[Joint House and Senate Hearing, 109 Congress]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 109-635
 
                 THE EMPLOYMENT SITUATION: JANUARY 2006

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

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                            FEBRUARY 3, 2006

                               __________

          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]

HOUSE OF REPRESENTATIVES             SENATE
Jim Saxton, New Jersey, Chairman     Robert F. Bennett, Utah, Vice 
Paul Ryan, Wisconsin                     Chairman
Phil English, Pennsylvania           Sam Brownback, Kansas
Ron Paul, Texas                      John E. Sununu, New Hampshire
Kevin Brady, Texas                   Jim DeMint, South Carolina
Thaddeus G. McCotter, Michigan       Jeff Sessions, Alabama
Carolyn B. Maloney, New York         John Cornyn, Texas
Maurice D. Hinchey, New York         Jack Reed, Rhode Island
Loretta Sanchez, California          Edward M. Kennedy, Massachusetts
Elijah E. Cummings, Maryland         Paul S. Sarbanes, Maryland
                                     Jeff Bingaman, New Mexico

               Christopher J. Frenze, Executive Director
                  Chad Stone, Minority Staff Director


                            C O N T E N T S

                              ----------                           

                      Opening Statement of Members

Hon. Jim Saxton, Chairman, a U.S. Representative from the State 
  of New Jersey..................................................     1

                               Witnesses

Statement of Kathleen P. Utgoff, Commissioner, Bureau of Labor 
  Statistics; accompanied by John S. Greenlees, Associate 
  Commissioner, Offices of Prices and Living Conditions; and John 
  M. Galvin, Associate Commissioner, Employment and Unemployment 
  Statistics.....................................................     2

                       Submissions for the Record

Prepared statement of Representative Jim Saxton, Chairman........     9
Prepared statement of Senator Jack Reed, Ranking Minority........    10
Prepared statement of Kathleen P. Utgoff, Commissioner, Bureau of 
  Labor Statistics, together with press release USDL 06-160, 
  entitled, ``The Employment Situation: January 2006''...........    11
Response from Commissioner Utgoff to Chairman Saxton.............    43
The New York Times article, entitled, ``The Nation of the 
  Future''.......................................................    46


                 THE EMPLOYMENT SITUATION: JANUARY 2006

                              ----------                              


                        FRIDAY, FEBRUARY 3, 2006

             Congress of the United States,
                          Joint Economic Committee,
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:30 a.m., in 
room 2212, Rayburn House Office Building, Hon. Jim Saxton, 
Chairman of the Committee, presiding.
    Present: Representative Saxton; Senator Sessions.
    Staff Present: Chris Frenze, Colleen Healy, Brian Higgin-
botham, John Kachtik, Jeff Schlagenhauf, Nan Gibson, Matthew 
Salomon, Chad Stone and Rachel Thomson.

        OPENING STATEMENT OF HON. JIM SAXTON, CHAIRMAN, 
             A U.S. REPRESENTATIVE FROM NEW JERSEY

    Representative Saxton. Good morning. It is a pleasure to 
welcome Commissioner Utgoff and her colleagues before the 
Committee this morning to discuss the latest employment data.
    The January employment data are good news for American 
workers. According to the payroll survey, employment has 
increased by 193,000 jobs in January. Since May 2003, more than 
4.7 million jobs have been created. According to the household 
survey, employment also advanced, while the unemployment rate 
fell to 4.7 percent. Over the last year, most of the net 
increase in employment has been in occupations that pay in the 
middle range or higher.
    The employment data are consistent with other data showing 
that the economy continues to grow. In 2005, the real GDP 
increased 3.5 percent. Although economic growth slowed to only 
1.1 percent in the fourth quarter of 2005, this advance figure 
is incomplete and may be revived upward. Most forecasters 
project a rebound in economic growth in the first quarter of 
2006.
    As an important Federal Reserve policy statement recently 
noted, the expansion in economic activity appears solid. 
According to the Federal Reserve, the Congressional Budget 
Office and private economists, economic growth this year will 
be comparable to the healthy pace set in 2005.
    The economy seems to have weathered the recent rise in oil 
prices quite well, although oil prices have probably had some 
negative impact on growth. Inflation appears to be contained 
over the long run, as the Fed recently stated. In conclusion, 
U.S. economic growth has been healthy in recent years and 
significantly higher than most other advanced economies.
    The U.S. unemployment rate also remains below comparable 
rates in many other economies. Most recent forecasters expect 
good economic and employment growth to continue.
    Commissioner Utgoff, we are pleased that you are here this 
morning, and we look forward to hearing your statement.
    [The prepared statement of Representative Jim Saxton 
appears in the Submissions for the Record on page 9.]

 STATEMENT OF HON. KATHLEEN P. UTGOFF, COMMISSIONER, BUREAU OF 
LABOR STATISTICS; ACCOMPANIED BY JOHN S. GREENLEES AND JOHN M. 
                             GALVIN

    Commissioner Utgoff. Thank you, Mr. Chairman. I appreciate 
this opportunity to comment on the labor market data we 
released this morning.
    Nonfarm payroll employment increased by 193,000 in January, 
and the unemployment rate fell to 4.7 percent. Payroll 
employment was up by 140,000 in December and by 354,000 in 
November. Over the year, payroll employment increased by 2.1 
million. In January, employment growth occurred in 
construction, mining, and in several service-producing 
industries.
    Employment in construction rose by 46,000 over the month 
and by 345,000 over the year. Above-average temperatures in 
most of the country may have contributed to fewer seasonal 
layoffs than usual in January.
    Manufacturing employment was little changed in January. A 
few manufacturing industries have some small job gains in 
recent months, including wood products, fabricated metals, and 
electrical equipment.
    Mining added 6,000 jobs in January. Since its most recent 
low in April 2003, mining employment has increased by 91,000.
    In the service-providing sector, employment growth 
continued in health care over the month. Jobs were added in 
doctors' offices, hospitals and nursing and residential care 
facilities.
    In January, employment in food services and drinking places 
grew by 31,000. Over the year, this industry has added 214,000 
jobs.
    Employment in professional and business services was up by 
24,000 in January, following 2 months of unusually large gains 
that totaled 138,000. In January, accounting services lost 
jobs, while employment trended up in computer systems design 
and in management and consulting services.
    In January, financial activities added 21,000 jobs. 
Wholesale trade employment was up by 15,000, while retail 
employment was little changed.
    Average hourly earnings for production or nonsupervisory 
workers on private payrolls rose by 7 cents in January to 
$16.41. Over the year average hourly earnings grew by 3.3 
percent.
    The establishment survey data released today reflect the 
incorporation of annual benchmark revisions and updated 
seasonal adjustment factors. Each year we anchor our sample-
based survey estimate to full universe counts of employment 
derived principally from administrative records of the 
unemployment insurance tax system.
    The benchmark revision increased the level of nonfarm 
payroll employment in March 2005 by 158,000, or about \1/10\th 
of 1 percent. Over the past decade, benchmark revisions have 
averaged plus or minus \2/10\th of 1 percent. The seasonally 
adjusted establishment survey data from January 2001 forward 
have been revised to incorporate updated seasonal adjustment 
factors.
    Turning now to measures from our household survey, the 
unemployment rate declined to 4.7 percent in January, and the 
number of unemployed persons fell to 7 million. The number of 
long-term unemployed persons, those unemployed for 27 weeks or 
more, declined to 1.2 million in January. They constituted 16.3 
percent of all unemployed persons down from 21 percent a year 
earlier. The number of discouraged workers fell over the year 
to 396,000. Discouraged workers are those persons outside the 
labor force who had stopped looking for work because they 
believed their job search efforts would be unsuccessful.
    With today's release, we again report on the labor force 
status of survey respondents who evacuated from their homes due 
to Hurricane Katrina. The data are derived from a special set 
of questions that have been included in the household survey 
since October to identify and gather information from evacuees. 
The estimates do not account for all persons who evacuated from 
their homes due to Hurricane Katrina. We do not gather 
information on those evacuees who remain outside the scope of 
the survey, such as those currently living in hotels or 
shelters.
    The January data indicate that there were about 1.2 million 
persons age 16 and over who have evacuated from their August 
residence due to Hurricane Katrina. By January, about one-half 
of the evacuees had returned to the homes they vacated in 
August. Among Katrina evacuees in January, 56.8 percent were in 
the labor force, and their unemployment rate was 14.7 percent. 
Unemployment rates were much lower for those evacuees who had 
returned home than for those evacuees who had not. The January 
unemployment rate for those who had returned was 2.9 percent. 
It was 26.3 percent for those who had not yet returned to their 
residences.
    To summarize, the labor market data for January payroll 
employment rose by 193,000, and the unemployment rate declined 
to 4.7 percent.
    My colleagues and I would be happy to answer any of your 
questions.
    [The prepared statement of Commissioner Utgoff appears in 
the Submissions for the Record on page 11.]
    Representative Saxton. Commissioner, thank you again for 
being with us again this month.
    As I noted in my opening statement, the economy's growth in 
the fourth quarter of last year fell to 1.1 percent, and, in 
spite of that, we continued to see significant job growth 
through most of that quarter.
    Can you review with us the number of jobs created during 
the fourth quarter of last year?
    Commissioner Utgoff. Five hundred thirty-one thousand.
    Representative Saxton. Five hundred thirty-one thousand 
jobs were created during the fourth quarter, and yet GDP sunk 
to--I think it was 1.1 percent.
    Do you expect that there will be some revisions in the GDP 
number for the fourth quarter of last year?
    Commissioner Utgoff. Yes.
    Representative Saxton. Can you shed any light on that at 
this point, or is it too early for us to?
    Commissioner Utgoff. It is too early.
    Representative Saxton. What are the factors that would 
account for the revision of GDP growth in the fourth quarter of 
last year?
    Commissioner Utgoff. New information on wages and salaries, 
new information on exports and imports, new information on all 
the components of GDP.
    Representative Saxton. Can you give us any idea what those 
adjustments might look like as they begin to come in?
    Commissioner Utgoff. I can't predict whether those 
adjustments will be upward or downward.
    Representative Saxton. Right. But we expect, as a normal 
course of events that there will be some adjustments in the GDP 
figure from the fourth quarter.
    Commissioner Utgoff. Yes. This is called a preliminary GDP 
number, and for good reason.
    Representative Saxton. And do you have any idea as to when 
we may see those adjustments take place?
    Commissioner Utgoff. Approximately 3 weeks.
    Representative Saxton. Is the increase in January payroll 
employment a solid number, or is it significantly inflated by 
special factors?
    Commissioner Utgoff. It is a solid number, and with the 
upward revisions that we had for the previous 2 months from 
late reporters, it is a very solid report.
    Representative Saxton. And once again, what was the number 
of jobs created in January?
    Commissioner Utgoff. One hundred ninety-three thousand.
    Representative Saxton. One hundred ninety-three thousand. 
And is that a significant number?
    How much did the revisions in November and December of 2005 
payroll employment figures add to total employment for those 
months?
    Commissioner Utgoff. Eighty-one thousand.
    Representative Saxton. Eighty-one thousand.
    And so once again when we talk about preliminary numbers 
and adjusted numbers, we may see this number revise upward?
    Commissioner Utgoff. Yes.
    Representative Saxton. In January the diffusion index rose 
to 60.6 percent. What does this figure say about the breadth of 
job gains in January?
    Commissioner Utgoff. It says that they were widespread.
    Representative Saxton. So we are not seeing job growth 
confined to a specific sector, but it is widespread throughout 
the economy?
    Commissioner Utgoff. That is correct.
    Representative Saxton. Is the decline in unemployment to 
4.7 percent statistically significant?
    Commissioner Utgoff. Yes.
    Representative Saxton. And when we talk about the 4.7 
percent unemployment rate, can you give us an idea as to how 
that compares with the unemployment rate over the last, let's 
say, 3 years?
    Commissioner Utgoff. It is the lowest rate since January--
July 2001.
    Representative Saxton. July of 2001.
    Commissioner Utgoff. Yes.
    Representative Saxton. So that obviously is also good news.
    What is the unemployment rate for men 20 and over?
    Commissioner Utgoff. 4.0.
    Representative Saxton. So we continue to have good news 
there.
    What is the unemployment rate for women aged 20 and over?
    Commissioner Utgoff. 4.3 percent.
    Representative Saxton. 4.3 percent.
    We used to say that when we got to these low levels--we 
used to talk about that being full employment. Are we reaching 
what you would consider full employment?
    Commissioner Utgoff. These are the lowest unemployment 
rates for men and women since summer 2001.
    Representative Saxton. Historically low unemployment rates. 
Very good.
    At this point how would you interpret the apparent effects 
of the hurricanes on payroll employment over the last 5 months?
    Commissioner Utgoff. There were 2 months, September and 
October, where the unemployment rate was clearly held down by 
the effects of Hurricane Katrina. In the subsequent months, the 
economy appears to have recovered, and job growth has been--job 
growth has been substantial.
    Representative Saxton. Could you spend a few moments 
explaining the benchmark revisions to the payroll employment 
survey?
    Commissioner Utgoff. Yes. Let me see if I can do this 
simply is we have--when I testify before you each month, we 
have an estimate of payroll employment that comes from a sample 
of 400,000 establishments. That is large, but that is not all 
the establishments.
    Once a year we take a census of all establishments largely 
taken from unemployment insurance records, and we tie the 
census to the sample so that in this year and March they are 
the same, and then adjust the other numbers to meet that census 
number.
    Representative Saxton. Thank you.
    Mr. Sessions.
    Senator Sessions. Thank you, Mr. Chairman, and, 
Commissioner, I am pleased to welcome you here and to see 
continued good news.
    I guess, Mr. Chairman, good news doesn't attract as many 
Members as bad news.
    Representative Saxton. Airplanes attract Members on 
Fridays.
    Senator Sessions. Maybe you are right, airplanes attract 
Members.
    Commissioner, we are having a little excitement in Alabama. 
Everybody is trying to claim credit for the unemployment rate. 
Our unemployment rate, Mr. Chairman, is 3.5 percent, the lowest 
ever recorded in the State. Job training program is first rate 
and been ranked, I think, No. 1 one in the country, but now is 
the challenge to get people trained for the good jobs that are 
out there.
    Have you had occasion, Commissioner, to be able to consider 
whether if we could get people trained quicker, turn them 
around more readily with skills that are needed in the 
workplace, we could not only find more jobs, but we could move 
people up into higher-paying jobs and better benefits?
    Commissioner Utgoff. Yes.
    Senator Sessions. What could you tell us about your 
observation there? I think the reason I raise that is I don't 
think it is a coincidence that Alabama's low unemployment rate 
coincides with the fact that the job training program for the 
State was rated 
No. 1 in the country. Do you have any thoughts about that?
    Commissioner Utgoff. Yes. Job training programs are 
incredibly important in getting people into their first jobs, 
which is important, and then moving them up into higher-paying 
jobs. And the one-stop centers have been doing an excellent job 
in taking in people and moving them through the entire process 
of getting them into good jobs.
    Senator Sessions. There has been a good bit of interest on 
behalf of Governors in consolidating Federal workforce 
programs. And we are trying to do that, although our Senate 
bill is not as good as I would like; frankly, I think it is far 
short of what the Governor has requested, but I remain hopeful.
    Do you have any information and received any feedback from 
the fact that a lot of these stovepipe programs are 
contradictory and duplicative and would be much more efficient 
if they were merged together?
    Commissioner Utgoff. Yes. There are duplicative programs 
for the same groups of people, and moving them together will 
allow better service for these people. I have to say that I, 
from the BLS, am well aware of the work that the Employment and 
Training Administration is doing to improve the training, and 
particularly tie training to the local workforce needs. But I 
think the Assistant Secretary for Employment Training would be 
a better witness for all of the things that are going on in 
that area.
    Senator Sessions. Well, I think we can do better. Our 
commissioner, Dr. Roy Johnson, the chancellor of the system, 
made this statement to me as we were going to a meeting, and he 
said, an individual 28 years old with 2 kids can't go--he is 
chairman of the community college system in the State, where 
you have 2-year programs for the most part traditionally, when 
you think in terms of the 2-year program--they don't have 2 
years. What we need to do, he says, and he is doing, is create 
specific programs that prepare people in 6 months or less for a 
high-paying job, and he believes it can be done and is doing 
that.
    Would you agree that that has an important role in our 
system--as well as our classical interest in degrees in 4 years 
and 2-year degrees--but this kind of more specific focus on 
training persons for a job that exists in that community, can 
we do better than that?
    Commissioner Utgoff. Yes. We can do better than that.
    Senator Sessions. And would you share with us some thoughts 
on that subject?
    Commissioner Utgoff. Well, I would note that in the 
military people are taken in for specific jobs and trained in 
far less than 2 years for specific jobs and come out with 
skills that are often good for the private sector, and that we 
can't afford to have someone in for 4 years of service spending 
2 years in a job training program. So that 6 months is 
certainly a much better target period than for 2 years, 
especially for someone who is 28 years old and has 2 children.
    Senator Sessions. I think that was a very insightful 
comment. I hadn't thought about the military. They absolutely 
don't have--they can't spend 2 years preparing somebody, and 
they train them for highly technical jobs in very short order, 
and then when they get out, businesses line up to hire them. 
They are very pleased to have them because of the way they have 
been trained.
    Mr. Chairman, I was just looking at the February 2 New York 
Times article by David Brooks that made this point. And I think 
in our country, we get a little too down on ourselves, and when 
things are good, people start thinking, well, next week it is 
going to be bad; you know, it can't stay good. But look at 
this. David Brooks points out, has the American economy shrunk 
as a part of the world economy? In 1971, the United States 
economy accounted for 30.52 percent of the world's GDP. 30.52.
    Now, we have seen China surge; Japan really over the last 
30 years has been a tremendous force; India, the Asian tigers; 
production in Europe and all; and today, he notes, our 
percentage of GDP is 30.74, a larger percentage of the world's 
GDP in the United States today than it was 30 years ago. And if 
you listen to a lot of our commentators out there, you would 
think the United States is in a period of decline.
    That is a phenomenal achievement in light of the 
productivity growth in other areas of the world. It is not as 
if they shrank. They have been surging, and we still are doing 
that, and our job numbers are going down. And we only have a 
couple of things to fear, I think, and that is making sure our 
children are properly trained and educated and really motivated 
to take advantage of this economy, and to be positive and to 
see that if they work hard, they can actually sustain a good 
lifestyle for themselves and their children in the future.
    Thank you for your leadership, Mr. Chairman, and I was 
pleased to be here today. And, Commissioner, you should take a 
bow on the job growth, too. Everybody else is. I am trying to. 
If it were going up, they would blame me, so I might as well 
claim some credit.
    [The New York Times article entitled, ``The Nation of the 
Future,'' appears in the Submissions for the Record on page 
46.]
    Representative Saxton. Thank you very much, Senator. I have 
said in jest a couple of times that people were running for 
airplanes. Actually, the Democrat Minority party has their 
retreat today, and so that is the reason that they are not 
here. And so I just wanted to make that part of the record.
    Let me just ask one final short question. Manufacturing 
employment has been a concern to the Members of the Committee, 
and I am sure to you, also, Commissioner, over the last several 
years. But manufacturing employment showed some small increases 
in January, and I am curious to know in what sectors of 
manufacturing did job gains actually take place. Can you talk 
about that a little bit?
    Commissioner Utgoff. Wood products, electrical equipment, 
and there was one other, fabricated metals.
    Representative Saxton. And what percentage of the 
manufacturing sector would that involve? Can you give us an 
estimate?
    Commissioner Utgoff. I can't give you that estimate now, 
but I will--we will provide that to you in a letter.
    [The response from Commissioner Utgoff to Chairman Saxton 
appears in the Submissions for the Record on page 43.]
    Representative Saxton. We would certainly appreciate that.
    But in general, the manufacturing sector showed some job 
gains in January; is that right?
    Commissioner Utgoff. Yes. Yes.
    Representative Saxton. And was it statistically 
significant?
    Commissioner Utgoff. No.
    Representative Saxton. But it was an indicator that there 
is life in terms of growth in the manufacturing sector?
    Commissioner Utgoff. Yes.
    Representative Saxton. Thank you. I have no other questions 
at this point, and we want to thank you for being with us here 
today. It is always a pleasure to see you, and it is even more 
of a pleasure when you have good news like the news you brought 
us today. Thank you very much.
    Commissioner Utgoff. I hope it will continue.
    Representative Saxton. We do, too. Thank you.
    [Whereupon, at 9:56 a.m., the Committee was adjourned.]
                       Submissions for the Record

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