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



                                                        S. Hrg. 108-662



                   THE EMPLOYMENT SITUATION: MAY 2004

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

                                HEARING

                               BEFORE THE

                        JOINT ECONOMIC COMMITTEE

                     CONGRESS OF THE UNITED STATES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 4, 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
      Christopher J. Frenze, Chief Economist to the Vice Chairman


                            C O N T E N T S

                              ----------                              


                      Opening Statement of Members


Representative Jim Saxton, Vice Chairman.........................     1

                               Witnesses

Statement of Hon. Kathleen P. Utgoff, Ph.D., Commissioner, Bureau 
  of Labor Statistics, accompanied by: Dr. John Greenlees, 
  Associate Commissioner, Office of Prices and Living Conditions; 
  and John Galvin, Associate 
  Commissioner, Employment and Unemployment Statistics...........     2

                       Submissions for the Record

Prepared statement of Representative Jim Saxton, Vice Chairman...    11
Prepared statement of Commissioner Kathleen P. Utgoff, together 
  with Press Release No. 04-996, entitled, ``The Employment 
  Situation: May 2004,'' 
  Bureau of Labor Statistics, Department of Labor................    11

 
                       THE EMPLOYMENT SITUATION: 
                                MAY 2004

                              ----------                              


                          FRIDAY, JUNE 4, 2004

                     Congress of the United States,
                                  Joint Economic Committee,
                                                     Washington, DC
    The Committee met, pursuant to call, at 9:30 a.m., in room 
1334, Longworth House Office Building, the Honorable Jim 
Saxton, Vice Chairman of the Committee, presiding.
    Present: Representative Saxton.
    Staff Present: Christopher Frenze, Robert Keleher, Brian 
Higginbotham, Colleen J. Healy, Donald Marron, Reed Garfield, 
Mike Ashton, and Matthew Salomon.

        OPENING STATEMENT OF REPRESENTATIVE JIM SAXTON, 
                         VICE CHAIRMAN

    Representative Saxton. Good morning. It is a pleasure to 
welcome Commissioner Utgoff once again to testify on the 
monthly employment statistics.
    This morning, the Commissioner brings more good news for 
American workers. According to the establishment survey, 
payroll employment increased by 248,000 in May. Furthermore, 
upward revisions pushed the level of job gains to 353,000 in 
March and 346,000 in April. Manufacturing employment increased 
by 32,000 in May, which is perhaps even more remarkable. So far 
this year, payroll employment has increased by more than 1 
million jobs.
    The diffusion index--an important measure of the breadth of 
employment gains by industry groups--indicates that employment 
increases were broad-based. The monthly diffusion index has 
shown expansion for 5 months in a row, more than 1.4 million 
jobs have been created since last August. According to the 
household survey, employment also increased.
    The positive employment data reported today are consistent 
with other recent economic data on output, investment and 
consumption. GDP growth in the first quarter was recently 
revised upward to 4.4 percent. Over the year, the economy has 
expanded at a 5 percent rate.
    A rebound in investment has made a major contribution to 
the acceleration of the economy over the last year, with 
equipment and software investment posting an increase of 12.5 
percent during this period. Manufacturing activity is expanding 
at a brisk pace. Meanwhile, homebuilding and construction are 
robust. Independent economists have identified tax relief and 
accommodative monetary policy as the two key reasons for the 
improvement in the economy.
    In summary, economic conditions remain strong. The 
expansion is on track and consistent with the Blue Chip 
Consensus projection of nearly 5 percent growth in 2004. As I 
noted many months ago, healthy economic growth offers the best 
way to improve labor market conditions and to expand 
employment. As the numbers show, the pick up in the economy has 
indeed boosted payroll employment growth, and led to the 
probability of good employment gains throughout 2004.
    [The prepared statement of Representative Saxton appears in 
the Submissions for the Record on page 11.]
    Representative Saxton. Commissioner, welcome this morning, 
and we are ready for your testimony.

     OPENING STATEMENT OF HON. KATHLEEN P. UTGOFF, Ph.D., 
        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 GALVIN, 
 ASSOCIATE COMMISSIONER, EMPLOYMENT AND UNEMPLOYMENT STATISTICS

    Commissioner Utgoff. Thank you, Mr. Chairman.
    I appreciate this opportunity to comment on the labor 
market data that we released this morning.
    Nonfarm payroll employment rose by 248,000 in May, 
following even larger job gains in both April and March. Since 
August 2003, payroll employment has risen by 1.4 million. In 
May, job growth was widespread for the third consecutive month. 
Employment continued to expand in manufacturing, construction, 
and several service-providing industries. The unemployment rate 
held steady at 5.6 percent in May. It has essentially shown no 
movement since last December.
    Among the goods-producing industries, employment in 
manufacturing rose by 32,000 and has increased 91,000 since 
January. The over-the-month gain was concentrated in the 
durable goods component, which has accounted for nearly all of 
the recent job growth in manufacturing. The factory work week 
rose by four-tenths of an hour over the month, more then 
offsetting declines in the prior 2 months.
    The upward trend in construction employment continued in 
May, as the industry added 37,000 jobs. Since March 2003, the 
number of construction jobs has risen by 248,000. Employment 
growth in mining has picked up in recent months. The industry 
has added 18,000 jobs since January.
    In the service-producing sector, employment in professional 
and business service increased by 64,000 in May, following an 
even larger gain in April. Nearly half of May's growth in 
professional and business services occurred in temporary help. 
Employment in temporary help has risen nearly 300,000 since its 
recent low in April 2003.
    Employment continued to increase in health care and social 
assistance. Job growth in this industry has accelerated in 
recent months. Employment growth in leisure and hospitality was 
strong for the third consecutive month. The industry added 
40,000 jobs in May, with food services and drinking places 
continuing to account for most of the gain. So far this year, 
employment increases in food services have averaged 32,000 per 
month.
    Elsewhere among the service-providing industries, the 
financial sector added 15,000 jobs in May, as employment in 
real estate and credit intermediation continued to expand. In 
retail trade and wholesale trade, employment continued its 
upward trend.
    One industry which employment has continued to trend down 
is telecommunications. Over the month, employment declined by 
5,000. Since its peak in March 2001, the industry has shed 
283,000 jobs.
    In May, average hourly earnings for production and 
nonsupervisory workers rose by 5 cents, following a 4-cent 
increase in April. Over the year, average hourly earnings grew 
by 2.2 percent.
    Looking at some of our measures obtained from the survey of 
households, the May unemployment rate was unchanged at 5.6 
percent. After trending down during the second half of last 
year, the jobless rate has been either 5.6 or 5.7 in each month 
since December.
    In May, 8.2 million persons were unemployed. The number of 
persons who have been jobless for 27 weeks or longer held at 
1.8 million. The labor force participation rate was 65.9 
percent for the fourth consecutive month.
    In summary, nonfarm payroll employment increased by 248,000 
in May, by 947,000 over the last 3 months and by 1.4 million 
since August. The unemployment rate was unchanged over the 
month 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. 04-996, appears in the Submissions for 
the Record on page 11.]
    Representative Saxton. Thank you very much. This is indeed 
good news. And we--as I jokingly remarked to you before the 
hearing started--we have been getting good news almost since 
the day you arrived.
    Commissioner Utgoff. Not quite.
    Representative Saxton. So perhaps that has something to do 
with it.
    Let me just begin with a question. Obviously, the numbers 
that we are here to discuss specifically today are good news.
    American families always like to hear that more people are 
going back to work. And, in fact, I sharpened my pencil up a 
little bit this morning and looked at the last 3 months in 
particular. It looks to me like we have created just under a 
million jobs in the last 3 months, which is good news.
    Commissioner Utgoff. That is correct.
    Representative Saxton. But, Commissioner, the growth in the 
economy has been much broader than just job growth, at least 
from my perspective. There are many segments of the economy 
that have been showing good growth. And we began to see 
increases in payroll employment 9 months ago and, even prior to 
those, when we had small gains in employment, there were 
factors that were at work in the economy that led us to believe 
that these employment gains were soon to be felt.
    For example, the housing industry has been strong for quite 
some time. And we have seen elevated levels of housing--of 
employment in the housing area. Another example is retail 
sales. Retail sales have been trending up since 2002. And so 
that was an early indicator that suggested to us that we would 
soon be seeing growth in employment.
    Real disposable income has been going up. We had, during 
the recession and immediately after the recession, some 
problems with household net worth, meaning the wealth factor 
that we talked about after the bursting of the stock market 
bubble. But today, we see that household net worth has 
rebounded to the level that it was prior to the recession.
    This chart, with the yellow vertical lines, shows that, 
during and immediately after the recession, that household net 
worth was actually in the negative. But now, today, it looks 
like to me like changes in household net worth have rebounded 
to pre-recession levels.
    And in addition to that, fixed investment, which also went 
into the negative area, into negative territory during the 
recession, in private nonresidential fixed investment in 
particular, has rebounded. And so for the last four quarters we 
have been back on the positive side once again.
    In addition to that, profits are up for business. Capital 
goods orders are up, which is a good indicator for the future. 
The stock market has rebounded over the last four quarters and, 
today, remains well over the 10,000 level (that is, the Dow.)
    And inventories--at the same time--inventories are low, 
which would indicate that perhaps businesses will have to 
rebuild inventories, which also speaks well for the future.
    So the numbers that we are here to specifically talk about 
today, gains in employment, are a factor which shouldn't 
surprise us, because the rest of the economy is doing so well 
also.
    Would you expand, if you would, on this notion and tell me 
whether or not what I am seeing in other sectors, in various 
sectors of the economy is right. Am I interpreting this 
correctly?
    Commissioner Utgoff. Yes, you are.
    Representative Saxton. Do you have anything to add that I 
may have missed here? Is there any other data that we should be 
looking at?
    Commissioner Utgoff. Well, the BLS also produces 
productivity statistics, and those have remained strong.
    Representative Saxton. Let me turn now to a question about 
gross domestic product (GDP), which is a very, of course, broad 
measure of economic growth.
    We have seen over the past--looks like about eight 
quarters, if we look at the chart, the graph to your left, we 
can see, the yellow lines indicate where we have been with 
regard to GDP growth. Of course, we were in negative territory 
at one point back in the--some months ago. But we now are 
projecting that we are going to see good economic growth into 
the future. Would you comment on this chart for us?
    Commissioner Utgoff. Yes. The numbers are as I know them to 
be. But we do not--the BLS does not make projections for future 
growth in GDP.
    Representative Saxton. You would concur that the chart 
shows that we have seen, on average, more than 5 percent growth 
over the past year?
    Commissioner Utgoff. Yes.
    Representative Saxton. Thank you. In your testimony, you 
described payroll employment gains as widespread. Isn't this 
confirmed in the May level of the diffusion index which 
measures the breadth of employment gains by industry? And why 
don't you start by telling us precisely what the diffusion 
index is?
    Commissioner Utgoff. It is roughly a measure of the 
percentage of business establishments that are expanding 
employment, compared to those that are contracting employment.
    Representative Saxton. So the diffusion index is compiled 
by looking across the economy and reporting on, if you will, 
reporting on the percentage of businesses that are growing. Is 
that right?
    Commissioner Utgoff. Roughly. Yes.
    Representative Saxton. And the chart that we have here to 
your left indicates that over 60 percent of this Nation's 
businesses are in positive territory, 62 percent to be--I can't 
quite read the number here--62.8 percent of the businesses in 
the U.S. economy are growing. Am I interpreting that correctly?
    Commissioner Utgoff. Yes.
    Representative Saxton. And that number is considered to be 
healthy by economists, generally, when it rises above 50 
percent?
    Commissioner Utgoff. Yes.
    Representative Saxton. So we are well into healthy 
territory as measured by the diffusion index. Is that right?
    Commissioner Utgoff. Gains in employment have been very 
widespread for the last 3 months, which is reflected in the 
diffusion index.
    Representative Saxton. Thank you. Does the level of the 
diffusion index in manufacturing reflect the improving 
situation in that sector as well?
    Commissioner Utgoff. Yes.
    Representative Saxton. There are about 32,000 employment 
gains in the manufacturing sector. Has this been long enough to 
establish a trend in the manufacturing sector?
    Commissioner Utgoff. After many months of contraction, 
there have been 4 consecutive months of increases in 
construction employment.
    Representative Saxton. And----
    Commissioner Utgoff. Excuse me. In manufacturing 
employment.
    Representative Saxton. Thank you. So we have seen four 
consecutive months of increase in manufacturing employment. In 
the world of economics, does that establish a trend, or does it 
appear that there may be a trend underway?
    Commissioner Utgoff. We hesitate to, in fact, do not make 
projections. But it is certainly a much more optimistic pattern 
than we have been seeing in the past.
    Representative Saxton. And how would you interpret the 
32,000 single month gain in May?
    Commissioner Utgoff. That is statistically significant. The 
gains for this last month and for the last 4 months have been 
statistically significant.
    Representative Saxton. Okay. Thank you. Are the monthly 
employment gains in May entirely due to the private sector 
growth, or are there other factors at play here?
    Commissioner Utgoff. It is private sector growth. There was 
a decline in the Government sector.
    Representative Saxton. There was a decline in Government 
growth?
    Commissioner Utgoff. Yes. So it is all private sector 
growth.
    Representative Saxton. That would seem to be good news to 
me. Would you interpret it as good news?
    Commissioner Utgoff. Depends on your feeling about the 
relative size of the Government.
    Representative Saxton. Well, many of us think that it is a 
little too big.
    How much has construction employment increased over the 
last, let's say, over the last year?
    Commissioner Utgoff. Let me get that for you.
    Representative Saxton. Thank you.
    Commissioner Utgoff. 194,000. Construction employment is at 
an all time high.
    Representative Saxton. When you say construction--over the 
last year it is 190----
    Commissioner Utgoff. 194,000?
    Representative Saxton. 194,000 jobs over the last year?
    Commissioner Utgoff. Yes.
    Representative Saxton. You say that is at an all time high?
    Commissioner Utgoff. Yes. The current level is an all time 
high.
    Representative Saxton. Very good. So let me just back up 
for a minute and ask, what are the greatest areas of strength 
in the May payroll data?
    Commissioner Utgoff. As I said, the gains were fairly 
widespread. But we see, as in the past, we see gains in the 
health care and social service sectors. And that was 
particularly strong in May.
    Representative Saxton. Which industries have expanded 
fastest?
    Commissioner Utgoff. Construction employment, professional 
and business services, which includes temporary help, 
manufacturing, health care and social assistance, leisure and 
hospitality. And there were some gains in employment and 
financial activities.
    Representative Saxton. Once again, that would appear to be 
fairly widespread?
    Commissioner Utgoff. Yes, it is.
    Representative Saxton. Have there been any regional 
differences that you can point to in job growth, that is, 
regions of the country? Is one region doing better than 
another? Or is one region perhaps lagging more than others?
    Commissioner Utgoff. Let me find that for you.
    Representative Saxton. Thank you.
    Commissioner Utgoff. The northeast has had a .3 percent 
increase in employment over the last year. The south, 1.1 
percent. The midwest, .2 percent. And the west, 1.2 percent.
    Representative Saxton. And when you--sometimes, I know you 
don't like to venture into speculative answers, but is there 
something about these growth numbers that indicate why the 
regions of the country are doing differently?
    Commissioner Utgoff. I think it is fair to say that some of 
the explanation has to do with the location of industries 
within those particular States. The industries that have had 
health care and more services, have done relatively better than 
the sections of the country that have been--had the industries 
that are growing slightly less rapidly, and that is 
manufacturing.
    Representative Saxton. I can understand that. For example, 
if we were in a section of the country where there was a lot of 
growth in terms of construction, since the construction sector 
is doing very well, then it would follow that sector--then that 
section of the country would be growing faster. Wouldn't it?
    Commissioner Utgoff. Yes.
    Representative Saxton. Commissioner, let me just look at 
some other things. Here in Washington, some people like to talk 
about the decline in payroll employment since January of 2001.
    The net employment decline since that time is entirely 
accounted for by the manufacturing sector. Therefore, I would 
like to ask you several questions about recent trends in 
manufacturing employment to try and examine some of these 
issues in greater--in some greater detail.
    First, is it not the case that manufacturing employment has 
been trending downward for quite some time?
    Commissioner Utgoff. Yes.
    Representative Saxton. Over what period of time has 
manufacturing employment been trending downward?
    Commissioner Utgoff. Well, the percent of employment in 
manufacturing has been declining since virtually the end of the 
1940s.
    Representative Saxton. So we have seen a trend over the 
last several decades?
    Commissioner Utgoff. Yes.
    Representative Saxton. In loss of jobs in the manufacturing 
sector?
    Commissioner Utgoff. There have been increases and 
decreases, and particularly cyclically, in manufacturing, the 
absolute number of people in manufacturing. But when you look 
at the percent of employment in manufacturing, that has been 
declining for a very long time.
    Representative Saxton. And you say since--for the last half 
of the 20th Century?
    Commissioner Utgoff. Yes. Roughly.
    Representative Saxton. Now, despite this long-term trend, 
during business cycles there are ups and downs in the 
manufacturing employment.
    During the economic expansion of the late 1990s, is it not 
true that manufacturing employment reached a cyclical peak in 
March of 1998, and that was--according to the numbers I have 
here--that was about 17.6 million jobs?
    Commissioner Utgoff. That is correct.
    Representative Saxton. So we reached a peak in 1998. And 
since this peak was reached in March of 1998, how much did 
manufacturing employment decline through--let's take through 
January of 2001?
    Commissioner Utgoff. Just a moment.
    Representative Saxton. From 1998 to January of 2001?
    Commissioner Utgoff. By 544,000.
    Representative Saxton. So during that roughly 2-year 
period, we lost over a half a million jobs in the manufacturing 
sector?
    Commissioner Utgoff. That is correct.
    Representative Saxton. In January 2001, what was the change 
in manufacturing employment in that one month?
    Commissioner Utgoff. A drop of 82,000.
    Representative Saxton. Isn't this about the same amount as 
manufacturing employment declined on average, on an average 
monthly basis, between 2001 and then the end of 2003?
    Commissioner Utgoff. I think that is roughly correct.
    Representative Saxton. Around 80,000 jobs a month that we 
saw decline?
    Commissioner Utgoff. Yes.
    Representative Saxton. So manufacturing employment was in 
decline before January of 2001, and the piece of monthly 
declines in manufacturing since has been about the same as the 
decline in 2001. So when did the consecutive monthly declines 
in manufacturing employment actually begin?
    Commissioner Utgoff. In August of 2000.
    Representative Saxton. Well, it is very clear that these 
problems did not originate with the current Administration or 
its policies and probably had very little to do with the 
policies of the previous administration as well. This decline 
started during the late 1940s.
    There has been much said recently about what caused this 
decline. It is obviously a very, very long trend. It is 
unfortunate that we have been going in this direction for a 
long time. Despite attempts to use factory employment as a 
partisan football, the fact is that declines in manufacturing 
employment started in one administration most recently and 
continued into the next?
    Commissioner Utgoff. That is correct.
    Representative Saxton. Okay. So we are very pleased, of 
course, that we see this trend seemingly, at least for the last 
several months, reversing. And so we continue to look forward 
for more good news.
    The good employment gains that we have seen are not 
surprising given the strength of the overall economy. I would 
just like to take a moment to review the recent economic 
statistics that provide the context for the growth of 
employment.
    First, in the first quarter of 2004, the output of goods 
and services in the U.S., that is our GDP, jumped 4.4 percent 
after adjustment for inflation. The second quarter is expected 
to show comparable growth.
    Independent economists have attributed much of the 
acceleration of the economy in the last year or so due to the 
tax relief that provided jobs and growth, the Jobs and Growth 
Act of 2003, along with, of course, historically low interest 
rates.
    Investment in particular has picked up, boosting economic 
growth. The question is this: Are the strong payroll employment 
gains in recent months consistent with good performance of the 
economy?
    Commissioner Utgoff. Yes.
    Representative Saxton. The sector that consistently has 
performed well in recent years, as we have mentioned before, is 
housing. Is the health of the housing sector reflected in the 
recent construction employment data? And perhaps I should ask, 
how many construction jobs have been created so far this year?
    Commissioner Utgoff. Let me get the exact number for you. 
135,000 jobs have been created. But it is clear from the types 
of construction jobs that have been created that it is related 
to the housing market.
    Representative Saxton. Okay. Very good. How does the level 
of construction employment compare with its historic highs?
    Commissioner Utgoff. The construction employment is now at 
an all-time high.
    Representative Saxton. Obviously, this is good news for 
folks who are in that industry. And so we continue to see--we 
will continue to see that growth in the future we hope.
    Is the average compensation in this sector below average, 
average, or perhaps above average?
    Commissioner Utgoff. It is above average.
    Representative Saxton. So compensation in this fastest 
growing sector is above average.
    Commissioner Utgoff. Yes.
    Representative Saxton. Thank you.
    How much has employment in professional and business 
services increased over the past 3 months?
    Commissioner Utgoff. It has grown at 78,000 a month.
    Representative Saxton. So we see in the professional and 
business sector, as well, that we have seen very robust growth.
    Commissioner Utgoff. Yes.
    Representative Saxton. Commissioner, I could go on and ask 
an unending number of questions here, but I think we get the 
picture. We have seen good job growth. It has taken place 
across the economy.
    We know that we have seen indicators that this has been 
coming for quite some time. We know that much of this has been 
brought on by tax policy that was a result of action by the 
Congress and the Administration.
    And we know that there has been another stimulus provided 
by the Federal Reserve and monetary policy, i.e. low interest 
rates. And so this is a picture that the American people, I 
know, welcome. And so, hopefully, it will continue in the many 
months ahead. And I would just like to thank you for coming 
here today as you do each month to help us review economic 
data.
    Sometimes in the past, it has been pleasant. Sometimes in 
the past, it has been discouraging. But today, I must say is 
one of the most encouraging reports that I have seen since I 
had the privilege of sitting in this seat.
    So thank you for coming here today to share this 
information with us. We appreciate it very much. And we look 
forward to seeing you next month.
    Commissioner Utgoff. You are most welcome.
    Representative Saxton. Thank you.
    [Whereupon, at 10:05 a.m., the hearing was adjourned.]

                       Submissions for the Record

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

     Prepared Statement of Representative Jim Saxton, Vice Chairman
    It is a pleasure to welcome Commissioner Utgoff once again to 
testify on the monthly employment statistics.
    This morning the Commissioner brings more good news for American 
workers. According to the establishment survey, payroll employment 
increased by 248,000 in May. Furthermore, upward revisions pushed the 
level of March job gains to 353,000, and April job growth to 346,000. 
Manufacturing employment increased by 32,000 in May. So far this year, 
payroll employment has increased by more than 1 million jobs.
    The diffusion index--an important measure of the breadth of 
employment gains by industry group--indicates that employment increases 
were broad-based. The monthly diffusion index has shown expansion for 
five months in a row. More than 1.4 million jobs have been created 
since last August. According to the household survey, employment also 
increased.
    The positive employment data reported today are consistent with 
other recent economic data on output, investment, and consumption. GDP 
growth in the first quarter was recently revised upward to 4.4 percent. 
Over the year, the economy has expanded at a 5 percent rate.
    A rebound in investment has made a major contribution to the 
acceleration of the economy over the last year, with equipment and 
software investment posting an increase of 12.5 percent during this 
period. Manufacturing activity is expanding at a brisk pace. Meanwhile, 
homebuilding and construction are robust. Independent economists have 
identified tax relief and accommodative monetary policy as two key 
reasons for the improvement in the economy.
    In summary, economic conditions remain strong. The expansion is on 
track and consistent with the Blue Chip consensus projection of nearly 
5 percent growth in 2004. As I noted many months ago, healthy economic 
growth offers the best way to improve labor market conditions and to 
expand employment. As the numbers show, the pick-up in the economy has 
indeed boosted payroll employment growth, and led to the probability of 
good employment gains throughout 2004.

                               __________
     Prepared Statement of Hon. 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 that we released this 
morning.
    Nonfarm payroll employment rose by 248,000 in May, following even 
larger job gains in both April and March (346,000 and 353,000, 
respectively). Since August 2003, payroll employment has risen by 1.4 
million. In May, job growth was widespread for the third consecutive 
month. Employment continued to expand in manufacturing, construction, 
and several service-providing industries.
    The unemployment rate held at 5.6 percent in May; it has shown 
essentially no movement since last December.
    Among the goods-producing industries, employment in manufacturing 
rose by 32,000 in May and has increased by 91,000 since January. The 
over-the-month gain was concentrated in the durable goods component 
(26,000), which has accounted for nearly all of the recent job growth 
in manufacturing. The factory workweek rose by four-tenths of an hour 
over the month, more than offsetting declines in the prior 2 months.
    The upward trend in construction employment continued in May, as 
the industry added 37,000 jobs. Since March 2003, the number of 
construction jobs has risen by 248,000. Employment growth in mining has 
picked up in recent months; the industry has added 18,000 jobs since 
January.
    In the service-providing sector, employment in professional and 
business services increased by 64,000 in May, following an even larger 
gain in April. Nearly half of May's growth in professional and business 
services occurred in temporary help (31,000). Employment in temporary 
help has risen by nearly 300,000 since its recent low in April 2003.
    Employment continued to increase in health care and social 
assistance (36,000). Job growth in this industry has accelerated in 
recent months.
    Employment growth in leisure and hospitality was strong for the 
third straight month. The industry added 40,000 jobs in May, with food 
services and drinking places continuing to account for most of the gain 
(33,000). So far this year, employment increases in food services have 
averaged 32,000 per month.
    Elsewhere among the service-providing industries, the financial 
sector added 15,000 jobs in May, as employment in real estate and in 
credit intermediation continued to expand. In retail trade and 
wholesale trade, employment sustained its upward trend.
    One industry in which employment has continued to trend down is 
telecommunications. Over the month, employment declined by 5,000; since 
its peak in March 2001, the industry has shed 283,000 jobs.
    In May, average hourly earnings for production or nonsupervisory 
workers rose by 5 cents, following a 4-cent increase in April. Over the 
year, average hourly earnings grew by 2.2 percent.
    Looking at some of our measures obtained from the survey of 
households, the May unemployment rate was unchanged at 5.6 percent. 
After trending down during the second half of last year, the jobless 
rate has been either 5.6 or 5.7 percent in each month since December.
    In May, 8.2 million persons were unemployed. The number of persons 
who had been jobless for 27 weeks or longer held at 1.8 million. The 
labor force participation rate was 65.9 percent for the fourth 
consecutive month.
    In summary, nonfarm payroll employment increased by 248,000 in May, 
by 947,000 over the last 3 months, and by 1.4 million since August. The 
unemployment rate was unchanged over the month, at 5.6 percent.
    My colleagues and I now would be glad to address your questions.

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