[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

                               __________

          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

                                                                   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.]


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