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



                                                        S. Hrg. 109-687
 
                THE EMPLOYMENT SITUATION: FEBRUARY 2006

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

                                HEARING

                               before the

                        JOINT ECONOMIC COMMITTEE
                     CONGRESS OF THE UNITED STATES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 10, 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 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 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 New Jersey.     1

                               Witnesses

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

                       Submissions for the Record

Prepared statement of Representative Jim Saxton, Chairman........     8
Prepared statement of Senator Jack Reed, Ranking Minority Member.     9
Prepared statement of Hon. Kathleen P. Utgoff, Commissioner, 
  together with Press Release No. 06-396, entitled, ``The 
  Employment Situation: February 2006,'' Bureau of Labor 
  Statistics, Department of Labor................................    10


                       THE EMPLOYMENT SITUATION: 
                             FEBRUARY 2006

                              ----------                              


                         FRIDAY, MARCH 10, 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.
    Staff present: Chris Frenze, Robert Keleher, Brian 
Higginbotham, Colleen Healy, Katie Jones, Chad Stone, Matt 
Salomon and Nan Gibson.

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

    Chairman Saxton. Good morning. Commissioner Utgoff, it is a 
pleasure to welcome you once again to testify before the Joint 
Economic Committee.
    The economic figures released today reflect more good news 
for American workers. According to the payroll survey, 243,000 
jobs were created during the month of February. The level of 
the diffusion index shows that job gains were widespread last 
month. According to the household survey, the unemployment rate 
at 4.8 percent was statistically unchanged.
    The U.S. economy has created 5 million jobs since August of 
2003. The strength of the economy since 2003 has led to 
sustained job growth and downward pressure on unemployment. The 
resilience and flexibility of the economy have overcome a 
number of serious shocks, most recently the hurricanes of last 
year.
    The pick-up in economic growth since 2003 is explained by a 
rebound in investment activity. The bursting of the stock 
market and technology bubbles in the first quarter of 2000 had 
exposed a lot of bad investments. These investments took years 
to liquefy and had a negative effect on investment. Falling 
investment was a drag on economic growth and undermined the 
early expansion period.
    In 2003, the new policy mix caused a sharp rebound in 
investment activity. The combination of low interest rates set 
by the Fed, together with increased tax for investment, led to 
a sustained upward trend in investment that boosted economic 
and employment growth. The result is that the economic 
expansion is healthy, and the outlook is good.
    In a recent policy report to Congress, the Fed noted that, 
quote, ``The U.S. economy delivered a solid performance in 
2005.'' Furthermore, the Fed observed that the U.S. economy 
should continue to perform well in 2006 and 2007. The Fed, 
along with a number of private and Government agencies, expects 
economic growth in 2006 to be about 3\1/2\ percent. The 
economic growth will continue to expand employment and further 
reduce unemployment.
    [The prepared statement of Representative Saxton appears in 
the Submissions for the Record on page 8.]
    Chairman Saxton. At this time I would like to ask unanimous 
consent that Senator Reed's statement be included in the 
record. He had fully intended to be here today, but another 
hearing on the Senate side, which was originally scheduled for 
10, was moved forward to 9:30, so he will be unable to be here.
    [The prepared statement of Senator Reed appears in the 
Submissions for the Record on page 9.]
    Chairman Saxton. Commissioner Utgoff, we are ready for your 
testimony.

 STATEMENT OF HON. KATHLEEN P. UTGOFF, COMMISSIONER, BUREAU OF 
    LABOR STATISTICS, ACCOMPANIED BY JOHN GALVIN, ASSOCIATE 
 COMMISSIONER FOR EMPLOYMENT AND UNEMPLOYMENT STATISTICS; AND 
 JOHN GREENLEES, ASSOCIATE COMMISSIONER FOR PRICES AND LIVING 
                           CONDITIONS

    Commissioner Utgoff. Mr. Chairman, I appreciate this 
opportunity to comment on the employment and unemployment data 
we released this morning.
    Nonfarm payroll employment rose by 243,000 in February, and 
the unemployment rate was little changed at 4.8 percent. 
February's employment increase reflected gains in construction, 
mining, and several service-producing industries.
    Within the goods-producing sector, construction employment 
increased by 41,000 in February following another sizable gain 
in January. Over the past 12 months, job growth in construction 
has totaled 346,000. In February, employment continued to rise 
in mining, mainly in support activities, especially for those 
for oil and gas operations.
    Manufacturing employment overall was virtually unchanged in 
February. There were, however, offsetting movements in several 
industries. The largest job losses were in motor vehicles and 
parts and primary metals. Job gains occurred in machinery, 
petroleum products, and computers and electronic products. The 
manufacturing workweek and factory overtime each rose by 1/10 
of an hour.
    Over the month, financial activities added 22,000 jobs, 
reflecting increases in depository institutions and in 
insurance carriers. Health care employment expanded by 18,000, 
with continued growth in hospitals, doctors' offices and home 
health care. Professional and business services, private 
education, food services and drinking places, and government 
also had job gains in February.
    Average hourly earnings for private production or 
nonsupervisory workers rose by 5 cents in February, following 
increases of 7 cents in both December and January. Over the 
year, hourly earnings increased by 3.5 percent. The average 
workweek was down by 1/10 of an hour in February to 33.7 hours.
    Turning to data from the household survey, both the number 
of unemployed persons and the unemployment rate were little 
changed over the month. The number of persons employed for 27 
weeks or more returned to its December level of 1.4 million 
after declining in January. These long-term unemployed 
constituted 19.0 percent of all unemployed persons, down 
slightly from a year earlier.
    Total employment in the labor force continued to trend up 
in February. However, the employment-to-population ratio has 
held steady in recent months, and the labor force participation 
rate has shown little movement for about 2\1/2\ years.
    This month 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 gather information about evacuees. The estimates do 
not account for all persons who evacuated from their homes due 
to Hurricane Katrina. Information is not gathered on those 
evacuees who remain outside the scope of the survey, such as 
those currently living in hotels or shelters.
    The February data indicate that there were about 1 million 
persons age 16 and over who evacuated from their August 
residences due to Hurricane Katrina. In February, about one-
half of the evacuees were back in the homes they vacated in 
August. Among Katrina evacuees identified in February, 58.1 
percent were in the labor force, and their unemployment rate 
was 12.6 percent. Unemployment rates were much lower for those 
evacuees who returned home than for those evacuees who had not.
    To summarize February's labor market data, nonfarm payroll 
employment rose by 243,000, and the unemployment rate was 
little changed at 4.8 percent. Payroll employment has increased 
by 2.1 million over the year, and the unemployment rate is down 
by half a percentage point.
    My colleagues and I would now be glad to respond to your 
questions.
    [The prepared statement of Commissioner Utgoff, together 
with Press Release No. 06-396, appears in the Submissions for 
the Record on page 10.]
    Chairman Saxton. Commissioner, thank you very much.
    Commissioner, let me ask this question. You mentioned that 
there was a slight change in the unemployment rate. It actually 
increased from 4.7 to 4.8 percent.
    Commissioner Utgoff. Yes.
    Chairman Saxton. Is that a statistically significant 
change?
    Commissioner Utgoff. No, it was not.
    Chairman Saxton. Are there any special factors distorting 
or overstating the payroll job gains reported this month?
    Commissioner Utgoff. No. We haven't identified any special 
factors.
    Chairman Saxton. You mentioned Katrina a minute ago. Has 
the aftermath of Katrina continued to have some effect on the 
economy generally, or is that more of a regional phenomenon?
    Commissioner Utgoff. I wouldn't know about the economy in 
general, but the unemployment rate in Louisiana is quite low, 
and about half of the people who evacuated from their homes in 
Katrina have returned, and they have an unemployment rate of 
4.8 percent.
    Chairman Saxton. You mentioned that the evacuees who have 
not returned home have a higher unemployment rate; is that 
right?
    Commissioner Utgoff. Yes; 22.6 percent.
    Chairman Saxton. And they are in Houston and in other 
places?
    Commissioner Utgoff. Yes.
    Chairman Saxton. And continue to live in temporary housing?
    Commissioner Utgoff. Yes.
    Chairman Saxton. Does the current level of the diffusion 
index indicate that payroll job gains in February were fairly 
widespread?
    Commissioner Utgoff. Yes, it does.
    Chairman Saxton. Were there any sectors of the economy 
where job creation was significantly higher than others?
    Commissioner Utgoff. In construction and in several service 
industries.
    Chairman Saxton. You mention construction. Is that business 
construction or residential construction? Do you have those 
indicators?
    Commissioner Utgoff. Most of the increase was in specialty 
trade.
    Mr. Galvin. I think our analysis indicates most of the 
increase was in residential construction.
    Chairman Saxton. I am curious. There has been some evidence 
of cooling in the real estate sector. Do your statistics shed 
any light on what is happening with real estate generally, real 
estate construction?
    Commissioner Utgoff. As Mr. Galvin said, previous to this, 
most of the increase had been in residential construction, and 
last month it was in--much more in heavy construction. I should 
also note that for many months the increase in--there was a 
marked increase in mortgage bankers and brokers, and for the 
last 2 months we have seen a flattening of that.
    Chairman Saxton. So your figures on residential 
construction would tend to bolster the notion that the real 
estate market has cooled some?
    Commissioner Utgoff. The very limited evidence that we have 
would.
    Chairman Saxton. January was the warmest January in 
recorded history, and some attributed the job growth in January 
to climatological factors, warm weather. Was there anything 
about February's weather that you can attribute to the very 
healthy job growth that we saw?
    Commissioner Utgoff. There was a snowstorm in the 
Northeast, but it occurred on a Saturday and Sunday, and it was 
the kind of snow that was easily removable, so we didn't see 
anything in the data that would indicate that there were 
special weather factors in February.
    Chairman Saxton. What do payroll job gains suggest about 
the strength of commission growth in the first quarter of 2006, 
which many forecasts expect to be strong? Are the payroll job 
gains consistent with solid economic growth?
    Commissioner Utgoff. The payroll job gains are very 
consistent with solid economic growth. I can't predict what 
will happen for the rest of the quarter. There is 1 month left 
in the quarter.
    Chairman Saxton. The last quarter of last year was weaker 
than we expected. Has there been any change in the rate of 
growth as measured by your statistics in the last quarter of 
last year?
    Commissioner Utgoff. Compared to the first quarter of this 
year?
    Chairman Saxton. No. The last quarter of last year was 1.6 
percent GDP growth, and we expected that figure to be adjusted. 
Was there an adjustment?
    Commissioner Utgoff. Yes, there was an adjustment. From the 
preliminary announcement of GDP to the revised announcement, 
there was an increase in measured GDP.
    Chairman Saxton. Mr. Frenze tells me that it was adjusted 
from 1.1 percent to 1.6 percent. Is that correct?
    Commissioner Utgoff. That is correct.
    Chairman Saxton. Thank you.
    Do you have any indicators as to what we can expect? Can we 
expect a rebound during the first quarter of this year?
    Commissioner Utgoff. I can't predict that.
    Chairman Saxton. OK. Thank you.
    What can you tell us about the revisions in the recent 
payroll data?
    Commissioner Utgoff. They were very small.
    Chairman Saxton. And is the gain in February payroll 
employment statistically significant?
    Commissioner Utgoff. Yes, it is.
    Chairman Saxton. How do we account for the slight tick up 
in the unemployment rate while we see such healthy job growth?
    Commissioner Utgoff. Household survey and the payroll 
survey, as you know, come from different sources, and the 
unemployment rate has to do with participation and a number of 
other factors so that there can be an increase in the 
unemployment rate. There really wasn't an increase. It was the 
same. So that what happened was the employment-to-population 
ratio stayed the same, and the unemployment rate stayed the 
same.
    I have to say the answer is every month household and 
payroll series can show differences, and in this month they do 
that.
    Chairman Saxton. Of course, I ask you questions, and you 
say that you can't speculate, but let me just ask one anyway. 
With the trend in job creation being, now, 5 million jobs since 
August of 2003, and seeing good job growth this month, I might 
be able to anticipate some downward trends in the unemployment 
rate in the months ahead, couldn't I?
    Commissioner Utgoff. Right. Right. Certainly that is your 
right.
    Chairman Saxton. Seasonal adjustment factors affected the 
February numbers? And if so, which sectors are affected most 
significantly by these seasonals?
    Commissioner Utgoff. It is going to take me a minute.
    Mr. Galvin. It is not really a very seasonal month. Normal 
seasonal movements are about 600,000 at the total nonfarm 
level. And the sector with the biggest normal seasonal movement 
looks to be education and health services. But we did not see 
anything unusual from a seasonal perspective this month.
    Chairman Saxton. And are there any other particular 
statistical anomalies affecting this month's payroll or 
household numbers?
    Commissioner Utgoff. We don't see any.
    Chairman Saxton. OK. I thank you for being here this 
morning. We always enjoy it when you come with good news and 
good numbers. And we will look forward to seeing you in the 
months ahead. Thank you very much.
    [Whereupon, at 9:49 a.m., the Joint Committee was 
adjourned.]

                       Submissions for the Record

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

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[GRAPHIC] [TIFF OMITTED] T0053.002

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

    Mr. Chairman and Members of the Committee:
    I appreciate this opportunity to comment on the employment and 
unemployment data that we released this morning.
    Nonfarm payroll employment rose by 243,000 in February, and the 
unemployment rate was little changed at 4.8 percent. February's 
employment increase reflected gains in construction, mining, and 
several service-providing industries.
    Within the goods-producing sector, construction employment 
increased by 41,000 in February, following another sizeable gain in 
January. Over the past 12 months, job growth in construction has 
totaled 346,000. In February, employment continued to rise in mining, 
mainly in support activities, especially those for oil and gas 
operations.
    Manufacturing employment overall was virtually unchanged in 
February. There were, however, offsetting movements in several 
industries. The largest job losses were in motor vehicles and parts and 
primary metals. Job gains occurred in machinery, petroleum products, 
and computer and electronic products. The manufacturing workweek (at 
41.0 hours) and factory overtime (at 4.6 hours) each rose by 0.1 hour.
    Over the month, financial activities added 22,000 jobs, reflecting 
increases in depository institutions and in insurance carriers. Health 
care employment expanded by 18,000, with continued growth in hospitals, 
doctors offices, and home health care. Professional and business 
services, private education, food services and drinking places, and 
government also had job gains in February.
    Average hourly earnings for private production or nonsupervisory 
workers rose by 5 cents in February, following increases of 7 cents in 
both December and January. Over the year, hourly earnings increased by 
3.5 percent. The average workweek was down by 0.1 hour in February to 
33.7 hours.
    Turning to data from the household survey, both the number of 
unemployed persons (7.2 million) and the unemployment rate (4.8 
percent) were little changed over the month. The number of persons 
unemployed for 27 weeks or more returned to its December level of 1.4 
million, after declining in January. These long-term unemployed 
constituted 19.0 percent of all unemployed persons, down slightly from 
a year earlier.
    Total employment and the labor force continued to trend up in 
February. However, the employment-population ratio has held steady in 
recent months, and the labor force participation rate has shown little 
movement for about 2\1/2\ years.
    This month, 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 gather information 
about evacuees. The estimates do not account for all persons who 
evacuated from their homes due to Hurricane Katrina. Information is not 
gathered on those evacuees who remain outside the scope of the survey, 
such as those currently living in hotels or shelters.
    The February data indicate that there were about 1 million persons 
age 16 and over who evacuated from their August residences due to 
Hurricane Katrina. In February, about one-half of the evacuees were 
back in the homes they vacated in August. Among Katrina evacuees 
identified in February, 58.1 percent were in the labor force, and their 
unemployment rate was 12.6 percent. Unemployment rates were much lower 
for those evacuees who had returned home (4.8 percent) than for those 
evacuees who had not (22.6 percent).
    To summarize February's labor market data, nonfarm payroll 
employment rose by 243,000, and the unemployment rate was little 
changed at 4.8 percent. Payroll employment has increased by 2.1 million 
over the year, and the unemployment rate is down by about half a 
percentage point.
    My colleagues and I now would be glad to respond to your questions.

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