[Joint House and Senate Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 110-646
THE EMPLOYMENT SITUATION: MARCH 2008
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
April 4, 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 Republican
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
----------
Opening Statement of Members
Statement of Hon. Charles E. Schumer, Chairman, a U.S. Senator
from New York.................................................. 1
Statement of Hon. Baron P. Hill, a U.S. Representative from
Indiana........................................................ 2
Statement of Hon. Sam Brownback, a U.S. Senator from Kansas...... 5
Witness
Statement of Dr. Keith Hall, Commissioner, Bureau of Labor
Statistics, Accompanied by: Philip L. Rones, Deputy
Commissioner, Bureau of Labor Statistics, U.S. Department of
Labor, Washington, D.C.; and Michael W. Horrigan, Associate
Commissioner for Prices and Living Conditions.................. 3
Submissions for the Record
Prepared statement of Senator Charles E. Schumer................. 17
Prepared statement of Representative Baron P. Hill............... 18
Prepared statement of Keith Hall, Commissioner, Bureau of Labor
Statistics..................................................... 18
Prepared statement of Senator Sam Brownback...................... 19
THE EMPLOYMENT SITUATION:
MARCH 2008
----------
FRIDAY, APRIL 4, 2008
Congress of the United States,
Joint Economic Committee,
Washington, DC
The committee met at 9:30 a.m., in room 106 of the Dirksen
Senate Office Building, the Honorable Charles E. Schumer
(Chairman) and Congressman Baron Hill, presiding.
Senators present: Schumer and Brownback.
Representatives present: Hill.
Staff present: Christina Baumgardner, Heather Boushey,
Stephanie Dreyer, Nan Gibson, Greeta Goodwin, Colleen Healy,
Annabelle Tamerjan, Chris Frenze, Bob Keleher, Jeff
Schlagenhauf, and Jeff Wrase.
OPENING STATEMENT OF HON. CHARLES E. SCHUMER, CHAIRMAN, A U.S.
SENATOR FROM NEW YORK
Senator Schumer. The hearing will come to order. I want to
thank Commissioner Hall and his staff for being here.
Well today we got some bad news on the job front. The
numbers 80,000 and 60,000 should be a shot across the bow to
this Administration to get off its hands and start moving in
terms of getting us out of the bad straits we are in in this
economy.
These numbers are a shot across the bow. They are saying
that the economy is getting soft. It is no longer just housing
prices and credit, but jobs. And once you get the three
together headed downward, there is real trouble in the economy.
Despite these job numbers, the Administration continues its
Hoover-like attitude of doing nothing. We get no help on
getting some relief in the mortgage foreclosure crisis. We get
no help on restructuring our financial system in a way that
meets the needs of the Twenty-first Century.
We get no help on crafting a stimulus package that can get
the economy going--a second stimulus package dealing with
infrastructure and unemployment and the kind of direct spending
that is needed to augment the tax relief that we have passed.
And so these numbers hopefully will be a wake-up call to
the Administration, a wake-up call to stop its Hoover-like
trance of doing nothing, letting the free market govern in any
way. We believe in free markets but we have learned over the
last 100 years that there are ways to improve them.
I want to thank Baron Hill for chairing this hearing. I
apologize. We have votes. I did not expect to be able to be
here at all and thank the Commissioner for his work.
Congressman Hill.
[The prepared statement of Senator Schumer appears in the
Submissions for the Record on page 17.]
OPENING STATEMENT OF HON. BARON P. HILL, A U.S. REPRESENTATIVE
FROM INDIANA
Mr. Hill [presiding]. Good morning everybody. I want to
welcome Commissioner Hall and thank him for testifying here
this morning on the March employment situation.
I have a vested interest in these dreary numbers we have
recognized this morning, as I have seen firsthand how the
recent economic downturns have affected my constituents in
Bloomington, Indiana.
The General Electric Refrigerator Plant announced in
February that it will close by the end of 2009, and it will
result in the loss of 900 jobs for this area.
Job losses like this are occurring throughout the country
as today's employment numbers highlight. The labor market news
keeps getting worse, and today's report is no exception.
As a matter of fact, yesterday we were anticipating the
loss of 60,000 jobs--some were estimating 50,000 jobs--and
today we learned that it is 80,000 jobs.
March marks the third consecutive month of job losses for a
total of 232,000 jobs lost in the first quarter of this year.
We have not seen job losses like this for nearly 5 years.
Now this chart over here illustrates what is going on right
now. The downward arrow indicates the loss of jobs in non-farm
payrolls, and it is alarming. And it keeps on going down.
I agree with Senator Schumer that this Administration needs
to get serious about trying to get this economy turned around.
On Wednesday, the Federal Reserve Chairman Ben Bernanke
told this Committee that a recession is possible. We do not
want that to happen. Maybe we are already in that, and so I
think it is behooving to all of us that we as Members of
Congress, along with the Administration, try to do something to
prevent this from happening.
Yesterday brought news that the weekly unemployment benefit
claims rose above 400,000, a level that typically signals that
the labor market is already in recession.
The Federal Reserve and many private sector economists
expect unemployment to climb throughout the year. We seem to be
a long way from a healthy economy which usually adds 150,000 to
200,000 jobs each month, but the economy has lost 77,000 jobs
per month on the average in the first quarter of this year.
The widespread job losses we are seeing are a clear
indication to me that the economy is in trouble. For nearly 2
years now the manufacturing industry has shrunk. These trends
adversely affect my State's economy as Indiana has a high
proportion of manufacturing jobs compared to the rest of the
country.
In Indiana we have seen an average unemployment period of 9
weeks. And as of the fourth quarter of 2007, 40 percent of
unemployed Hoosiers have now exhausted their unemployment
benefits, the eleventh highest in the nation.
Congress should consider a proposal to provide an extension
of unemployment benefits that would last an additional 13
weeks.
Republicans in Congress and this Administration have
resisted that. Workers could receive these benefits--workers
who could receive these benefits are those who have lost their
job through no fault of their own. They have had the bad luck
of working for a business that must lay off workers or close
its doors due to the weakening economy, like the workers at the
Bloomington General Electric plant.
Extending unemployment benefits to struggling workers
should be a high priority. Wages are not keeping up with the
rising cost of living. Sky high gas prices and rising health-
care costs add to the pinch for families.
These elements have combined to create the lowest consumer
outlook for the economy in 35 years. And on another chart here
we can see that since October real earnings in this country are
dropping dramatically at an alarming rate.
As I said earlier, this economy is in trouble and we better
be doing something about it. I do want to thank Mr. Hall and
his colleagues for being here to discuss today's labor
statistics, and I look forward to the continued focus on labor
market conditions by this Committee.
Now let me introduce our witness. Dr. Keith Hall is the
Commissioner of Labor Statistics for the U.S. Department of
Labor. As Commissioner he oversees the Bureau of Labor
Statistics which is the principal fact-finding agency in the
Federal Government in the broad field of labor economics and
statistics.
Prior to becoming Commissioner, Dr. Hall was the chief
economist for the White House Council of Economic Advisors for
2 years.
He has also served as the chief economist for the U.S.
Department of Commerce. 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,
a good old Indiana college. I'm glad that you went there.
I also want to acknowledge your colleagues Mr. Rones and
Mr. Horrigan and thank them for joining us today.
Commissioner Hall, you may proceed with your testimony.
[The prepared statement of Representative Hill appears in
the Submissions for the Record on page 18.]
STATEMENT OF HON. KEITH HALL, COMMISSIONER, BUREAU OF LABOR
STATISTICS, ACCOMPANIED BY: PHILIP L. RONES, DEPUTY
COMMISSIONER, BUREAU OF LABOR STATISTICS, U.S. DEPARTMENT OF
LABOR, WASHINGTON, D.C.; AND MICHAEL W. HORRIGAN, ASSOCIATE
COMMISSIONER FOR PRICES AND LIVING CONDITIONS
Mr. Hall. I thank you, Mr. Chairman. Thank you for this
opportunity to discuss the March labor market data we released
this morning.
Non-farm payroll employment continued to trend down in
March and the unemployment rate rose from 4.8 to 5.1 percent.
Payroll employment edged down by 80,000 over the month
bringing the decline over the past 3 months to 232,000. To put
these recent changes into context I would note that labor
market conditions started to weaken more than a year ago.
Average monthly job growth slowed from 175,000 in 2006 to
107,000 in the first half of last year, to 76,000 in the last
half of last year to -77,000 for the first quarter of this
year.
The unemployment rate remained at or near 4.5 percent
during the first half of 2007 but rose steadily to 4.7 percent
in the third quarter, 4.8 percent in the fourth quarter, and an
average of 4.9 percent in the first quarter of this year.
Returning to the payroll employment figures for March, job
losses occurred in construction, manufacturing, and employment
services. Job growth continued in health care, food services,
and mining.
The construction industry lost 51,000 jobs over the month
with declines concentrated in residential and nonresidential
specialty trade contracting. Since its peak in September 2006,
construction employment has fallen now by 394,000.
Manufacturing employment decreased by 48,000 in March.
Motor vehicle manufacturing employment was down by 24,000; this
decline largely reflected the impact of a strike at an
automotive parts maker. The resulting parts shortage triggered
plant shutdowns and idled workers at non-striking motor vehicle
factories.
Elsewhere in manufacturing there were job declines in
several construction-related industries: wood products,
furniture, and nonmetallic minerals.
Both manufacturing hours and overtime were up by one-tenth
of an hour.
In the service-providing sector, employment services shed
42,000 jobs in March. This industry group includes temporary
help services. Over the past 12 months, employment services has
lost 158,000 jobs, three-quarters of which were in temporary
help.
Professional technical services employment was little
changed for the third consecutive month compared with average
monthly gains of 27,000 last year.
Elsewhere in the service-providing sector, employment
growth continued in health care and in food services. Each
industry added 23,000 jobs in March.
In the goods-producing sector, mining employment rose by
6,000 due to gains in oil and gas extraction and related
support activities. Average hourly earnings for production and
non-supervisory workers in the private sector rose by $.05 in
March and have increased by 3.6 percent over the past 12
months.
From February 2007 to February 2008 the Consumer Price
Index for urban wage earners and clerical workers rose by 4.5
percent.
Turning to the labor market data from the survey of
households, the number of unemployed and the unemployment rate
both rose over the month. The jobless rate was 5.1 percent in
March, up from 4.8 percent in February and up from 4.4 percent
in March of last year.
Over the month the number of unemployed persons grew by
434,000 to 7.8 million. The number of unemployed persons who
were job losers continued to trend up. Job losers represent 54
percent of all unemployed persons in March, up from 48 percent
12 months earlier.
Other groups of unemployed persons include those entering
the labor market for the first time, those re-entering after an
absence, and those who voluntarily leave jobs.
About 1.3 million unemployed individuals had been searching
for work for 27 weeks or more, little changed from a year
earlier.
The number of persons in the labor force increased in
March, reversing the decline in the prior month. The labor
force participation rate has been at or near 66 percent since
last spring. In March, 62.6 percent of the population was
employed, down from a recent peak of 63.4 percent at the end of
2006.
The number of persons working part-time who prefer full-
time employment showed little change over the month but has
risen by 629,000 over the past 12 months.
In summary, payroll employment continued to trend down in
March. Job losses have totaled 232,000 for the first 3 months
of the year. The unemployment rate rose to 5.1 percent.
My colleagues and I would now be glad to answer your
questions.
[The prepared statement of Commissioner Hall appears in the
Submissions for the Record on page 18.]
Mr. Hill. Thank you, Dr. Hall.
The Chair wants to recognize Senator Brownback for an
opening statement.
OPENING STATEMENT OF HON. SAM BROWNBACK, A U.S. SENATOR FROM
KANSAS
Senator Brownback. Thank you very much, Mr. Chairman, and
Commissioner and witnesses. I appreciate very much you being
here. We are all very interested in hearing about recent
developments in the labor force.
Today's news that the economy lost 80,000 payroll jobs
last month and the unemployment rate rose 5.1 percent is
disappointing to all of us. This is not good news. This is bad
news.
We will be working on what we can do to see that that not
go further in a difficult way. I do want to get some questions
to you as we get into a time period for questions whenever that
might be appropriate to be able to ask what--do we see in trend
lines here in the data that can let us know where this is going
or what particular areas seem to be the weakest and where do we
have the potential for strength. Those are the things I'm going
to be curious about as well.
Mr. Chairman, thank you for letting me step in here. We had
two votes on the Senate floor that I had to be at and so I look
forward to the rest of the presentation and some questions.
[The prepared statement of Senator Brownback appears in the
Submissions for the Record on page 19.]
Mr. Hill. I don't know if your other colleagues wish to
make any statements or not?
Mr. Hall. [Nods in the negative.]
Mr. Hill. Let me ask the first question, Dr. Hall. When was
the last time we have had three consecutive months of job
losses?
Mr. Hall. The last time we had three consecutive months was
between April and June in 2003 while the U.S. Labor market was
still recovering from the 2001 recession.
Mr. Hill. Does 3 months of job losses mean that we're in a
recession?
Mr. Hall. I would like to not offer an opinion on that
primarily because of the role of the Bureau of Labor
Statistics. Our mission is to produce relevant and accurate and
objective economic statistics and objective analysis of the
factors underlying the trends devoid of value judgments,
assumptions, or opinions.
So I therefore feel constrained by my position from
offering an opinion on particularly where the economy is going
to go from now.
Mr. Hill. Let me ask it in a different way that may kind of
let you off the hook. In discussions among yourself and other
economists, what is the measurement by which most economists
declare that we are in a recession? Do you know the answer to
that question?
Mr. Hall. There is not a really strong rule of thumb. The
generally accepted group that makes a declaration of a
recession is a committee within the National Bureau of Economic
Research, which is a private nonprofit research organization.
They usually make a determination of a recession.
I can tell you first that a recession is generally defined
as a decline in economic activity spreading across the economy
that lasts for more than just a few months.
This committee typically, as a result, makes the
determination retrospectively. So they do it fairly far down
the line.
For example, the last two recessions they waited until
eight straight months of job loss before they declared a
recession. Other than that, I am not sure there are real strong
rules of thumb.
Mr. Hill. Is the labor market in a recession right now?
Mr. Hall. The real answer to that would be if the labor
market started to shed jobs, or continued to shed jobs for
several months. We have had 3 months of that. We will have to
wait and see where it goes from here.
I am not sure for example the committee would have an
opinion yet as to whether the labor market has been in decline
for long enough for it to be declared a recession.
Mr. Hill. Again, is there a defined length of time among
economists who feel like that we can label this labor market in
a recession?
Mr. Hall. There really isn't. There really isn't. You know,
at this point there are lots of people who have an opinion on
it, and they are quite often right fairly early on, but I don't
know of a consensus rule of thumb on the labor market.
Mr. Hill. But would you be willing to offer that these
statistics that we are hearing today and for the last couple of
months spell trouble for our economy in this country?
Mr. Hall. It is certainly a serious concern.
Mr. Hill. Can you tell us where the job losses began and
what industries are now seeing employment?.
Mr. Hall. Sure. The residential construction industry began
experiencing job losses in early 2006. More broadly, industries
related to the housing market have been shedding jobs for about
the past 2 years, declining by nearly 800,000 over that period.
At the moment now the job losses are appearing broadly. In
fact, just about every sector--there are exceptions--but just
about every sector has had a slowdown in job growth and a
number have actually had job loss at the moment.
In particular for industries that have not had job losses,
that still appear pretty strong, it is pretty much health care
and educational services that remain strong.
Mr. Hill. So we are increasing jobs in those sectors?
Mr. Hall. Yes.
Mr. Hill. What subsectors of the manufacturing industry
have been hardest hit by the recent job losses?
Mr. Hall. Very recently it has been automotive, motor
vehicles. Other than that, I think it is fairly broad in
manufacturing. Manufacturing is an industry that has not
actually had job gains. In fact we have not had a significant
increase in jobs in manufacturing for a decade. So that has
been an industry that has had long term job loss. What has
happened recently of course is the job loss has increased.
Mr. Hill. Well let me ask you, you talk about the
automobile sector having job losses, does that apply just to
American-owned companies in the United States? Or are we
talking about foreign-owned companies that are manufacturing in
the United States as well?
Mr. Hall. Yes. I mean our data includes all manufacturing
in the United States whether it is foreign-owned or domestic-
owned. I do not know the breakout, whether the loss has been
concentrated or not in particular companies.
Mr. Hill. OK. Let me give Senator Brownback the opportunity
to ask a few questions here now as well.
Senator Brownback. Thanks, Mr. Chairman.
Thanks for the data and the information. We had Chairman
Bernanke in earlier this week and he was talking about the
growth in the export market that was taking place as one of the
great sides of the economy.
Do you see any of that reflected in your employment data of
either strength or less weakness in employment and export-
oriented sectors?
Mr. Hall. I would say it is really hard for us to match job
gains or losses in exports directly certainly on a month-to-
month basis, so I really could not say.
Senator Brownback. You mentioned that the construction
industry--when you say on month-to-month, do you see any trend
lines on the export on a broader--on a longer basis on
employment related to exports broader than a few months?
Mr. Hall. No, no, I really don't. It is the sort of thing
where you can do some research and get some idea of what
export-related employment might be, but it is not something we
measure directly. So we have really no way of linking
particular jobs to exports.
For example companies that export quite often will sell
some domestically and some abroad, and it is very hard to
separate it out.
Senator Brownback. I have been touring a number of places
in my state and manufacturing industries had experienced a
significant fall off of employment over the past several years
but have been experiencing some strength recently with the
declining value of the dollar. I didn't know if that is
happening across the country?
Mr. Hall. Well I guess I am saying it may be, but I am not
aware of a trend in export-related employment.
Senator Brownback. The overall unemployment rate rose to
5.1 percent. Where was that rate a year ago? Where were we at a
year ago? Do you recall? Do you have that in any of your data?
Mr. Hall. Yes I think I had it--Yes, 4.4 percent.
Senator Brownback. OK and so has it steadily risen during
that period of time? Or did we see a major jump up in this
first quarter of this year? What are you seeing on the numbers?
Mr. Hall. Well we have seen some month-to-month variation,
but if you look at say quarterly averages of the unemployment
rate, in the first half of the year the unemployment rate was--
of last year, I am sorry--the unemployment rate was about 4.5
percent. Then in the third quarter it went 4.7. In the fourth
quarter it went 4.8. And now this quarter it is 4.9. So it has
been steady.
Senator Brownback. So there has been a steady deterioration
since about the middle of last year?
Mr. Hall. That's correct.
Senator Brownback. So would we ascertain from that that the
economic slowdown started roughly the middle of last year? Or
you do not draw that kind of conclusions from this data?
Mr. Hall. Well I would certainly say the labor market
weakness started over a year ago.
Senator Brownback. You were hesitant to use the word
``recession,'' but would you say we are in a recession relative
to unemployment rates?
Mr. Hall. I would not want to make that judgment. You know
again because if--the important thing about a recession is that
it lasts for longer than just a few months.
Senator Brownback. Well the definition is two quarters of
negative growth is what I have always understood the kind of
classic definition of a recession is.
Mr. Hall. Yes. That was a rule of--that has been sort of a
rule of thumb. That rule of thumb actually was broken the last
recession. We never did have two consecutive quarters of
decline.
I can tell you that the Business Cycle Dating Committee of
the National Bureau of Economic Research, the ones that are
actually--have as closest to an official declaration of a
recession--they look at a lot of things. They cite particularly
the labor market and personal income and industrial production
as really important data that they look at in declaring a
recession.
Senator Brownback. Now Chairman Bernanke talks about slow
performance late last year, you know, the signs of a recession
this year--I think he carefully tries to choose his words--but
then looking at an upward growth in the economy in the second
half of this year.
Do you do any soliciting of groups that you survey to see
if they have employment projections or what they are
anticipating to do looking down the next quarter, two quarters?
Mr. Hall. No, we do not, and the real reason is that we are
too close to the data. We are the ones who produce the
employment data, and we want to give every appearance and every
reason for people to trust us that we are just reporting the
facts. So we stay away from trying to project data in any way.
The exception would be we do do some projections on long
term, 10-year projections on occupations, but that is not
really related to the business cycle.
Senator Brownback. OK. And the biggest falloff in
employment has been the construction industry?
Mr. Hall. That is the one that has been declining the
longest. And this month that was the biggest decline.
Senator Brownback. What of the 80,000 job loss was
associated with the construction industry?
Mr. Hall. I think it was about to fifty, was it fifty-four?
Fifty-one thousand.
Senator Brownback. Oh boy. So you are looking at well over
60 percent of the job loss is in the one industry alone,
construction?
Mr. Hill. Yes, but there were several other industries that
also had job losses that were made up by job gains in other
industries.
For example, as I mentioned, education and health care had
strong job growth. So there were other industries that had job
losses that outweighed the increase in say health care and
education.
Senator Brownback. What were the other major ones?
Mr. Hall. Well manufacturing this month was the second-
biggest decline.
Senator Brownback. With how many job losses there?.
Mr. Hall. I'm sorry, I should remember this. I just looked
at it--a 48,000 job loss.
Senator Brownback. OK and what is behind them? What is the
next one behind it?
Mr. Hall. Let me grab my data here really quickly.
Professional business--professional and business services lost
35,000 jobs.
Senator Brownback. What is in that category? What is the
big one in that category?
Mr. Hall. That includes employment services and temporary
help. That particular sector in particular lost a number of
jobs.
Senator Brownback. So that is telling us that companies are
not putting on temps? Is that what you are saying to us?
Mr. Hall. Yes.
Senator Brownback. And that--I mean it seems to me that
that would be one of the first moves the company would make.
The first thing would be well we are not going to hire any
temps this month.
Mr. Hill. Yes, that is part of why I think that is an
important thing to note, that that is a concern.
Senator Brownback. So if you took construction and
manufacturing together, what percentage of the job loss--was it
well over 100 percent?
Mr. Hall. Right.
Senator Brownback. I mean if we are just looking at those
numbers because it was offset by gains in education and health
services?
Mr. Hall. Correct.
Senator Brownback. Those are the--the big losing areas are
construction and manufacturing?
Mr. Hall. Yes.
Senator Brownback. And you don't provide any more granular
data on manufacturing as to which sectors in manufacturing?
Mr. Hall. Well we have a split-out between durable and
nondurable goods, for example.
Senator Brownback. The reason I am asking this is, you know
obviously we are looking at a number of policy issues up here
for what we can do to try to stimulate the growth, and I think
everybody's key focus has been on the housing market and what
we can do to stimulate the housing market, which would
certainly be supported by your data. And then some people are--
well I--certainly saying we cannot raise taxes in this
environment because that is going to hurt the economy when it
is clearly in difficulty.
So whether it is in durable or nondurable may really tell
us something about the consumer nature of this.
Mr. Hall. Well we do have it split out where we have been
breaking out housing-related industries. So we collect all the
industries that are related to the housing market.
The housing-related industries together lost about 68,000
jobs this month.
Senator Brownback. 68,000 in all housing-related. So that
would include your durable goods that you put into a house? Is
that what you're telling me?
Mr. Hall. Yes, and it would include some services as well.
It is everything from furniture to real estate services, to
things like----
Senator Brownback. So that fall-off in the housing market
is a key piece of this data. That is the big piece of this
data?
Mr. Hall. Yes. But I would say though that the weakness is
much broader than that. There is weakness well beyond just the
housing-related industries. And there is now some job loss in
industries that have nothing to do with housing.
Mr. Hill. Let me interject here for just for a minute, if--
--
Senator Brownback. I'm sorry, I thank you for letting me
question----
Mr. Hill. No--and if you have more questions feel free to
ask them.
But I want to make sure this math adds up here. We lost
80,000 jobs in March, correct?
Mr. Hall. Yes.
Mr. Hill. But you mentioned that we lost 51,000 in
construction jobs in March?
Mr. Hall. Yes.
Mr. Hill. And 48,000 in manufacturing?
Mr. Hall. Yes.
Mr. Hill. And 35,000 in ``others''?
Mr. Hall. Yes.
Mr. Hill. That adds up to 134,000 jobs.
Mr. Hall. Right. Now there is little overlap, for example,
because some of the manufacturing is related to housing. And
then, you know, we had some industries with job gains. So on
net it came out to be a negative 80,000.
Mr. Hill. OK, how many jobs in the health and education
field were gained?
Mr. Hall. 42,000 jobs.
Mr. Hill. 42,000 new jobs were gained?
Mr. Hall. Yes.
Mr. Hill. OK, that answers my question then.
Senator, feel free to ask more questions.
Senator Brownback. Thank you for letting me do this, and
thank you for participating with me on this. I mean this really
helps to try to figure what we ought to be targeting with this.
On the manufacturing side of the job loss, is this part of
a long-term trend? Or is this part of, if you take out the
housing market on this and the durable-good manufacturing,
which I don't know if you do split that out that way, but is
this just a continuation of a long-term trend? Or is this a
part of the weakness in the economy?
Mr. Hall. It looks to me like it is part of the weakness in
the economy. The long-term trend has been for manufacturing to
shed a few jobs, but the job loss in manufacturing has
accelerated as the general labor market weakness has increased.
Senator Brownback. OK, and it is primarily in durable goods
in manufacturing? Or what is the breakout on that?
Mr. Hall. OK. Well, for example, just this month about
35,000 in durable goods, about 24,000 of that was in motor
vehicles and parts. And in nondurable goods, it is about
13,000.
Senator Brownback. 13,000 in nondurable?
Mr. Hall. Right.
Senator Brownback. And what is it in automotive, 28,000?
Mr. Hall. About 24,000.
Senator Brownback. 24,000 of the 34,000 in durable?
Mr. Hall. Yes.
Senator Brownback. OK, so we have got a real weakness in
the automotive sector continuing there? Correct?
Mr. Hall. Correct.
Senator Brownback. And that is showing up. And then what is
the big piece in the nondurable?
Mr. Hall. To be honest, it is pretty broad. Everything from
food manufacturing, textile mills, apparel, petroleum and coal
products, plastic and rubber products, those all lost jobs
within the nondurable goods sector.
Senator Brownback. Any thought as to why on those?
Mr. Hall. I don't, but it is certainly consistent with just
the general weakening in the economy.
Senator Brownback. That people are just spending less
money?
Mr. Hall. Yes.
Senator Brownback. So that the stimulus package which put
forward toward consumers is one we would hope would go at that
particular sector?
Mr. Hall. Exactly. Yes. And actually it would hopefully
affect everything.
Senator Brownback. What about the financial activities
sector? Because, you know, we had the big Bear Stearns bailout
and the problems there. Are we seeing substantial job losses in
that category?
Mr. Hall. Yes, the financial activities sector lost about
5,000 jobs. It is actually a bit weaker than that in the sense
that that is normally a sector that has pretty solid job
growth. So has weakened to the point where I guess we lost
5,000 jobs this month.
Senator Brownback. So that one is more alarming than the
number might portend because it has been a growth sector?
Mr. Hall. Yes.
Senator Brownback. OK. All right, thank you for breaking
that out.
Any thoughts on policy issues that are helpful or harmful?
I think everybody here wants to see what we can do that would
be helpful, particularly in the job creation and sustaining
roll.
Mr. Hall. I am afraid I am constrained by my job since the
Bureau produces the data and we want to remain objective and
just let the data speak for itself as much as possible. So I
want to steer clear of talking about policy issues.
Senator Brownback. A wise man.
Thank you, Mr. Chairman.
Mr. Hill. Thank you, Senator.
Dr. Hall, we appreciate your testimony. Senator Brownback
pointed to the fact that the unemployment rate rose 5.1 percent
last month, and your testimony in answer to his question was
that this was not a spike but more of a trend upwards.
Yesterday, the Department of Labor reported that last week
applications for unemployment benefits rose above 400,000.
Before this, we are learning that those who have applied for
unemployment insurance have had their unemployment insurance
expire because they have been out of a job for longer that what
the law allows.
I know we do not like to define whether or not--with these
statistics whether or not we are in a recession, but many
economists consider this 400,000 mark as an indication that the
labor market is in a recession.
Your comments?
Mr. Hall. In particular that data is a weekly series so it
is highly volatile. It has got value, but to some degree it is
sort of trumped I think by the payroll data. Once we report the
payroll data like we are today, you have got sort of the same
information that you got from the unemployment insurance
claims.
Now to the degree this may imply something about next
month's employment report, I don't know.
Mr. Hill. What share of the U.S. population has a job right
now?
Mr. Hall. I have to look that one up. About 62.6 percent.
Mr. Hill. OK, and how long has it been since the share of
Americans with a job was this low?
[Pause.]
Mr. Hall. I'm sorry but it will take me a minute to dig
that out.
Mr. Hill. OK.
Mr. Hall. Since March of 2005.
Mr. Hill. March of 2005.
Senator Brownback in his remarks commented that we are
trying to figure out what we should be doing from our end in
order to stem the tide of all these negative statistics. Some
have argued that we need to pass legislation to extend benefits
to the long-term unemployed because the unemployment rate
remains relatively low.
In the recessions of the early 1990s and early 2000, the
unemployment rate was at 7 percent and 5.7 percent,
respectively. It was at that time that Congress extended
unemployment insurance benefits higher than it is today. As a
matter of policy do you have any comment as to whether this is
a wise approach that we should be looking at?
Mr. Hall. I think I am going to give a similar answer to
what I did a minute ago. Since the Bureau of Labor Statistics
is producing this data and we want to keep our reputation as
being objective reporters of data, I am going to try not to
give an opinion on policy issues.
Mr. Hill. You are good at not being pinned down, Dr. Hall.
Let me switch gears here a bit. The dollar is very low
right now. It seems to me that because the dollar is low that
exports ought to be going up. Are exports going up in this
country?
Mr. Hall. We do not produce the export data but I think
export growth has been fairly strong for a period, but I don't
have that data right in front of me.
Mr. Hill. Do you have any data showing what kind of
employment rate is tied to exports?
Mr. Hall. No, we do not.
Mr. Hill. OK. My understanding is that wage growth should
be tied to the productivity of workers. Is it correct that
output per hour in the nonfarm business sector has grown at a
1.9 percent average annual rate, but the real hourly
compensation, pay-plus-benefits, of workers producing that
output actually decreased 0.5 percent in the fourth quarter of
2007? Looking at this graph to my left, you can see that real
earnings have dropped over the last several months.
Your comments?
Mr. Hall. Well those figures that you just quoted are
correct. Would you like me to talk about productivity and wage
growth a little bit? Is that what----
Mr. Hill. Yes, please.
Mr. Hall. Oh, sure. Historically there has been a pretty
good link between productivity growth and real wage growth, in
particular productivity growth and real hourly compensation,
labor compensation which includes both wages and non-wage
benefits. The numbers that you cite show that the gap between
labor productivity and real compensation growth is actually
wider than it usually is.
Now it is not unusual for this gap to get wide after a
recession as part of the business cycle, but usually by this
point that gap has closed. And this time it is not yet closed.
Mr. Hill. Is this a trend? And if it is, does this trend
tell us anything about the state of the economy?
Mr. Hall. Well obviously I don't know what the trend is
going to be like going forward. And, to be honest, I do not
know what this is going to tell us about the economy if this
gap does not close.
All I can tell you is that this gap has always closed
pretty much between 1973 and say 2001. The gap has been pretty
constant at a fairly narrow rate of something like a half a
percentage point.
Mr. Hill. Since when did you say?
Mr. Hall. Since 1973 to 2001.
Mr. Hill. OK. Employers labor costs include not only wages
and salaries but also benefits. When labor costs rise to
increases in health insurance, how does that affect your
measures of employee compensation?
Mr. Hall. Well we do have measures of employee compensation
that include health insurance costs when the health insurance
is provided by employers. So when the health-insurance costs go
up, compensation does go up by our compensation measures.
Mr. Hill. OK, we are getting near the end of the questions
that I have. I would invite Senator Brownback, if he has any
further questions, before I end up this committee meeting to
ask his questions.
Senator Brownback. Thank you, Mr. Chairman, and thank you
for allowing me to ask so many.
I find this real interesting. In part of your report you
are saying the duration of unemployment has shortened at this
point in time from what it was a year ago. Is that correct?
Mr. Hall. Let me scramble for just a second and get the
data here.
Senator Brownback. You are saying that the duration, the
mean, the average duration of unemployment decreased in March
of 2008 to 16.2 weeks from 16.8 weeks in the preceding month,
and a year ago it was 17.2 weeks.
Mr. Hall. I am sure that is correct. I just want to find
the data.
Senator Brownback. Well it just kind of jumped out at me
because I had thought that would have gone differently but it
would have a bearing on whether or not to extend unemployment
benefits.
Mr. Hall. Yes. I think the thing that is probably
indicating is that when job loss--when we start to lose jobs
the duration goes down because you have newly unemployed
people.
Senator Brownback. Ah, thank you. OK, so that that is a
reflection of the bigger number of unemployment taking place,
rather than that people are unemployed for a less period of
time.
Mr. Hall. Correct.
Senator Brownback. All right. Thank you for explaining that
because I looked at that and it seemed odd to me.
Thank you, very much.
Thank you, Mr. Chairman.
Mr. Hill. Thank you, Senator.
Consumer spending has remained stagnant in February. It was
0.1 percent in January. In your view does this trend portend
for the labor market--in your view, what does this trend
portend for the labor market in the months to come?
Mr. Hall. Well I kind of want to stay out of the business
of forecasting the labor market. Again, because we produce the
data I do not want to sort of try to guess what the data is
going to be.
Mr. Hill. But there is a connection between consumer
spending and this trend, right?
Mr. Hall. Oh, absolutely. Absolutely. And consumer spending
actually has been weakening, and I think that has been part of
this broader weakening in the labor market, is because consumer
spending is going down. That's sort of why we are probably
seeing the job loss or job weakness extending beyond just
housing-related industries.
Mr. Hill. I know of your reluctance to define whether or
not we are in a recession, but if at some point that we declare
that we are in a recession, how long does it take for
employment to recover to its pre-recession peak?
Mr. Hall. The last four recessions, the average time was
about 20 months. The most recent recession was unusually long.
That took 39 months.
Mr. Hill. And how long do wages and other compensations
take to recover?
Mr. Hall. Well in terms of the level, the level of wages is
very quick. Because wage growth does not pause very much. That
is only maybe a couple of quarters. But in terms of--not in
terms of levels but in terms of growth of wages, in the last
couple of recessions wage growth rates have never recovered
actually.
Mr. Hill. OK. So based upon your analysis of today's
report, I know you were not willing to say that we are in a
recession, but does it appear that we may be in a difficult
period for the labor market in the months to come?
Mr. Hall. I will say, I hope not.
Mr. Hill. You hope not?
Mr. Hall. Yes.
Mr. Hill. And that is all you will add?
Mr. Hall. Again, I do not want to forecast what our future
data may look like.
Mr. Hill. I want to take a step back to the long-term
unemployed. The number of long-term unemployed is still higher
than it was at the beginning of the last recession. Is that
correct?
Mr. Hall. That is correct.
Mr. Hill. OK. So, Dr. Hall, and your colleagues, we thank
you very much for coming here this morning. Obviously the
numbers that you have reported here today are not good, but we
must as Members of Congress face the reality that this economy
is sputtering along.
If you are unwilling to define it as a recession, I think
it is fair to say that this economy is in trouble. Would you be
willing to say that?
Mr. Hall. I would say that the labor market is certainly
weaker than we would like to see it, and it has certainly been
weakening.
Mr. Hill. Well, there are people suffering out there. I
mean, we deal with these statistics but the statistics are
statistics of real people and real pain out there among people
who are struggling to make a living. Not only are they losing
their jobs, but they are paying over $3 a gallon for gasoline.
Their health-care costs are going up. In my state, property
taxes have been going up dramatically, and I believe that we
should recognize that people are suffering out there and that
the Congress needs to respond to try to provide some relief.
So with that said, let me thank you all for appearing here
this morning. We appreciate your willingness to come, and we
thank you for the data that you have provided to us this
morning.
Mr. Hall. Thank you.
Mr. Hill. This committee is adjourned.
[Whereupon, at 10:18 a.m., Friday, April 4, 2008, the
hearing was adjourned.]
Submissions for the Record
=======================================================================
[GRAPHIC] [TIFF OMITTED] T2946.002
Prepared Statement of Senator Schumer, Chairman
schumer: today's jobs report is a shot across the bow
Joint Economic Committee Holds Hearing with BLS Chairman on Employment
Picture Showing 80,000 Jobs Lost in March and 232,000 in 2008
Today, the Bureau of Labor Statistics (BLS) released the monthly
jobs report that showed a loss of 80,000 jobs in March and 232,000 jobs
lost over the last three months. Sen. Charles E. Schumer, the Chairman
of the Joint Economic Committee (JEC), released a statement on these
bleak numbers and their impact on our economy. The JEC convened a
hearing on the employment situation this morning with the BLS
Commissioner, Keith Hall, chaired by Rep. Baron Hill (D-IN).
Sen. Schumer's statement follows:
``Today's jobs report is a shot across the bow for the
administration that has not acted in the face of serious economic
troubles. Even with falling home prices, rising foreclosures, job
losses, and no economic growth, we have an administration that refuses,
in a Hoover-like way, to take off its ideological handcuffs and help
the economy. It's no surprise that nearly 80% of Americans are
pessimistic about the direction of our country right now.''
``And the Bush administration continues to be a day late and a
dollar short in responding to the economic realities we are facing. The
President is traveling abroad this week, but in reality he's been on a
year-long vacation from the country's economic problems. President Bush
is literally and figuratively in Bucharest.''
``Today's job report is alarming and much weaker than expected. We
lost 80,000 jobs in March--the third straight month of losses--the
first time in 5 years we've experienced such a string of job loss.''
``As if the March news wasn't bad enough, we have also learned
today that job losses for January and February were worse than
reported. We now know that 60,000 more jobs were lost than the
government data showed last month.''
``Chairman Bernanke was here on Wednesday and he came as close to
saying that we're in a recession as he has so far. He walked up to the
door, knocked on it, and someone opened it--but he didn't walk in. It
crystal clear to Americans that we're in a recession. The report of
80,000 jobs lost in March, and 232,000 jobs lost so far this year, is
an elephant in their living rooms.''
The Joint Economic Committee, established under the Employment Act of
1946, was created by Congress to review economic conditions and
to analyze the effectiveness of economic policy.
www.jec.senate.gov
###
__________
Prepared Statement of Representative Baron P. Hill
Good morning. I am honored that Chairman Schumer and Vice Chair
Maloney have asked me to preside today.
I want to welcome Commissioner Hall and thank him for testifying
here today on the March employment situation.
I have a vested interest in these numbers as I have seen first hand
how the recent economic downturns have affected my constituents. In
Bloomington, Indiana, the GE refrigerator plant announced in February
that it will close by the end of 2009. This will result in a loss of
900 jobs for the area. Job losses like this are occurring throughout
the country, as today's employment numbers highlight.
The labor market news keeps getting worse and today's report is no
exception. The unemployment rate jumped to 5.1 percent in March and
nonfarm payroll employment fell 80,000 jobs. March marks the third
consecutive month of jobs losses, for a total of 232,000 jobs lost in
the first quarter of this year. We haven't seen job losses like this
for nearly five years.
On Wednesday, Federal Reserve Chairman Ben Bernanke told this
committee that a recession is possible. Yesterday brought news that
weekly unemployment benefit claims rose above 400,000, a level that
typically signals that the labor market is already in recession.
Indeed, the Federal Reserve and many private sector economists expect
unemployment to climb throughout the year.
We seem to be a long way away from a healthy economy--which usually
adds about 150,000 to 200,000 jobs each month--since the economy has
lost 77,000 per month on average in the first quarter of this year. The
widespread job losses we are seeing are a clear indication to me that
the economy is in trouble.
For nearly two years now, the manufacturing industry has shrunk and
since the beginning of 2006, motor vehicles and parts manufacturing
alone has lost 172 thousand jobs. These trends adversely affect my
state's economy, as Indiana has a high proportion of manufacturing jobs
compared to the rest of the country. In Indiana we have seen an average
unemployment period of 9 weeks. And, as of the fourth quarter of 2007,
40 percent of unemployed Hoosiers have now exhausted their unemployment
benefits, the eleventh highest rate in the nation.
Congress should consider a proposal to provide an extension of
unemployment benefits that would last an additional 13 weeks for those
who have exhausted their regular six month benefits while looking for a
new job. Workers who could receive these benefits are those who have
lost their job through no fault of their own--they have the bad luck of
working for a business that must lay off workers or close it doors due
to the weakening economy, like the workers in the Bloomington GE plant.
Extending unemployment benefits to struggling workers should be a high
priority.
Wages are not keeping up with the rising cost-of-living. Sky-high
gas prices and rising healthcare costs add to the pinch for families.
These elements have combined to create the lowest consumer outlook for
the economy in 35 years.
I want to thank Mr. Hall and his colleagues for being here to
discuss today's labor statistics, and I look forward to the continued
focus on labor market conditions by this Committee.
__________
Prepared Statement of Keith Hall, Commissioner, Bureau of Labor
Statistics
Mr. Chairman and Members of the Committee:
Thank you for this opportunity to discuss the March labor market
data we released this morning.
Nonfarm payroll employment continued to trend down in March, and
the unemployment rate rose from 4.8 to 5.1 percent. Payroll employment
edged down by 80,000 over the month, bringing the decline over the last
3 months to 232,000. To put these recent changes into context, I would
note that labor market conditions started to weaken more than a year
ago. Average monthly job growth slowed from 175,000 in 2006 to 107,000
in the first half of 2007, to 76,000 in the last half of 2007, and to -
77,000 for the first quarter of this year. The unemployment rate
remained at or near 4.5 percent during the first half of 2007 but rose
to 4.7 percent in the third quarter, 4.8 percent in the fourth quarter,
and 4.9 percent in the first quarter of this year.
Returning to the payroll employment figures for March, job losses
occurred in construction, manufacturing, and employment services. Job
growth continued in health care, food services, and mining.
The construction industry lost 51,000 jobs over the month, with
declines concentrated in residential and nonresidential specialty trade
contracting. Since its peak in September 2006, construction employment
has fallen by 394,000.
Manufacturing employment decreased by 48,000 in March. Motor
vehicle manufacturing employment was down by 24,000; this decline
largely reflected the impact of a strike at an automotive parts maker.
The resulting parts shortage triggered plant shutdowns and idled
workers at non-striking motor vehicle factories. Elsewhere in
manufacturing, there were job declines in several construction-related
industries--wood products, furniture, and nonmetallic minerals. Both
manufacturing hours and overtime were up by one-tenth of an hour.
In the service-providing sector, employment services shed 42,000
jobs in March. This industry group includes temporary help services.
Over the past 12 months, employment services has lost 158,000 jobs,
three-fourths of which were in temporary help. Professional and
technical services employment was little changed for the third
consecutive month, compared with average monthly job gains of 27,000 in
2007.
Elsewhere in the service-providing sector, employment growth
continued in health care and in food services; each industry added
23,000 jobs in March. In the goods-producing sector, mining employment
rose by 6,000 due to gains in oil and gas extraction and related
support activities.
Average hourly earnings for production and nonsupervisory workers
in the private sector rose by 5 cents in March and have increased by
3.6 percent over the past 12 months. From February 2007 to February
2008, the Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W) rose by 4.5 percent.
Turning to labor market data from the survey of households, the
number of unemployed and the unemployment rate both rose over the
month. The jobless rate was 5.1 percent in March, up from 4.8 percent
in February and from 4.4 percent in March of last year. Over the month,
the number of unemployed persons grew by 434,000 to 7.8 million. The
number of unemployed persons who were job losers continued to trend up.
Job losers represented 54 percent of all unemployed persons in March,
up from 48 percent 12 months earlier. (Other groups of unemployed
persons include those entering the labor market for the first time,
those re-entering after an absence, and those who voluntarily leave
jobs.) About 1.3 million unemployed individuals had been searching for
work for 27 weeks or more, little changed from a year earlier.
The number of persons in the labor force increased in March,
reversing a decline in the prior month. The labor force participation
rate has been at or near 66.0 percent since last spring. In March, 62.6
percent of the population was employed, down from a recent peak of 63.4
percent at the end of 2006. The number of persons working part time who
prefer full-time employment showed little change over the month but has
risen by 629,000 over the past 12 months.
In summary, payroll employment continued to trend down in March,
and job losses have totaled 232,000 for the first 3 months of the year.
The unemployment rate rose to 5.1 percent.
My colleagues and I now would be glad to answer your questions.
__________
[GRAPHIC] [TIFF OMITTED] T2946.001
Prepared Statement of Senator Sam Brownback
Thank you, Representative Hill, and thank you Commissioner Hall for
appearing before this committee. We are all very interested in hearing
about recent developments in our Nation's labor markets.
Today's news that the economy lost 80,000 payroll jobs last month
and that the unemployment rate rose to 5.1% is disappointing all of us.
However, the unemployment rate does remain low by historical standards.
I will be interested to hear the degree to which job losses remain
confined primarily to the manufacturing and construction sectors or if
weakness has spread to other sectors as well.
We often hear from the other side of the aisle that, somehow, the
administration's policies are responsible for low growth in inflation-
adjusted wages, high unemployment rates in some sectors of the labor
markets, and anemic economic growth. Somehow, the administration's
policies simply favor the rich, or look out for Wall Street, instead of
Main Street. I have yet to hear from the other side, however, precisely
what those policies are that are responsible for some of the slowdown
in economic activity that we are currently observing. Is it low taxes
that lead to slower economic activity or the discrepancy between
productivity growth and wage growth? Is that the policy that is
responsible for the economic slowdown?
You might even think, given budget proposals from the other side of
the aisle, that allowing current tax policy to expire--which is the
same thing as increasing taxes without taking votes--will help
stimulate out economy. I wonder what set of economic principles lead
those on the other side of the aisle to believe that the higher taxes
and bigger government that they seek will give rise to more prosperity
in the private sector. To the contrary, I believe that if we allow pro-
growth tax policies that we instituted in 2001 and 2003 to continue,
then we will allow the American people to keep more of their hard-
earned income to use to provide for their families.
The economic lessons that I learned in school suggest that if we
keep taxes low, and we work toward a leaner and more efficient
government, then people have the proper incentives to work hard for
their families because they can keep their hard earned income, choose
how to use it for their families well being, and not have to send money
to fund inefficient government spending.
I am anxious to hear about the status of our Nation's labor markets
and look forward to Commissioner Hall's testimony.