct the record here?
Chairman Bennett. Yes.
Commissioner Utgoff. I was reading a different series.
The number is----
Mr. Galvin. We dropped about 60,000.
Chairman Bennett. You dropped about 60,000. That's worse
than anemic.
But doesn't that fit with a productivity number of 4.4 and
a GDP growth of 4.3?
Commissioner Utgoff. Yes.
Chairman Bennett. The implications of that are pretty
serious. If productivity remains enormously high, that means in
order to create new jobs, we've got to have GDP growth of 5
percent or more, if the productivity growth remains at roughly
4.5, if we're going to get the kind of job growth that we're
looking at.
Is that in the ballpark?
Commissioner Utgoff. Yes, that's the usual rule of thumb.
Chairman Bennett. GDP growth of 5 percent or more for X-
number of years is something that you only get in a country
like China, where somebody that's coming off a very low base.
For the most developed and mature economy in the world,
which we are, a GDP growth of 5 percent per year is almost
unattainable.
Commissioner Utgoff. But productivity growth is high now
because we're in the recovering stages from the recession when
productivity growth is normally higher.
You could expect as the recovery matures to see some
diminution in productivity.
Chairman Bennett. Okay. That's where I was going next.
Thank you.
So you're suggesting that the productivity growth will come
down as we come out of the early stages of the recovery.
Commissioner Utgoff. That's the usual pattern.
Chairman Bennett. Do you have any idea as to how far down
it will come so that we can see what our GDP target has to be?
Commissioner Utgoff. I can't answer that.
Chairman Bennett. Anybody else got an educated guess, or
even an uneducated guess?
[No response.]
Nobody wants to say that on the record, I think. Okay. I
understand. This is the dilemma we have, I think, here on this
Committee, which is charged by the law of looking at the entire
economic picture.
We have the luxury, if you will, of having no legislative
authority and therefore, no responsibility to try to craft a
particular piece of legislation.
We have the charge to look at the entire economy and where
it is going and what overall economic policies need to be
addressed here.
And I think what we're seeing in this recovery and in the
statistical anomalies that are coming out here is that we are
in an economy that is quite different than the one that we have
historically seen.
And we need to have a degree of wisdom and a degree of
flexibility in analyzing this that maybe we have not shown in
previous recoveries that have taken place in economies where we
felt more comfortable with the data.
This is by no means a criticism of you and the excellent
work that you do. But I'm nervous about the reliability of the
data that you, that the Fed, that the Finance Committee and the
Ways and Means Committee and others are looking at as they make
monetary policy decisions and fiscal policy decisions.
We're grateful to you for your willingness to help us try
to probe into this.
I would hope that this Committee would not spend its time
in political slogans on either side. The tendency to do that is
very strong on both sides. And that we would accept our charge
from the Congress to try to understand exactly what's happening
in the economy as a whole. And then, once we do get that
understanding, we share it with our colleagues.
Since I have no other colleagues here today and have
filibustered about as far as I want to filibuster on this
particular issue, unless you have anything further that you
wish to call to the attention of the Committee, I'm prepared to
adjourn the hearing.
Commissioner Utgoff. Thank you, Mr. Chairman.
Chairman Bennett. Thank you very much.
The hearing is adjourned.
[Whereupon, at 10:25 a.m., the hearing was adjourned.]
Submissions for the Record
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