[Joint House and Senate Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 111-113
THE EMPLOYMENT SITUATION: JANUARY 2009
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HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 6, 2009
__________
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
HOUSE OF REPRESENTATIVES SENATE
Carolyn B. Maloney, New York, Chair Charles E. Schumer, New York, Vice
Maurice D. Hinchey, New York Chairman
Baron P. Hill, Indiana Edward M. Kennedy, Massachusetts
Loretta Sanchez, California Jeff Bingaman, New Mexico
Elijah E. Cummings, Maryland Amy Klobuchar, Minnesota
Vic Snyder, Arkansas Robert P. Casey, Jr., Pennsylvania
Kevin Brady, Texas Jim Webb, Virginia
Ron Paul, Texas Sam Brownback, Kansas, Ranking
Michael Burgess, M.D. Texas Minority
John Campbell, California Jim DeMint, South Carolina
James E. Risch, Idaho
Robert F. Bennett, Utah
Nan Gibson, Executive Director
Jeff Schlagenhauf, Minority Staff Director
Christopher Frenze, House Republican Staff Director
C O N T E N T S
----------
Opening Statement of Members
Hon. Carolyn B. Maloney, Chair, a U.S. Representative from New
York........................................................... 1
Hon. Sam Brownback, Ranking Minority Member, a U.S. Senator from
Kansas......................................................... 2
Hon. Amy Klobuchar, a U.S. Senator from Minnesota................ 4
Hon. Kevin Brady, a U.S. Representative from Texas............... 6
Hon. Robert P. Casey, Jr., a U.S. Senator from Pennsylvania...... 8
Witnesses
Dr. Keith Hall, Commissioner, Bureau of Labor Statistics; Dr.
Michael Horrigan, Associate Commissioner for Prices and Living
Conditions, Bureau of Labor Statistics; and Mr. Philip Rones,
Deputy Commissioner, Bureau of Labor Statistics, U.S.
Department of Labor............................................ 10
Submissions for the Record
Prepared statement of Representative Carolyn B. Maloney.......... 26
Prepared statement of Senator Sam Brownback...................... 27
Prepared statement of Representative Kevin Brady................. 29
Prepared Statement of Dr. Keith Hall, Commissioner, Bureau of
Labor Statistics, together with Press Release No. 09-0117...... 30
Chart entitled ``Job Losses Are Mounting at an Accelerated Rate'' 63
THE EMPLOYMENT SITUATION: JANUARY 2009
----------
FRIDAY, FEBRUARY 6, 2009
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 Carolyn B. Maloney
(Chair), presiding.
Senators present: Klobuchar, Casey, Brownback, and Risch.
Representatives present: Maloney, Brady, and Burgess.
Staff present: Gail Cohen, Eleni Constantine, Nan Gibson,
Colleen Healy, Aaron Kabaker, Nolan Berry, Doug Branch, James
Gilroy, Rachel Greszler, Jeff Schlagenhauf, Colm Willis, Jeff
Wrase, Ted Boll, Gordon Brady, Chris Frenze, Bob Keleher, and
Robert O'Quinn.
Chairman Maloney. The Committee will come to order.
Commissioner Hall, we thank you for testifying today and we
also thank your colleagues for joining you, and we will go
forward.
I would like to first give an opening statement and see if
other members would like to be recognized for an opening
statement.
OPENING STATEMENT OF HON. CAROLYN B. MALONEY, CHAIR, A U.S.
REPRESENTATIVE FROM NEW YORK
The newest job numbers today told Americans something they
already knew: things are bad. They are bad all over. In almost
every sector of the economy and in almost every section of the
country things are bad and Americans are hurting.
These numbers add to the overwhelming evidence for getting
a recovery package to the President's desk fast. In today's
report we see that even the bright spots are dim. According to
the figures just released by the Bureau of Labor Statistics,
nearly 3.6 million jobs have been lost since the recession
began in December, including the nearly 600,000 jobs shed in
January.
Given the steady stream of mass layoffs, a credit freeze,
and a decline in consumer spending, the writing was already on
the wall for a devastating 13th month of job losses. The job
losses were widespread throughout our economy and employers cut
jobs at a faster pace last month.
My home State of New York, even though the unemployment
rate is lower than the national record, has been especially
hard hit with the highest number of announced layoffs in the
country last month, almost 48,000 jobs were lost.
The Labor Department announced yesterday that initial
jobless claims surged to a 17-year high of 626,000 last week,
and that the number of people on the unemployment rolls ticked
up to nearly 4.8 million, the most since records began in 1967.
We now hear that the growing rolls of the unemployed are
colliding head-on with states who cannot afford to efficiently
process their claims. More than 2 million homes have gone into
foreclosure, and millions of other homeowners find themselves
owing more to the bank than their homes are worth.
Because of these job losses, millions have also lost their
health insurance; and an estimated $6 trillion in personal
wealth has simply evaporated since the economic crisis began.
Alarm bells are sounding and our economic recovery package
must make its way to the President as soon as possible. The
current economic crisis requires bold solutions that address
the magnitude of our economic woes and the American recovery
and reinvestment plan will do just that.
These jobless numbers today underscore once again that
there is no issue that is more important for this government to
address than saving and creating jobs. Our recovery package
will create or save an estimated 4 million jobs and will make
key investments in our future.
We will create jobs across a variety of sectors over the
next several years which will soften the downturn and foster a
solid economic recovery that benefits all Americans.
First and foremost we will help families in need by
increasing Food Stamp benefits for some 30 million Americans,
expanding Unemployment Benefits for 18 million Americans, and
preserving health care benefits for 20 million Americans.
We have an historic opportunity to make the investments
necessary to modernize our public infrastructure, transition to
a clean energy economy, and make us more competitive in the
future. America's schools, roads, bridges, and water systems
are in disrepair and this is creating a drag on economic
growth.
Our plan also supports working families by providing a
$1000 Making Work Pay tax cut for 95 percent of workers and
their families. These families will go out and spend the money,
not save it, and help jumpstart local economic recovery.
Now is the time to put aside the differences we might have
in economic theories and put the needs of our country first.
Now is the time to save our economy, not defend the failed
policies of the past. We need to stand together for the good of
our Nation.
President Obama and the Democrats are ready to embark on a
bold, common sense plan to turn this economy around, to address
the fierce urgency of now, and to get this country back on its
feet. Today's numbers underline the need to act and the need to
act now. Thank you.
[The prepared statement of Representative Maloney appears
in the Submissions for the Record on page 26.]
Chairman Maloney. I will now recognize my colleague,
Senator Brownback, for five minutes.
OPENING STATEMENT OF HON. SAM BROWNBACK, RANKING MINORITY
MEMBER, A U.S. SENATOR FROM KANSAS
Senator Brownback. Thank you very much, Chairwoman Maloney.
I appreciate that. I appreciate the hearing and, Commissioner
Hall, I appreciate being able to hear from you--although I do
not like the information that we are getting. This is a very
difficult and another very bad month. The Unemployment numbers
are up another 598,000 with an unemployment rate of 7.6 percent
during the month of January. This is all very unwelcome news. I
think most would say it is probably expected, but certainly not
welcome.
There is no question that our economy and the people of the
Nation are hurting, and hurting badly. I wish I could say that
I am looking forward to your testimony, but this is news we
could do without.
I know that Commissioner Hall is here to testify on the
data in today's report and is not here to offer us projections
about future results or policy prescriptions for what ails us.
That isn't the job of the BLS Commissioner, so I hope we can
all avoid the temptation to rewrite your job description today.
There is no question that our economy needs help. Passage
of a stimulus package is essential. It is necessary for this
economy. Passage of a massive spending bill that permanently
adds to the size of government is not. We need to put gas in
the tank, not sugar. Unfortunately, the stimulus bill passed by
the House and the one under consideration by the Senate fail
both tests.
I think the thing that actually makes me the saddest about
this is this is totally avoidable. We easily could have had a
normal process on a truncated schedule and come up with a bill.
In the Senate I know that we could have gotten 75 votes for it
if we could have had a normal appropriations process. I'm on
the Appropriations Committee, Ranking Member.
I got the bill 24 hours ahead of the vote. No input. I
got--we had an hour-and-forty-minute markup hearing in the
Appropriations Committee. No amendments. And that is the bill.
It is a spending bill, not a stimulus bill.
I think really what we should do at this point in time is
to send it back to the committees for a set period of time, for
two weeks, and say that everything in the bill must be
stimulative, at least on a 2-to-1 ratio of $2 of economic yield
per $1 of activity, and then bring it back.
We are going to be in this stew for a period of time that
we are in right now in the economy, and we need to work on this
together. This is a $1 trillion bill, and we do not have many
bullets that size.
We need to hit the target with it. There is a good deal of
economic research that analyzes data as opposed to building
models on Keynesian assumptions that government can spend our
way into prosperity.
Research by President Obama's Chair of the Council of
Economic Advisors--this is his chair--Christina Romer and her
husband find a tax multiplier of about three to one, a dollar
of tax cuts raises the gross domestic product by about $3. This
is his Council of Economic Advisors' chief.
Andrew Mountford of the University of London and Harald
Uhlig of the University of Chicago analyzed U.S. quarterly data
from 1955 to 2000. They considered three policy scenarios:
A deficit-financed government spending increase;
A deficit-financed tax cut; and
A balanced-budget increase in government spending.
And all this spending we are looking at on both the tax and
the spending side is all deficit. Their findings:
``We find that deficit-financed tax cuts work best among
these three scenarios to improve GDP, with a maximal . . .
multiplier of five dollars of total additional GDP per each
dollar of the total cut in government revenue fine years after
the shock.''
Another economist at the IMF, Olivier Blanchard, and
Roberto Perotti find that, quote:
``In most cases [of tax and spending changes in the U.S.]
the multipliers are small, often close to one,'' on spending,
and that ``. . . both increases in taxes and increases in
government spending have a strong negative effect on private
investment spending.''
Now I am not opposed to all government spending in this. I
think we can--I think we clearly need to do things on Food
Stamps, and health care. People are out of jobs and they are
hurting and we need to help in that category.
I think we need to do some things on infrastructure. I just
think the economic models clearly point out that the
stimulative effect is not in those categories. I think we need
to help people where they are hurting, and we need to do that.
I think we can do some of the infrastructure things that
have multiplier effects to them, but at the end of the day what
our experience has shown is that if you want to stimulate the
economy you get money back into people's pockets.
The thing that you were talking about, the $1000 per
person, I think those are the sort of ideas that are good that
we can use, but not $450 billion of grab-bag government
spending.
We really need to get this right. I am ready to work to get
it right. I think the process to get it right is to send it
back to committees for a short period of time to actually get a
product we can agree on.
I look forward to hearing what your numbers say that we can
look at into the future, and a particular category so that we
can target these. Senator Mikulski and I got an amendment
through to make tax exempt interest on buying a new car in
2009. My guess is that the auto industry numbers are big and
that this is one that we can actually get automobiles sold
with. I have had three people say they will buy one this next
year, or look to buying one with this provision.
I think those are the sort of tax provisions that we can do
to try to stimulate targeted categories where employment has
been falling.
Thank you, Madam Chairman.
Chairman Maloney. Thank you so much.
[The prepared statement of Senator Brownback appears in the
Submissions for the Record on page 27.]
Chairman Maloney. Senator Klobuchar.
OPENING STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR FROM
MINNESOTA
Senator Klobuchar. Thank you very much, Madam Chair, and I
want to congratulate you on leading this committee in the 111th
Congress.
Chairman Maloney. Thank you.
Senator Klobuchar. I look forward to working with you as we
tackle some of these enormous problems that we face.
I want to also thank you for holding this hearing, and
thank Dr. Horrigan, Commissioner Hall, and Mr. Rones for
joining us today to discuss the most recent evidence that our
Nation is in the midst of a financial and economic crisis of
historic proportions with Americans facing record job losses
and the largest loss of wealth since the Great Depression.
Today's report further reveals that America is trapped in a
vicious cycle where consumers are afraid to spend, businesses
are unable to invest, leading to more workers losing their jobs
and income, which further reduces consumer spending. And
working families are bearing the brunt of this vicious cycle.
Since 2000--and these figures actually predate the severe
economic downturn--the average American family has lost
something like $1200 in their average salaries when adjusted
for inflation. At the same time, their expenses have increased
by more than $4500.
So the bottom line is that the average middle class family
has suffered a net annual income loss of something like $6500
over the last eight years.
In my State of Minnesota, the unemployment rate rose to 6.9
percent last month, the highest it has been in over 20 years.
Over the past months I traveled across my State on a Main
Street Jobs Tour to hear directly from Minnesotans about how
they have been effected by this crisis.
While I know we are going to hear the numbers from all of
you, the stories are just as important. I heard from a father
with three young daughters under the age of 10. After they go
to bed, he and his wife sit at the kitchen table and put their
heads in their hands and just wonder how they are going to make
it.
I heard from a special education teacher who lost her job
due to the economy who has been watching her Mutual Funds and
other investments shrink. She is now forced to rent out her
house.
I heard from a Minnesotan who inherited just a little bit
of money from her father that she was going to spend on her
daughter's wedding, and then to see it all get lost in the
Stock Market.
And I have heard from Veterans who are being hit
particularly hard by the current unemployment situation,
members who bravely served overseas and are now standing in
unemployment lines back at home.
In 2007, unemployment among Veterans aged 18 to 24 was 11.2
percent, more than twice the national rate that year. A
separate report by the Department of Veterans Affairs found
that nearly one in five Veterans who sought work within one to
three years after their discharge from the Armed Forces
remained jobless.
It is unbelievable that we couldn't do more to help the men
and women who protect this country to find a way to provide for
themselves or their families upon returning home.
As layoff rates are expected to continue to increase 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.
Despite all this, after travelling my State for the last
few months I believe that the American People still have faith
in our Nation. They know that our economy has great potential,
and many, many of them have faith in our new President.
Our immediate challenge is to implement a comprehensive
recovery package that will not only provide a short-term boost
to our economy but also make the investments necessary to build
long-term foundations for prosperity.
Right now, as you know, we are in the midst of long
negotiations over the Senate Economic Recovery Plan. I believe
this Plan should achieve three critical objectives:
Deliver immediate relief to the middle class, and also
provide the safety net with unemployment and some of the
changes that need to be made;
Invest in jobs, infrastructure, bridges, roads, building
schools, broadband, doing things that create jobs but also give
us something to show for it in the long term so that when our
economy gets moving again we have the roads in place and the
rail in place to bring our goods to market;
Investing in an energy economy that reduces our dependence
on foreign oil and instead emphasizes home-grown, renewable
energy sources.
That is what the President's Plan is all about, and I do
not believe that we can bury our heads in the sand and pretend
that these numbers that we are going to hear about today are
just going to go away by doing more of the same.
We have to act. I look forward to working with the
President, members of the Committee, and my colleagues in the
Senate to deliver this recovery package swiftly and responsibly
to the American People who are desperate for the assistance
that it will provide.
Thank you, Madam Chair, and I look forward to hearing from
our witnesses.
Chairman Maloney. Thank you so much.
Congressman Brady.
OPENING STATEMENT OF HON. KEVIN BRADY, A U.S. REPRESENTATIVE
FROM TEXAS
Representative Brady. Chairman Maloney, let me congratulate
you, too, on your leadership of the Committee----
The Chairman. Thank you.
Representative Brady [continuing]. And Ranking Member
Brownback as well, and we look forward to working with you on
obviously an issue that is the number one priority in America,
to get the economy going again. So thank you.
I would like to join you in welcoming Commissioner Hall,
too, before the Committee as well.
The data show that payroll employment fell by 598,000 jobs
January and the job losses were widespread, reflecting the
deepening recession and economic hardship facing many families.
The unemployment rate climbed to 7.6 percent, the highest
since September of 1992. Clearly there is little to be
encouraged about in this report. The question is: Will the
controversial stimulus bill going through Congress bring these
jobs back?
Unfortunately, the answer is; No. We all want the stimulus
to work, but it is slow and costly and too filled with pork to
do the job, just as, unfortunately, were many of the eight
stimulus packages that Congress has enacted since 1948.
Between 2009 and 2019 the House bill would add $1.2
trillion of Federal debt to the already large and growing
burden of public debt on the economy. It would add a bill of
$7000 to every household in America over the next 10 years.
Clearly we, our children, our grandchildren will be paying for
this spending spree for a very long time to come.
And even before the stimulus bill was considered, the
Congressional Budget Office warned that the budget deficit
would balloon to a record $1.2 trillion again in this year
alone. To put it in perspective what is alarming is the
publicly held debt as a percent of our economy was projected to
increase from 40.8 percent in 2008 to nearly 60 percent by
2011. It is a dangerous and alarming increase in our debt
position.
The real budget outlook is actually considerably worse
because the CBO baseline does not include a number of items
that will further enlarge the deficit. Trillions of dollars of
federal bailouts also expose taxpayers. Furthermore, the
looming retirement of the Baby Boom generation will cause
entitlement spending to accelerate faster and faster in the
next few years.
The U.S. fiscal outlook is already undermining financial
markets. As The Financial Times reported Thursday, the U.S.
Treasury opened the floodgates of government bond issuance
yesterday. The announcement came amid fears about growing U.S.
Government deficits and send the yield on the Benchmark 10-year
Treasury Note rising to 2.95 percent. The rise in yields has
been pushing 30-year mortgage rates higher, complicating
efforts by U.S. authorities to revive the economy.
The key question, as Senator Brownback asked, is whether
huge federal spending increases will actually work to stimulate
the economy. As economist John Taylor noted in a recent paper
presented at the annual American Economic Association meetings,
quote, ``There is little empirical evidence that government
spending is the way to end a recession or accelerate
recovery.''
It didn't work in Japan, and there is no reason to think it
will work now in the United States. Part of the reason to doubt
the effectiveness of stimulus spending is that taxpayers know
that they will end up paying for the stimulus in higher future
taxes and inflation, and will adjust accordingly now,
undermining any stimulative effect. One study even found that
it is thus possible for responses to expected future policies
to exacerbate and prolong recessions.
The prospect of borrowing over a trillion dollars for
questionable programs thrown together with little procedural
deliberation has rightly given the American People pause. Even
if job creation is assumed--and many do not--the cost per job
has been estimated at nearly $275,000 a job, far above average
taxpayer income.
We do know one thing: There is an absolute certainty that
at least the House-passed stimulus will increase deficits and
debts by over $1 trillion, the equivalent of all the personal
income taxes we gather in America each year. And there is
little indication that it will do much to help the economy.
President Obama has been impressive in his call for GOP
ideas, and I have admired his choice to ask for that input. We
have given him ideas that would double the amount of jobs we
create at half the price, by lowering marginal rates, by
putting in pro-growth tax provisions, and moving toward a far
smarter and targeted stimulus than we have today.
I will close with this. To date I think there has been a
good, healthy debate on Capitol Hill, and again I admire
President Obama's call for good ideas from both parties. I am
alarmed in recent days that the President's rhetoric is getting
too partisan. We have had that for many years. I would gently
remind everyone present that no party and no one person has a
monopoly on good ideas on Capitol Hill. Let's work together and
find a bill that can actually move this economy back in the
direction we want.
With that, I yield, Madam Chairman.
Chairman Maloney. Thank you.
[The prepared statement of Representative Brady appears in
the Submissions for the Record on page 29.]
Chairman Maloney. Senator Casey.
OPENING STATEMENT OF HON. ROBERT P. CASEY, Jr., A U.S. SENATOR
FROM PENNSYLVANIA
Senator Casey. Madam Chair, I congratulate you on the
assumption of your duties as Chair of this Committee. We are
grateful for your service, and the same goes for Senator
Brownback, as Ranking Member.
Chairman Maloney. Thank you.
Senator Casey. I have been saying over the last couple of
months that if our economy was analogized to a car, that we're
in a ditch and that we have to push ourselves out of that
ditch. And I still believe that.
But when you see numbers like this, that we have lost
basically 600,000 jobs in a month, I have to ask the question
whether or not what we thought was an economy in the ditch
might be an economy that has gone over the cliff.
I hope that is not the case, but I believe that if we do
not take strong action now--not a month from now, not two
months from now--but right now, this week, if not early next
week, that that analogy of going over a cliff will in fact be
the case.
We cannot allow that to happen. In Pennsylvania we have
seen evidence of it. Just in November and December, for
example, in our--and the State numbers sometimes lag a month
behind the national numbers--but in Pennsylvania it was more
than 27,000, plus another 27,000 in December. So in two months,
well more than 50,000 jobs lost.
We saw the number yesterday, the national number on
unemployment claims, I guess it was 636,000. The three-month
number--this is one of the numbers that really struck me--the
three-month job loss number is almost 1.8 million jobs. It is
hard to comprehend when you think about even the early or mid-
point of 2008.
So as Senator Klobuchar said before, this is more than just
the numbers, and I know that our panel today is going to add
more detail on the numbers, but this is now about the trauma
that families are being hit with in the midst of this terrible
recession. They are the ones that are paying the price.
Family after family are either losing their job or their
home, and in a larger sense losing their hope and optimism. One
thing we have to do, in addition to passing something this week
to jumpstart this economy, to get this economy at least out of
the ditch if not out of something, a larger hole than just
being in a ditch, is that we have to do our best to begin to
rebuild the trust and the confidence that the American People I
think have lost in Congress.
Forget whether they are hopeful or not about their own
prospects, they have lost confidence in Congress's ability to
do the right thing and to get this right. And part of that is
what underlies this debate.
I think the American People, no matter what their opinion
of Congress--the House and the Senate--they have great
confidence in our new President. And they have a right to
expect that we are going to help him get this economy moving,
and they want us to help him, and they should want us to help
the new President.
He has given us an opportunity to do just that, to
jumpstart the economy and also to make investments that will
create jobs now, and many years from now, by making investments
in healthcare and energy and education, as well as doing the
short-term things that we need to jumpstart our economy right
now.
So we look forward to the testimony, not because we want to
hear these numbers but because we have to understand them if in
fact this economy has gone over a cliff. I hope that is not the
case, but in my judgment, if we are not there yet, we are very
close to that point and that is why we have to act now and get
a bill passed this week.
Thank you.
Chairman Maloney. Thank you so much.
Congressman Burgess, and welcome to the Committee.
Representative Burgess. Thank you, Madam Chairman. I will
just say congratulations on being appointed Chairman of the
Committee and I look forward to serving with the other Members.
Chairman Maloney. Thank you very much.
Dr. Keith Hall is the Commissioner of the Bureau of Labor
Statistics at the U.S. Department of Labor. Before becoming BLS
Commissioner, Dr. Hall served as Chief Economist for the White
House Council of Economic Advisors. Prior to that he was Chief
Economist for the U.S. Department of Commerce. Dr. Hall
received his B.A. Degree from the University of Virginia, and
his M.S. and Ph.D. Degrees in Economics from Purdue University.
Thank you so much for coming. Please introduce your
colleagues and proceed with your testimony.
STATEMENT OF DR. KEITH HALL, COMMISSIONER, BUREAU OF LABOR
STATISTICS, U.S. DEPARTMENT OF LABOR; ACCOMPANIED BY: DR.
MICHAEL HORRIGAN, ASSOCIATE COMMISSIONER FOR PRICES AND LIVING
CONDITIONS, BUREAU OF LABOR STATISTICS; AND MR. PHILIP RONES,
DEPUTY COMMISSIONER, BUREAU OF LABOR STATISTICS
Commissioner Hall. Thank you, Madam Chairman. I would like
to first introduce the Deputy Commissioner, Phil Rones, on my
left, and Associate Commissioner Michael Horrigan on my right.
Madam Chairman and Members of the Committee:
Thank you for the opportunity to discuss the employment and
unemployment data we released this morning.
The labor market continued to weaken dramatically in
January. Total nonfarm payroll employment fell by 598,000, and
the unemployment rate rose from 7.2 to 7.6 percent.
January's sharp drop in employment brings job losses to 3.6
million since the start of the recession in December 2007.
About half of the decline occurred in the past three months
alone. Job losses in January were large and widespread across
the major industry sectors.
Manufacturing employment fell by 207,000 over the month,
bringing the job loss in this industry to 1.1 million since the
start of the recession. Nearly half of the job loss occurred in
the past three months.
In January, employment declines were spread throughout the
sector but were especially large in fabricated metal products,
motor vehicles and parts, and machinery.
Construction shed 111,000 jobs over the month. The pace of
job loss in this sector has accelerated in recent months.
Employment has declined by 781,000 since the beginning of the
recession, with about 40 percent of the decrease occurring in
the past three months.
In January, job losses continued throughout most of the
service-providing sector. Since the start of the recession this
sector has lost 1.8 million jobs, with over half of the decline
occurring in the past three months.
Employment in temporary help agencies fell by 76,000 in
January and has declined by 605,000 since December 2007. Other
large over-the-month job losses occurred in retail trade,
transportation and warehousing, financial activities, wholesale
trade, and professional and technical services.
Private education and health care added jobs in January.
Employment in health care was up by 19,000 over the month
compared with an average of 30,000 a month in 2008.
Average hourly earnings for production and nonsupervisory
workers in the private sector rose by 5 cents, or 0.3 percent,
in January. Over the past 12 months, average hourly earnings
have increased by 3.9 percent.
From December 2007 to December 2008, the seasonally
adjusted Consumer Price Index For Urban Wage Earners and
Clerical Workers fell by 0.7 percent.
Measures from our household survey also reflected the weak
labor market conditions in January. The unemployment rate rose
from 7.2 to 7.6 percent, bringing the total number of
unemployed persons to 11.6 million.
Since December 2007, the rate has risen by 2.7 percentage
points with the increase widespread across demographic groups.
In January, the employment-population ratio dropped to 60.5
percent, 2.2 percentage points lower than at the beginning of
the recession. This is the lowest level since May 1986. The
labor force participation rate at 65.5 percent in January has
edged down in recent months.
Also, this morning on our web site the Bureau of Labor
Statistics began publishing monthly estimates of the employment
status of persons with a disability. In January, the
unemployment rate for these persons was 13.2 percent compared
with a rate of 8.3 percent for persons with no disability.
The employment-population ratio for persons with a
disability was 20 percent, compared with 65 percent for those
with no disability. The collection of these important data is
sponsored by the Department of Labor's Office of Disability
Employment Policy.
Summarizing labor market developments for January, nonfarm
payroll employment fell by 598,000, and the unemployment rate
rose to 7.6 percent. Since the start of the recession in
December 2007, job losses have totaled 3.6 million, with about
half of the decrease occurring in the past three months.
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 30.]
Chairman Maloney. Thank you very much.
This is bad news across the board: 13 months of growing
numbers of unemployment. Have you ever seen this many bad
employment reports in a row, 13 months of unemployment? Has it
ever been this bad before?
Commissioner Hall. That's a good question, whether we have
had 13 months. Thirteen months is a fairly long time. It would
be a reasonably long recession at 13 months, if it stopped
right now. I think the most remarkable thing is the past three
months, and maybe five months, how very bad the numbers have
been.
Chairman Maloney. How accelerated it is.
Commissioner Hall. Yes, exactly.
Chairman Maloney. And why do you think it is accelerating
at such a point?
Commissioner Hall. You know, I cannot say why it is
accelerating. I think it is notable that it is accelerating so
dramatically. That has not happened very often. But it is also
very, very widespread. And as I mentioned, it is across all
industries; it is across demographic groups. As our December
data showed, it is across all 50 States, and unemployment rates
rose in 363 of 369 metropolitan areas. So it is very wide by
any dimension.
A third thing I think is notable is there really are not
signs of improvement in this report.
Chairman Maloney. In fact, some economists are predicting a
decline in the GDP of 2 to 3 percent. Are you concerned that
job losses may reach historic rates?
Commissioner Hall. You know obviously I cannot predict
where we are going, but the job loss is very big now. It is as
big as we have had in recent years. And the fact that there are
not signs of improvement at this point are certainly
concerning.
Chairman Maloney. Building on what you said, the
unemployment rate has now risen to 7.6 percent. Is there any
way that you can predict when we might see the peak of
unemployment?
Commissioner Hall. No, there really is not. In fact, we
might see the unemployment rate continue to rise even once the
recession is over and we start to get job growth. There may be
a period where the unemployment rate continues to rise a bit.
Chairman Maloney. Well the current downturn that began in
December of 2007 and is already longer than the last two
recessions, based on historical data, how long can we predict
that it might take for employment to return to its pre-
recession peak?
Commissioner Hall. It is hard to predict. I can tell you,
for example, the last recession took an extraordinarily long
time. After the last recession it took about four years for the
payroll employment level to fully recover.
Chairman Maloney. And the severe slump in housing prices
that is cited oftentimes for part of the recession is making it
much harder for workers to sell a home, and move, and take
another job. Do you see any indication that long-term
unemployment rates are being affected by this loss of mobility
due to the housing market?
Commissioner Hall. It is hard for us to make a connection
with the housing market. I can say that the levels of, and the
percentage of, unemployed that are long- term unemployed is
very high right now. In fact, typically in expansions that
number goes down to somewhere about say 10 percent of the
unemployed are long-term unemployed. This past expansion that
number never went down like it has in the past, so now when we
are seeing this increase in job loss it is taking the long-term
unemployed number to actually a rather high level at this
point.
Chairman Maloney. Well even the good news was very bad and
dim in this report in the two areas that are gaining jobs:
education, private education; and health care. Those areas also
have slowed.
Was there any good news anywhere in this report? Was there
any glimmer of hope, or turnaround? Was there any good news?
Commissioner Hall. No good news comes to mind from this
report.
Chairman Maloney. Senator Brownback.
Senator Brownback. I do note what you were saying in
education and health care sectors. What was the employment in
those sectors?
Commissioner Hall. In education I think we gained about
33,000 jobs. And in health care I think we gained about 19,000
jobs.
Senator Brownback. The reason for me asking that and
pointing that out is, in my looking at the stimulus package--
this is not about your job--but in my looking at it, those are
sectors that have maintained relative stability during this
recession thus far in the numbers I have looked at. Is that
accurate?
Commissioner Hall. Yes. Both those sectors have continued
to see some job growth.
Senator Brownback. So that the stimulus, to me you want to
target in on sectors that have shown huge weaknesses, not ones
that have had relative stability. And along that line, in the
auto and auto parts sector what have we seen for job loss over
the 13-month time period? Do you recall that?
Commissioner Hall. Sure. I think I have a good data chart
for that.
Senator Brownback. Or even if you have within the last
three months.
Commissioner Hall. Yes. The last three months--sorry I have
to do a little math here--the last three months motor vehicle
and parts have lost about 75,000 jobs.
Senator Brownback. And those would be concentrated in the
major auto-producing states?
Commissioner Hall. It should be, yes.
Senator Brownback. That's one--to me, as we look at this
you need to target in on the zones where we have the most
problems and try to get the most bang for your buck there. That
is why it was talked about making tax-deductible interest on
new cars purchased in 2009 as a way to try to stimulate that
employment.
It looks like to me in some of these sectors, particularly
manufacturing ones, that people were looking at the inventory
buildup over the last couple of months, and probably said we
are going to start shedding employment because our inventories
are starting to build up. Do you--I do not know that you track
inventory. Do you?
Commissioner Hall. No, we do not.
Senator Brownback. Okay. I know in the auto industry we
have got a major plant in my State in Kansas City, and they
were starting to back up on sales, and so they were just
slowing the production lines down. Then eventually they took a
two- to three-week holiday time period where people were off,
not voluntarily, but forced because they did not want to get
the inventories of autos built up, and that that goes in this
zone.
What happened three months ago? Are there things that you
were tracking, or saw? Because you are pointing out that we
have had a soft employment picture for 13 months, and then just
really--to quote my colleague from Pennsylvania--went over a
cliff three months ago. What happened then? I think that is
what the Chairwoman was asking, but I wanted--
Commissioner Hall. Sure. I would say up until about five
months ago the job loss was really centered in a few
industries. It was centered in housing-related industries,
construction and such, and in manufacturing somewhat. And what
has happened lately is it has just spread to all parts of the
economy.
It has sort of mirrored that decline in consumer spending.
When consumer spending stops, you have this very, very broad
impact on the economy. I think that is what we are seeing.
Senator Brownback. The other figure that comes to my mind
is that exports stopped the last quarter of last year. We were
having nice growth in exports the first three quarters of last
year, and then when the recession went global that that had a
broadening impact also on unemployment. Would that be accurate?
Commissioner Hall. Yes, it would.
Senator Brownback. Which again to me augurs for us
targeting in on key sectors of whatever we can do to get those
moving again.
What has happened to construction employment since 2003? I
want to look at that period of time in particular because we
have had this big bubble of credit in the construction
industry. Do you recall? Or is that easily available for you to
come up with?
Commissioner Hall. Yes, my colleagues will look up the
exact numbers, but my recollection is that there was a very
large buildup in construction employment since 2003 and we have
now fallen back down to a level actually about where we were in
2003.
Senator Brownback. Okay. So while your numbers are showing
a precipitous falloff, it was enormous growth that had taken
place?
Commissioner Hall. Yes. Yes, in fact the last--we are back
down to a level around where we were around in the middle of
2003. The level of employment in construction is back down to
that level.
Senator Brownback. Thank you.
Chairman Maloney. Senator Klobuchar.
Senator Klobuchar. Thank you very much, Madam Chair.
Commissioner Hall, if current economic conditions continue
or worsen--and I know you talked about how this is very bleak,
this report, that there is no good news, that this is such a
long period of time--but if current economic conditions
continue or worsen, do you believe it is possible for the
Nation to experience double-digit unemployment for an extended
period?
Commissioner Hall. I would not want to speculate on how--on
the future of something like the unemployment rates since
certainly we produce that data. I will say, though, that the
unemployment rate has been going up, and in the past we have
seen at least some moderation of the decline in job loss before
the unemployment rate stops going up, and we have not seen that
yet.
Senator Klobuchar. So you think it is possible we would go
into the double digits?
Commissioner Hall. I think it is possible the unemployment
rate will rise. I do not want to speculate too much on exactly
how far.
Senator Klobuchar. And I remember at the last hearing, the
lengthy one when Senator Casey and I were there a few months
ago, where we talked about not just the people who have lost
their jobs but the people who have reduced hours. Do you have
statistics on that, as well?
Commissioner Hall. Yes.
Senator Klobuchar. And that is not included in the 7.6
percent rate? Is that right?
Commissioner Hall. Correct.
Senator Klobuchar. Or the 598,000 job loss in January.
Commissioner Hall. Or you think of something like people
who are--
Senator Klobuchar. Reduced hours.
Commissioner Hall [continuing]. Or just reduced hours.
Senator Klobuchar. I just remember that that is something
that people, as they are struggling to get by, talked about how
difficult it is to keep up; that it was somewhat stunning to
know those numbers, as well; that that is very difficult for
people who maybe lose some hours and then they cannot afford
their health care, or they lose some hours and they cannot
afford to get a car. [Pause.]
Commissioner Hall. I am sorry to be so----
Senator Klobuchar. No, that is fine. In fact, you could
look and tell me later, too, if that is easier. Do you want to
do that?
Commissioner Hall. Yes.
Senator Klobuchar. And then when we come back around I will
ask?
Commissioner Hall. Yes.
Senator Klobuchar. I can just tell you in general I am sure
the hours have been declining. When we have a generally
declining labor market, hours decline typically along with
employment.
Senator Klobuchar. Maybe your friends there can look and we
will continue on.
Commissioner Hall. Yes.
Senator Klobuchar. The Congressional Budget Office has
projected that the economic recovery package the Senate is
considering would raise employment by .9 million to 2.5 million
at the end of 2009; 1.3 million to 3.9 million at the end of
2010. I know you cannot comment on your thoughts on the
economic recovery package that is pending legislation, but do
you generally believe that this level of job creation is
possible in the next few years with a stimulus recovery
package?
Commissioner Hall. Certainly at the end of a recession we
obviously get job growth at that sort of numbers. I cannot
speak to how it might be related to any legislation, but that
level of job growth is certainly possible.
Senator Klobuchar. Okay. As I discussed in my opening
statement, American Veterans are facing particularly high
unemployment. In 2007 unemployment, as I said, among Veterans
ages 18 to 24 was 11.2 percent, more than twice the national
rate during that year.
A separate report found that nearly 1 in 5 Veterans who
sought work within 1 to 3 years after their discharge from the
Armed Services remained jobless.
Could you talk about some of the unique challenges Veterans
face when they return home from overseas, and if we see an
increase in the number of Veterans returning home in the next
few years do you see an increase in Veterans' unemployment?
Commissioner Hall. Sure. I think the pattern of
unemployment for Veterans appears to be--as my memory is--it
appears to be similar to anybody else who has lost a job, that
there can be an extended period of job search before they get
jobs back.
And certainly during a recession like this it is
particularly difficult for people entering or re-entering the
civilian labor market to find work.
Senator Klobuchar. So when you say ``job loss,'' you mean
because they went to serve our country they lost their job, and
so when they are trying to re-enter at a time when there is
suddenly such a drop in jobs it is understandable that this
would happen?
Commissioner Hall. Absolutely.
Senator Klobuchar. But it is incredibly--it is double the
amount and a cause of great concern.
As you know, state and local governments across the Nation
are facing record budget deficits. Can you talk about the
impact further cuts in public spending at the state and local
level might have on employment?
Commissioner Hall. Sure. Typically state and local
employment does not start to decline oftentimes until after a
recession, once I suppose state and local budgets start to
tighten up.
In state employment, for example, I think we have had
declines in state employment for the last couple of months. It
is still too early to tell if that is a trend now, but if that
is true that would be a bit quicker than in past recessions.
Local government employment has actually flattened out the
last four or five months. So that is already showing signs of
difficulty. In past recessions, local government employment
often has not even slowed growth and now we are seeing it
flatten out.
Senator Klobuchar. Thank you. And you maybe could get me
those numbers later.
Commissioner Hall. Okay, we will do that.
Senator Klobuchar. Do you have them?
Mr. Rones. The hours--the average workweek from our Payroll
Survey was at 33.3 hours in January. I think that is the lowest
on record, although the hours' data have not been falling
dramatically the way the employment numbers have, but it's been
edging----
Senator Klobuchar. The lowest on record from history?
Mr. Rones. I believe that's----
Senator Klobuchar. Wow.
Mr. Rones [continuing]. The case. Although for most of the
last five or six years it has been in the 33 to 34 range. So
that is why I said it has been edging down.
Senator Klobuchar. So it has not gone up.
Mr. Rones. It has been edging down. But certainly from our
Household Survey we have measures of the number of people who
are working part-time even though they would prefer full-time
work, and that has gone up just the way the number of
unemployed has gone up.
Senator Klobuchar. And just to point out--and I am going
beyond my time here--so people understand this, that is not
even reflected in that 7.6 percent unemployment rate. So you
have these people in astronomical increase, like the seven--up
to that levels for people that would like to work full-time but
are working part-time. And then you also have people who are
having reduced hours at a time when their expenses are going
up.
Mr. Rones. Right.
Senator Klobuchar. And none of that is reflected in the
unemployment numbers.
Mr. Rones. Right. We have a set of alternative unemployment
measures in our news release each month that takes that into
account.
Senator Klobuchar. Thank you. Thank you, Mr. Rones.
Chairman Maloney. Thank you so much.
Congressman Brady.
Representative Brady. Thank you, Madam Chairman.
Clearly when someone loses their job in a family it is a
remarkably traumatic event. And so there is among the Democrats
and Republicans alike a strong desire to bring these jobs back
as quickly as possible.
Let me ask you, because the key for the day is how can we
bring these jobs back? That is the key question. You have a
unique background as former chief economist of the Economic
Advisors for the President and your role here at BLS. One of
the centerpieces of the stimulus bill is the making work pay
credit, a rebate by another name.
For the average worker, it would give them an extra $1.35 a
day in their paycheck. We have lost 45,000 retail jobs this
last month. How many retail jobs will be created by that extra
$1.35 a day?
Commissioner Hall. In my current role I think I want to
avoid speculating on things like that, or doing that sort of
forecasting.
Representative Brady. But do you look at jobs numbers?
Obviously, because you track them and your role in advising the
President in the past, do you have a feel for what types of job
creation we will have?
Commissioner Hall. You mean from that particular----
Representative Brady. Um-hmm.
Commissioner Hall. No, I do not, really. This is something
I actually have not taken a hard look at.
Representative Brady. Let me ask. You know, consensus by
economists is that the second and third quarters will continue
to decline with some uptick in the fourth quarter of this year,
so everyone agrees 2009 is the key year if you are going to
recover these jobs.
In the infrastructure area, another major part of this
stimulus but only just a little over one-tenth of this whole
stimulus goes to infrastructure, we lost 111,000 construction
jobs this last month, yet very little of the infrastructure
spending will occur this year. How many jobs this year will be
brought back in the construction industry as a result of the
stimulus as you view it?
Commissioner Hall. Yeah. Again I--I am in a position where
we rely on our objectivity and putting out the data and not
forecasting things like that, so I would like to beg off trying
to answer that just because of our unique role at the Bureau of
Labor Statistics.
Representative Brady. Small businesses are just such a big
job creation machine, yet in the stimulus bill that passed the
House there was actually more money allocated to buy new art in
America than to help small businesses' expense, new computers,
equipment, and machines. Along the same lines do you have at
least a general feel for how many small business jobs can be
recreated as a result of the stimulus as you see it going
forward?
Commissioner Hall. Yeah, again I do not want to speculate
on that and I certainly have not sat down and done any sort of
analysis on the effect of the stimulus.
I can tell you that small businesses are clearly a major
source of job growth, especially coming out of a recession.
Representative Brady. Is new art a major source of job
growth in America? I love it, but I am just wondering.
Commissioner Hall. That seems unlikely.
Representative Brady. Okay. The final--close to final
question is on consumer confidence. The latest poll yesterday
shows that only 37 percent of Americans, barely a third, have
confidence and support the stimulus package. In all of our
statistics do you see--have you seen any increase in consumer
confidence as a result of this stimulus package being discussed
and debated in Congress?
Commissioner Hall. I do not watch the consumer confidence
numbers. We do not produce those. But I guess I will revert
back to what I have said before, there is very little sign of
improvement in this report.
Representative Brady. Sure. And I think every Member here
has talked about the unemployment number because it is high.
Help me put it in perspective.
Today it is 7.6 percent in this report?
Commissioner Hall. Yes.
Representative Brady. What is the next highest unemployment
figure that we have reached in modern times? In 1982 it was at
10.8 percent.
Commissioner Hall. Yes, we have the historical data here.
We will take a quick peek.
Representative Brady. Because one of the questions was:
Will we reach double-digit unemployment? That is a fair
question. Which would take us back to the 1982 era.
Commissioner Hall. Yes. The last time we had double-digit
unemployment was in the 1980s recession.
Representative Brady. So we are not to that magnitude yet,
but----
Commissioner Hall. No.
Representative Brady. But as it moves, those are sort of
the benchmarks. Just curious, a final question: What level did
Depression-era unemployment reach?
Commissioner Hall. Do we have data going back that far? It
was very high. It was about 25 percent, right? It was 24.9
percent.
Representative Brady. Around 24 percent or so.
Commissioner Hall. Right. It was really high.
Representative Brady. Thank you. Thank you, Madam Chairman.
Chairman Maloney. Senator Casey.
Senator Casey. Thank you.
I wanted the panel first to direct your attention to the
data on Minority Unemployment. It seems to me from looking at
the numbers that, as bad as this recession has been overall for
all Americans, that it has had a particularly disproportionate
adverse effect on African Americans and Latinos.
I want to make sure I am stating the numbers accurately.
The unemployment rate for African Americans and Latinos has
jumped about 3.5 percentage points since the recession began,
and that would be--and I would ask you just to tell me if I am
accurate on this--for African Americans it has gone from 8.4 to
11.9? Is that correct?
Commissioner Hall. Yes. Actually the numbers I have are it
went from 8.9 to 12.6, but that is the same ballpark, 3.7
percentage points.
Senator Casey. 8.9 to 12.6?
Commissioner Hall. Yes.
Senator Casey. Okay, and that is over what time period?
Commissioner Hall. That is since the start of the
recession.
Senator Casey. So since December of '07?
Commissioner Hall. Yes.
Senator Casey. Okay. So it is actually higher.
And also for Latinos, 5.7 to 9.2?
Commissioner Hall. Right. The most recent numbers, it has
gone from 6.2 to 9.7, about 3.5 percentage points.
Senator Casey. And that is starting from the beginning of
the recession?
Commissioner Hall. Yes.
Senator Casey. Give me that number again? Six point?
Commissioner Hall. 6.2 to 9.7.
Senator Casey. 9.7. And then when you look at it in terms
of white unemployment rates only rose about 2.5 percent? Do you
know those numbers?
Commissioner Hall. Yes, that's correct. It went from 4.4 to
6.9 percent.
Senator Casey. 4.4 to 6.9?
Commissioner Hall. Yes.
Senator Casey. Okay. That is an obvious differential
between minority versus white unemployment. Are those numbers--
can you put them in any kind of broad historical context? I do
not need an exact number, but is that consistent with recent
history when we have had a recession, that the minority
unemployment rate would outstrip or outrun the white
unemployment rate at that rate?
Commissioner Hall. The unemployment rates for all these
groups have risen more than the last couple of recessions, but
you are exactly right. Typically the African American and the
Latino unemployment rates rise by more during recessions just
generally. In every past recession that has happened.
Senator Casey. And so just to recap on where we are now,
the African American unemployment rate right now is 12.6? That
is the latest number?
Commissioner Hall. Yes.
Senator Casey. And the Latino unemployment rate right now
is 9.7?
Commissioner Hall. Yes.
Senator Casey. And for whites it would be 6.9?
Commissioner Hall. Yes.
Senator Casey. Okay. I wanted to take a look at one of our
charts. Our staff here does a great job of preparing them, so I
want to use at least one. It is obviously not good news. Could
you just talk about what that depicts? I mean, it is obvious it
is a decline, but can you just kind of provide a summary of
what that means?
Commissioner Hall. Sure. You will see for the first half of
this time period, maybe a little bit more than half, you have
significant job loss but it is not a huge job loss. And it is
sort of centered in a few industries. And then you have about
two months of a significant uptick where you have job loss at
over 300,000 jobs, and that got much broader. Now the past
three months we have had job loss of over 500,000, nearly
600,000 job loss.
So you have a pretty significant deepening and broadening
of the deterioration in the labor market.
Senator Casey. And there may not be one month, but I guess
where it started to really break away is August-September? What
is the best way to describe where it began to really--
Commissioner Hall. I would say it was in two stages. For
August and September it jumped up to over 300,000 jobs lost.
And then since then it has been well over 500,000 a month job
loss.
Senator Casey. The last thing--and I have about 30
seconds--is on Unemployment Insurance. I guess for the third
quarter of 2008 you have got about 15 states that have--15
states as well as Puerto Rico, Virgin Islands, and D.C.--who
have Unemployment Insurance Benefit exhaustion rates of more
than 40 percent. Is that correct?
Commissioner Hall. I believe that is correct. We do not
collect that data, but I believe that is correct.
Senator Casey. The concern that I have--and I guess I will
not make it a question because we are out of time--but the
concern that I and a lot of people would have is not just that
you are getting numbers very high and benefit exhaustion rates,
is can our current system of Unemployment Insurance Benefits
handle the tsunami or the flood of these Unemployment claims? I
will end with that question. It is rhetorical because I think
we know. We can only speculate about the answer, but that is
pretty frightening.
Thank you very much.
Chairman Maloney. Thank you, Senator. You raised a very
important point. I am hearing it at offices in my District in
Massachusetts. A friend called and told me that they line up
early in the morning, and by the time that they can get in all
the people in line cannot even take the slots that are
available that day. So that is a huge concern that is
confronting men and women in our country.
Congressman Burgess.
Representative Burgess. Thank you, Madam Chair.
Dr. Hall, Representative Brady in his opening statement
talked a little bit about the overall cost of this bill. I am
going to make my comments in reference to the House-passed bill
because the Senate bill is still a moving target and we do not
know where that is going to end up, but we were talking about a
package that I think was $819- or $820 billion, and people have
written that if you include the cost of capital into that
figure that it is in excess of $1.2 trillion. I am concerned
because the small part of the bill that my committee of
jurisdiction got to mark up on Energy and Commerce dealt with
increases in Medicaid funding, increases in COBRA funding.
It seems as if you look at those types of funding, and
there are big funding cliffs that occur--12 months for the
COBRA, payments 18 or 24 months for the Medicaid payments--and
if you looked at extending those costs out beyond those cliffs,
we are probably talking about a total package with the
extension of those costs and the cost of capital, we are
probably talking about a bill that may in fact be in excess of
$3 trillion, which I think would fit anyone's definition of
truly explosive spending.
What I am concerned about is that we do not seem to be
acknowledging with just say concentrating on the increase in
the Federal match for Medicaid for states with that funding
cliff, that is equivalent to a balloon payment on a note. In
fact, it starts to look a lot like some of the subprime loans
that were made that got us into this difficulty in the first
place.
I realize that is a little bit out of your area of
jurisdiction, but would you care to comment on that?
Commissioner Hall. I think that is pretty far into the
policy woods for me to comment on.
Representative Burgess. But again going back to
Representative Brady's earlier remarks, the total cost of this
bill is undoubtedly going to have an effect upon the economy,
and I do not know if we--well I will just say this to the
people on the Dias--I do not know if we have been honest with
ourselves and with the American People about how much money we
are actually spending, borrowing, printing, however we propose
to get that, and it does almost resemble the types of predatory
lending that was going on that sparked the housing crisis that
began this problem in the first place.
I do not think we have been honest about the total cost of
ownership to the government for expanding these programs, and
in fact is this a good deal or a bad deal for the taxpayer? I
do not know that we have made that case.
Let me just shift gears for a moment with the time I have
left. On your section provided by the Department of Labor under
the Frequently Asked Questions about Employment Unemployment
estimates, there is a paragraph that starts out: Are
undocumented immigrants counted in the surveys?
There is a reasonable answer given there that it is
difficult to assess that number, but it looks like the data
from the Household Surveys show that foreign-born workers
accounted for 15.7 percent of the labor force.
Is it possible to use statistics from the Department of
Labor or Homeland Security to know how many people are in the
country with a work permit, with a work visa, and extrapolate
from that then what percentage, or what part of that 15.7
percent are people are in the country without a work visa?
Commissioner Hall. That is something that we would never
do. We just collect the data. We actually never ask the
question when we count the employed in the payroll jobs. So I
would not know how to make an estimate.
Representative Burgess. But those numbers, in fact to
calculate that number, are available if someone were to want to
tease them out and run that formula? Is that correct?
Commissioner Hall. Sure. I suspect people have done that.
Representative Burgess. And I do not want this to sound too
harsh, but I come from a part of the country where--and I think
the comments from Senator Casey, about the minority populations
where the unemployment rate is so much higher, clearly we as
Members of Congress have a duty to protect those jobs of
American citizens first. It was referenced about the low
credibility that Congress has, and this is one of those issues
that has seriously eroded Congressional credibility over the
past several years. And just for the record it seems like
something that we might devote some attention to and see if we
cannot be better stewards of the Nation's workforce, at least
as it revolves around people who are actually legally in this
country to work and those who are not. And I yield back. Or I
would yield to the Commissioner if he has a comment to make.
Commissioner Hall. I do not.
Chairman Maloney. Thank you. And Senator Risch.
Senator Risch. Pass.
Chairman Maloney. Pass?
Senator Risch. Yes.
Chairman Maloney. We are going to submit some more
questions to the record, but we really need to go forward with
some of our meetings that we are having on my side of the aisle
in support of moving the economic recovery package forward.
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Chairman Maloney. I would just like to state for the record
that we now have job numbers for the entire eight years of the
former Administration, the Bush Administration. In the last
eight years, payroll jobs are up only 1.6 percent. That is far
and away the lowest eight-year gain on record.
In the eight years of Clinton, jobs grew by 20.7 percent.
In the 70 years of available data, jobs have grown at an
annual rate of 2.2 percent. For the 62 years before President
Bush, the average was 2.4 percent.
I just would like to thank you very much for your service.
There may be additional questions that other members would like
to get to you, and again these are not good numbers but we
appreciate very much your testimony.
Senator Brownback. Madam Chairwoman, could I ask a question
that I am going to get to you in writing, but I would like to
put you on notice for it?
There is a lot of discussion obviously in our stimulus
about spending, and I understand you have some economists that
focus on international areas. I am going to have two questions
I am going to submit to you and I hope you can answer them.
One is the effect of the Japanese stimulus package that
they did on spending. If you have economists that have
researched that, I would like to get that number in
perspective.
And the second is: Because we have had such a falloff of
exports, what you would project, or your economists, if they do
project, if we have a declining value of the dollar taking
place, or a rising value of the dollar taking place, its impact
on projected employment areas.
I think those are two key current issues that we need to
look at.
[The chart entitled ``Job Losses are Mounting at an
Accelerated Rate'' appears in the Submissions for the Record on
page 63.]
Senator Brownback. And I appreciate your notice, too, about
the housing bubble that we floated on for quite a period of
time in the Clinton and Bush Administrations on those expanded
credit numbers, and it seems like that is a big part of what we
are dealing with, the bursting of that that has now expanded
not just housing but it has gone broad-based all sectors, and
it has gone global as well.
So I think we do not want to reinflate another bubble, but
we want to target into places where we can create some jobs and
opportunities.
Chairman Maloney. Thank you, Senator. I join you in
requesting this information.
I just would like to close with one question about your
funding. Do you have enough funding to get the important
statistics that we need in order to make the proper policy
decisions?
And are there any other labor statistics that you think
would be helpful for you to collect to help to make the best
possible policies going forward?
Commissioner Hall. Sure. Well, as you know we are under a
Continuing Resolution holding our funding to 2008 levels. That
is not nearly enough for us to continue to produce all our
products. So our most important thing is we need to go ahead
and get an '09 budget, or if the Continuing Resolution gets
extended, we are going to need some help to continue our
programs at their current levels.
Chairman Maloney. Are there other statistics and items that
you feel you should be focusing on that would help us in making
better policy decisions?
Commissioner Hall. Yes, I can think of two areas.
One is I would like to see us improve the accuracy of our
detailed job and wage trends by occupation. We have some of
that data, but we do not have that data over time. I think that
would be really important to sort of follow, especially when
you get back to job growth, following the impact of job growth
where you have good job growth, what kind of job growth you
have.
And the other thing is I think we would like to see some
better data on new business formation.
Chairman Maloney. Well I hope the Minority will join me in
a letter requesting a budget request for them to be able to
include this important information in their analysis.
Thank you very, very much for your important report today.
The meeting is adjourned. Thank you.
Commissioner Hall. Thank you.
[Whereupon, at 10:41 a.m., Friday, February 6, 2009, the
meeting of the Committee was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Carolyn B. Maloney
The newest job numbers--with the fourth straight month of
job losses over half a million--highlight the misery and
disruption that American families have been enduring. As the
chart shows, well over 4 million Americans have lost their jobs
since the start of this recession--almost half of them in the
last 4 months.
This recession looks to be the worst since the Great
Depression--and this chart was prepared before the latest bad
news. I can't even begin to imagine how deep this recession
would have been in the next few months had Congress not passed
the recent stimulus bill.
These numbers add further support to the bankruptcy bill
pending in the House of Representatives that would allow a
homeowners' primary residence to be included in bankruptcy. As
millions of Americans have lost their jobs, they have become
unable to pay their mortgages. And in many states, the bursting
of the housing bubble means that these homeowners owe more than
their houses are worth, eliminating the possibility of
refinancing a mortgage or selling a house at a high enough
price to pay off the existing mortgage, and therefore
increasing foreclosures in that state. The housing problem is
making a vicious cycle even worse--as more people lose their
homes to foreclosure, the stock of unsold houses increases
putting more downward pressure on house prices, which leads to
more homeowners owing more than their house is worth, which is
leading to more foreclosures. And homeowners who have lost
their jobs are less mobile when they owe more than their house
is worth--taking a job in another area of the country would
entail coming up with money to pay off their mortgage or taking
a serious hit to their credit rating.
The latest numbers show that almost 1 in 10 mortgage
holders in Florida were in foreclosure during the fourth
quarter of 2008, and in Nevada, Arizona, California and Ohio
more than 1 in 25 mortgage holders are in foreclosure. Not
surprisingly, most of those states have unemployment rates much
higher than the national average. California recently reported
that the unemployment rate in January was 10.1 percent.
Although the housing prevention plan outlined by Secretary
Geithner helps some homeowners--interest rates are lowered to
homeowners who have limited or no equity in their houses,
homeowners who have lost their jobs and will need to sell their
houses have been offered no help. If homeowners can lower their
payments through bankruptcy proceedings, they may be able to.
According to the figures just released by the Bureau of
Labor Statistics, more than 3.6 million jobs have been lost
since the recession began in December 2007, including the
nearly 600,000 jobs shed in January. Given the steady stream of
mass layoffs, a credit freeze and a decline in consumer
spending, the writing was already on the wall for a devastating
13th month of job losses. The job losses were widespread
throughout the economy and employers cut jobs at a faster pace
last month.
The Labor Department announced yesterday that initial
jobless claims surged to a 17-year high of 626,000 last week
and that the number of people on the unemployment rolls ticked
up to nearly 4.8 million, the most since records began in 1967.
We now hear that the growing rolls of the unemployed are
colliding head-on with states who cannot afford to efficiently
process their claims.
More than 2 million homes have gone into foreclosure, and
millions of other homeowners find themselves owing more to the
bank than their homes are worth. Because of these job losses,
millions have also lost their health insurance. And an
estimated $6 trillion in personal wealth has simply evaporated
since the economic crisis began.
Alarm bells are sounding and our economic recovery package
must make its way to the President as soon as possible. The
current economic crisis requires bold solutions that address
the magnitude of our economic woes, and the American Recovery
and Reinvestment Plan will do just that.
These jobless numbers today underscore once again that
there is no issue that is more important for this government to
address than saving and creating jobs. Our recovery package
will create or save an estimated 4 million jobs and will make
key investments in our future. We will create jobs across a
variety of sectors over the next several years, which will
soften the downturn and foster a solid economic recovery that
benefits all Americans.
First and foremost, we will help families in need by
increasing food stamps benefits for some 30 million Americans,
expanding unemployment benefits for 18 million Americans, and
preserving health care benefits for 20 million Americans.
We have an historic opportunity to make the investments
necessary to modernize our public infrastructure, transition to
a clean energy economy, and make us more competitive in the
future. America's schools, roads, bridges, and water systems
are in disrepair and this is creating a drag on economic
growth.
Our plan also supports working families by providing a
$1,000 ``Making Work Pay'' tax cut for 95 percent of workers
and their families. These families will go out and spend the
money, not save it, and help jumpstart local economies right
away.
Now is the time to put aside the differences we might have
in economic theories and put the needs of our country first.
Now is the time to save our economy, not defend the failed
policies of the past. We need to stand together for the good of
our nation.
President Obama and the Democrats are ready to embark on a
bold, common sense plan to turn this economy around, to address
the fierce urgency of now, and to get this country back on its
feet. Today's numbers underline the need to act, and to act
now.
----------
Prepared Statement of Senator Sam Brownback
The Bureau of Labor Statistics' report that payroll
employment declined by another 598,000 jobs and that the
unemployment rate rose to 7.6 during the month of January is
unwelcome, but not unexpected, news. There is no question that
our economy and the people of this nation are hurting, and
hurting badly. I wish I could say that I am looking forward to
Commissioner Hall's testimony this morning, but candidly this
is news that we could all do without.
I know that Commissioner Hall is here to testify on the
data in today's report and is not here to offer us projections
about future results or policy prescriptions for what ails us.
That isn't the job of the BLS Commissioner, so I hope we can
all avoid the temptation to attempt to re-write his job
description this morning.
There is no question that our economy needs help. Passage
of a stimulus package is essential. Passage of a massive
spending bill that permanently adds to the size of government
is not. We need to put gas in the tank, not sugar.
Unfortunately, the stimulus bill passed by the House and the
one under consideration by the Senate both fail the test--and
fail it miserably.
We will hear a great deal of discussion about how spending
is more effective than tax reduction in stimulating economic
activity. Yes, there are a significant number of economists
that use their macroeconomic models to generate results to
support that notion. However, the results those models generate
say more about how the models were constructed than about the
economy. These models are more parable than fact. Recent
economic research does not support the notion that government
spending is the most effective way to stimulate the economy.
In fact, there is a good deal of recent economic research
that analyzes data as opposed to building models on Keynesian
assumptions.
Research by President Obama's Chair of the Council of
Economic Advisors, Christina Romer and her husband find a tax
multiplier of about three: a dollar of tax cuts raises the
gross domestic product (GDP) by about three dollars.
Andrew Mountford of the University of London and Harald
Uhlig of the University of Chicago analyzed U.S. quarterly data
from 1955-2000. They considered three policy scenarios: a
deficit-financed government spending increase, a deficit-
financed tax cut, and a balanced-budget increase in government
spending.
Their findings: ``We find that deficit-financed tax cuts
work best among these three scenarios to improve GDP, with a
maximal . . . multiplier of five dollars of total additional
GDP per each dollar of the total cut in government revenue five
years after the shock.'' They found that a deficit financed tax
cut has a maximal multiplier of 5.33 after 14 quarters, while a
deficit financed increase in government spending has a maximal
multiplier of only 0.65 after one quarter.
Olivier Blanchard, Chief Economist at the IMF and Roberto
Perotti find that ``In most cases [of tax and spending changes
in the U.S.] the multipliers are small, often close to one,''
and that ``. . . both increases in taxes and increases in
government spending have a strong negative effect on private
investment spending.''
While consumers will save some portion of a tax cut and,
equivalently, pay down household debt, it is not sound policy
to suggest that individuals taking steps to improve household
balance sheets is a negative for the economy. Improved credit
quality is an important part of freeing up bank lending. The
reduced debt service requirement also increases a household's
long term income that is available for consumption. Many of the
current so-called stimulus measures involve long-term
government spending programs that are advocated as long-term
investments in our Nation's infrastructure and future growth.
Why is it not prudent to allow families to shore up their
balance sheets to provide for their own private financial
infrastructures and their families' future growth prospects?
While there has been a great deal of focus placed on
financial institutions' balance sheets, household balance
sheets have suffered significantly. From the third quarter of
2007 to the 3rd quarter of 2008, the net worth of households
and nonprofit organizations has declined by $7.1 trillion or
8.9%.
Household debt declined in the third quarter of 2008 for
the first time since the Federal Reserve began tracking this
data in 1952.
It should not be surprising that households are moving to
shore up their balance sheets. Neither should it be considered
a bad thing from an economic perspective, if one takes a long
view.
It is also important to note that evidence suggests that
consumers are more likely to spend tax reduction that comes in
the form of permanent reductions than they are one time
stimulus checks.
While it may be timely in the current deep economic
downturn to consider stimulus measures, the current proposals
are neither targeted toward measures that will provide actual
stimulus nor temporary. In fact, the proposals are a giant step
toward permanently increasing the size of the federal
government. Once spending is in place, it will remain in place.
We owe the American people better. Congress and the
Administration need to step back and take the time--not a long
time--but the time to craft a true stimulus package.
----------
Prepared Statement of Representative Kevin Brady
I would like to join in welcoming Commissioner Hall before
the Joint Economic Committee this morning. The data released
today underscore the need for effective steps to get the
economy back on track.
The data show that payroll employment fell by 598,000 in
January. The job losses were widespread, reflecting the
deepening recession and economic hardship facing many families.
The unemployment rate climbed to 7.6 percent last month.
Unfortunately, the policy response to the downturn was a
partisan stimulus bill passed by the House to increase federal
spending, deficits, and debt by astronomical amounts. Between
2009 and 2019, the House bill would add $1.2 trillion of
federal debt to the already large and growing burden of public
debt on the economy. The stimulus bill would add more than
$3,000 to the share of public debt of every man, woman, and
child in the U.S. by 2019. We, our children, and grandchildren
will be paying for this spending spree for a long time to come.
Even before the stimulus bill was considered, the
Congressional Budget Office (CBO) projected that the budget
deficit would balloon to a record $1.2 trillion in 2009 alone.
The publicly held debt as a percent of GDP was projected to
increase from 40.8 percent in 2008 to 50.5 percent in 2009, a
whopping 10 percentage point increase in only one year. The
stimulus bill could push this debt-to-GDP ratio to nearly 60
percent by 2011.
The real budget outlook is actually considerably worse
because the CBO baseline does not include a number of items
that will further enlarge the deficits. Trillions of dollars of
federal bailouts also expose taxpayers. Furthermore, the
looming retirement of the baby boom generation will cause
entitlement spending to accelerate faster and faster in the
next few years.
The U.S. fiscal outlook is already undermining financial
markets. As the Financial Times reported Thursday, ``. . . The
U.S. Treasury opened the floodgates of government bond issuance
yesterday . . . the announcement came amid fears about growing
U.S. government deficits and sent the yield on the benchmark
10-year Treasury note rising to 2.95 percent . . . The rise in
yields has been pushing 30-year mortgage rates higher,
complicating efforts by U.S. authorities to revive the economy
. . .''
The key question is whether huge federal spending increases
will actually work to stimulate the economy. As economist John
Taylor noted in a recent paper presented at the annual American
Economic Association meetings, ``there is little empirical
evidence that government spending is a way to end a recession
or accelerate a recovery.'' It didn't work in Japan, and there
is no reason to think it will work now in the U.S. Part of the
reason to doubt the effectiveness of stimulus spending is that
taxpayers know that they will end up paying for the stimulus in
higher future taxes and inflation, and will adjust accordingly
now, undermining any stimulative effect. One study even found
that ``. . . It is thus possible for responses to expected
future policies to exacerbate and prolong recessions . . .''
The prospect of borrowing over a trillion dollars for
questionable programs thrown together with little procedural
deliberation has rightly given the American people pause. Even
if job creation is assumed, the cost per job has been estimated
at well over $200,000, far above average taxpayer income. We do
know one thing: there is an absolute certainty that the House-
passed stimulus will increase deficits and debt by over $1
trillion. However, there is very little indication that it will
do much to help the economy.
A much better approach would be long-term marginal tax rate
reductions to improve incentives to work, save, and invest. As
Christina Romer, President Obama's chair of the Council of
Economic Advisers has written, ``tax cuts have very large and
persistent positive output effects.'' The Republican tax
package offered in the Ways and Means Committee included a
number of pro-growth tax provisions. We proposed cutting the
marginal income tax rates in the bottom two brackets by five
percentage points, tax deduction for small business, income tax
relief for taxpayers receiving unemployment benefits, and a tax
incentive for qualifying home buyers. This approach offers a
much better prospect for economic growth than a tidal wave of
new wasteful federal spending.
This bloated spending stimulus bill is in trouble and there
is still time to consider a better course of action. Instead of
burdening the economy with more deficit spending and debt,
let's reduce the burden of government and improve the prospects
for economic growth.
----------
Prepared Statement of Keith Hall
Madam Chair and Members of the Committee:
Thank you for the opportunity to discuss the employment and
unemployment data we released this morning.
The labor market continued to weaken dramatically in
January. Total nonfarm payroll employment fell by 598,000, and
the unemployment rate rose from 7.2 to 7.6 percent. January's
sharp drop in employment brings job losses to 3.6 million since
the start of the recession in December 2007 (as determined by
the National Bureau of Economic Research). About half of the
decline occurred in the past 3 months. Job losses in January
were large and widespread across the major industry sectors.
Manufacturing employment fell by 207,000 over the month,
bringing the job loss in this industry to 1.1 million since the
start of the recession. Nearly half of the loss occurred in the
past 3 months. In January, employment declines were spread
throughout the sector but were especially large in fabricated
metal products (-37,000), motor vehicles and parts (-31,000),
and machinery (-22,000).
Construction shed 111,000 jobs over the month. The pace of
job loss in this sector has accelerated in recent months.
Employment has declined by 781,000 since the beginning of the
recession, with about 40 percent of the decrease occurring in
the past 3 months.
In January, job losses continued throughout most of the
service-providing sector. Since the start of the recession,
this sector has lost 1.8 million jobs, with over half of the
decline occurring in the past 3 months. Employment in temporary
help agencies fell by 76,000 in January and has declined by
605,000 since December 2007. Other large over-the-month job
losses occurred in retail trade (-45,000), transportation and
warehousing (-44,000), financial activities (-42,000),
wholesale trade (-31,000), and professional and technical
services (-29,000).
Private education and health care added jobs in January.
Employment in health care was up by 19,000 over the month
compared with an average of 30,000 a month in 2008.
Average hourly earnings for production and nonsupervisory
workers in the private sector rose by 5 cents, or 0.3 percent,
in January. Over the past 12 months, average hourly earnings
have increased by 3.9 percent. From December 2007 to December
2008, the seasonally adjusted Consumer Price Index for Urban
Wage Earners and Clerical Workers (CPI-W) fell by 0.7 percent.
Measures from our household survey also reflected the weak
labor market conditions in January. The unemployment rate rose
from 7.2 to 7.6 percent, bringing the total number of
unemployed persons to 11.6 million. Since December 2007, the
rate has risen by 2.7 percentage points, with the increase
widespread across demographic groups.
In January, the employment-population ratio dropped to 60.5
percent, 2.2 percentage points lower than at the beginning of
the recession. This is the lowest level since May 1986. The
labor force participation rate, at 65.5 percent in January, has
edged down in recent months.
This morning, on our Web site, the Bureau of Labor
Statistics began publishing monthly estimates of the employment
status of persons with a disability. In January, the
unemployment rate for these persons was 13.2 percent, compared
with a rate of 8.3 percent for persons with no disability (not
seasonally adjusted). The employment-population ratio for
persons with a disability was 20.0 percent, compared with 65.0
percent for those with no disability. The collection of these
important data is sponsored by the Department of Labor's Office
of Disability Employment Policy.
Before closing, I would note there were routine annual
adjustments to the data from our two surveys. The establishment
survey data released today reflect the incorporation of annual
benchmark revisions. Each year, we re-anchor our sample-based
survey estimates to full universe counts of employment,
primarily derived from administrative records of the
unemployment insurance tax system. Household survey data for
January reflect updated population estimates from the U.S.
Census Bureau. Further information about the impact of these
adjustments is contained in our news release and on our
website.
Summarizing labor market developments for January, nonfarm
payroll employment fell by 598,000, and the unemployment rate
rose to 7.6 percent. Since the start of the recession in
December 2007, job losses have totaled 3.6 million, with about
half of the decrease occurring in the last 3 months.
My colleagues and I now would be glad to answer your
questions.
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