[Joint House and Senate Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 110-498
THE EMPLOYMENT SITUATION: JANUARY 2008
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 1, 2008
__________
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
Charles E. Schumer, New York, Carolyn B. Maloney, New York, Vice
Chairman Chair
Edward M. Kennedy, Massachusetts Maurice D. Hinchey, New York
Jeff Bingaman, New Mexico Baron P. Hill, Indiana
Amy Klobuchar, Minnesota Loretta Sanchez, California
Robert P. Casey, Jr., Pennsylvania Elijah E. Cummings, Maryland
Jim Webb, Virginia Lloyd Doggett, Texas
Sam Brownback, Kansas Jim Saxton, New Jersey, Ranking
John E. Sununu, New Hampshire Minority
Jim DeMint, South Carolina Kevin Brady, Texas
Robert F. Bennett, Utah Phil English, Pennsylvania
Ron Paul, Texas
Michael Laskawy, Executive Director
Christopher J. Frenze, Republican Staff Director
C O N T E N T S
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Members
Hon. Charles E. Schumer, Chairman, a U.S. Senator from New York.. 1
Hon. Elijah E. Cummings, a U.S. Representative from Maryland..... 3
Witnesses
Statement of Dr. Keith Hall, Commissioner, Bureau of Labor
Statistics, U.S. Department of Labor, Washington, DC........... 5
Submissions for the Record
Prepared statement of Senator Charles E. Schumer, Chairman....... 15
Prepared statement of Representative Elijah E. Cummings.......... 16
Prepared statement of Representative Carolyn B. Maloney, Vice
Chair.......................................................... 18
Prepared statement of Dr. Keith Hall, Commissioner, Bureau of
Labor
Statistics, U.S. Department of Labor, Washington, DC........... 18
Press Release: Establishment and household survey data....... 20
THE EMPLOYMENT SITUATION: JANUARY 2008
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FRIDAY, FEBRUARY 1, 2008
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The Committee met at 9:30 a.m. in room 216 of the Hart
Senate Office Building, the Honorable Charles E. Schumer
(Chairman) presiding.
Senators present: Schumer.
Representatives present: Cummings.
Staff Present: Christina Baumgardner, Heather Boushey,
Stephanie Dreyer, Chris Frenze, Tamara Fucile, Nan Gibson,
Colleen Healy, Tim Kane, Bob Keleher, and Michael Laskawy.
OPENING STATEMENT OF HON. CHARLES E. SCHUMER, CHAIRMAN, A U.S.
SENATOR FROM NEW YORK
Chairman Schumer. Good morning. I am pleased to call this
hearing to order, a hearing that resumes the longstanding
tradition of the Bureau of Labor Statistics coming before the
Joint Economic Committee to present findings of its Monthly
Jobs Report.
Given the important information these numbers can provide
us on the health of the economy, I am hopeful that this is only
the beginning of a conversation that we'll have throughout the
course of the year.
I am also pleased to be the first to welcome Dr. Keith Hall
to his first hearing on Capitol Hill as the Senate-confirmed
Commissioner of the Bureau of Labor Statistics.
Congratulations, Commissioner, and welcome.
Today, unlike 6 months ago, everyone, from the board room
table to our kitchen table, is keenly aware of our economic
problems and looking for ways to secure our economic future.
But now the new worry is jobs, even more troublesome to our
economy. In fact, I'm concerned that the last few years of
lower-than-expected job growth will look good compared to the
shrinkage we may well see in coming months.
First, it was housing, then with the decline in housing
prices, lower consumer spending, and a tightening of consumer
credit, and now it is jobs.
Our economic problems started last year with the subprime
mortgage crisis, but they have expanded outward and gotten much
worse as that mess spread to the broader housing market,
squeezed credit markets, cut consumer spending, and now has
ultimately affected the job market.
The numbers this morning should be a wakeup call for the
Administration. Given today's job numbers, the Administration
should abandon its ideological opposition to spending stimuli
such as unemployment insurance because every economist will
tell us that stimulus spending will get into the economy much
quicker than a tax rebate which we're all for.
The Administration needs to take off its ideological
handcuffs to enact an economic stimulus package quickly, a
package that is strong and directed and not limited by
ideological constraints.
Any doubts that we're heading into a recession should be
erased with today's employment report. This morning we learned
officially that the U.S. labor market is faltering.
Today's labor statistics show that job growth, which we
already knew was bad, is even worse than we thought. According
to this morning's report, annual job growth for 2007 was less
than 1 percent for the first time since 2003, and during the
month of January, for the first time in 4 years, our economy
actually lost 17,000 jobs.
In a normal period of economic expansion, just to keep pace
with the growing population, we should expect a monthly jobs
report to show that the U.S. economy added 150,000 to 200,000
jobs each month, but this morning's report tells a very
different story.
Declines in the housing sector have negatively impacted
construction jobs, and workers in the mortgage and credit
industry. Over the past year, construction has lost 278,000
jobs, and 104,000 jobs have been lost in the credit industry.
Since 2000 we have seen productivity rising at an average
of 2.5 percent a year, but economic growth has not been shared
by all. For years, wages have lagged behind the growth in
productivity.
While today's numbers might be news to some here in
Washington, they're not news to millions of American families
trying to make ends meet. As employers have stopped hiring,
we've seen millions of Americans struggling to find employment.
Today, approximately 7.6 million Americans are out of work
and are actively looking for a new job. Our Nation's
unemployment rate was 4.9 percent in January, and that was
almost a full point higher than it was when the President took
office in 2001.
This rate doesn't even include those who are working part-
time but need full-time work or those who have given up their
job searches entirely. If we include these Americans, the full
underemployment rate would be 9 percent.
The employment picture is particularly bleak in minority
communities. The unemployment rate for Blacks was more than
double that of Whites, and at 6.3 percent, the Hispanic
unemployment rate was also significantly higher than that of
Whites.
At the same time, long-term unemployment has soared. Almost
20 percent of the unemployed have been out of work for more
than 26 weeks. Under current law, these people are no longer
eligible to receive unemployment insurance, making a difficult
time even more trying.
While lower than expected job growth has been
characteristic of this Administration, if it continues it can
be a dangerous situation for a growing population and the
global economy.
In the last month in particular, economists--from
conservative former Federal Reserve Chairman Alan Greenspan to
liberal New York Times columnist Paul Krugman and others--have
suggested that we're teetering on the brink of recession.
The data that has been released today seems to bear that
out, and the bad numbers are not in jobs alone. This week we
have seen new reports showing record drops in home prices,
sales, construction, and equity, thrusting Americans into the
worst housing market in over 20 years.
On Wednesday we learned that the U.S. economy last quarter
just about stalled. The Commerce Department measured a mere 0.6
percent growth in gross domestic product.
All the warnings signs that Washington should give the
economy a good shot in the arm are there, and I'm hopeful we
can deliver on that very soon.
I was pleased to join my colleagues on the Senate Finance
Committee in passing an economic stimulus package that protects
those who have been out of work for more than 6 months and are
struggling to make ends meet.
I am hopeful the Senate can soon pass a stimulus package
that provides quick aid to those who have been most directly
affected by the economic downturn, and that the President will
quickly approve such a package.
Unemployment insurance is a highly effective form of
economic stimulus generating $1.73 of economic growth for every
dollar spent. We should not abandon this proven stimulus
message simply because the Administration is ideologically
opposed to such a program.
I look forward to hearing more about today's labor
statistics from Commissioner Hall, but I must say that the
numbers today are a shot across the bow to this Administration
to move quickly, take its off ideological blinders, and do
what's best for the economy which includes both tax cuts and
spending stimuli.
[The prepared statement of Chairman Schumer appears in the
Submissions of the Record on page 15.]
Chairman Schumer. Congressman Cummings.
STATEMENT OF HON. ELIJAH E. CUMMINGS, A U.S. REPRESENTATIVE
FROM MARYLAND
Representative Cummings. Thank you very much, Mr. Chairman,
for holding this very important hearing on the employment
situation in January of 2008.
We are convened today, having recently learned that
economic growth in the last quarter of 2007 fell to just 0.6
percent while prices showed a troubling increase.
The ``middle class squeeze'' is an expression becoming all
too common at dinner tables across the country, as working
Americans reflect on their situation. These are precisely the
numbers that are putting the squeeze on families' pocketbooks.
At the same time, as we will discuss today, the Bureau of
Labor Statistics has reported that in January the economy lost
some 17,000 jobs, the first time we have seen such job losses
since 2003.
The overall number of unemployed persons stands at 7.6
million people, and unemployment is reported to stand at 4.9
percent.
This situation is even worse among Americans of color. In
the third quarter of 2007, the quarterly average unemployment
among African Americans was 8 percent. Today, it was reported
by the Bureau of Labor Statistics to be 9.2 percent in January.
Additional reports demonstrate that 22 percent of all
unemployed workers have been unemployed for 6 months or more.
Even those who are fortunate enough to have steady
employment are finding their paychecks will not reach as far as
they once did. Thus, though we did experience some wage gains
last year, these increases were not nearly enough to keep up
with inflation.
During the December congressional recess, many of my
constituents told me, often with a look of mixed both
determination and anxiety, that they simply cannot make ends
meet. Some families are even having to make the difficult
choice of which bills to skip this month in order to pay record
prices for heat.
Gas prices have risen 10 cents a gallon in the last 3
weeks, and new projections suggest prices could reach a
staggering $3.50 a gallon by spring. Many of my constituents in
Baltimore also confront the possibility that they may lose the
homes for which they have been saving their entire lives while
those who are not at risk of foreclosure are scared that the
value of their homes will plummet.
Earlier this week the House passed an economic stimulus
package that makes some important strides in bolstering the
U.S. economy. Unfortunately, I believe the House Plan will not
reach all of those who are most in need.
Over more than 100 million families will be receiving tax
rebates under this plan; two of the most effective and
efficient methods for providing a quick economic boost are
missing. As the Chairman said, extension of unemployment
insurance benefits is one of those and the other one is
increases in food stamp benefits.
These two critical measures would provide direct help for
workers and families hardest hit by the economic downturn.
Indeed, among all the tax and spending stimulus options that
CBO examined, the only two that were found to create a large
bang for the buck as a stimulus and to have the ability to be
put in place fast enough to really boost the economy were
unemployment insurance and food stamp provisions.
Both could start injecting more consumer purchasing power
into the economy within 1 to 2 months while helping those who
have too long been forgotten as the Bush administration focused
its economic policies on passing tax cut after tax cut for the
wealthiest Americans.
Thus, while the House's economic stimulus plan takes a step
in the right direction, we need to make sure that the step our
Nation eventually takes lifts all of our citizens up.
It is now up to the Senate, Mr. Chairman, to use our
stimulus package as a foundation and extend unemployment
benefits and increase food stamps to get money into the hands
of those who will spend it the quickest and need it the most.
With that, I look forward to Dr. Hall's testimony and to a
closer examination of the troubling unemployment trends in our
Nation, and with that, Mr. Chairman, I yield back.
[The prepared statement of Representative Cummings appears
in the Submissions for the Record on page 16.]
Chairman Schumer. Thank you, Congressman Cummings. Our Vice
Chair, Carolyn Maloney, who attends our hearings religiously,
is unable to attend today because of the caucus, but we ask
that her entire statement be submitted for the record which
I'll place in there without objection.
[The prepared statement of Vice Chair Maloney appears in
the Submissions for the Record on page 18.]
Chairman Schumer. Now let me introduce our only witness
this morning. I'd like to welcome Dr. Keith Hall to this
hearing, his first, as I mentioned, as BLS Commissioner.
Prior to becoming Commissioner, Dr. Hall was the Chief
Economist for the White House Council of Economic Advisers for
2 years. He also served as the Chief Economist for the U.S.
Department of Commerce, and was on the U.S. International Trade
Commission for 10 years.
Before entering Government, Dr. Hall was an economics
professor on the faculties of both the University of Arkansas
and the University of Missouri. He received his Ph.D. in
economics from Purdue University.
You may proceed, Commissioner Hall, and welcome.
STATEMENT OF DR. KEITH HALL, COMMISSIONER, BUREAU OF LABOR
STATISTICS, U.S. DEPARTMENT OF COMMERCE, WASHINGTON, DC
Commissioner Hall. Thank you, Mr. Chairman and Members of
the Committee. I appreciate this opportunity to comment on the
employment and unemployment data that we released this morning,
and I look forward to working with you in the future.
Non-farm payroll employment was essentially unchanged in
January at 138.1 million, as was the unemployment rate at 4.9
percent.
Employment declined in construction and in manufacturing,
while the number of jobs increased in healthcare. In 2007,
payroll employment grew by an average of 95,000 jobs per month,
compared with an average of 175,000 jobs per month in 2006.
Average hourly earnings rose by 4 cents in January, or two-
tenths of 1 percent. From December 2006 to December 2007,
average hourly earnings rose by 3.7 percent, compared with the
rise in the Consumer Price Index for urban wage earners and
clerical workers of 4.4 percent.
In January, construction employment decreased by 27,000,
with the decline concentrated among residential components.
Construction has now lost 284,000 jobs since its employment
peak in September of 2006. The residential component lost about
315,000 jobs over that period.
Manufacturing employment fell by 28,000 jobs in January,
with small but widespread declines occurring in both durable
and nondurable goods.
Manufacturing has lost 269,000 jobs over the past 12
months, and both the factory and work week and overtime were
unchanged in January at 41.1 and 4.0 hours, respectively.
In the service-providing sector, employment in healthcare
continued to increase in January. Over the year ending in
January, this industry added 367,000 jobs, accounting for more
than one-third of the growth in total non-farm employment.
In January, employment rose in ambulatory healthcare, which
includes doctors' offices and in hospitals. Food services
employment also continued its upward trend over the month,
though employment growth in that industry slowed recently.
From November 2007 through January, food services added an
average of 16,000 jobs per month; the average growth during the
12-month period ending October 2007 was 28,000 jobs per month.
Following a large increase in December, employment in
professional and technical services was little changed in
January. In 2007 this industry added 335,000 jobs.
Within administrative support and services, business
support services lost jobs in January.
Elsewhere in the service-providing sector, retail trade
employment was little changed both over the month and over the
year.
Wholesale trade employment has been flat since October
2007. The industry had been adding jobs for several years.
Within financial activities, employment in credit
intermediation, which includes mortgage lending, continued to
trend down in January and has fallen by 111,000 jobs since its
recent high point in October of 2006.
Now, the Establishment Survey data released today reflects
a couple of additional things: It reflects the incorporation of
our annual benchmark revisions; it reflects updated seasonal
adjustment factors and a minor revision to the industry
classification system.
The benchmark revision caused a decrease in the level of
non-farm payroll employment--or caused a decrease in our
measurement of that in March of 2007 of 293,000 jobs or about
two-tenths of 1 percent.
Over the past 10 years, benchmark revisions have averaged
plus or minus about two-tenths of 1 percent.
All these seasonally-adjusted Establishment Survey data
from January 2003 forward have been revised to incorporate
additional seasonal adjustment factors, and then of course, the
last thing that we did change is we updated to the 2007 North
American Industry Classification System.
Turning now to some of our measures from the Household
Survey, both the number of unemployed persons at 7.6 million
and the unemployment rate at 4.9 percent were essentially
unchanged over the month.
However, both measures were up over the past 12 months. In
January, 18.3 percent of unemployed persons had been unemployed
for 27 weeks or longer, up from 16.2 percent the year before.
Civilian employment rose in January, after accounting for
an adjustment to the population controls, and the employment-
to-population ratio edged up to 62.9 percent.
We also added some updated population controls for the
Household Survey. The updated controls resulted in a decline of
745,000 to our estimated size of the civilian non-institutional
population of 16 years and over for December so what this
essentially did was, this lowered our estimate of the
population, the labor force, employment, and the number of
unemployed, but it left our unemployment rate the same.
And so to summarize January's labor market developments,
payroll employment was essentially unchanged at minus 17,000 as
was the unemployment rate at 4.9 percent.
My colleagues and I would now be glad to answer any
questions.
[The prepared statement of Commissioner Keith Hall and
supporting documents appear in the Submissions for the Record
on page 18.]
Chairman Schumer. Thank you, Commissioner Hall. So in
January, the actual number went down 17,000, the number of
jobs?
Commissioner Hall. That's correct.
Chairman Schumer. When was the last time we actually had a
decline?
Commissioner Hall. It has been something over 50 months.
Chairman Schumer. It's over 4 years?
Commissioner Hall. Yes.
Chairman Schumer. This if the first time in 4 years that
we've had an actual decline in the number of jobs.
Commissioner Hall. Correct.
Chairman Schumer. Thank you. OK, how does the--now, I'm
troubled by the numbers, obviously, that show that job growth
has come to a halt over the last several months so I want to
ask you how does this level of job creation compare with the
past few years and with the economic expansion in the 1990s?
Commissioner Hall. Sure. Well, over the past year in 2007,
we averaged about 95,000 jobs a month, and in the fourth
quarter of last year the average was about 95,000 jobs a month.
That's down from about 175,000 in 2006 and about 211,000 in
2005.
Chairman Schumer. Right.
Commissioner Hall. Now, with respect to periods of
expansion--let me see, I've got some numbers here.
[Pause.]
I apologize for shuffling papers here.
Chairman Schumer. It's OK; we all do it, Commissioner.
Commissioner Hall. OK, great. All right, the job creation
during this expansion since the business cycle trough averaged
about 97,000 jobs a month.
During the previous business cycle recovery and
expansionary period the average gain was about 200,000 jobs a
month.
Chairman Schumer. That's it; that's a rather large change.
And what would jobs have to grow just to keep up with the
population growth in the country?
Commissioner Hall. I don't have that calculation. The
number you mentioned, about 150,000----
Chairman Schumer. Right.
Commissioner Hall [continuing]. Is about----
Chairman Schumer. So actually, this year job growth was
slower than in other expansions and also fewer jobs were
created than the number that should keep up, if we were keeping
consistent with population growth?
Commissioner Hall. That's correct.
Chairman Schumer. OK. So far, is it fair to say that job
creation over the economic recovery that began in 2001 has been
weak in historical terms?
Commissioner Hall. Yes, with respect to the labor market,
certainly the labor market took a bit longer to recover than in
past business cycles.
Chairman Schumer. Right. And when it did, it didn't recover
as robustly.
Commissioner Hall. The job growth wasn't. The job growth
was enough that our unemployment rate went down, as it has in
other business cycles. That's an important thing.
And there probably are some things that go into the monthly
job growth like the growth in population, the growth in the
labor force, et cetera.
Chairman Schumer. Right. In your opinion, is there any
reason to believe this situation will improve?
Commissioner Hall. Well, I don't want to speculate since we
handle the data. I will say that the labor market data is
important data to watch as we go forward in looking to see how
we recover out of this.
We want to look at things like the continued job growth and
look at the unemployment rate and look at some other things
like that.
Chairman Schumer. All right OK, Commissioner, today's
report includes several revisions that show job growth is even
slower than previously reported; is that correct?
Commissioner Hall. That's correct.
Chairman Schumer. And I'm particularly concerned about the
revisions to job creation. Can you tell me what the revised
annual rate of job creation for 2007 is now, and what was the
number before the revision?
Commissioner Hall. Before the revision in 2007 we averaged
about 111,000 jobs per month, and after the revision we
averaged about 95,000 jobs per month.
Chairman Schumer. Right, so in percentage terms, the growth
was about 1 percent, but now it's .8 percent; is that fair to
say?
Commissioner Hall. That sounds about right.
Chairman Schumer. Mr. Rones, is that right?
Mr. Rones. That's correct.
Chairman Schumer. Mr. Rones seems to be your little slide
rule over there.
[Laughter.]
Chairman Schumer. OK, wouldn't you agree that a downward
revision, regardless of how small, changes our picture of how
well the labor market has been performing in recent years and
indicates that our overall economy is weaker than previously
thought?
Commissioner Hall. Well, it wasn't a really large revision,
and I hesitate to judge whether and how much of an effect
that's had. It's certainly clear that we've had a slowdown in
job growth from 2006 to 2007.
Chairman Schumer. Right.
Commissioner Hall. That's certainly pretty clear.
Chairman Schumer. And I just want to talk a little bit
about housing and its effect on job losses. We have known for
months that as a result of the subprime crisis, housing-related
industries such as the construction and credit industries have
experienced large job losses. Have we seen job losses fanning
out across industries beyond the housing sector, and if so,
where?
Commissioner Hall. We have seen job loss fairly widely
spread. I can tell you, for example, that we've done a
tabulation of housing-related jobs. These are jobs that are
directly related to residential construction or things related
to construction.
In 2007, the housing-related jobs declined by about 440,000
jobs, so that puts it a little bit less than half of the
deceleration in job growth in 2007, housing-related, so that
meant about half was from other areas.
Chairman Schumer. Right. I mean, I would just add a comment
here that, again, a good stimulus package would focus on
housing to a far greater extent than this one has done, and the
reason, again, is the Administration's sort of ideological view
that government shouldn't get involved in any kind of
situation.
It's good that we're going to raise the conforming loan
limits which I believe will be part of the package, but there's
so many more things to do, and housing is at the bull's-eye of
this economic crisis, and we're skirting around the edges of it
but not attacking it directly, and I think that's wrong. I
think we should do much more.
OK, on unemployment, this morning's report shows that the
unemployment rate is unchanged from last month, but the trend
has been upwards in recent months. It's now half a percent
higher than where it was in March of 2007.
Does the unemployment rate typically rise this fast?
Commissioner Hall. It's not atypical for it to rise like
that, but certainly a more severe rise over a shorter time
period would be a much, much worse signal.
Chairman Schumer. Right. And you mentioned that when it
comes to long-term unemployment that the percentage of
unemployed without a job for more than 26 weeks has gone up to
18.3 percent. Do you recall when the last time this ratio was
that high?
Commissioner Hall. Yes. Actually, it was that high about 2
months ago, but it's about 2 percentage points higher than it
was a year ago.
Chairman Schumer. Got it, OK. So, people--in general, the
trend in the economy is when people are out of work, they're
looking for work over a longer period of time.
Commissioner Hall. Over the year.
Chairman Schumer. Yes. OK, if we look at the employment-to-
population ratio--that is, the fraction of working-age
population with a job--we see that it also is lower at .5
percent less than it was 2 years ago; is that right?
Commissioner Hall. [The employment-population ratio, at
62.9 percent in January, was 0.4 percentage points lower 1 year
ago and the same proportion 2 years ago.] * Corrected by BLS.
Chairman Schumer. This morning's report also showed that
the labor force participation rate remains quite low. In fact,
this rate is lower than it was before the start of the
recession in 2001; is that right?
Commissioner Hall. Yes.
Chairman Schumer. OK, so let me get this straight: What
this morning's employment numbers tell us is that even though
unemployment didn't rise last month, we see from the
Establishment Survey that the economy hasn't created new jobs
in 2 months.
Further, the share of people with a job is lower than it
was just a couple of years ago, and more people are having a
difficult time finding a new job and becoming long-term
unemployed. Doesn't that make it pretty clear that the labor
market, at least as of now, is just not creating new jobs, net?
Commissioner Hall. I would say that certainly the job
growth has slowed quite a bit, and there have been periods
during expansions when there has been a pause in job growth
like this so I'd say it's a little early to talk about this
being a real issue yet, because it's only one datapoint, but
yes.
Chairman Schumer. All right. Now, I'd like to talk a little
bit about--well, one other question: Would you agree that all
of these factors combined means, at the very least, we're
entering a labor market downturn and quite possibly a
recession?
Commissioner Hall. I shouldn't speculate on that.
Chairman Schumer. How about the first part? I understand
that you don't want to mention the R-word.
Commissioner Hall. Right.
Chairman Schumer. Although it seems clear to me, at least,
that it seems that's what the data shows we're headed. But what
about--we are entering a labor market downturn; doesn't that
seem pretty clear?
Commissioner Hall. Well, I'd say we've had pauses like this
before, but we don't want this to continue.
Chairman Schumer. Well, I think we can all agree with that,
Commissioner.
Let me go to wages and earnings for a minute. What has
happened to growth in wages and earnings recently, compared
with what has been happening to inflation? In other words, have
workers' paychecks kept up with inflation?
Commissioner Hall. Actually, as I mentioned in my
statement, the average hourly earnings in 2007 rose by about
3.7 percent over the 12 months, and the Consumer Price Index
for wage earners increased about 4.4 percent.
Chairman Schumer. So actually, it was a loss of .7 percent
in earning power?
Commissioner Hall. Correct.
Chairman Schumer. OK. We've seen strong productivity growth
over the last few years. Wouldn't we expect to translate that
growth into wages keeping ahead of or at least up with
inflation?
Commissioner Hall. Yes. Actually, it's widely recognized
that productivity growth is an important condition for growth
in real wages.
Chairman Schumer. But for some reason--and I'm not asking
you to speculate on the reasons here; that's not your job, but
for some reason, that productivity growth has not translated
itself into wage gains for the average worker.
Commissioner Hall. From 2000 to 2006, productivity grew
about 2.7 percent, and during that same time period, real
hourly compensation of workers grew about 1.2 percent.
Chairman Schumer. Right. OK, finally on--I think this is my
last series--on earnings, I believe that the BLS publishes data
on the usual weekly earnings of full-time workers, including
some information about wage distributions; is that right?
Commissioner Hall. That's correct.
Chairman Schumer. OK, our staff at the Joint Economic
Committee has done some calculations that show some disturbing
trends in that wage distribution.
First, they show that from the fourth quarter of 2000 to
the fourth quarter of 2007, median earnings, right in the
middle, have fallen by .9 percent or about .1 percent per year
after inflation. Does that number seem about right to you?
Commissioner Hall. That's roughly in line with our
calculations.
Chairman Schumer. However, over that same period, earnings
at the very top of that distribution, the 90th percentile, have
risen by 4.5 percent or .6 percent a year after inflation while
earnings near the bottom of the distribution, the 10th
percentile, have fallen by 2.3 percent or 3 percent a year
after inflation. Does that seem right to you as well?
Commissioner Hall. Yes, it does.
Chairman Schumer. OK. Well, what these numbers bear out is,
if you look at average figures, the economy looks a lot better
than if you look at median figures, because the distribution,
the gains that we have made over the last year--and we can,
again, speculate at the reasons--but they have been
disproportionate to the highest income earners; is that fair to
say by definition?
Commissioner Hall. Well, yes.
Chairman Schumer. Yes?
Commissioner Hall. Yes.
Chairman Schumer. OK, thank you. Congressman Cummings?
Representative Cummings. Thank you very much, Mr. Chairman.
Dr. Hall, I just want to ask you a few questions about
minorities and the unemployment rate.
A recession hurts everybody, but it especially hurts
minorities who are often described as experiencing a permanent
recession. The official unemployment rate only includes people
who are actively looking for work, and it shows that the
unemployment rate for African Americans is about twice as great
as the rate for the population as a whole. Is that right?
Commissioner Hall. That seems about right, yes.
Representative Cummings. Is it the case that African
American men, especially younger, less educated African
American men, are more likely to be detached from the labor
force than other population groups according to what you've
got? Mr. Rones, you look like you're ready to jump over the
table.
[Laughter.]
Mr. Rones. It is certainly the case that the labor force
participation for minorities in general would be lower than it
is for Whites, and participation rates for minority men are
particularly lower than they are for White men.
Representative Cummings. What does it mean to be detached
from the labor force, and does that mean that we should be
looking at other statistics besides the unemployment rate to
get an accurate picture of labor market outcomes for African
American males, especially younger, less educated African
American males?
Commissioner Hall. Well, we do produce a number of broader
measures of the unemployment rate. I'm not sure they fully fill
the bill for what you're talking about.
We do have measures that include marginally-attached and
people working part-time for economic reasons.
Representative Cummings. And do you have those figures
there?
Commissioner Hall. Well, they've all moved similarly to the
regular unemployment rate. Our broadest measure which includes
the unemployed, marginally-attached, and part-time, that's
about 9 percent.
Representative Cummings. OK. What is the relationship
between the unemployment rate, the labor force participation
rate, and the employment-to-population ratio?
Commissioner Hall. In a sense, those are the different
pieces that you use to calculate the unemployment rate. The
unemployment rate is the number of people who are unemployed
divided by the labor force.
Representative Cummings. Now, if you know, what happened to
African American unemployment rates during the last recession?
Did it grow more than the population as a whole? If so, can we
expect that to be the case again?
Commissioner Hall. The gap between the African American
unemployment rate and, say, the White unemployment rate did in
fact decrease during the last recession.
Representative Cummings. And what was that--what kind of
gap was there?
Commissioner Hall. It got about 2.2 times as high.
Representative Cummings. So that means that it grows at a
greater rate in non-recessionary times than in recessionary
times; is that right?
Commissioner Hall. Correct.
Representative Cummings. So I guess that's about twice as
much in non-recessionary times?
Commissioner Hall. Yes.
Representative Cummings. In the data of the Bureau of Labor
Statistics released today, it showed that the African American
unemployment rate increased from 8.4 percent in November of
2007 to 9.2 percent in January of 2008. Meanwhile, Hispanics
had an unemployment rate of 5.7 percent in November of 2007
which rose to 6.3 percent in January of 2008.
In comparison, the Caucasian unemployment rate, which
hovered at 4.4 percent in December and January, the data for
African Americans and Hispanics was strikingly higher. In your
opinion, how can Congress assist African Americans and
Hispanics from experiencing strikingly higher unemployment
rates in comparison to the general population, and what exactly
should the Senate consider adding to this economic stimulus
package? I guess you want to see more jobs.
I mean I know you keep the records. You're examining the
stats. I understand that, but to improve those numbers, what--I
would assume that you would want to see more jobs.
Commissioner Hall. Absolutely. I don't want to make too
many policy comments.
Representative Cummings. I understand that. That's why I
tried to qualify everything I said. But I cannot imagine you
looking at these numbers and not having thoughts.
Commissioner Hall. Absolutely, yes. Job growth is extremely
important, and I think in some respects, what's important about
economic expansions is that they support job growth; they
support strong job growth. That's why you'd like to see, among
other things, why you would like to see strong economic growth.
Representative Cummings. I want to go back to something the
Chairman asked you a few minutes ago. You were talking about in
2007, you said there was a decline of 440,000 housing-related
jobs; is that right, 440,000? I think that's the figure I wrote
down here.
Commissioner Hall. That sounds--yes, that's correct.
Representative Cummings. Now, how does that--what other
areas of employment would that affect the most, based upon the
statistics that you've seen? Are you following my question?
In other words, if you've got people who are--those are
probably earning decent wages, right, pretty livable wages.
So I guess if you don't have people in the housing market
doing fairly well and you lose 440,000 jobs, what would you say
would be the impact on, say, other types of things like the
barber shops and the stores, things of that nature?
Commissioner Hall. Well, the things most obviously directly
related are the housing-related like the homebuilding
materials, providers of services to homebuilders, et cetera.
But you're correct to a degree that this lowers, generally
lowers, economic activity. It can impact jobs across the
economy.
Representative Cummings. And so the 440,000 would have
quite a bit of impact; is that what you find based upon your
statistical reviews?
Commissioner Hall. It's hard to draw conclusions about how
much the housing sector affected non-housing sectors.
Representative Cummings. I got you. Mr. Rones, did you want
to say something?
Mr. Rones. No.
Representative Cummings. You're making me nervous.
[Laughter.]
Representative Cummings. You just looked like you wanted to
say something.
In the past when recessions have occurred in the U.S.
economy, how soon after were they later found to have begun?
Was their impact registered in the unemployment figures?
Commissioner Hall. To some degree, I think recessions are
almost defined by the labor market. At least in my mind, a
recession is where economic growth slows enough that you are no
longer creating jobs for a sustained period of time.
So for example, if you look at the last recession, the
recession started in March, and that's exactly where the job
growth turned negative and stayed negative for several months.
Representative Cummings. You know, economists at Goldman
Sachs say once the 3-month average of unemployment rate has
risen 0.3 percentage points, the economy has always either been
in or about to enter a recession. Do you agree with that
assessment?
Commissioner Hall. I'm not familiar with that work, but
that sounds about right.
Representative Cummings. OK. Just a few more questions, Mr.
Chairman.
According to the data recently released by the Internal
Revenue Service, Americans' average income in 2005 was less
than in 2000, the fifth consecutive year in which this was the
case and the first time since World War II that this has
happened.
We also see that the income and wealth are becoming
increasingly concentrated in the hands of a very few. Thus,
those making more than a million dollars received just under 50
percent of all the income gain that occurred in 2005.
Can you comment on why this is occurring and what you've
seen from your review of the stats, and is that--and what
potential impact on the unemployment--on the employment rate,
does that--you know, I mean, what do you forecast with regard
to trends?
Commissioner Hall. It's hard for me to know what's causing
things like that. In part, given my job, I don't want to
speculate too much.
Representative Cummings. I understand.
Commissioner Hall. And I don't really want to forecast
about the trends, going forward.
Representative Cummings. OK. If the long-term unemployed
were counted in the unemployment rate, what would the figure
actually be? That's in your purview, is it not?
Commissioner Hall. Actually, they are included for people
who are unemployed for 27 weeks or longer.
Representative Cummings. Say that again. You just sort of
trailed off a little bit.
Commissioner Hall. I'm sorry. The people who are unemployed
for 27 weeks or longer, those are included in our unemployment
numbers.
Representative Cummings. OK, I have nothing else, Mr.
Chairman.
Chairman Schumer. Commissioner, I want to thank you, and,
as I said, the Joint Economic Committee is very interested in
these statistics, and we may do this again, but thank you all
for coming.
I want to thank you, Mr. Horrigan and Mr. Rones, and my
colleague, Congressman Cummings. The hearing is adjourned.
[Whereupon, at 10:14 a.m., the hearing was adjourned.]
Submissions for the Record
=======================================================================
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Prepared Statement of Senator Charles E. Schumer, Chairman
Good morning. I am pleased to call this hearing to order--a hearing
that resumes the long-standing tradition of the Bureau of Labor
Statistics coming before the Joint Economic Committee to present the
findings of its monthly jobs report. Given the important information
these numbers can provide us on the health of the economy, I am hopeful
that this is only the beginning of a conversation we will have
throughout the course of the year.
I am also pleased to be the first to welcome Dr. Keith Hall, to his
first hearing on Capitol Hill as the Senate-confirmed Commissioner of
the Bureau of Labor Statistics.
Today, unlike 6 months ago, everyone from the boardroom table to
our kitchen table is keenly aware of our economic problems and looking
for ways to secure our economic future.
But now the new worry is jobs--even more troublesome to our
economy. In fact, I'm concerned that the last few years of lower than
expected job growth will look good compared to the job shrinkage we may
well see in the coming months.
First it was housing, then it was consumer credit and consumer
spending, and now it is jobs. Our economic problems started last year
with the subprime mortgage crisis, but they have gotten much worse as
that mess spread to the broader housing market, squeezed credit
markets, cut consumer spending, and now has affected the job market.
This should be a wake up call for the administration. Given today's
jobs numbers, they should abandon their ideological opposition to
spending stimuli, such as unemployment insurance, because every
economist will tell you that stimulus spending will get into the
economy much quicker than a tax rebate, which we're all for.
The administration needs to take off its ideological handcuffs to
enact an economic stimulus package quickly, which is strong and
directed, and not limited by ideological constraints.
Any doubts that we are heading into a recession should be erased
with today's employment report.
This morning, we learned officially that the U.S. labor market is
faltering. Today's labor statistics show that job growth--which we
already knew was bad, is even worse than we thought. According to this
morning's report, annual job growth for 2007 was less than 1 percent
for the first time since 2003.
During the month of January, our economy actually lost 17,000 jobs.
In a normal period of economic expansion, just to keep pace with a
growing population, we should expect a monthly job report to show that
the U.S. economy added 150,000 to 200,000 jobs in 1 month. But this
morning's report tells a very different story.
Declines in the housing sector have negatively impacted
construction jobs, and workers in the mortgage and credit industry.
Over the past year, construction has lost 278,000 jobs and 104,000 jobs
have been lost in the credit industry.
Since 2000 we have seen productivity rise an average of 2.5 percent
per year. But economic growth has not been shared by all. For years,
wages have lagged far behind growth in productivity.
While today's numbers might be news to some here in Washington,
they certainly are not news to millions of American families trying to
make ends meet.
As employers have stopped hiring, we have seen millions of
Americans struggling to find employment. Today, approximately 7.6
million are out of work and actively looking for a new job. Our
nation's unemployment rate was 4.9 percent in January; almost a full
point higher than it was when President Bush took office in 2001.
This rate doesn't even include those who are working part time but
need full time work or those who have given up their job searches
entirely. If we include these Americans, the full UNDER-employment rate
would be 9.0 percent.
The employment picture is particularly bleak in minority
communities. The unemployment rate for blacks was more than double that
of whites. And at 6.3 percent, the Hispanic unemployment rate was also
significantly higher than that of whites.
At the same time, long term unemployment has soared. Almost 20
percent of the unemployed have been out of work for more than 26 weeks.
Under current law, these people are no longer eligible to receive
unemployment insurance--making a difficult time even more trying.
While lower than expected job growth has been characteristic of
this administration, if it continues, it can be a dangerous situation
for a growing population and a global economy.
In the last month in particular economists from conservative former
Federal Reserve Chairman Alan Greenspan to liberal New York Times
columnist Paul Krugman and others have suggested that we are teetering
on the brink of a recession. The data that has been released today
seems to bears that out.
And the bad numbers are not in jobs alone. This week we have also
seen new reports showing record drops in home prices, sales,
construction, and equity--thrusting Americans into the worst housing
market in over 20 years.
On Wednesday we learned that the U.S. economy last quarter just
about stalled--the Commerce Department measured a mere 0.6 percent
growth in Gross Domestic Product (GDP). All the warning signs indicate
that Washington should give the economy a good shot in the arm, and I'm
hopeful we can deliver that very soon.
I was pleased to join my colleagues on the Senate Finance Committee
on Wednesday in passing an economic stimulus package that protects
those who have been out of work for more than 6 months and are
struggling to make ends meet. I am hopeful that the Senate can soon
pass a stimulus package that provides quick aid to those who have been
most directly affected by this economic downturn and that the President
will quickly approve such a package. Unemployment insurance is a highly
effective form of economic stimulus, generating $1.73 of economic
growth for every $1 spent. We should not abandon this proven stimulus
measure because the administration is ideologically opposed to such a
program.
I look forward to hearing more about today's labor statistics from
Commissioner Hall, and am hopeful that today's hearing will shed even
greater light on what we in Washington must do to protect American
workers from the sagging economy.
__________
Prepared Statement of Representative Elijah E. Cummings
Thank you, Mr. Chairman, for holding this important hearing on the
employment situation in January 2008.
We convene today having recently learned that economic growth in
the last quarter of 2007 fell to just .6 percent while prices showed a
troubling increase.
The ``middle class squeeze'' is an expression becoming all too
common at dinner tables across the country as working Americans reflect
on their situation--and these are precisely the numbers that are
putting the squeeze on families' pocketbooks.
At the same time, as we will discuss today, the Bureau of Labor
Statistics has reported that in January, the economy lost 17,000 jobs--
the first time we have seen a job loss since 2003.
The overall number of unemployed persons stands at 7.6 million
people--and unemployment is reported to stand at 4.9 percent.
This situation is even worse among Americans of color. In the third
quarter of 2007, the quarterly average unemployment among African
Americans was 8 percent. Today, it was reported by the Bureau of Labor
Statistics to be 9.2 percent in January.
Even those who are fortunate enough to have steady employment are
finding that their paychecks do not reach as far as they once did.
Thus, though we did experience some wage gains last year, these
increases were not nearly enough to keep up with inflation.
During the December Congressional recess, many of my constituents
told me--often with a look that mixed both determination and anxiety--
that they simply cannot make ends meet. Some families are even having
to make the difficult choice of which bills to skip this month in order
to pay record prices to heat their homes.
Gas prices have risen 10 cents a gallon in the last 3 weeks, and
new projections suggest prices they could reach a staggering $3.50 a
gallon by spring.
Many of my constituents also confront the possibility that they may
lose the homes for which they have been saving their entire lives--
while those who are not at risk of foreclosure are scared that the
value of their homes will fall.
Earlier this week, the House passed an economic stimulus package
that makes some important strides toward bolstering the U.S. economy.
Unfortunately, I believe the House plan will not reach all of those
who are most in need.
Although more than 100 million families will be receiving tax
rebates under this plan, two of the most important and effective
methods of providing a quick economic boost are missing: extension of
unemployment insurance benefits and increases in food stamp benefits.
These two critical measures would provide direct help for the
workers and families hardest hit by the economic downturn.
Indeed, among all of the tax and spending stimulus options that CBO
examined, the only two that were found to create a large ``bang-for-
the-buck'' as a stimulus and to have the ability to be put in place
fast enough to really boost the economy were unemployment insurance and
food stamp provisions.
Both could start injecting more consumer purchasing power into the
economy within one to 2 months while helping those who have too long
been forgotten as the Bush administration focused its economic policies
on passing tax cut after tax cut for the wealthiest Americans.
Thus, while the House's economic stimulus plan takes a step in the
right direction, we need to make sure that the step our nation
eventually takes lifts all of our citizens.
It is now up to the Senate to use our stimulus package as a
foundation and extend unemployment benefits and increase food stamps to
get money into the hands of those who will spend it quickest and need
it most.
With that, I look forward to Dr. Hall's testimony and to a closer
examination of the troubling unemployment trends in our nation.
__________
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Prepared Statement of Representative Carolyn B. Maloney, Vice Chair
Good morning. I would like to thank Chairman Schumer for holding
this hearing on the employment situation in January. It is critically
important to fully examine labor market conditions during this
downturn. I want to welcome Commissioner Hall and thank him for
testifying here today.
The unemployment rate was essentially unchanged at 4.9 percent and
the economy shed 17,000 jobs last month. Clearly, danger signs for the
labor market remain. Over the last month, new evidence has emerged that
a significant downturn in the economy may be underway. Economic growth
stalled last quarter, retailers have posted disappointing sales, and
manufacturing began to contract again, despite a weak dollar that has
spurred exports. Forecasters expect the economy to slow as high energy
prices, falling home prices, and stagnant wages squeeze American
families.
The housing wealth that consumers once relied on to fuel their
spending--and the economy relied on to grow--is quickly evaporating as
house prices continue their downward spiral. All of which points to a
gathering storm that could drag down the economy, taking thousands of
American jobs with it.
This dismal employment report is further evidence that the economy
could use a booster shot. The House of Representatives has passed a
bipartisan economic stimulus package that is timely, temporary, and
targeted. Under the plan, more than 100 million families squeezed by
the high costs of basic living expenses will get a meaningful tax
rebate, millions of Americans can get help to avoid losing their homes,
and small businesses can take advantage of tax cuts to help spur
investment and job creation.
This package will provide a boost to the economy by putting
hundreds of dollars in the hands of middle- and lower-income families
who will generate demand, without the fear of igniting inflation. I
welcome efforts by the Senate to enhance this package and hope that it
can be accomplished without delay.
Long-term unemployment persists, and evidence of hidden
unemployment is reflected in the continued depressed levels of the
labor force participation rate and falling fraction of the population
with a job. In short, jobs have become harder to find. Providing an
extension of unemployment benefits is critically needed.
A stimulus package is an important first step, but there is more to
do to blunt the effects of this downturn and to get the economy back on
track.
Mr. Chairman, thank you for holding this hearing and I look forward
to the continued focus on labor market conditions by this committee.
__________
Prepared Statement of Dr. Keith Hall, Commissioner, 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 was essentially unchanged in January, at
138.1 million, as was the unemployment rate, at 4.9 percent. Employment
declined in construction and in manufacturing, while the number of jobs
increased in health care. In 2007, payroll employment grew by an
average of 95,000 per month, compared with an average of 175,000 per
month in 2006. Average hourly earnings rose by 4 cents in January, or
0.2 percent. From December 2006 to December 2007, average hourly
earnings rose by 3.7 percent, compared with a rise in the Consumer
Price Index for Urban Wage Earners and Clerical Workers of 4.4 percent.
Construction employment decreased by 27,000 in January, with the
decline concentrated among the residential components. Construction has
lost 284,000 jobs since its employment peak in September 2006; the
residential components lost 315,000 jobs over that period.
Manufacturing employment fell by 28,000 in January, with small but
widespread declines occurring in both durable and nondurable goods
industries. Manufacturing has lost 269,000 jobs over the last 12
months. Both the factory workweek and overtime were unchanged in
January, at 41.1 and 4.0 hours, respectively.
In the service-providing sector, employment in health care
continued to increase in January (27,000). Over the year ending in
January, this industry added 367,000 jobs, accounting for more than
one-third of the growth in total nonfarm employment. In January,
employment rose in ambulatory health care, which includes doctors'
offices, and in hospitals.
Food services employment also continued its upward trend over the
month, though employment growth in this industry has slowed recently.
From November 2007 through January, food services added an average of
16,000 jobs per month; the average growth during the 12-month period
ending in October 2007 was 28,000 jobs per month.
Following a large increase in December (49,000), employment in
professional and technical services was little changed in January. In
2007, this industry added 335,000 jobs. Within administrative and
support services, business support services lost jobs in January.
Elsewhere in the service-providing sector, retail trade employment
was little changed, both over the month and over the year. Wholesale
trade employment has been flat since October 2007; the industry had
been adding jobs for several years. Within financial activities,
employment in credit intermediation, which includes mortgage lending,
continued to trend down in January and has fallen by 111,000 since its
most recent high point in October 2006.
The establishment survey data released today reflect the
incorporation of annual benchmark revisions, updated seasonal
adjustment factors, and a minor revision to the industry classification
system. Each year, we re-anchor our sample-based survey estimates to
full universe counts of employment, primarily derived from
administrative records of the unemployment insurance tax system. The
benchmark revision caused a decrease in the level of nonfarm payroll
employment in March 2007 of 293,000 (not seasonally adjusted) or 0.2
percent. Over the past 10 years, benchmark revisions have averaged plus
or minus 0.2 percent.
All seasonally adjusted establishment survey data from January 2003
forward have been revised to incorporate updated seasonal adjustment
factors. Another change effective with this release is an update to the
2007 North American Industry Classification System (NAICS) from the
2002 NAICS. The update to NAICS 2007 resulted in minor definitional
changes. All affected historical time series data for the establishment
survey beginning in January 1990 have been reconstructed based on NAICS
2007.
Turning now to some of our measures from the household survey, both
the number of unemployed persons (7.6 million) and the unemployment
rate (4.9 percent) were essentially unchanged over the month. However,
both measures are up over the past 12 months. In January, 18.3 percent
of unemployed persons had been unemployed 27 weeks and over, up from
16.2 percent a year earlier. Civilian employment rose in January (after
accounting for an adjustment to the population controls used in the
survey), and the employment-population ratio edged up to 62.9 percent.
Household survey data beginning in January 2008 reflect updated
population controls. As part of its annual review of intercensal
population estimates, the U.S. Census Bureau determined that a downward
adjustment should be made to the population controls. This adjustment
stems from revised estimates of net international migration and the
institutional population, along with updated vital statistics
information. The updated controls would have resulted in a decline of
745,000 in the estimated size of the civilian noninstitutional
population age 16 years and over for December 2007. In accordance with
our usual practice, official estimates for December 2007 and earlier
months will not be revised.
A comparison of December 2007 not seasonally adjusted data based on
the old and new controls shows that the population adjustment caused
decreases in the levels for the labor force (-637,000), employment (-
598,000), and unemployment (-40,000). The unemployment rate was
unaffected by the new population controls; there was a negligible
impact on other percentage estimates.
To summarize January's labor market developments, payroll
employment was essentially unchanged (-17,000), as was the unemployment
rate at 4.9 percent.
My colleagues and I now would be glad to answer your questions.
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