[Joint House and Senate Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 110-862
THE EMPLOYMENT SITUATION: APRIL 2008
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
MAY 2, 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 Cummings, Maryland
Jim Webb, Virginia Lloyd Doggett, Texas
Sam Brownback, Kansas Jim Saxton, New Jersey, Ranking
John 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, Minority Staff Director
C O N T E N T S
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Opening Statements of Members
Hon. Amy Klobuchar, a Senator from Minnesota..................... 1
Hon. Robert P. Casey, a Senator from Pennsylvania................ 4
Witnesses
Statement of Keith Hall, Commissioner, Bureau of Labor
Statistics, Accompanined by John Galvin, Associate Commissioner
for Emmployment and Unemployment Statistics, and Michael W.
Horrigan, Associate Commissioner for Prices and Living
Conditions..................................................... 5
Submissions for the Record
Chart entitled ``There Are More Long Term Unemployed and More
Workers Exhausting Unemployment Benefits Than at the Beginning
of Previous Two Recessions''................................... 28
Prepared statement of the Honorable Charles E. Schumer, Chairman. 29
Prepared statement of Dr. Keith Hall, Commissioner, Bureau of
Labor Statistics, together with Press Release No. 08-0588...... 30
Witten analysis from Dr. Keith Hall to Hon. Robert P. Casey...... 59
Written analysis from Dr. Keith Hall to Hon. Amy Klobuchar....... 66
Chart entitled ``Income and Expense Changes 2000-2007''.......... 69
Chart entitled ``Income and Expense Changes, Working Parents, One
Small Child 2000-2007''........................................ 70
Chart entitled ``Income and Expense Changes, Families with One
Child in College 2000-2007''................................... 71
Chart entitled ``Total Consumer Debt, 2000-2007''................ 73
THE EMPLOYMENT SITUATION: APRIL 2008
----------
FRIDAY, MAY 2, 2008
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met at 9:30 a.m. in Room SD-562 of the
Dirksen Senate Office Building, the Honorable Amy Klobuchar,
presiding.
Senators present: Klobuchar and Casey.
Staff present: Christina Baumgardner, Heather Boushey,
Stephanie Dreyer, Gretta Goodwin, Colleen Healy, Annabelle
Tamerjan, Chris Frenze, Bob Keleher, Tyler Kurtz, Jeff
Schlagenhauf, and Jeff Wrase.
OPENING STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR FROM
MINNESOTA
Senator Klobuchar [presiding]. We are calling the hearing
to order of the Joint Economic Committee on this month's
Unemployment statistics.
I want to thank our witnesses for being here, Commissioner
Hall, and Dr. Horrigan, and Mr. Galvin. Thank you very much for
being here.
I think we all know what has been going on in this country.
We have lost 260,000 jobs in just the first four months of this
year. Twenty thousand jobs were lost this past month.
We also have the phenomenon that more and more workers are
going part-time, and reducing their hours, and the other
phenomenon we are going to discuss here today and why we are in
such trouble right now, or workers are in such trouble, is
because at the same time you see reduced hours, stagnant wages
or in fact declining wages, you see expenses going up.
And I am looking forward to discussing in detail what all
of these numbers mean. I do think that we would not be fair if
we did not say that we are in tough times. I say that after
visiting with people all over my State and seeing what is going
on with them. And some of them may have jobs, but they have
seen such stagnant wages, and with the rise of costs in
gasoline and the rise in cost of health care and other things,
it is getting tougher and tougher for them to get by. And they
look for a second job, and they cannot find them because of
course we are having less jobs in this country.
What has been going on is that the wealthiest 1 percent of
the United States families is garnering the largest share of
income since 1929, while most of America is just struggling to
hang on.
Middle-class income has fallen over $2000 since this
Administration has taken office, a phenomenon that we have not
seen in 50 years.
Meanwhile, the cost of virtually everything has
skyrocketed, from heating bills, to groceries, to gas, to
health care, and college tuition. For many families even some
basic necessities seem out of reach.
Just yesterday we had a hearing in this very room of the
Joint Economic Committee about the price of food. We had food
banks testify about how they are stretched thin. We had a baker
testify about how difficult it is for bakers to pay for wheat.
And in fact there has been some interesting work done on
this that I will be asking our witnesses about later by a woman
at Harvard, a professor there, who has shown this lost income
of wages. And she actually tracked it from 2000 to 2007.
She showed the total lost income and increased expenses for
your average American family comes to $5739. And I will be
passing out copies of this in about ten minutes or so. She
showed that the lost income is $1175 for the average American
family between 2000 and 2007. And then she was able to show how
the expenses have increased.
Higher mortgage payments, again this does not include 2008,
higher mortgage payments, $1729 a year.
Higher gas bills, $2081 a year.
Higher food costs, $237 a year--again not including even
what's been going on in 2008.
Higher phone bills, land line, $112.
Higher appliance costs, $42.
Higher health insurance costs, $363.
And when you have families with children, there has been
even a greater change with increased daycare, increased after-
school, and increased state college costs.
So you see this net basically of $5739 per year that the
average American family has lost. I bring this up in the
context of the unemployment rate, and the reduction in hours,
and real wages for Americans because that is what so many
middle-class families are experiencing. That is why they have
been putting more of their debt on credit cards, because they
literally are not keeping up.
Americans are facing the largest loss of wealth since the
Great Depression. And here you have a chart showing that, that
the Stock Market lost $2.7 trillion in value since May of 2007.
The crisis has wiped out $2.7 trillion in home values. And the
dollar has lost a third of its value. And the Federal Debt has
nearly doubled in the last eight years. And for too many
families across the country the dream of owning a home is
turning into a nightmare. Every day 8000 more families lose
their homes to foreclosure. Between January and March of this
year, 1 out of every 194 households received notice of default,
auction sale, or bank repossession.
What started as a foreclosure crisis has now had more than
ripple effects. It is turning into a tsunami across the entire
country.
For many people in my State who are paying their mortgage,
like I have, they say: Well, why does this matter to me? I pay
my mortgage. But what they have finally begun to realize is
that it is affecting home values across this country.
In my State we have seen a 10 percent decrease in home
values. When Chairman Bernanke testified before our Joint
Economic Committee a few weeks ago he agreed that what started
as a foreclosure crisis is now in fact the root of the economic
crisis.
As of this month there are 7.6 million Americans
unemployed. But with the continuous loss of jobs, they are now
vying for 3.9 million available jobs. The number of unemployed
workers is almost double the amount of jobs that they can find.
More and more jobs are disappearing each month. In January
through March, as I mentioned, we lost a total of 240,000 jobs.
And for some industries the losses are particularly felt, and
that is something I think we should discuss in this hearing.
There is a difference between industries. In construction this
month we saw a loss of 61,000 jobs. In manufacturing we saw a
loss of 46,000 jobs. In retail we saw a loss of 27,000 jobs.
What today's numbers also show is that, while some
companies have not been cutting jobs, they have been cutting
back on hours. Across the board manufacturing hours were down,
as was factory overtime. And remember, when we are talking
about families that have seen this $4500 a year increase in
expenses, when they lose some of their overtime this is what
puts them over the edge in terms of their family expenses.
While this might sound insignificant for many of us that
they lost a little overtime, or they got their hours cut back,
for them these lost hours can literally make the difference of
paying their mortgage or not paying their mortgage.
Unemployment rates in the month of April remained high.
What we have also seen is that those that have not been able to
find a job are exhausting their unemployment benefits. In
Minnesota 52,000 people are expected to lose their unemployment
benefits without having found work. That is 5000 more than last
year. And as you see here on this chart, which is the
Unemployment Exhaustion chart, nationally long-term
unemployment and exhaustion rates have continued to rise.
[Chart entitled ``There Are More Long Term Unemployed and
More Workers Exhausting Unemployment Benefits Than at the
Beginning of Previous Two Recessions'' appear in the
Submissions for the Record on page 28.]
While they were unemployed, these people paid into the
Unemployment Compensation Fund, a fund that currently has a
surplus of $35 billion. They paid into this insurance, and now
they are running out of resources. In every other economic
downturn when we have seen this kind of exhaustion of
unemployment benefits, the Administration has extended
unemployment.
Time and time again people in this situation have
appropriately been given relief through an extension of
unemployment benefits by 13 to 26 weeks. But we have not seen
this kind of relief yet from this Administration.
These unemployment numbers are hitting our veterans as
well. Members who have bravely served overseas now are standing
in unemployment lines back home. I figure when these men and
women signed up for war, there was not a waiting line, and we
would hope that when they come home after serving our country
there should not be a waiting line to get a job.
This shows how recent veterans are having a hard time
finding work. Their percentage in the total workforce, all
veterans serving after September 2001, and the percentage of
young male veterans serving after September 2001 with the
unemployment rate. So 11.2 percent of young male veterans
serving after September 2001 are now unemployed, which is a
higher rate than of course the national average.
It is unbelievable that we cannot do more to help the men
and women that protect this country to find a way to provide
for themselves or their families upon returning.
As layoff rates are expected to increase to 68 percent for
U.S. companies, and prices for everything from college tuition,
to health care, to food, continue to rise, it looks like we
will likely have to brace ourselves for continued increases in
unemployment.
I look forward to hearing from Commissioner Hall and what
the numbers for April can tell us about the economic outlook,
and working with my colleagues in the Senate to bring much
needed relief to American families feeling the pressure of this
economic downturn.
With that, I am pleased that Senator Casey has joined us,
from Pennsylvania, and I will give him an opportunity for an
opening statement.
[The prepared statement of the Honorable Charles E. Schumer
appears in the Submissions for the Record on page 28.]
OPENING STATEMENT OF HON. ROBERT P. CASEY, A U.S. SENATOR FROM
PENNSYLVANIA
Senator Casey. Madam Chair, thank you very much for calling
this hearing, and also for the testimony that you just
provided. You covered virtually every aspect of this challenge
to our economy and the challenge for our families.
I just wanted to highlight a couple of basic numbers that
we know about today, and I know we will explore these further,
but one of the numbers that jumped off the page to me when I
looked at the preliminary analysis of today's numbers was the
number of manufacturing jobs.
Manufacturing employment fell by 46,000 over the month.
That is troubling even in light of the overall number, which
the decrease is less than it was last month, but that
manufacturing number is very high, just as it was a month ago
and virtually every month in the recent past.
Senator Klobuchar made the point about long-term
unemployed. This is a huge problem for the country, the
challenge posed by those numbers that we saw for our veterans,
especially young male veterans.
Also I think when you combine all of this economic data
with the other data that we see, not only on jobs but on the
housing crisis, health care costs, college tuition, food, and
of course gasoline prices. I was noting in a summary of
Pennsylvania data that households with children in Pennsylvania
are paying $2920 more per year for gasoline than when President
Bush took office.
So when you combine all of that, the misery, the hardship,
the trauma that has been heaped upon families in this country
is almost bringing them to the breaking point. They cannot
often make ends meet just to get through the week, just to get
through the month, just to provide basic necessities for their
children, and that all starts with jobs, or lack thereof.
I am interested in hearing the testimony today of
Commissioner Hall, and all of our witnesses, but this is a
challenge for the country. I think the Administration has to
take much more dynamic and focused actions to deal with this
issue.
If anything, there has been almost a state of denial that
things are not that bad. No one believes that. No one that I
know believes that this country is headed in the right
direction. And these numbers today, and the other data that we
just highlighted, points to that very basic concern that a lot
of families feel.
So we are grateful for the testimony that will be provided
today, and I want to thank Senator Klobuchar for her leadership
on the central challenge faced by American families. And that
is, the economic challenge, and in particular the challenge of
job loss, and the challenge of economic trauma in the life of a
family.
Thank you, very much.
Senator Klobuchar. Thank you very much, Senator Casey.
Commissioner Hall.
STATEMENT OF DR. KEITH HALL, COMMISSIONER, BUREAU OF LABOR
STATISTICS, U.S. DEPARTMENT OF LABOR, ACCOMPANIED BY: JOHN
GALVIN, ASSOCIATE COMMISSIONER FOR EMPLOYMENT AND UNEMPLOYMENT
STATISTICS, U.S. DEPARTMENT OF LABOR, AND MICHAEL W. HORRIGAN,
ASSOCIATE COMMISSIONER FOR PRICES AND LIVING CONDITIONS, U.S.
DEPARTMENT OF LABOR
Commissioner Hall. Madam Chair, Members of the Committee:
Thank you for the opportunity to discuss the April
employment and unemployment statistics we released this
morning.
Nonfarm payroll employment changed little in April
following job losses in the first quarter that averaged 80,000
per month.
In April, employment continued to decline in construction,
manufacturing, and retail trade, while jobs were added in
health care and in professional and technical services. The
unemployment rate at 5.0 percent was also little changed.
Within the goods-producing sector, employment in
construction declined by 61,000. Since its peak in September
2006, construction employment has fallen by 457,000.
Over the last six months, job losses in construction
averaged 50,000 per month compared with an average of 12,000
per month from September 2006 to October 2007.
Manufacturing employment continued to decline in April. Job
losses totalled 46,000 and were concentrated in durable goods
manufacturing.
Manufacturing hours fell from 41.2 to 40.9 hours per week
over the month, with reductions widespread across both durable
and nondurable industries. Factory overtime was down by one-
tenth of an hour.
In the service-providing sector, retail trade employment
continued to trend down. Since a peak in March 2007, the
industry has shed 137,000 jobs. In April, job declines occurred
in building and garden supply stores and in department stores.
Elsewhere in the service-providing sector, health care
employment expanded by 37,000 with continued growth in
hospitals, home health care, and doctors' offices.
Professional and technical services added 27,000 jobs in
April, following 3 months in which employment was about
unchanged.
Employment in the food services continued to trend up over
the month, although the pace of job growth has slowed in recent
months.
Average hourly earnings for production and nonsupervisory
workers in the private sector were up by 1 cent, or 0.1 percent
in April, and by 3.4 percent over the past 12 months.
From March 2007 to March 2008, the Consumer Price Index for
Urban Wage Earners and Clerical Workers rose by 4.3 percent.
Turning to data from the household survey, both the number
of employed persons and the unemployment rate were little
changed in April.
Over the past 12 months the jobless rate has risen by 0.5
percentage point, and the number of unemployed individuals has
risen by 797,000.
Although the number of unemployed persons who had been
searching for work for 27 weeks or more increased by 160,000,
their share of total unemployment changed little.
Over the month, the number of persons who were unemployed
due to job loss was little changed, at 4 million, but was up by
698,000 from a year earlier.
These job losers accounted for 53 percent of all unemployed
persons in April, up from 49 percent 12 months earlier.
Other groups of unemployed persons include those entering
the labor market for the first time, those who are entering
after an absence, and those who were voluntarily leaving jobs.
The number of persons in the labor force was about
unchanged over the month, and the labor force participation
rate held at 66.0 percent.
In April, 62.7 percent of the population was employed,
essentially unchanged from the prior month, but down from a
recent peak of 63.4 percent at the end of 2006.
The number of persons working part-time who preferred full-
time employment rose by 306,000 in April to 5.2 million. Over
the past 12 months, involuntary part-time employment has
increased by 849,000.
To summarize April's labor market developments, payroll
employment was little changed at 137.8 million, as was the
unemployment rate, at 5.0 percent.
[The prepared statement of Keith Hall appears in the
Submissions for the Record on page 29.]
My colleagues and I would now be glad to answer questions.
Senator Klobuchar. Thank you very much, Commissioner Hall.
According to today's report the economy lost 20,000 jobs in
April, and we know as I mentioned that the economy lost an
average of 80,000 jobs per month in the first three months of
2008. When was the last time that we saw four months of
consecutive job losses?
Commissioner Hall. The last time we had four consecutive
months of job loss was in 2003 when the U.S. labor market was
still recovering from the effects of the 2001 recession.
Senator Klobuchar. And then how many more months did we go
with job losses in 2003?
Commissioner Hall. Job growth ticked up in September of
2003 but we had fairly consistent job loss from about March of
2001 to August of 2003, so it was quite a long time. Nonfarm
payroll unemployment reached its most recent trough, or
lowpoint, in August 2003.
Senator Klobuchar. Do you think the circumstances are
different this year?
Commissioner Hall. Well certainly we have now had four
months of job loss. We have not seen nearly quite the numbers
of loss that we had obviously during the recession, but again
we do have four months in a row of job loss.
Senator Klobuchar. Discuss the fact that in some industries
such as construction and manufacturing have seen job losses for
the first time for some time, and during the first four months
of this year construction lost 190,000 jobs. In fact, in my
State we have seen the largest over-the-year increase in mass
layoffs from construction.
However, employment losses are now spread across a wide
array of industries. Can you tell us where job losses began and
what industries are now seeing unemployment?
Commissioner Hall. Sure. Well the job loss really began in
residential construction, which has been experiencing job
losses since early 2006. More broadly, industries related to
the housing market have been shedding jobs for about two years
now, declining nearly 850,000 over that period.
This actually wipes away about 90 percent of the jobs
gained in those industries between April 2004 and April 2006.
Otherwise, I would say there is sort of broad weakening in
job growth fairly much across the board with the big exception
being health care and educational services.
Even those industries that have not been experiencing job
loss lately have had a slowing in job growth.
Senator Klobuchar. How many jobs have been lost in the
temporary help industry? And I ask this because I have heard
that this is a precursor to a sign that things are in trouble.
Commissioner Hall. The temporary help industry peaked in
December 2006 most recently, and has shed 155,000 jobs since
then.
Senator Klobuchar. And do you consider the temporary help
industry a leading indicator of employers' willingness to hire?
Commissioner Hall. The temporary help industry is
considered by many to be a leading indicator. The logic is that
firms may let go of temporary workers first when the economy
begins to weaken.
I don't know how well it functions right now as a leading
indicator, but I will say that prior to the 2001 recession
temporary help began to decline in May of 2000, about 10 months
prior to the recession.
Senator Klobuchar. And when was the last time this
temporary--that the temporary help industry saw this level of
job loss?
Commissioner Hall. 2001.
Senator Klobuchar. Nationwide, manufacturing saw job losses
from 2001 to 2004, and after a slight respite manufacturing has
been shedding jobs since mid-2006. Is that correct?
Commissioner Hall. The most recent employment peak for
manufacturing was August 2004.
Senator Klobuchar. I just had a number of builders visiting
me, so I know first-hand what they have been experiencing.
Which subsector of manufacturing have been the hardest hit
by recent job losses?
Commissioner Hall. Looking at it over the past six months,
the biggest job losses were in motor vehicle and parts, which
lost 66,000 jobs; fabricated metal products; furniture; wood
products, all lost around 20,000 jobs. Then non-metallic
mineral products, plastic and rubber products, apparel, and
textile industries all lost jobs.
Senator Klobuchar. It is my understanding that some parts
of the country are experiencing higher joblessness in other--
could you tell me what regions are seeing the highest job loss?
Commissioner Hall. Sure. Actually we've had, we've had
states in every region of the country experience job loss. The
largest job loss over the past 12 months have been in Michigan
and Florida, by far; and then California, Rhode Island, Ohio,
Arizona, and Wisconsin also lost jobs.
Senator Klobuchar. Could you go through that again?
Commissioner Hall. Sure. Michigan and Florida, California,
Rhode Island, Ohio, Arizona, and Wisconsin. Those are in order
of job loss.
Senator Klobuchar. Okay. So it is not necessarily regional
as much as--what do you think defines the job losses in the
state? It seems some of them are manufacturing states, I would
say.
Commissioner Hall. Yes, that's certainly true for some of
them. Michigan I think in particular has probably been hit with
quite a lot of manufacturing job loss.
Senator Klobuchar. What parts of the country are being
impacted by falloffs in the housing and credit-related
industries? I think we talked about what states you think are
hit by manufacturing decline.
Commissioner Hall. Sure. 33 states have seen construction
declines over the past year, and again it is not concentrated
in regions. It is pretty spread out.
By far California and Florida have seen the biggest
declines, but there were also significant declines in Arizona,
Michigan, and Nevada.
With respect to financial activities, again California and
Florida were the two biggest losers, but New Jersey and Arizona
also lost jobs.
Senator Klobuchar. It almost would be simpler if you said
this was regional. The concern for me when I hear this is it
seems like this is truly a national economic downturn, and it
is not just one region or area of the country. Is that right?
Commissioner Hall. Yes, it seems consistent with that.
Certainly it is fairly broad with respect to industries and
regions.
Senator Klobuchar. Are there other industries that are
driving the decline of employment in some areas besides the
ones we have talked about, the construction and the financial
and the manufacturing?
Commissioner Hall. Yes, that's a--it's a question that it's
impossible to give sort of a simple answer to that question
because every area has its own unique industry mix.
I would say the labor market performance really depends a
lot on the industries. For example, the Texas job market might
have been helped recently by rising oil prices, but other areas
would be hurt, for example. So there is really not a simple
answer to that.
Senator Klobuchar. Okay. In our State the employment to
population ratio, which is the fraction of working-age
population with a job, keeps falling. And the information you
reported on today shows that the percentage of the U.S.
population with jobs is also quite low. Is that correct?
Commissioner Hall. Yes.
Senator Klobuchar. And when was the last time the national
employment to population rate was as low as it has been
recently?
Commissioner Hall. Um, that's a good question.
Senator Klobuchar. You have done so well, so far.
[Laughter.]
Commissioner Hall. I am going to have to dig a little for
that one. [Pause.]
When has it been? Well I will tell you what I know and they
can see if they can dig up a specific answer.
Senator Klobuchar. Okay, that's fine.
Commissioner Hall. The employment to population ratio is at
62.7 percent this month, and that has edged down a little bit
from 63 percent a year ago.
Senator Klobuchar. Okay. When you put this all together--
and then I am going to turn it over to Senator Casey, and then
come back with some additional question--would you agree that
the employment situation is looking rather grim?
Commissioner Hall. I try to stay away from sort of looking
forward because we do--
Senator Klobuchar. Okay, then that it looked grim the past
four months, if you want to look at it that way.
Commissioner Hall. We have certainly seen a significant
slowing in the labor market, and it is broad.
Senator Klobuchar. Okay. Thank you very much.
Senator Casey?
Senator Casey. Thank you very much, Senator Klobuchar.
Commissioner Hall, I wanted to ask you about productivity,
which I guess we will technically describe as output per hour
in the nonfarm business sector. I want to use the right
terminology. I am going to shorthand that and use the word
``productivity,'' but isn't it true that that productivity
number, the output per hour, has grown at a 1.9 percent average
annual rate--and this I guess would precede this month--but the
real hourly compensation, which we would define as pay plus
benefits, of those workers producing that increase in output,
hasn't that actually decreased by a half a percentage point in
the fourth quarter of 2007?
Commissioner Hall. Those figures are correct.
Senator Casey. I mean it stands to reason I think even if
you are not an economist or a Bureau of Labor Statistics
expert, that if you have greater productivity you would think,
I would think, I think anyone would logically think that wages
would grow at the same time. Is that not necessarily consonant
with the data?
Commissioner Hall. There is a business-cycle aspect to
that. Over a long time period, say from 1973 say to 2000, they
have grown very closely.
The business cycle part of it is that in the early stages
of an economic expansion, productivity does outpace real
compensation growth. But real compensation growth typically
catches up.
Senator Casey. Well that's what--in looking at this chart
on my left, employee compensation has lagged far behind
productivity. You see the gap there between productivity being
the line on top, the blue line, and compensation the red line
below it, that gap. And this is of course starting in 1998
where there was a confluence or a connection or a meeting of
the two from 1998, 1999, 2001, and then you get into 2002 until
2007 and that is where we have the gap or the disconnect.
Do you know of anything in recent American economic history
where there has been that much of a gap, any period of time?
Commissioner Hall. The answer is, no.
That sort of gap has happened in the past in the early
stages, but typically it is either closed or it is closing by
now during the expansion. It just has not closed like it
normally does.
Senator Casey. What do you think is the cause of that? I
mean, there may be multiple causes, but what is different about
our economic situation today as opposed to comparable periods
when we have had a recession or a downturn, however you want to
describe it?
Commissioner Hall. It is hard to say. It is hard to say
just because productivity/real compensation in the past have
always grown back together. That gap has always narrowed.
Senator Casey. Let me ask you this. If you can describe it
today, that would be great, but if you could add to the record
of this hearing, the Committee record, a written analysis of
why you think that has happened, and why it is unusual, because
that is part of the frustration here.
You are not called upon to make policy pronouncements, but
here is the problem. Here is the trauma for the American
family.
They are working as hard as they have ever worked, or
frankly as hard as any group of Americans have worked, and they
are not seeing a commensurate increase in their wages. In other
words, the costs of everything in their lives is going up at
the same time that they are producing more than they have been.
So I think that is a troubling sign for the economy, and
especially for those families. I don't know if you want to add
something to that. I did not mean to interrupt you.
Commissioner Hall. No, no, I don't disagree. We will
provide you with a written analysis.
[The witten analysis from Dr. Keith Hall to the Honorable
Robert P. Casey appears in the Submissions for the Record on
page 58.]
Commissioner Hall. The obvious things that come to mind is
we have had pretty significant energy inflation, and wages have
not kept up with that. And that is the most obvious thing.
And of course now over the past year plus we have had a
weakening in the labor market, so that has almost certainly
contributed to this.
Senator Casey. I also wanted to ask you about this question
of the long-term unemployed. I don't know if you can pull that
chart up. This I know was referred to earlier, but we have
long-term unemployment, more and more workers exhausting their
unemployment benefits, and more so than at the beginning of the
two previous recessions.
We go from the third quarter of 1990, long-term unemployed
on the left, the kind of purple bar there, unemployment benefit
exhaustions 580,000.
Quarter one of 2001, a comparison there.
And then quarter four of 2007. And you have more of a gap
between the long-term unemployed number, almost 1.4 million,
and the unemployment benefit exhaustion 665,000 individuals.
What is your assessment of that in terms of comparing 1990,
2001, and 2007, in those quarters?
Commissioner Hall. Sure. The share of unemployed that are
long-term unemployed has a real strong cyclical component.
Obviously during recessions you have people become unemployed
with a lag, and then they start to become long-term unemployed.
Typically during an economic expansion, at some point the
share of long-term unemployed starts to decline, and it pretty
much steadily trends down throughout the business cycle.
What has happened right now is for about the past couple of
years that decline in long-term unemployed has stalled. It has
been flat now for a couple of years, and that is unusual. That
is why it is at a higher level now than it typically is at this
point in a business cycle.
Senator Casey. And what does that mean?
Commissioner Hall. I think it is simply an indication of
the weakening in the labor market that we have had. We just
never got quite as strong a job growth as we have in past
economic expansions, and now we are having a weakening in the
labor market over the past year plus.
Senator Casey. Do you think that it is sufficient to leave
the duration of unemployment benefits at their current level?
Do you think we need to make some kind of an adjustment?
Commissioner Hall. I am going to beg off answering policy
questions.
Senator Casey. I tried again. [Laughter.]
Well I will tell you what I think.
Senator Klobuchar. Please do, Senator Casey.
Senator Casey. We tried very hard--we were debating,
Senator Klobuchar and I, and many others were urging that in
the stimulus package that was put together that we include
unemployment compensation benefits as part of that.
That was shot down. And I think that was a terrible mistake
for both short-term economic stimulus but also long-term. And I
think some of the data that we just reviewed supports that.
Let me move to one more section and then I will--I'm glad
that Senator Klobuchar has not put a time restriction on us.
That never happens. I do not want to abuse it, though, because
she is the Chairwoman of this hearing and I do not want to
abuse that privilege.
Commissioner Hall, the number of persons working part-time
obviously for economic reasons are not doing it for exercise.
The number of people who would like to work full-time but
cannot find full-time employment rose by 306,000 to 5.2
million? Is that correct?
Commissioner Hall. I will look it up to make sure. That
sounds right.
Senator Casey. Do you want to verify that to make sure we
have our numbers right?
Commissioner Hall. Yes. Yes, that is correct.
Senator Klobuchar. And that would be just in the past month
that it went up 306,000?
Commissioner Hall. Yes, that's correct.
Senator Klobuchar. So now we are at a point where we have
5.2 million people in the country that are working part-time?
Is that correct?
Commissioner Hall. Yes.
Senator Klobuchar. Tell me about that. Is that--well, (a)
tell me about what you can inform us about with regard to the
types of jobs that they are taking. Do you have any data on
that?
Commissioner Hall. No, actually--no, actually we don't. We
collect data on people who are working part-time for economic
reasons, but we do not actually--
Senator Casey. You mean you do not track that, necessarily?
Commissioner Hall. No.
Senator Casey. Okay. I am wondering if that is
ascertainable, if you are able to do some kind of analysis to
tell us about that. Because I think it is significant.
Commissioner Hall. We would be happy to see if we can
follow up.
Senator Casey. I think it is significant, the types of jobs
they are taking, but also tell us what you can about what that
means, that trend line where more and more people are working
part-time. Is that unusual in terms of historic patterns? Is it
a danger sign for the economy?
Commissioner Hall. I would say it is consistent with the
other labor market data. It is an indication of a weakening
labor market.
Senator Casey. And finally--and this will be all, and I
want to turn it over to Senator Klobuchar--construction
employment was down 61,000 since its peak in September 2006,
construction employment has fallen by 457,000 people? Is that
correct?
Commissioner Hall. Yes.
Senator Casey. So since September of 2006, not 2007, 2006,
we have lost almost a half a million construction jobs? Is that
right?
Commissioner Hall. Yes.
Senator Casey. Thank you, very much.
Senator Klobuchar. Thank you very much, Senator Casey.
Commissioner Hall, I just want to follow up a little bit of
Senator Casey's questions about the part-time workers, because
it has been my impression, and I guess it is hard for you to
get to the bottom of these statistics, but that some people
would like to work full-time but they are working part-time, it
is not by choice. Do you have any statistics on that?
Commissioner Hall. Well, yes, actually I think the number
that I quoted before is people who are working part-time for
economic reasons, as opposed to other reasons--
Senator Klobuchar. Okay, so that 306,000 you gave to
Senator Casey, those are not people that, you know, they have a
child so they want to work from noon to four or something like
that? This is people that are pushed by economic reasons to
work part-time?
Commissioner Hall. Correct.
Senator Klobuchar. And do you know how high the
unemployment rate would be if it included those who work part-
time for economic reasons, as well as those who did not have
any job at all?
Commissioner Hall. Well the broadest measure--we have
several measures of unemployment--the broadest measure we've
got includes not only the unemployed but those working part-
time for economic reasons, and those who are marginally
attached.
Senator Klobuchar. Okay.
Commissioner Hall. That's our broadest measure. And that
number is at 9.2 percent right now.
Senator Klobuchar. Because to me, when I am giving you
those statistics early on--and we will talk about them a little
more about how people are just hanging on, and their expenses
are going up--when they are pushed to go half-time, and they
have got some credit card debt, or mortgage debt, it seems to
me that for them, maybe it is losing half a job, but it is
losing enough that they might not be able to make it.
And that 9.2 percent figure feels a little bit more like
what you hear when you are out there than the other
unemployment rate. And do you know how that has changed over
time?
Commissioner Hall. That has had similar changes as the
regular unemployment rate. It has actually increased from 8.2
to 9.2 over the past year.
Senator Klobuchar. So it has gone up say roughly with my
math, almost 10 percent, or something like that?
Commissioner Hall. Yes. It's up about 1 percentage point.
The regular unemployment rate is up about a half a percentage
point over that time.
Senator Klobuchar. Compared to what it was? If it was 8.2
percent, and then it's gone up to 9.2 percent, it hasn't gone
up 10 percent, but it's percentagewise, it's gone up rather
dramatically.
And would you agree with me that if the expenses are going
up and they have just a little bit of a change can make a
difference to them, that when you are in that situation with
rising expenses that those kinds of loss of full-time to part-
time jobs is more meaningful in the economy to individual
families?
Commissioner Hall. Absolutely.
Senator Klobuchar. Okay. The thing I also wanted to focus
on here is how well the labor market is doing is not just about
employment, but it is also about wages.
How have wages done for the past say year, April to April
or something like that?
Commissioner Hall. Over the past--well data is not
available for inflation in April at the moment, but over the 12
months ending in March, hourly earnings grew by 3.7 percent,
and that did not keep up with inflation. Inflation grew about
4.3 percent at that time.
Senator Klobuchar. So that's my argument with the expenses.
Commissioner Hall. Yes.
Senator Klobuchar. So the inflation--whatever they made got
eaten up by their health care or other things like that.
Commissioner Hall. Yes.
Senator Klobuchar. And how about those numbers say going
back to 2000, the wages, the average wages?
Commissioner Hall. We will have to look that up.
Senator Klobuchar. I stumped you again, Commissioner.
Commissioner Hall. You did. [Laughter.] [Pause.]
Senator Klobuchar. And then I probably will then ask about
controlling it for inflation, too. And if it is easier, just
take your time. Senator Casey and I are happy we're not using a
clock.
Commissioner Hall. This might be a question where we would
need a calculator, so I am not sure we are going to be--
Senator Klobuchar. Senator Casey is threatening to put on
the Jeopardy! music, but I have told him we will not do that.
[Laughter.] [Pause.]
Commissioner Hall. This might be something where we would
be better off--
Senator Klobuchar. Okay, that's just fine--
Commissioner Hall [continuing]. Following up later, if
that's okay.
Senator Klobuchar [continuing]. And what I'm just trying to
do is find a longer term trend just in general with the wages,
and then wages adjusted for inflation. Because I have these
numbers from a well-known professor, and I just wanted to see
where you were coming from.
I think she probably used your statistics.
Commissioner Hall. Odds are, yes.
[The witten analysis from Dr. Keith Hall to the Honorable
Amy Klobuchar appears in the Submissions for the Record on page
65.]
Senator Klobuchar. How much have real wages then fallen? So
the actual, when you adjust it for inflation, has gone down,
what, 1 percent or something?
Commissioner Hall. Over the past 12 months it has been
about 6/10ths of a percent.
Senator Klobuchar. It's been about what?
Commissioner Hall. Six-tenths of a percent.
Senator Klobuchar. Six-tenths of one percent.
And employers' labor costs include not only wages and
salaries, but also benefits. When labor costs rise due to
increases in health insurance, how does that affect your
measure of employee compensation?
Commissioner Hall. Well we do have measures of employee
compensation that include health care costs. So for employer-
provided health care, it does raise compensation.
Senator Klobuchar. Okay. And as employers shift more
burden, there is a lot of discussion right now about, you know,
health care reform, and my prediction, I would try to make
predictions, would be that we would be taking this on not this
year but next year, and there are discussions about placing
more burden by some people onto employees.
As employers shift more burden, and they have been doing
that, of rising health care costs to their workers, doesn't
that reduce the purchasing power of their take-home pay even
more?
Commissioner Hall. Yes. And when health care costs rise, in
fact I think you see two things. To the degree that the burden
is shifted onto workers, their purchasing power is reduced.
Also what can happen though is employer-provided health
insurance can crowd out wage increases and you actually get
slower wage growth as a result of higher health care costs.
Senator Klobuchar. Oh, because the money they are paying
out to their workers, more is going out to pay for health care
instead of for the wages?
Commissioner Hall. Yes.
Senator Klobuchar. So either way you do it, they are kind
of messed up--
Commissioner Hall. Yes.
Senator Klobuchar. [continuing] Because the worker is
either taking more of the health care costs, and then maybe the
employer gives a little higher wage, or the employer pays for
more of the health care cost.
But you are saying the statistics show when that happens
then that is not reflected in his higher wages?
Commissioner Hall. Yes.
Senator Klobuchar. Okay. Yesterday this Committee, as I
mentioned, held a hearing on the rising costs of food.
Government forecasters predict that for 2008 we will see a 4 to
5 percent increase in the Consumer Product Index for food
consumed at home.
So that is just another example. Does this concern you
about the health of our economy in general?
Commissioner Hall. Yes. Certainly higher food prices would
put extra strain on consumers, and obviously consumers are a
major part of the economy, and that would add to their
difficulties.
Senator Klobuchar. And then I just wanted to go through
these numbers. These are these numbers that I got from the
professor.
If you want to look first on the first page--and I thought
this was just a nice way of laying this out--and it shows that
for the average American--this is from 2000 to 2007, and what I
find somewhat scary about this for the average American family
is that this does not even include the food increases that we
are talking about in 2008, or the enormous gas increases we
have just seen in this past year.
But when you look at this, the lost income at $1175. And
then you look at these increases:
Higher mortgage payments, $1729, each year. This is extra
money that our people are paying.
Higher gas bills, $2081 per year. This is from 2000 to
2007. Again, not including the increases that we've seen.
Higher food costs, $237. Again not including that 4 to 5
percent increase that is being projected.
Higher phone bills--these are land line bills--$112 more. I
personally know this from seeing my bill.
Higher appliance costs, $42.
Higher health insurance costs, which you and I have been
talking about some, increased $363 per year.
And so when you add up the increases, and then you add in
the wage losses, you are at $5739 that the average American
family is paying out that they didn't before.
So I bring this up. And then when you have families with
children, increased day care expenses have gone up. And this is
what they have gone up, not what they are, $1321 per year.
Increased after-school costs--that's the area I am in now, I am
in the little dip of child growth--$511. And then increased
state college costs--this is state college--$1021 per year.
So depending on where a family is with their kids, this is
additional money that they are paying out per year. So when you
add all this up, it can be even more than $5739. And you can
see the bar graphs show the same thing, the declining income
and then you add in this increased expenses. You look at it for
working parents with one small child. You look at it with
families with one child in college. And it says here that these
are based on U.S. Census Bureau Population Reports. Changes and
expenses are calculated from the Bureau of Labor Statistics.
And also they use the Consumer Price Index.
Then the last chart I included just because I thought it
was interesting, was the total consumer debt increase from 2000
to 2007.
[Chart entitled ``Income and Expense Changes 2000-2007''
appear in the Submissions for the Record on page 68.]
[Chart entitled ``Income and Expense Changes, Working
Parents, One Small Child 2000-2007'' appear in the Submissions
for the Record on page 69.]
[Chart entitled ``Income and Expense Changes, Families with
One Child in College 2000-2007'' appear in the Submissions for
the Record on page 70.]
[Chart entitled ``Total Consumer Debt, 2000-2007'' appear
in the Submissions for the Record on page 72.]
Now do you project that any of this will change in the next
year? Are they still going to be facing these higher expenses,
Commissioner Hall?
Commissioner Hall. I wouldn't project.
Senator Klobuchar. That's right. I forgot. Does this
trouble you, what's happened in the past?
Commissioner Hall. I haven't seen this study, but sure it
would trouble me.
Senator Klobuchar. I noticed the higher mortgage payments
again as we're seeing more and more problems with that. The
higher gas bills again go up. And I just think that is at the
root of what we are looking at with these unemployment numbers.
And the reason that Senator Casey and I--I will speak for
myself--but we are concerned about those part-time employment
rates is that these are people that are just on the cusp, and
they are trying to keep those full-time jobs with their rising
expenses.
And we are also concerned as policymakers because they are
putting--a lot of families are putting this on their credit
cards, these increases, $5000 a year. And it is very similar to
what we are seeing for the average American putting it on their
credit cards.
So what we are trying to find here is some glimmer of hope
with the job market. I personally think, from a policy
standpoint, that we need to look at more direction for this
economy with green jobs and other things.
I also think that when you look at that initial--do you
want to put that wealth chart up again that we had from the
beginning, where we had showed that for the top one percent
they are doing the best they ever have since 1929.
They have the largest share of income they have ever had
since 1929. And I am hoping this will lead us to make some
changes with tax policy with regard to the top one percent.
But does this trouble you, what we are seeing with the loss
of income, and then the out-sized portion going to the top one
percent?
Commissioner Hall. Sure.
Senator Klobuchar. Okay. I have another area of questions
about consumer spending, but I think I will let Senator Casey
go and then I will come back.
Senator Casey. Thank you. I wanted to ask you,
Commissioner, about the overall number, when we looked at a
number that a lot of people are becoming familiar with now, is
the number for the total for January, February, and March job
loss of 232,000.
Is that correct?
Commissioner Hall. Yes. Actually it's 240,000.
Senator Casey. That is the point of my question. 232,000
has now become 240,000? Is that correct?
Commissioner Hall. Yes.
Senator Casey. It was adjusted upward.
Commissioner Hall. Yes.
Senator Casey. And that adjustment was just made for
today's report? Is that correct? In other words, if I had asked
you the question last week you would have said 232,000? It is
just recently adjusted?
Commissioner Hall. Correct. We revised back two months.
Senator Casey. Right, right. And I guess even in the
context of that time window there were adjustments. There was a
January number reported, and then later there was an
adjustment, or was it January and February, or just one of
those months?
Commissioner Hall. We revise the data. We give an initial
estimate, and then we give two additional estimates, actually,
as more data comes in on employment.
Senator Casey. And how do you do that? What is the timing
of that? Do you usually do that two weeks after the initial
report? Or a month after?
Commissioner Hall. Yes. We have our initial estimate, and
then one month later we revise, about one month later, then
another month later we revise as we get more data in.
Senator Casey. So for purposes of today, the 20,000 job
loss number may change when you have further reporting a month
from now, or two months from now? Is that correct?
Commissioner Hall. Yes. There will be two more revisions
over the next two months.
Senator Casey. Okay. And for the reports for the month of
January, the month of February, and the month of March, when
you've revised them, all of them have been revisions upward? Is
that correct?
Commissioner Hall. Gosh, I'm--okay, we've got the
revisions. One second.
Senator Casey. The point I'm making is the twenty may grow?
Commissioner Hall. That's possible, yes.
Senator Casey. I guess another area I wanted to ask you
about was that this week the Bureau of Economic Analysis
reported that the Gross Domestic Product, GDP, rose by .2
percent over the first quarter of 2008? Is that correct? Do you
know that to be true?
Commissioner Hall. I think it was .06 percent. Am I
remembering correctly?
Senator Casey. Point six for the first quarter of 2008?
Commissioner Hall. The first quarter, yes.
Senator Casey. Now I guess the growth there for the first
quarter, much of that, if not all of that, is attributable to
an increase in inventories? Is that your understanding?
Commissioner Hall. It is. Actually, more than 100 percent
of the growth was in inventories, about .8 percentage point of
the .6 was in inventories.
Senator Casey. Okay. So now you have this month's
Unemployment Report showing accelerating job losses in goods-
producing industries. Can you explain how these two pieces of
data are linked, where you have some GDP growth, rather limited
I would argue, but some GDP growth premised on, based solely on
inventories, and yet you still see accelerating job losses in
goods-producing industries?
How do you assess that?
Commissioner Hall. I would say that they are consistent. I
would say that the GDP growth in the first quarter was not
strong enough to sustain job growth, is the way I would word
it. So I would say they are consistent. The weakening in the
labor market, and the weakening in the GDP----
Senator Casey. You wouldn't expect anything else, you're
saying?
Commissioner Hall. Correct.
Senator Casey. Okay. That may be all I have for now.
Senator Klobuchar.
Senator Klobuchar. Thank you very much, Senator Casey.
I wanted to just go back to the Unemployment Rate a little
bit before talking about the consumer statistics. So basically
the Unemployment Rate is at 5 percent, is that correct?
Commissioner Hall. That's correct.
Senator Klobuchar. And how many people entered unemployment
last month?
Commissioner Hall. Well the unemployment rate ticked down a
little bit. It was little changed over the month. But I would
say the month-to-month numbers, they vary a bit. I prefer to
look at maybe quarterly averages.
Senator Klobuchar. That would make sense.
Commissioner Hall. So for example if you start with the
second quarter of last year, you start with an average of 4.5
percent. Then the next quarter, 4.7, 4.8, and then 4.9. So we
have seen this steady rise in the Unemployment Rate up through
the first quarter of this year. So I think that gives you the
best picture of unemployment.
Senator Klobuchar. And as you and I discussed, a similar
rate for that, was it 9.2 percent when you add in the economy,
the part-time workers that didn't want to go there but are
there? And what is the other group you called, marginally----
Commissioner Hall. Marginally attached.
Senator Klobuchar. What does that mean?
Commissioner Hall. Those are folks who want to work, and
say they want to work, and they have looked for a job some time
in the past but they are not looking now.
Senator Klobuchar. Okay. And this idea that jobs are
difficult to find is something that I have heard a lot from
people across the country. Just yesterday the Department of
Labor reported that last week applications for Unemployment
Benefits rose to 380,000, up from 345,000 the previous week.
So we seem to be getting close to the 400,000 mark, which
is significant because I am told that many economists consider
that to be an indication that the labor market is actually in
recession.
Do you agree with that?
Commissioner Hall. To be honest, I'm not sure I do because
I think the relationship between the unemployment, UI initial
claims and the job growth is not quite what it used to be.
Senator Klobuchar. Why is that?
Commissioner Hall. The relationship seems to have changed
over the last year or two, and to be honest with you I really
don't know. But what you are saying is it was the old rule of
thumb about the UI claims being consistent with a certain level
of job loss or job growth.
Senator Klobuchar. So then what do you consider to be the
best indicators for whether or not we are in a recession?
Commissioner Hall. Payroll job growth and the Unemployment
Rate.
Senator Klobuchar. Okay. And do you think we're there?
Commissioner Hall. I, I wouldn't want to offer an opinion.
And really it is because of the role of the Bureau of Labor
Statistics.
Senator Klobuchar. I understand.
Commissioner Hall. Because it is important for us--we
produce the data, and we want to be clear that people have
trust that we are not offering our opinions; we are offering
the facts, and we do what we can to let the data speak for
itself.
Senator Klobuchar. And as we talked about earlier, people
enter unemployment for a number of reasons. What is the most
common reason to be unemployed in April?
Commissioner Hall. The most common reason is job loss.
Senator Klobuchar. Okay.
Commissioner Hall. In April, about 52 percent of the
unemployed were unemployed because of job loss.
Senator Klobuchar. And what is the next reason?
Commissioner Hall. Second would be re-entrants and new
entrants. And about 36 percent of the unemployed are either re-
entering the labor market, or are new entrants.
Senator Klobuchar. So is that possible that some of our
returning Veterans that we talked about that come back are new
entrants because they had lost their jobs when they served
overseas?
I am just trying to--it would make sense to me--I am trying
to figure out why we are seeing those high numbers with our
returning Veterans, those that have served since 2001. And if
it is harder, if you do not have a job, or you had to give up a
job either because you decide to stay home with the kids, or
you went to fight in Iraq, or whatever, it seems like it would
be--this is my own common sense--harder to get back in the
market.
And so that is what I am trying to get at with that
question.
Commissioner Hall. Yes, I think that is right. I think the
returning Veterans would count as re-entrants, or new entrants
in the job market.
Senator Klobuchar. Okay. Just one more question about the
long-term unemployed people. Isn't it the case that the share
of the unemployed who are long-term unemployed is higher today
than it was in the early 1990s and the early 2000s? Is that
true?
Commissioner Hall. That's true.
Senator Klobuchar. And back then Congress extended the
Unemployment Insurance Benefits, didn't they?
Commissioner Hall. I believe so.
Senator Klobuchar. Do you think this is a good measure
about whether or not we should extend benefits, Unemployment
Insurance Benefits to the long-term unemployed?
Commissioner Hall. I will beg off on that as a policy
question.
Senator Klobuchar. Okay, but just to keep you with the
facts, back in the early 1990s and early 2000s, and this was--
when we discussed, this must be like the 2003 issue we were
discussing early on--when we saw long-term unemployment, that
was when Congress extended the Unemployment Insurance Benefits,
and now it is worse now?
Commissioner Hall. I believe so.
Senator Klobuchar. Okay. All right, the consumer spending
issue. The Commerce Department reported that consumer spending,
which represents about two-thirds of economic activity,
increased by only .1 percent in March after remaining stagnant
in February.
In your view what does this trend portend for the labor
market in the months to come?
Commissioner Hall. Well----
Senator Klobuchar. This is based historically on what
you've seen.
Commissioner Hall. Okay, yes. Without forecasting I will
say the weakening in the consumer spending has been consistent
with the weakening in the labor market.
And I think this is something that works in both
directions. Weaker consumer spending weakens the labor market,
and a weaker labor market means lower income growth, which can
lower consumer spending. So you sort of have things working
both ways.
Senator Klobuchar. So getting at my issue that I have been
focusing on today with how you have more expenses--these
expenses are going up no matter what happened with wages; we
know these expenses are going up--so when expenses are going
up, and wages are pretty much stagnant and have gone down maybe
over time, then you see less consumer spending? Is that right?
Is that a trend that happens?
Commissioner Hall. Yes.
Senator Klobuchar. And so what you have just said is when
you see less consumer spending that can also lead to a weaker
job market? Is that right?
Commissioner Hall. It can, yes.
Senator Klobuchar. So it is almost the chicken and the egg,
it just keeps--so how does that work? That less consumer
spending leads to a lesser job market?
Commissioner Hall. Well, that is if consumers are spending
less then you have businesses cutting back on production. And
that leads to the weaker job growth. And then it can eventually
lead to job loss.
Senator Klobuchar. Okay. So when Minnesotans are not going
to buy a new fishing rod because gas is too expensive, and they
are not going to go up to their cabin as much, then the people
that were making the fishing rods see less jobs?
Commissioner Hall. Yes.
Senator Klobuchar. So this expense issue that I brought up
is not just some wild-eyed thing, it is actually related to the
loss in jobs?
Commissioner Hall. Yes.
Senator Klobuchar. Typically in a recession how long does
it take for employment to recover to its pre-recession peak?
Commissioner Hall. Since 1980 the average time for
employment to recover to its pre-recession level is about 20
months. I will point out that the most recent recession took 39
months for employment to recover.
Senator Klobuchar. 39 months. And that was back in early
2000?
Commissioner Hall. Yes.
Senator Klobuchar. Okay. How long do wages and compensation
take to recover?
Commissioner Hall. It depends on if you are talking about
the levels or the growth. Wages and compensation do not
typically decline for very long, the levels don't, during a
recession. But the growth--in fact, the last two recessions the
growth in wages has never recovered. You had what seems to be
so far has been a permanent decline in the growth of wages.
Senator Klobuchar. So that has been continuing since the
1990s, basically?
Commissioner Hall. Real wages hit a low point in the mid-
1990s but then rose steadily until the 2001 recession. Since
then, real wages have been essentially flat.
Senator Klobuchar. And recessions before that, it did
recover?
Commissioner Hall. Um, that's a good question. I don't know
beyond the last couple of recessions.
Senator Klobuchar. When you had those recessions before in
the 1990s and the early 2000s, did you see this kind of
escalating expenses like we are seeing with food and gas
prices?
Commissioner Hall. I don't know. My memory is not that good
to--
Senator Klobuchar. We can check that out. I am just
thinking, the reason I am going there is that you have this--
some of how you got out of these recessions in the past was
that people were able to increase their spending.
Commissioner Hall. Right.
Senator Klobuchar. And part of how they did that is that
they had the money to do it. And now when these expenses are
escalating, they are going to have less money to do it, and so
we may have--it may take longer, and have more of a gloomy
picture in terms of getting out of it.
Commissioner Hall. Right, right. Yes, I don't--I'm just
going to do this from memory a little. I don't recall that both
declining economic growth and high inflation, I don't think we
have had both of those two things together since the early
1980s.
Senator Klobuchar. So based on your analysis of today's
report, and mostly--which I've appreciated--the trends going
over the last years, does it appear that we are going to
continue to be in a difficult period for the labor market in
the months to come?
Commissioner Hall. Well I am going to beg off on that.
Senator Klobuchar. It's based on the historical data.
Commissioner Hall. Well the reason is that we produce--we
are going to be producing the data over the next few months.
Senator Klobuchar. Yes.
Commissioner Hall. And if we are going to be producing it,
I do not want to forecast what I think it is going to show. I
want to let the data come out and speak for itself.
Senator Klobuchar. Okay, very good.
Senator Casey?
Senator Casey. Thank you. In light of your statement
earlier about looking at quarterly averages as opposed to
month-to-month, I was struck by something I had not noticed in
terms of a big differential.
Quarterly averages in terms of race. White unemployment,
4.3--we're talking about fourth quarter 2007, fourth quarter
2007, and first quarter 2008. So the two recent quarters
compared to each other.
White unemployment, 4.3 to 4.4. Right? So that only went up
very slightly. And correct me if I'm wrong, I'm just reading
from your tables here.
African American unemployment, last quarter 2007 to this
quarter 2008, 8.6 to 8.8. So that is up .2 percent. Correct?
Commissioner Hall. I don't--we have quarterly averages
here, but that sounds reasonable.
Senator Casey. I think this is your table, if I'm not
mistaken. And if I'm wrong about that, correct me.
And in the one that had the most significant increase,
Hispanic, or Latino, depending on what term you use,
unemployment, 5.9 percent unemployment fourth quarter 2007, 6.5
percent unemployment first quarter 2008.
So in other words, Hispanic unemployment went from 5.9 to
6.5 one quarter to the other? Is that correct?
Commissioner Hall. Again that sounds reasonable. Oh, okay,
yes, that is correct. I found it. Thank you.
Senator Casey. So that is a staggering increase, .6 percent
in just one quarter to the other. And of course the numbers are
high. The African American unemployment rate is double what the
White number is, and Hispanic is almost double, but the
Hispanic increase is precipitous. So I just wanted to put that
in the record. It's very troubling.
Thank you.
Senator Klobuchar. Commissioner, is there anything you
wanted to say here at the end to clarify anything, or summarize
anything?
Commissioner Hall. No, thank you.
Senator Klobuchar. Okay, well I really appreciate you
giving us these statistics. I just thought I would summarize
what I learned from this hearing today, as Senator Casey and I
have just been here a year-and-a-half and have appreciated
being at this hearing and getting this information. Correct me
if any of the things I say are wrong, because I wrote this down
from what we got at the hearing.
So this month we have seen 20,000 or more people that
basically are unemployed. They have lost their jobs in this
country.
So that means we have had 260,000 people who have basically
lost their jobs or are unemployed in the first four months of
this year.
Is that correct?
Commissioner Hall. Yes, the payroll employment survey shows
a decline of 260,000 in the first four months of 2008 although
we don't know if all those people became unemployed.
Senator Klobuchar. We are seeing an increased trend in the
Unemployment Rate from the same time last year, and you kindly
gave me those numbers of 4.8, 4.9, up to the point of 5.2
percent?
Is that right? Or 5 percent where we are now?
Commissioner Hall. Yes.
Senator Klobuchar. 5 percent.
And then the statistic that I think people need to continue
to concentrate on is the people that do have jobs, but their
hours have been reduced and in hard economic times it is more
difficult for them to find work.
And I think the people, not that they chose to go part-
time, but they have been pushed part-time economically, was
306,000 more people in April coming to 5.2 million people in,
what was it, the last year?
Commissioner Hall. I think that was this month.
Senator Klobuchar. In the quarter?
Commissioner Hall. Yes.
Senator Klobuchar. In the quarter. So it is 306,000 people
going from full-time work, or maybe--does it have to be full-
time work, but just had their hours reduced? 306,000 people?
Commissioner Hall. The number of part-time for economic
reasons increased by that much this month.
Senator Klobuchar. Okay, so 300,000 people this month, a
total of 5.2 million people nationally.
Commissioner Hall. Yes.
Senator Klobuchar. Then at the same time you also have I
thought another statistic that was interesting was that we have
had people, the major reason that people are unemployed is
because they have lost their jobs?
Commissioner Hall. Yes.
Senator Klobuchar. But the second reason is people who are
returning to the work force are having trouble finding a job.
They can't get a job. And while you did not give me the
statistic, we had the statistic on the--did that come from your
work, the returning Veterans? Do we want to put that one up
again? Which includes the people who are returning Veterans.
So young male Veterans serving after September 2001, 11.2
percent of them are unemployed. So that has helped me to
understand this when we look at those statistics.
And then the last thing that you and I have talked about,
and you verified pretty much with your own statistics, is just
that we are seeing these increasing expenses for the average
American family.
The statistics that I used that came from the Consumer
Price Index--Consumer Product Index, and from Labor Bureau
statistics is a trend from 2000 to 2007--and again you have not
verified this number; this is statistics I got from a study,
and I will give you the study--where the average American
family has lost $1175 a year. And then their expenses have
increased over $4000 a year.
Would you say that doesn't surprise you at all?
Commissioner Hall. No, I would say it doesn't.
Senator Klobuchar. Okay, so maybe we're off a few hundred
here or there, but it is $5739 for total lost income and
increased expenses. And when you add in people who have kids,
that is even more.
One of the things I learned from our hearing today was that
that is bad on its own, but also because of the decreased
spending it leads to more job loss, basically. So you have this
chicken and an egg situation.
And while you cannot forecast for the future for me as a
new Senator here, I am proud that we have been trying to push
for these things that help people: extending the Unemployment
Benefits, which we discussed had happened in the last few
recessions, which we have been blocked by a filibuster from
doing.
Also, the long-term economic plans of trying to reduce
expenses, which I think is trickier but something that
Washington has not been doing.
And that is looking at a real oil policy with more reliance
on alternative energy, and doing more to promote research into
hybrid, and electric cars, and alternative fuels beyond corn-
based ethanol, the cellulosic ethanol. And you look at some of
these other countries like Brazil that have been able to do
this with sugar cane because of a government policy that pushed
it, and now they don't have to pay for all this expensive oil.
They are not dependent on these foreign countries.
So I want to thank you for this information, because it has
really helped me as I go forward, to go back with an even
stronger commitment to look at this long-term economic policy,
as well as the statistics that show how hard it is getting for
the middle class to get by.
What really concerns me is when you look at those numbers
for the top one percent, and you think of these tax cuts that
have helped that wealthiest group, and where it has gotten us.
It has gotten us to the point where we are much worse off
as a country. Now it is starting to hurt the entire economy.
So I think these are things that we will take from this
hearing as we go forward to make policy.
I know that you are a numbers person, as you are, Dr.
Horrigan, and you are, Mr. Galvin, but I thank you for getting
us these numbers on a timely basis so we can move forward.
Thank you, very much.
Commissioner Hall. Thank you.
Senator Klobuchar. The hearing is adjourned.
(Whereupon, at 10:48 a.m., Friday, May 2, 2008, the hearing
was adjourned.)
SUBMISSIONS FOR THE RECORD
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Prepared Statement of Keith Hall
Madam Chair and Members of the Committee:
Thank you for the opportunity to discuss the April employment and
unemployment statistics we released this morning.
Nonfarm payroll employment changed little in April (-20,000),
following job losses in the first quarter that averaged 80,000 per
month. In April, employment continued to decline in construction,
manufacturing, and retail trade, while jobs were added in health care
and in professional and technical services. The unemployment rate, at
5.0 percent, was little changed.
Within the goods-producing sector, employment in construction
declined by 61,000. Since its peak in September 2006, construction
employment has fallen by 457,000. Over the last 6 months, job losses
averaged 50,000 per month, compared with an average loss of 12,000 per
month from September 2006 to October 2007.
Manufacturing employment continued to decline in April. Job losses
totaled 46,000 and were concentrated in durable goods manufacturing.
Manufacturing hours fell from 41.2 to 40.9 hours over the month, with
reductions widespread across both durable and nondurable industries.
Factory overtime was down by one-tenth of an hour.
In the service-providing sector, retail trade employment continued
to trend down. Since a peak in March 2007, the industry has shed
137,000 jobs. In April, job declines occurred in building and garden
supply stores and in department stores.
Elsewhere in the service-providing sector, health care employment
expanded by 37,000, with continued growth in hospitals, home health
care, and doctors' offices. Professional and technical services added
27,000 jobs in April, following 3 months in which employment was about
unchanged. Employment in food services continued to trend up over the
month, although the pace of job growth has slowed in recent months.
Average hourly earnings for production and nonsupervisory workers
in the private sector were up by 1 cent, or 0.1 percent, in April and
by 3.4 percent over the past 12 months. From March 2007 to March 2008,
the Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) rose by 4.3 percent.
Turning to data from the household survey, both the number of
unemployed persons (7.6 million) and the unemployment rate (5.0
percent) were little changed in April. Over the past 12 months, the
jobless rate has risen by 0.5 percentage point and the number of
unemployed individuals has risen by 797,000. Although the number of
unemployed persons who had been searching for work for 27 weeks or more
increased by 160,000, their share of total unemployment changed little.
Over the month, the number of persons who were unemployed due to job
loss was little changed, at 4.0 million, but was up by 698,000 from a
year earlier. These job losers accounted for 53 percent of all
unemployed persons in April, up from 49 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.)
The number of persons in the labor force was about unchanged over
the month, and the labor force participation rate held at 66.0 percent.
In April, 62.7 percent of the population was employed, essentially
unchanged from the prior month but 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 rose by 306,000 in April to 5.2 million.
Over the past 12 months, involuntary part-time employment has increased
by 849,000.
To summarize April's labor market developments, payroll employment
was little changed at 137.8 million, as was the unemployment rate, at
5.0 percent.
My colleagues and I now would be glad to answer your questions.
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