[Joint House and Senate Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 111-112
THE EMPLOYMENT SITUATION: MARCH 2009
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HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
APRIL 3, 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
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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......................................................... 3
Hon. Kevin Brady, a U.S. Representative from Texas............... 4
Witnesses
Dr. Keith Hall, Commissioner, Bureau of Labor Statistics; Mr.
Philip Rones, Deputy Commissioner, Bureau of Labor Statistics;
and Dr. Michael Horrigan, Associate Commissioner for Prices and
Living Conditions, Bureau of Labor Statistics, U.S. Department
of Labor....................................................... 6
Submissions for the Record
Prepared statement of Representative Carolyn B. Maloney.......... 24
Prepared statement of Senator Sam Brownback...................... 24
Prepared statement of Representative Kevin Brady................. 25
Prepared statement of Dr. Keith Hall, Commissioner, Bureau of
Labor Statistics, together with Press Release No. 09-0328...... 26
Report entitled ``New Keynesian versus Old Keynesian Government
Spending Multipliers''......................................... 58
Prepared statement of Elijah E. Cummings......................... 80
THE EMPLOYMENT SITUATION: MARCH 2009
----------
FRIDAY, APRIL 3, 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: Casey and Brownback.
Representatives present: Maloney and Brady.
Staff present: Gail Cohen, Nan Gibson, Colleen Healy,
Anabelle Tamerjan, Andrew Wilson, Jeff Schlagenhauf, Chris
Frenze, Bob Keleher, and Robert O'Quinn.
Chair Maloney. Thank you very much, Commissioner Hall, for
testifying today, and also welcome your colleagues that are
here. The Chair recognizes herself for an opening statement.
OPENING STATEMENT OF HON. CAROLYN B. MALONEY, CHAIR, A U.S.
REPRESENTATIVE FROM NEW YORK
A few glimmers of hope have surfaced in the economy in
recent weeks as factory orders posted gains last month, a key
manufacturing index rose, and credit markets have begun to
thaw. But today's jobs report highlights the fact that there
are virtually no bright spots yet in the labor market.
In each of the last five months employers have slashed
about 600,000 or more jobs. Staggering job losses have totaled
more than 5 million since the start of the recession. The
unemployment rate now stands at 8.5, a jump of 3.6 percentage
points since the downturn began 15 months ago. And the broadest
measure of unemployment or under-employment that the BLS
publishes is now at 15.6 percent.
For the first time in at least 30 years every state in the
Nation is in recession. The state and local unemployment
numbers for February, which were released recently, show that 7
states already have unemployment rates over 10 percent.
Although my home State of New York is not one of those
states, the unemployment rate in New York State jumped .8
percentage points last month, the largest one-month jump in
almost 20 years. And the 1.2 percentage point jump in
unemployment in New York City represents the largest spike that
New York City has seen since BLS started collecting this data.
I am particularly concerned by the long duration of
unemployment faced by a great number of workers, and the
disruptive impact that this long-term unemployment has had and
will have on these workers and their families.
Almost one in four unemployed workers is experiencing an
unemployment spell of six months or longer, the highest level
in over 25 years. And of those long-term unemployed workers
more than half of them have been looking for work for over a
year.
This type of long-term unemployment is straining families
and forcing them to take on more debt as the financial pressure
of making ends meet mounts.
Even before job losses began accelerating, many families
were increasingly holding balances on their credit cards just
to pay for basic household necessities. The most recent data
available from the Survey of Consumer Finances shows that an
increased proportion of families, especially middle class
families, have been accumulating larger mountains of debt on
their credit cards.
Because of this increased reliance on credit cards,
especially by families of displaced workers, it is even more
important that legislation concerning credit cards is put into
place immediately.
The Credit Card Holders Bill of Rights was voted out of
subcommittee yesterday and will be moving through the House
later this month, and I remain very hopeful that the Credit
Card Accountability, Responsibility, and Disclosure Act, which
was voted out of the Senate Banking Committee this week, will
also be on the Senate Floor without delay.
Both of these bills would prohibit certain current
practices that are hurting financially strapped cardholders.
The recovery measures that Congress passed and President Obama
signed into law in the first 60 days in office are just
beginning to work their way into the economy.
Speaker Pelosi announced this week that the middle class
tax cuts have now gone into effect, so families will see an
increase in their take-home pay.
One in ten Americans are now receiving food stamps, so a
temporary increase in food stamp benefits will also go into
effect this month. These benefits are set to rise as much as
$80 a month for a family of four. Both of these measures should
provide a much-needed boost to consumer spending.
Last night, both the House and the Senate passed the Budget
Resolutions. A budget is fundamentally about priorities, and
our blueprint builds on our recovery efforts by making
investments in health care, renewable energy, and education to
put our people back to work and strengthen our economy in the
future.
Today's grim unemployment numbers underscore the wisdom of
the stimulus package that Congress worked so hard to pass
quickly. We will continue to focus on making sure that the
economy gets working again and examining ways to help
struggling families.
I would like to note that at least the stock market is up.
[The prepared statement of Representative Maloney appears
in the Submissions for the Record on page 24.]
With that, I will recognize the Ranking Member, Senator
Brownback.
OPENING STATEMENT OF HON. SAM BROWNBACK, RANKING MINORITY
MEMBER, A U.S. SENATOR FROM KANSAS
Senator Brownback. I want to thank the Chairlady for
holding the hearing, and thank you very much, Commissioner
Hall, for being here. I wish the news were better; I think we
all wish the news were better, but it obviously is not.
We want to dissect today's report to see what's going on in
various sectors. So I will appreciate the question and answer
session.
Today's employment report on labor market conditions in
March brings more bad news: employers shed 663,000 payroll jobs
in March and the unemployment rate rose to 8.5 percent from 8.1
in February and 5.1 a year earlier.
In total we have lost 5.1 million payroll jobs since the
beginning of the recession and 3.3 million jobs in the past 5
months alone. Behind these numbers is a great deal of
dislocation, pain, and suffering in American families.
Given the severity of the economic downturn that we face
and efforts already under way to try to offset the downturn, it
is clear to me that we need to get the policy mix right from
this point forward, and the last thing we need to do is to do
things in the policy realm that will hurt the American people,
American families, and American businesses and introduce
uncertainty into the employers' marketplace and into the
marketplace in total.
This is not the time to raise taxes. Yet that is precisely
what the Congress and the Administration have been talking
about doing. And make no mistake, the budget that we just
currently are considering and passed last night, by initiating
a move towards more government programs in health care and
taxes on carbon emissions, will ensure that 100 percent of
Americans can expect to pay higher taxes in the future.
The economy needs help. But rather than actually
stimulating the economy by providing improved incentives to
work and invest, we have been devoting trillions of dollars of
taxpayer money to expanding and creating permanent, long-term
government spending programs and income redistribution
mechanisms.
We have budgets from the Administration and the Democrats
that control Congress that seek to impose higher taxes on small
businesses, higher taxes on income from capital, beginning
implementation of a mechanism that will tax anyone who uses
carbon, and beginning a process of nationalizing health care
insurance, among other things.
This is precisely the wrong time and the wrong message. It
is not the time to raise taxes. It is not the time to inject
uncertainty about what taxes are going to be in the future.
In the face of a severe downturn in the economy and
significant declines in stock values and homeowner wealth, it
is almost inconceivable that there are those who wish to raise
taxes in this environment.
What will higher taxes on small business owners do to job
creation? What will higher taxes on dividends and other forms
of capital income due to stock values and the portfolios of
every American family?
What will new carbon taxes under the name of ``cap and
trade'' do to our already struggling industrial base? Now is
clearly not the time to increase taxes and chase more jobs and
production offshore.
Judging from calls that I receive from my Kansas
constituents where votes are placed with private investments in
their work, the verdict on how we are handling our Nation's
financial and economic crisis is not positive.
Some of my constituents have expressed unwillingness to
commit to new investments and expansions of their businesses
because of growing uncertainty since the beginning of the year:
Uncertainty about how high their taxes will be raised;
uncertainty about how much a cap and trade carbon policy will
translate into higher energy taxes;
Uncertainty about the extent to which health care policies
will translate into new government mandates and price controls;
Uncertainty about whether mortgage contracts may be in the
future be subject to judicial rewrites in bankruptcy courts;
and
Uncertainty about rules of the workplace, including how
workers and businesses decide on their representation.
There are many people in the heartland who are genuinely
and rightly upset that they are now being asked to support a
permanent expansion of government and to support the highly
leveraged speculative bets placed by the big financial
institutions that are ``too big to fail.''
Many of my constituents are also experiencing a great deal
of uncertainty about how far the Administration will try to
reach in its attempts to restructure the economy and vastly
expand the scope of government intervention into their lives.
We need to halt the mad dash to big government as the
solution to all of our problems and put incentives in place
that help Americans grow their businesses, invest, create jobs,
and prosper. Higher taxes and ever-expanding government and
creation of uncertainty are not the way to provide those
incentives.
I look forward to the testimony of Commissioner Hall to
dissect what's in this report. I do hope we get the policy
message right and not harmful to the economy.
Thank you, Chairwoman.
Chair Maloney. Thank you.
[The prepared statement of Senator Brownback appears in the
Submissions for the Record on page 24.]
Congressman Brady is recognized for five minutes.
OPENING STATEMENT OF HON. KEVIN BRADY, A U.S. REPRESENTATIVE
FROM TEXAS
Representative Brady. Thank you, Chairwoman Maloney. It is
a pleasure to join with Ranking Member Senator Brownback for
today's hearing.
I would like to join in welcoming Commissioner Hall before
the Committee, as well. Those looking for good news in these
numbers will not likely find them.
The employment data released this morning show the impact
of the deepening recession. Payroll employment declined by
663,000 in March, with losses broadly shared among major
industry groups. The unemployment rate increased to 8.5
percent, the highest since November 1983. And current trends
suggest that further increases are likely in coming months.
The job figures reported today add to the growing body of
evidence indicating that the Administration' economic forecast
is much too optimistic.
The unemployment rate is already significantly above the
Administration's forecast for all of 2009. The White House
projects that real GDP will fall 1.2 percent this year, and
rise to over 3 percent next year, compared with the Blue Chip
Consensus forecast of a decline of almost twice that much, 2.6
percent this year and an increase of 1.9 percent next year. The
CBO figures also show how far the Administration is likely off
in their numbers for this year.
As we go forward, what the Administration's unduly
optimistic economic assumptions create are a major problem.
These optimistic assumptions are a key foundation of the
President's budget proposals and lead to artificially low
deficit and debt projections.
No wonder The Economist called the assumptions in the
budget ``deeply flawed'' in an article entitled ``Wishful, and
Dangerous Thinking.'' Their effect is to make the
Administration's expansive new spending proposals look less
threatening than they actually are.
The reason the Democrats' Congressional Budget Resolution
got so far off track is that it is based on the President's
budget. This is why a variety of accounting gimmicks are needed
to hide the true costs of the Administration's dangerous
spending sprees in the Democrats' House Budget Resolution,
which passed last night.
As The Washington Post said last week: In this resolution
``Congress deals a blow to `honest budgeting.''' The Democrats
are now attempting to shoehorn expensive Administration
proposals based on unrealistic economic assumptions into a
House budget that uses more realistic economic assumptions from
the CBO.
A realistic economic forecast would indicate that the
fiscal situation is already very grim, with exploding deficits
and debt for the foreseeable future.
According to a recent study of many financial crises by
Professors Kenneth Rogoff and Carmen Reinhart that has become
an instant classic, the U.S. National Debt can be expected to
increase by $8 trillion to $9 trillion just over the next three
years.
According to Rogoff, inflation of 8 to 10 percent is one
likely way the government will end up financing the huge run-up
in federal debt. He compares the coming economic environment to
the 1970s which was a time of rising inflation, weak economic
growth, and rising unemployment.
The Democrats' budget will add yet more deficit spending
and debt to the huge amounts of each already in the pipeline.
The result will be much higher taxes and inflation in the
future, and lower economic growth.
Higher inflation in coming years will further reduce the
American standard of living as incomes and retirement funds are
further eroded.
The last time Democrats controlled both ends of
Pennsylvania Avenue for a significant length of time was in the
1970s and stagflation was the result. So nobody should be
surprised if history repeats itself.
I yield back.
[The prepared statement of Representative Brady appears in
the Submissions for the Record on page 25.]
Chair Maloney. Thank you. And I now would like to recognize
Commissioner Hall and introduce him for as much time as he may
consume. 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 during the
George W. Bush Administration. 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 very much for coming, and we are delighted to
have you here and we look forward to your testimony.
STATEMENT OF DR. KEITH HALL, COMMISSIONER, BUREAU OF LABOR
STATISTICS, U.S. DEPARTMENT OF LABOR; ACCOMPANIED BY: MR.
PHILIP I. RONES, DEPUTY COMMISSIONER, BUREAU OF LABOR
STATISTICS; AND DR. MICHAEL W. HORRIGAN, ASSOCIATE COMMISSIONER
FOR PRICES AND LIVING CONDITIONS, BUREAU OF LABOR STATISTICS,
UNITED STATES DEPARTMENT OF LABOR, WASHINGTON, DC.
Commissioner Hall. Thank you.
Madam Chair and Members of the Committee:
Labor market conditions continued to deteriorate in March.
Total nonfarm payroll employment decreased by 663,000, and the
unemployment rate increased from 8.1 to 8.5 percent.
Since the beginning of the recession in December of 2007,
job losses have now totaled 5.1 million, almost two-thirds of
which occurred in just the past 5 months.
These declines have been widespread across industry
sectors, but particularly sharp in manufacturing, construction,
and temporary help services. Together, these three industries
have accounted for nearly two-thirds of the job loss during the
recession.
In March, manufacturing employment fell by 161,000, with
job losses spread through the sector. Since the start of the
recession, manufacturing has shed 1.5 million jobs, with about
60 percent of the loss occurring in the past 5 months. In
March, the average workweek in manufacturing decreased by two-
tenths of an hour.
Construction employment declined by 126,000 over the month.
Since the beginning of the recession, employment has dropped by
about 1.1 million, with more than half of that total occurring
in the past 5 months.
In March, employment continued to contract throughout most
of the service-providing sector. Temporary help services shrank
by 72,000 over the month once the recession began. Employment
in the industry is down by about three-quarters of a million,
which is about 30 percent of the payroll jobs in that industry,
and over half of that coming in the past 5 months.
In March, other large job losses occurred in retail trade,
financial activities, transportation and warehousing,
accommodation and food services, and wholesale trade.
Health care employment continued to trend up in March,
although the pace of job growth appears to have slowed in the
past 3 months.
In the first quarter of 2009, the industry added an average
of 17,000 jobs per month, compared with a monthly average of
30,000 in 2008.
Average hourly earnings for production and nonsupervisory
workers in the private sector rose by 3 cents in March. Over
the past 12 months, average hourly earnings have increased by
3.4 percent.
From February 2008 to February 2009, the seasonally
adjusted Consumer Price Index for Urban Wage Earners and
Clerical Workers fell by a half a percent.
The major indicators from our Household Survey also reflect
weaker labor market conditions. In March, the unemployment rate
rose by four-tenths of one percentage point to 8.5 percent, and
the number of unemployed persons reached 13.2 million.
Since the recession began in December 2007, unemployment
has surged by 5.6 million. Job losers have accounted for about
80 percent of the increase, with returning workers and new
entrants to the labor market making up smaller portions.
In March, the number of individuals experiencing long
spells of joblessness rose by 265,000 to 3.2 million. Nearly
one in four of the unemployed had been jobless for over 6
months, the highest ratio since mid-1983.
Over the month, the employment-to-population ratio slipped
to 59.9 percent, 2.8 percentage points lower than at the
beginning of the recession and the lowest level since July of
1985.
Among the employed, the number of persons working part time
who would have preferred to work full time increased by 423,000
over the month to 9 million. Since December 2007, this measure
has risen by 4.4 million.
Summarizing the labor market developments for March,
payroll employment fell by 663,000 and the unemployment rate
climbed to 8.5 percent. Since the beginning of the recession in
December 2007, job losses have totaled 5.1 million.
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 26.]
Chair Maloney. First of all, welcome to you and your
colleagues.
Do you have any good news? Are there any positive economic
indicators? Are there any bright spots in this month's jobs
report?
Commissioner Hall. There are very few bright spots in this
month's jobs report.
Chair Maloney. Are there any anywhere?
Commissioner Hall. To be honest, no. In fact, the decline
has been remarkably consistent. This month we lost 663,000
jobs. Over the past five months we have averaged losing 667,000
jobs.
Chair Maloney. Last month you told us that this recession
had 4 out of the 10 worst months on record. Is this up to 5 out
of 10 now?
Commissioner Hall. Yes, it is. Of the months with over a
half a million jobs lost, 11 months with half a million jobs
lost, we have now got 5 of those in a row.
Chair Maloney. Are there any indicators that job losses are
not accelerating, or that they will slow any time soon?
Commissioner Hall. I would say the job losses have been
remarkably consistent. The labor market continues to
deteriorate at about the same pace.
Chair Maloney. And what is the typical amount of time after
a contraction ends before the labor market starts showing any
signs of recovery?
Commissioner Hall. Actually, the job loss should probably
start to slow about the same time that the economy starts to
recover, but it would probably be quite a while before the
unemployment rate--we would get strong enough growth for the
unemployment rate to stop rising. That often lags behind quite
a bit.
Chair Maloney. We hear a lot in the media and others saying
that this recession is comparable to the Great Depression. I
would like to hear more about how this recession compares to
past economic slumps. How does this compare to past downturns
in terms of its impact on the labor market?
Commissioner Hall. The job loss is very large. In
percentage terms, we have now lost over the past five months
about 2.4 percent of our jobs. That is the most since March of
1975. Probably more concerning is that this job loss appears to
not be slowing, so we could surpass the 1975 if this continues,
in which case we're going back all the way to say 1958 before
we've had this degree of job loss.
Chair Maloney. The current downturn is already longer than
the last two recessions. Based on historical data, how long is
it likely to take for employment to recover to its prerecession
peak?
Commissioner Hall. That actually varies quite a lot. The
two most recent recessions it took quite a long time. In the
2001 recession it took over three years for the job level to
get back to its prerecession level. In the 1990 recession it
took about two years.
Chair Maloney. Following six straight months of losses,
durable goods orders increased by 3.5 percent last month,
contrary to most economists' expectations. This marks the first
increase in monthly durable goods orders in six months.
What do you think this uptick means for the labor market,
if anything? You've got to admit that is at least one positive
indicator.
Commissioner Hall. It is. And I agree with your earlier
statement that it is a glimmer of hope. Because it is only one
month, we don't have a trend. To the degree that this may be
signaling rising business confidence, and if it is rising
business confidence it would be confidence that consumer
spending is going to pick up, that would be a good sign. But
again it is only one month.
Chair Maloney. I am concerned about the number of reports
of major newspapers slashing jobs. The third largest newspaper
in the country, the McClatchy Chain, announced earlier this
month that it was slashing 1600 jobs, and many others are
making similar reports.
Based on the data, can you tell us how many jobs have been
lost in the publishing industry since the recession began in
December of 2007?
Commissioner Hall. The publishing industry has lost 70,000
jobs since the start of the recession.
Chair Maloney. And how many were lost last month?
Commissioner Hall. Last month it was about 8000. What this
seems to indicate, there is an acceleration in the job loss in
that industry. The first 10 months of the recession we were
losing about two point--about 2500 jobs a month. The last 5
months we are losing about 9000 jobs a month in that industry.
Chair Maloney. Can you give us any information about
whether alternative news providers--for example, online and
news-only companies--have they seen the same type of job losses
as traditional newspapers?
Commissioner Hall. We have other information services,
which includes Internet publishing. They have actually gained
2900 jobs since December 2007.
Chair Maloney. Okay. Well my time has expired and I
recognize the Ranking Member.
Senator Brownback. Thank you very much, Madam Chairwoman.
What percent of our jobs are based on exports,
Commissioner?
Commissioner Hall. That is hard to say. I think it is
likely--it is likely pretty consistent with the export share of
GDP, which I don't have the numbers in front of me but I would
guess it is somewhere around 8 or 9 percent of GDP, so I would
guess it supports about 8 or 9 percent of the jobs.
Senator Brownback. Do you break your data out by that type
of category--exports that is?
Commissioner Hall. No, it's really hard for us to do that
because we really don't keep track of whether jobs are
supporting goods that wind up being exported or not. That is a
very hard thing to track.
Senator Brownback. Do you break this down by region? I know
you do state-by-state unemployment numbers. Do you have regions
of the country that are being harder hit than other regions?
Commissioner Hall. Yes. I would say that almost every----
Senator Brownback. Every state is experiencing the
downturn, but do you have more regionalized impacts?
Commissioner Hall. Yes, I do have a little data on that. I
can tell you which states have had the biggest impact.
The states with the largest employment decline over the
past 12 months are California, which has lost about 600,000
jobs; Florida, 400,000 jobs; Michigan; Ohio; Illinois; Georgia;
North Carolina; Arizona; and New York. So it is kind of a wide
variety of states in a number of regions.
Senator Brownback. So you do not have any sort of regional
breakout of that. It seems like you cited some of the larger
states, or the larger industrial based states.
Commissioner Hall. Right. Yes, if you look at a percentage
change you wind up getting states like Arizona, Michigan, and
Nevada having the largest percentage drop in employment.
Senator Brownback. And a lot of that would seem to be built
around housing, or manufacturing?
Commissioner Hall. I would say that is fair. This downturn
is very broad, but the greatest job loss is in manufacturing,
construction, and in temporary services.
Senator Brownback. Do you do any projections on what the
job loss would be if you see bankruptcy at one or two of the
major auto manufacturers in the country?
Commissioner Hall. We have not done an analysis like that.
I think I have seen some numbers that seem relatively in the
ballpark, but to be honest I do not recall what those numbers
are at the moment.
Senator Brownback. So the BLS doesn't do that sort of
projection?
Commissioner Hall. No, we don't.
Senator Brownback. Because I have seen ones that look very
significant as far as an increase in unemployment rates, if you
were to see a liquidation bankruptcy, but a reorganization
bankruptcy I guess would be a lot less predictable in what it's
going to do.
You were saying that two-thirds of the job loss happened in
the last five months?
Commissioner Hall. Yes.
Senator Brownback. If you compare that to prior recessions,
do you see a similar sort of trend mark where you have a fairly
long period of decline, and then a precipitous falloff?
It looked like to me what happened five months ago is that
the housing market, the construction market recession expanded
into the rest of the economy. It was like you had a stream here
that was going, and it was quite a way down, and it just spread
into the rest of the economy about five months ago.
Do you see that in prior recessions? And can we learn
anything from those prior trend lines?
Commissioner Hall. Actually I don't think you see that in
prior recessions. I think that is one of the unique things
about this recession. It really was--it really was a relatively
mild downturn for quite a few months which--I'm agreeing with
you--which I would say is sort of consistent with the downturn
in housing-related industries and construction.
What has happened over the last five months is just, has
just been credit market lockup. And that has just been a real--
a much more severe downturn.
Senator Brownback. And this is unusual from prior
recessions? Typically it is much broader going in?
Commissioner Hall. Yes. Typically it does not take quite so
long for a recession to get severe, and it is almost never this
severe, as well. You know, I would have to say one of the
things about recessions is they are all sort of unique. They
all happen for different reasons.
I do not see a lot of similarities between the recession
and other recessions except that we are having a very severe
downturn now, and that has happened before, but not so much
with this mild recession leading off a severe decline.
Senator Brownback. And you do not have a good thought as to
what caused it to expand into the rest of the economy five
months ago?
Commissioner Hall. Well it did really coincide with the
financial market----
Senator Brownback. The big credit lockups?
Commissioner Hall. Yes.
Senator Brownback. Thank you.
Chair Maloney. There has been some easing in the credit
markets, which has been good news.
I am concerned that families of unemployed or underemployed
workers are going to be hit hard, especially hard during this
recession. The fact that almost one in four unemployed workers
have been unemployed at least six months, and that more than
one in eight have been unemployed more than a year, does not
bode well for these households.
Is the duration of unemployment longer in this recession
than in previous recessions?
Commissioner Hall. Yes, it is. The main problem is that,
typically during economic expansions--prior to the recession,
the number of long-term unemployed typically starts at a much
lower level.
I think what we had was between the 2001 recession and the
start of this recession the labor market did not have as strong
a recovery as it has in the past. So we started from a much
higher level of long-term unemployed.
So now when we increase the number of long-term unemployed,
that number has gotten to be quite high.
Chair Maloney. And in previous long recessions like this
one, what percentage of the unemployed leave the work force? Do
you have any sense?
Commissioner Hall. Yeah, I think I--it's significant. When
you have a big increase in the number of unemployed, you also
do have a lot of people, a big increase in the number of people
who actually leave the labor force.
One of the indications is we have folks who are marginally
attached to the labor market. These are folks who have stopped
looking for a job, but they want a job and they have looked
within the past year, and that number has gone up quite a bit.
We are at something of about 2.1 million marginally attached
right now.
Chair Maloney. Thank you. I yield back to Congressman Brady
for five minutes.
Representative Brady. Thank you, Chairwoman, very much.
Commissioner, is there anything--any unusual statistical
issues, regarding seasonal adjustments, or the survey week,
that may have affected the data we see today?
Commissioner Hall. No. Some of the earlier data was
difficult for us to adjust to over the last five months because
it was such a severe drop, but we have now had five months of
this and we have adjusted.
Representative Brady. Did any industry show employment
increases in March?
Commissioner Hall. Only actually the health care industry
had some slight growth, although it was essentially unchanged.
Representative Brady. Government?
Commissioner Hall. Government was essentially unchanged.
There was actually a slight decline of something like 5,000,
but that was really essentially unchanged.
Representative Brady. We are at 8.5 percent unemployment
right now. Do you expect this recession to approach or top the
10.8 percent figure we had in the 1980s?
Commissioner Hall. Sure. I wouldn't want to try to project
that since we produce the numbers. All I can tell you is that,
at least in this report there is no sign of the decline slowing
down.
Representative Brady. America is so amazingly resilient as
a country but it seems to me there is such a lack of confidence
underpinning this recession, a lack of confidence in Wall
Street, a lack of confidence in the bailouts, a lack of
confidence unfortunately in Congress itself.
This new budget that Congress is considering unfortunately
feeds I think into that lack of confidence mainly because it
has such rosy economic assumptions that underpin the
President's budget and the Democrat budget as well. Dealing
with the budget in five-year projections is sort of like a moon
shot. The trajectory is long and if you are off at the
beginning you are way off as you go forward.
The big worry that is growing among economists and I think
the public is we are going to be way off on debt and deficit in
next year, which will only get worse as we go forward.
Is there in the recent labor market trends any evidence
that supports the Administration's economic forecast that we
would only have an 8.1 percent unemployment rate this year,
since we are already much higher than that?
Commissioner Hall. You know, I don't know what to make of
the forecast. I don't really want to comment on the forecasting
very much. I will say it is very difficult to forecast at any
time. Right now it is especially difficult to forecast.
Representative Brady. But may I ask this, Commissioner, I
agree with you on that. You know, if you had to guess between,
or choose between the Administration's forecasts of only 1.2
percent contraction this year versus the Blue Chip forecast
which is twice that, 2.6 percent? You know, if you were staking
your reputation on it, which do you think will prove more
accurate?
Commissioner Hall. Again, I don't want to say. But I can
tell you that the difference--that difference in growth would
imply a rather different level of job loss or job gain. It
would have a pretty significantly different result in the labor
market going forward.
Representative Brady. The economy would have to increase
dramatically to only contract by 1.2 percent this year,
correct? Since we've had five straight losses of 600,000 jobs
or more each month, how do you possibly get to that rosy
scenario?
Commissioner Hall. It would require a significant
improvement. The current labor market is consistent with pretty
significant decline in GDP right now.
Representative Brady. I can find few economists who believe
that we can meet the rosy economic assumptions that are in the
President's budget. The result is, I think we'll prove that we
are closer to a $2 trillion deficit this year, and that the
rosy scenarios underpinning the budget will end up costing us
much higher debt, much higher deficit, again all of which feed
into I think the lack of confidence in this government and how
it is working.
So that is my main concern as we look at these labor
numbers. They just do not prove out to be rosy, as the new
Administration is predicting.
With that, I would yield back, Madam Chairman.
Chair Maloney. I just want to note that after eight years
of George Bush's leadership, this country inherited a series of
records. Only they were the wrong kinds of records: record
deficits, record trade deficit, largest deficit in history.
And President Obama has been working very hard to turn that
around and move forward in a positive way. But this hearing is
not about politics. It is about understanding the economy more.
But if you are going to attack the Democrats, I am going to
attack the Republicans back, and the President----
Representative Brady. Well, Madam Chairman, Madam Chairman,
I actually was not. I was really questioning the economic
forecasts under the budget----
Chair Maloney. Okay.
Representative Brady [continuing]. Which again are just so
rosy that they are going to hide some major deficits----
Chair Maloney. Well they inherited----
Representative Brady [continuing]. And I would point out
for every record of the President----
Chair Maloney. They inherited major deficits.
Representative Brady. They did, but they inherited it from
a Democratic Congress, and that's I think what fails to be
said. And I think you're right to criticize President Bush for
the deficits, but it looks like this new President will double
that in only about three years. That is the worry I think we
have.
Chair Maloney. I will point out that when the former
President took office he inherited a $5.6 trillion ten-year
projected surplus. And now we have these raging debts and
deficits that we are trying to address, plus a dire economic
downturn.
Let's turn to the underemployment numbers. Last month the
number of Americans working part-time because they could not
find full-time jobs hit 8.9 million, the highest level since
the Bureau of Labor Statistics began collecting information on
involuntary part-time work.
Is the number of involuntarily part-time workers still
increasing?
Commissioner Hall. Yes, it is. An additional 423,000 became
involuntary part-time workers in March.
Chair Maloney. And does this show any signs of slowing
down?
Commissioner Hall. No, it doesn't.
Chair Maloney. And the broadest measure of unemployment
published by the BLS shows that 15.6 percent of workers were
under-employed. Is it fair to say that this recession is
characterized by remarkably high levels of underemployment?
Commissioner Hall. I would have to say, yes. The trend in
the unemployment rate and in the job loss, and then in the rise
in some of the other measures of underemployment, are all
consistent with a fairly deep recession.
Chair Maloney. How have women fared as the economy has shed
jobs this year? Are they losing jobs at a faster pace than men,
or a slower pace? How have they fared?
Commissioner Hall. 23 percent of the job loss in this
recession so far is borne by women. In say the last five months
through February 2009, almost 30 percent of the job loss was
from women. That is actually higher than most recessions. Last
recession at the peak of the job loss women lost 25 percent of
the jobs. In the 1990 recession, women lost less than 4 percent
of the jobs.
Chair Maloney. Wow. And what about women heads of
households? Is there a difference, a striking difference, or
any difference at all in terms of job loss?
Commissioner Hall. The unemployment rate for women heads of
household started higher and it has risen more. It started
about 10.8 percent--up to about 10.8 percent right now, and
it's risen about 3.7 percentage points over the last 12 months.
You compare that to women who are married, their unemployment
rate is about 5.4 percent right now.
Chair Maloney. In what industries have women lost the most
jobs and in what industries have they been more successful in
not losing jobs?
Commissioner Hall. Since December, the industries with the
largest job loss by women is professional business services.
They lost about 424,000. Manufacturing lost about 416,000.
Retail trade lost 223,000. And financial activities lost
205,000.
Chair Maloney. Have the job losses in the retail sales
sector expanded to other segments of the sector?
Commissioner Hall. Yes. A lot of the downturn started in
automobiles, and now it has expanded throughout the retail
trade sector.
Chair Maloney. And is it fair to say that job losses in the
service sector are accelerating?
Commissioner Hall. Yes. In fact, that is one of the things
that makes this recession different from the past two
recessions. Over the past five months the service sector has
borne over half the job loss. And in the past two recessions,
services only bore less than a quarter of the job loss.
Chair Maloney. Do you think that this erosion will impact
women's employment particularly in the service sector?
Commissioner Hall. I think that's fair to say. In some of
the sectors where you have traditionally more impact from a
recession, like manufacturing for example, women aren't
represented quite as highly as in services. So I think that is
part of why the women job loss is a bit higher this recession
so far.
Chair Maloney. Do you have any data to tell us something
about African American female headed households? How are they
doing compared to white female headed households?
Commissioner Hall. In 2008, African American head of
households, the unemployment rate was about 10.9 percent. And
for white female heads of households the unemployment rate was
about 6.8 percent.
Chair Maloney. My time has expired and I recognize Senator
Brownback for five minutes.
Senator Brownback. Thank you very much.
Getting back to this credit lockup that you were
identifying Commissioner, as being one of the things that
really accelerated this trend line down, there has been some
indication that credit markets are loosening up. Are you
tracking that? Do you see any positive impact--apparently not--
in any of the numbers you are seeing yet on impacts in the
credit market getting somewhat looser?
Commissioner Hall. Yes, I have to say I'm not sure I see
anything in the labor market. My expectation would be that if
the credit market eases up we would see some improvement in
some of the other numbers, the consumer confidence going up,
and maybe consumer spending increasing, and that would have to
happen probably before we would start to see an improvement in
the labor market.
Senator Brownback. If I could suggest to the Chairwoman,
that this is such a key part of what has accelerated and made
this recession so much more difficult, in the last week I have
had builders from my State and region and financial
institutions both pointing their finger at each other saying
that, well, we would be building right now but we can't get any
credit.
And the financial institution is saying, well, the
regulators are not letting us lend. They are being much more
strict on this.
It seems like to me it would be a great time for us to hold
a hearing with the regulators, and maybe some of the builders
or financial institutions, and quiz them at length. Because
they are all pointing at each other saying this is the reason
credit is not flowing.
And the Congress has pumped billions, hundreds of billions
of dollars into trying to get this credit market going again.
And as much as we have put into it, it does not seem to really
be moving much again, and that this might really be something
that this committee would be uniquely situated to try to bring
those factions together to get at the heart of what this issue
is.
Chair Maloney. Would the gentleman yield?
Senator Brownback. Yes.
Chair Maloney. I truly believe that is a very positive
suggestion. I likewise serve on the Financial Services
Committee and we did hold a similar hearing because of the
conflicting statements that are out there. You hear from
everyone in real estate: you go to the bank and it is
impossible to get a loan on real estate. And we hear from some
bankers that the Fed is telling them not to loan to real
estate.
Yet we know that real estate really employs a great number
of people. I think it is an excellent idea, and I look forward
to working with the Ranking Member in putting that together as
quickly a possible.
Senator Brownback. Thank you. Because I just----
Chair Maloney. I yield back.
Senator Brownback [continuing]. I keep getting from all my
institutions this pointing past each other on it, and yet you
are saying this is at the heart of what has really accelerated
this problem.
One of the things, Commissioner, do you look at--are you
watching any trip wires out there that you look at and you say:
Now if this happens, we could really see this accelerate, or
even get worse than the situation is right now?
I have asked you about bankruptcy in the auto sector. Are
you looking at anything that might happen overseas? Anything
that might happen here that you would consider a trip wire to
accelerate this into even a worse situation?
Commissioner Hall. To be honest, I'm not sure there are too
many trip wires that haven't already been tripped. This is a
very quickly declining labor market.
Senator Brownback. So nothing in that--but obviously if you
have bankruptcy in the auto industry, I mean because people are
pointing to that saying this would be a big one, particularly
in some of these states that are already hard hit. Are there
any others out there that you would----
Commissioner Hall. No, not really. I think in large part
because we are so focused on the labor market and dealing with
the data that I try not to look too far forward and try to
guess what the data is going to look like.
I guess one of the biggest concerns is that things just do
not improve. I mean, this is falling very quickly right now and
I'm not sure the labor market could fall any quicker than it is
right now. So I think maybe the biggest concern is that this
continues.
Senator Brownback. I was noting--one of the staff members
was saying to me that the historical experience has been that
the faster and deeper the job losses, the quicker the recovery,
has generally been in history. Is that correct?
Commissioner Hall. That is correct. It is hard to think of
that as a hard-and-fast rule simply because we have not had all
that many recessions. So it is really hard to predict that. But
in the past, deeper recessions have had quicker recoveries.
Senator Brownback. Now this one is unusual where it has
been long, and initially shallow and then going deep, from what
you have described.
Commissioner Hall. Yes.
Senator Brownback. And you don't know of an historical
recession that has really tracked along that same line?
Commissioner Hall. I don't think so. To be honest with you,
I probably ought to look more closely at some of the past
recessions to see if there's been a similar pattern, but I
don't think there has been.
In fact, to be honest with you I think for the first eight
months of the recession I am not sure that it was clearly a
recession. I think we had job loss and it was a downturn, but
things were mild enough that it was probably a tough call for
the NBERs as to whether there was a recession or not until we
had the credit market lockup.
Senator Brownback. Well again I think this is the issue
really to track for us, is this credit market lockup where the
Chairwoman who, her District is a lot of the financial center
of the country, I think would be quite uniquely positioned to
be able to dig into some of that. And it is obviously one of
the keys to be able to get this going.
My concern is, I am just not seeing it unlock at our level.
It may be starting to loosen up some at the international
level, I don't know. Really it hasn't loosened that much. But
we're certainly not seeing the sort of credit activity in the
Midwest, in my estimation, that is going to bode for any sort
of recovery in any near-term fashion.
Thanks for the time.
Chair Maloney. Congressman Brady.
Representative Brady. Thank you, Chairman.
I think obviously the major proponent of the new
Administration's recovery plan is the stimulus package. A lot
of money is being pushed out the doors these days.
The centerpiece of that Stimulus Proposal was a tax cut
called ``Making Work Pay Tax Credit,'' aimed at consumers and
working Americans. It kicked in this week, although I don't
think most people noticed the extra $1.10 a day in their
paycheck.
To be fair, it is too early, I think, to be expecting the
stimulus to be showing up in these unemployment numbers, but
when do you expect the impact from this extra $1.10 a day in
paychecks to show up in either lowering the unemployment
number, spurring consumption? When will we see that impact?
Commissioner Hall. It is not clear that we will ever be
able to see it in the labor market because it is such a--
especially when we are in such a decline, sort of parsing out
the impact of something like a tax cut is very difficult to do.
That is probably the sort of thing that, on a research basis a
few years from now we may be able to make some estimates of
that, but it would be hard to guess. And I am not sure that we
will see it in the data for sure as the data comes out.
Representative Brady. I may not have understood. In the
Stimulus package there was a projection of millions of new
jobs, the centerpiece of which was this Making Work Pay Tax
Credit. You are saying you won't be able to measure the job
creation from that component?
Commissioner Hall. I think it would be difficult to do, and
it is not something that we are likely to be able to do as the
data comes out. It doesn't mean the impact is not in there, but
that is something that would be rather difficult for us to
measure, and probably not our role to measure.
Representative Brady. Would you see any consumption impact?
Commissioner Hall. That would be the hope. In theory that
is how that would work. It would be encouraging consumer
spending. And certainly a decline in consumer confidence and
the resulting decline in consumer spending is a big part of
this economic downturn.
Representative Brady. Well will this new tax credit, do you
think it will show up in stronger consumer confidence here?
Most people that I have talked to this week do not even know
they are getting any type of tax change, certainly are not
running off to the mall with their new-found $1.10. I think
that is part of what was hoped by the Administration, was that
this would spur some type of consumer confidence.
I have been looking at a number of economic forecasts that
show that will not likely happen. I would like to submit for
the record, Madam Chairman, a study by four economists--John
Cogan, Tobias Cwik, John Taylor, and Volker Wieland--that deals
with an estimate of some of the impact of the stimulus, and
some of the concerns that it may not create the jobs that we
had hoped. I would submit that for the record.
[The report entitled ``New Keynesian versus Old Keynesian
Government Spending Multipliers'' on p. 58.]
Representative Brady. With that, I would yield back.
Chair Maloney. Thank you so much.
I would like to follow up on the line of questioning of our
Ranking Minority Member, Senator Brownback. Could you give us
some indication of the numbers in the housing market?
There was one report that said housing starts were up 5
percent. Could you give us a sense for single family, for
commercial, for whatever, a sense of what is happening in the
housing market? I guess you can't comment on whether or not it
is tied to the credit freeze, but could you give us an idea
where we stand?
Commissioner Hall. Sure. I don't know--that is not data
that we produce, but that was a one-month uptick, and it is
certainly a good sign, but it also is again only one month.
Housing starts have gotten to a fairly low level, below
half a million a year is a fairly low level, but to be honest
that's a pretty volatile series. So I am not sure yet we have a
clear change in trend in the housing market.
Chair Maloney. Well who collects that data?
Commissioner Hall. The Census Bureau does.
Chair Maloney. Pardon me?
Commissioner Hall. The Census Bureau.
Chair Maloney. The Census Bureau. And also I am hearing
that there is no commercial activity, that there are no loans
in any shape or form for commercial investment. Do you have any
indication for new starts for shopping centers, or businesses,
or small businesses?
Commissioner Hall. I will say our downturn in construction
employment is in both residential and nonresidential. In fact,
nonresidential right now is probably shedding slightly more
jobs than residential. So that is consistent with that.
Chair Maloney. I would like to ask a few questions about my
home State of New York, and I welcome my other colleagues to
ask specific questions on their states.
I notice that employment in state governments declined in
December, January, and February. The Governor of New York has
already told me that New York State employees were going to
face furloughs, or layoffs because of state budget problems.
With states now in recession, is that a problem that all
governors are facing?
Commissioner Hall. I would say the job growth in state
government, and even local government, both things have really
flattened out right now. So I would say nationwide it is pretty
broad that there's not that much growth, certainly not in state
or local government noneducation.
Chair Maloney. In my home state of New York, the
unemployment rate was 7.8 percent in February, a jump of .8 of
a percentage point from January. In New York City unemployment
jumped from 6.9 to 8.1 percent.
Are these changes similar to the changes in the national
unemployment rate?
Commissioner Hall. Over that period, they're a bit higher.
Nationally the unemployment rate over that period rose by half
a percentage point, which is a little bit less than the .8 for
the State and 1.3 percentage point for the City. But it's in
the same ballpark with respect to the statistical change.
Chair Maloney. On the national level, as you reported,
there is a sharp increase in the pace of job losses in recent
months. How does that compare to the payrolls in New York State
and New York City, and in other states and cities in general?
Is that the same trend?
Commissioner Hall. The trend is similar. In New York, job
loss between January and September averaged about 2000 a month.
And since then it has averaged about 29,000 jobs lost per
month. So that is similar to the national number, at least in
the trend.
Chair Maloney. How does New York and other states compare
to the Nation as a whole during recessions? Have past
recessions typically lasted longer at the state level or do
they trend at the same pace? What is the difference, if any?
Commissioner Hall. It actually has varied by recession.
Although recently the pattern of job loss in New York State has
been similar to the national numbers, the job loss has actually
been a bit milder than the national number.
New York City has lost about 1.2 percent of their jobs
since the recession started. Nationally we have lost about 3.2
percent of the jobs through February. So that has been milder
this recession.
The last recession, in terms of length New York and the
national both lost jobs about the same time period, but the job
loss for New York was more severe than the U.S. number. So we
have had sort of a different experience.
Chair Maloney. Thank you. I yield back and recognize my
colleague, Congressman Brady, for five minutes.
Representative Brady. Well thank you, Madam Chairman.
Commissioner, obviously in these financial times having
good numbers in the government is really critical, so making
sure that the Bureau of Labor Statistics if fully funded is
something that has bipartisan support.
Are you concerned about the funding levels you have for
your statistical programs?
Commissioner Hall. Actually our 2009 budget came in at a
significant increase. That was very much needed. So I would say
that we are now at a good level. We have actually had some
troubles, and I think we are in a position where we can now
sort of rebuild our capability. I think we were getting a
little stretched.
But our budget right now at the 2009 level is a good, solid
budget for us.
Representative Brady. Are there any new models, new
measurements, new approaches you are taking that could help us
as we sort of gauge the economy going forward?
Commissioner Hall. We always have a program of research
where we are looking for ways to improve our measurement, and
ways to increase the efficiency of our measurement.
In terms of actually implementing them, to be honest the
last few years we have been somewhat in retreat. We have been
trying very hard to maintain the quality of our programs. So we
have not really been able to implement much in terms of
improving our measurement in recent years, but we hope that
will change in the future.
Representative Brady. Are there any changes you anticipate?
Again, exports and trade have been up to this point one of the
shining spots in our economy, our ability to sell American-made
products around the world. At one point it accounted for almost
60 percent of our economic growth.
Obviously that has cooled. The WTO estimates that we will
see a 9 percent decrease in world trade flows this year. OECD
estimates that we will see a 4 percent or so contraction among
those member countries.
Do you have state-of-the-art modeling, or statistical
programs that can help measure what the impacts or the
predictive future is of some of our exports, some of our
ability to sell outside the country?
Commissioner Hall. We really don't very much because we are
so focused on the labor market. I do know some of the other
statistical agencies have some what I would call input/output
models where they can try to track the jobs, either directly or
indirectly supported by exports.
The Bureau of Economic Analysis, for example, has something
like that, but we typically do not do that.
Representative Brady. Can I ask why? It seems to me you do
a good job, whether it's construction, housing, real estate.
You delve pretty deeply into business investment, the financial
sector, a number of those sectors. Could you develop for this
committee and for Congress some of those impacts from experts
so we can track again what is becoming a fairly good sized
driver of our economy?
Commissioner Hall. Certainly on a research basis people can
make some estimates of this. Part of the big challenge is that
products are made in so many different places, both--the
content can be made throughout the country. Export contents
sometimes has import content. Export sometimes has import
content. So it is very hard to track all these pieces that go
into a product.
So it is somewhat a challenge that has been created by the
changing nature of production in modern economies.
Representative Brady. But you do surveys, don't you, to
identify trends in housing, financial, areas----
Commissioner Hall. Sure.
Representative Brady [continuing]. That can be extremely
complicated, as well.
Commissioner Hall. Sure, but----
Representative Brady. Why don't we do that?
Commissioner Hall. We do do that, but if you think about
it, when we collect employment at a particular establishment it
is quite--that establishment, they don't even know how much of
their output winds up in exports. You know, they know they
produce it. They know they sell it. But as to whether it winds
up being export-driven, or domestically driven, they often
don't know that. So it is very difficult for us to get that
information.
Representative Brady. But, you can measure more accurately
those who are actually exporting those U.S. products, and goods
and services. Correct?
Commissioner Hall. Yes. Correct.
Representative Brady. Well could you try to identify for us
some means where we can develop better numbers, better views,
better analysis of that economic sector? It is an important
one. I fear we ignore it. I think it is important overall to
our recovery and we ought to be taking a closer look at it.
Commissioner Hall. I agree. We will.
Representative Brady. Thanks.
Chair Maloney. Senator Casey, welcome.
Senator Casey. Madam Chair, thank you very much. And
Commissioner, thank you for your testimony.
I want to try to cover two or three subject areas. One area
in particular that I want to start with is with regard to
minority unemployment.
In terms of the numbers, the African American unemployment
rate is 13.4 percent? Is that right?
Commissioner Hall. Let me catch up here one second, I'm
sorry.
Senator Casey. Sure.
Commissioner Hall. That sounds correct.
Senator Casey. I may be looking at a February number.
Commissioner Hall. I'm sorry, I've got to get my--yes, it
is 13.3 percent. Thank you.
Senator Casey. Okay, 13.3. Now from what I understand, if
you look at the rate from February 2008 to February 2009, the
African American number has gone from about 8.4 to 13.3?
Commissioner Hall. Yes.
Senator Casey. So it is up five full percentage points,
which is----
Commissioner Hall. Yes.
Senator Casey [continuing]. Hard to comprehend. And the
same is true of the Latino rate. According to what I have, it
went from February 2008 to February 2009, from 6.3 to 10.9.
Does that sound right?
Commissioner Hall. Actually, I think we are up to 11.4
percent.
Senator Casey. 11.4.
Commissioner Hall. That's about right.
Senator Casey. So they are both up--for African Americans
and for Latinos--basically five full percentage points. Is
that----
Commissioner Hall. Close to five percent.
Senator Casey. Close to five. Which is stunning and
disturbing. No need to say more. These figures are the source
of significant worry for so many people. I can't even
comprehend or imagine what they are going through. It is an
awful increase for one year.
College. I wanted to ask you about that. There is a report
by the National Center for Public Policy and Higher Ed about
the rising cost of college. The report found that published
college tuition and fees increased by 439 percent from 1982 to
2007, while median family income rose 147 percent over the same
period.
So college costs have gone up by 439 percent in 25 years;
and median income has only gone up by 147 percent. I am not
asking you to verify that, but using this report as a basis for
my next question.
Tell us from what you can surmise from your data and
reports--not just this month but every time you appear--about
the difference between having a college degree versus having
only a high school degree on of the impact of the recession on
individuals?
Commissioner Hall. College-educated workers have huge
advantages in the labor market. It is not just during
recessions, but even during normal times. The wages are higher.
Labor force participation is higher. And their unemployment
rate is lower.
When you go into a recession, college educated workers,
they have a rise in the unemployment rate, and we've seen a
rise in the unemployment rate, but it rises higher for lower-
educated groups.
Senator Casey. Is there a number you have on those workers?
Commissioner Hall. Sure. The unemployment rate for those
with a bachelor's degree right now is about 4.3 percent. And
the unemployment rate for just high school grads is about 9
percent. So it is twice as high.
Senator Casey. Thank you for that information.
And finally a question on manufacturing jobs. In our State
of Pennsylvania we have lost, by one estimate, 200,000
manufacturing jobs since 2001. And I know the Nation has
experienced a similar sharp decline, as well.
Are there subparts, or subsectors, of manufacturing job
losses that are particularly severe or pronounced in the
national economy? Do you have any data on those segments, or
any sense of it?
Commissioner Hall. Actually, automobile-related industries
have been particularly well hit, but I would have to say that
virtually all portions of manufacturing have now seen job loss.
So it is very widespread, but it is particularly heavy in
automobiles.
Senator Casey. Thank you, very much.
Chair Maloney. I would like to thank you for your
testimony, and all the panelists, and I thank my colleagues,
and this meeting is adjourned.
[Whereupon, at 10:30 a.m., Friday, April 3, 2009, the
hearing before the Joint Economic Committee was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Representative Carolyn B. Maloney, Chair
A few glimmers of hope have surfaced in the economy in recent weeks
as factory orders posted gains last month, a key manufacturing index
rose and credit markets have begun to thaw. But today's jobs report
highlights the fact that there are virtually no bright spots yet in the
labor market.
In each of the last five months, employers have slashed about
600,000 or more jobs--staggering job losses totaling more than 5
million since the start of the recession. The unemployment rate now
stands at 8.5, a jump of 3.6 percentage points since the downturn began
over 15 months ago. And, the broadest measure of unemployment or
underemployment that the BLS publishes is now at 15.6 percent.
For the first time in at least 30 years, every state in the Nation
is in recession. The state and local unemployment numbers for February,
which were released recently, show that seven states already have
unemployment rates over 10 percent. Although my home state, New York is
not one of those states, the unemployment rate in New York state jumped
0.8 percentage points last month--the largest one month jump in almost
20 years. And the 1.2 percentage point jump in unemployment in New York
City represents the largest spike that New York City has seen since BLS
started collecting this data.
I am particularly concerned by the long duration of unemployment
faced by a great number of workers and the disruptive impact that this
long term unemployment has had and will have on those workers and their
families. Almost 1 in 4 unemployed workers is experiencing an
unemployment spell of 6 months or longer--the highest level in over 25
years. And of those long term unemployed workers, more than half of
them have been looking for work for over a year. This type of long term
unemployment is straining families and forcing them to take on more
debt as the financial pressure of making ends meet mounts.
Even before job losses began accelerating, many families were
increasingly holding balances on their credit cards just to pay for
basic household necessities. The most recent data available from the
Survey of Consumer Finances shows that a increased proportion of
families--especially middle class families--have been accumulating
larger mountains of debt on their credit cards.
Because of this increased reliance on credit cards--especially by
families of displaced workers, it is even more important that
legislation concerning credit cards is put into place immediately. The
Credit Cardholders' Bill of Rights was voted out of subcommittee
yesterday and will be moving through the House later this month. I
remain hopeful that the Credit Card Accountability, Responsibility and
Disclosure Act, which was voted out of the Senate Banking Committee
this week, will be on the Senate floor without delay. Both of these
bills would prohibit certain current practices that are hurting
financially strapped cardholders.
The recovery measures that Congress passed and President Obama
signed into law in his first 60 days in office are just beginning to
work their way into the economy. Speaker Pelosi announced this week
that the middle class tax cuts have now gone into effect, so families
will see an increase in their take home pay. A temporary increase in
food stamp benefits also goes into effect this month, with benefits set
to rise as much as $80 a month for a family of four. Both of these
measures should provide a much-needed boost to consumer spending,
Last night, both the House and the Senate passed their budget
resolutions. A budget is fundamentally about priorities and our
blueprint builds on our recovery efforts by making investments in
health care, renewable energy, and education to put people back to work
and strengthen our economy for the future.
Today's grim unemployment numbers underscore the wisdom of the
stimulus package that Congress worked so hard to pass quickly. We will
continue our focus on making sure that the economy gets working again
and examining ways to help struggling families.
__________
Prepared Statement of Senator Sam Brownback, Ranking Republican
Thank you Chairwoman Maloney for arranging today's hearing and
thank you Commissioner Hall for testifying today.
Unfortunately, today's employment report on labor market conditions
in March brings more bad news: employers shed 663,000 payroll jobs in
March and the unemployment rate rose to 8.5% from 8.1% in February and
5.1% a year earlier. In total, we have lost 5.1 million payroll jobs
since the beginning of the recession and 3.3 million jobs in the past
five months alone. Behind these numbers is a great deal of dislocation,
pain, and suffering in American families.
Given the severity of the economic downturn that we face, and
efforts already under way to try to offset the downturn, it is clear to
me that the very last thing that we want to do is raise taxes on
American businesses and introduce uncertainty into employers' plans.
Yet that is precisely what Congress and the Administration have been
contemplating. And, that is precisely what the Administration's
proposed budget will do. And make no mistake, the budget that we are
currently considering, by initiating a move toward socialized health
care and taxes on carbon emissions, will ensure that 100% of Americans
can expect to pay higher taxes in the future. The claim of the
Administration that 95% of Americans will not see their taxes raised by
even a dime is about as solid a AAA rating on a mortgage-backed
security turned out to be.
The economy needs help. But, rather than actually stimulate the
economy by providing improved incentives to work and invest, we have
been devoting trillions of dollars of taxpayer money to expanding and
creating permanent, long-term government spending programs and income
redistribution mechanisms. We have budget proposals from the
Administration and Democrats in Congress that seek to impose higher
taxes on small businesses, higher taxes on income from capital, begin
implementation of a mechanism that will tax anyone who uses carbon, and
begin a process of nationalizing health care, among other things. This
is precisely the wrong time to raise taxes and inject uncertainty about
what taxes are going to be in the future.
In the face of a severe downturn in the economy and significant
declines in stock values and homeowner wealth, it is almost
inconceivable that there are those who wish to raise taxes. What will
higher taxes on small business owners do to job creation? What will
higher taxes on dividends and other forms of capital income do to stock
values and the portfolios of every American family? What will new
carbon taxes, under the name ``cap and trade,'' do to our already
struggling industrial base? Now is clearly not the time to increase
taxes and chase more jobs and production offshore.
Judging from calls that I receive from my Kansas constituents and
judging from stock markets, where votes are placed with private
investments, the verdict on how we are handling our Nation's financial
and economic crises is not positive. Some of my constituents have
expressed unwillingness to commit to new investments and expansions of
their businesses because of growing uncertainty since the beginning of
the year--uncertainty about how high their taxes will be raised;
uncertainty about how much a cap-and-trade carbon policy will translate
into higher energy taxes; uncertainty about the extent to which health-
care policies will translate into new government mandates and price
controls; uncertainty about whether mortgage contracts may in the
future be subject to judicial rewrites in bankruptcy courts; and
uncertainty about rules of the workplace, including how workers and
businesses decide on union representation.
There are many people in the heartland who are genuinely and
rightly upset that they are now being asked to support a permanent
expansion of government and to support the highly leveraged speculative
bets placed by the big financial institutions that are ``too big to
fail.'' Many of my constituents are also experiencing a great deal of
uncertainty about how far the Administration will try to reach in its
attempts to restructure the economy and vastly expand the scope of
government intervention into their lives. We need to halt the mad dash
to big government as the solution to all of our problems and put
incentives in place that help Americans grow their businesses, invest,
create jobs, and prosper. Higher taxes, and ever-expanding government,
and creation of uncertainty are not the way to provide those
incentives.
I look forward to the testimony of Commissioner Hall.
__________
Prepared Statement of Kevin Brady, Ranking Republican
I would like to join in welcoming Commissioner Hall before the
Committee this morning.
The employment data released this morning show the impact of the
deepening recession. Payroll employment declined by 663,000 in March,
with losses broadly shared among major industry groups. The
unemployment rate increased to 8.5 percent, and current trends suggest
that further increases are likely in coming months.
The job figures reported today add to the growing body of evidence
indicating that the Administration's economic forecast is much too
optimistic. The unemployment rate is already significantly above the
Administration's forecast for all of 2009. The Administration projects
that real GDP will fall 1.2 percent in 2009 and rise 3.2 percent in
2010, compared with a Blue Chip Consensus forecast of a decline of 2.6
percent in 2009 and an increase of 1.9 percent in 2010. The CBO
forecast of a 3.0 percent decline in 2009 GDP also shows how far off
the Administration is likely to be for 2009.
The Administration's unduly optimistic economic assumptions are a
major problem. These optimistic assumptions are a key foundation of the
President's budget proposals, and lead to artificially low deficit and
debt projections. No wonder The Economist called the assumptions in the
Administration's budget ``deeply flawed'' in an article entitled,
``Wishful, and dangerous, thinking.'' Their effect is to make the
Administration's expansive new spending proposals look less threatening
than they actually are.
The reason the Democrats' Congressional budget resolution got so
far off track is that it is based on the President's budget proposals.
This is why a variety of accounting gimmicks are needed to hide the
true costs of the Administration's dangerous spending spree in the
Democrats' House budget resolution. As the Washington Post said last
week, in this resolution ``Congress deals a blow to `honest
budgeting.''' The Democrats now are attempting to shoehorn expensive
Administration proposals based on unrealistic economic assumptions into
a House budget resolution that uses more realistic economic assumptions
from the CBO.
A realistic economic forecast would indicate that the fiscal
situation is already very grim, with exploding deficits and debt for
the foreseeable future. According to a recent study of many financial
crises by Professors Kenneth Rogoff and Carmen Reinhart that has become
an instant classic, the U.S. national debt can be expected to increase
by $8 trillion to $9 trillion over the next three years. According to
Rogoff, inflation of 8 to 10 percent is one likely way the government
will end up financing the huge run-up in federal debt. He compares the
coming economic environment to the 1970s, which was a time of rising
inflation, weak economic growth, and rising unemployment.
The Democrats' budget will add yet more deficit spending and debt
to the huge amounts of each already in the pipeline. The result will be
much higher taxes and inflation in the future, and lower economic
growth. Higher inflation in coming years will further reduce the
American standard of living as incomes and retirement funds are further
eroded. The last time Democrats controlled both ends of Pennsylvania
Avenue for a significant length of time was in the 1970s and
stagflation was the result, so nobody should be surprised if history
repeats itself.
I'm pleased to welcome the panel of witnesses before us today. TARP
certainly raises a number of very troubling issues, but the central one
is why we still do not have a credible, effective, and transparent
financial rescue plan in place.
__________
Prepared Statement of Keith Hall, Bureau of Labor Statistics
Madam Chair and Members of the Committee:
Thank you for the opportunity to discuss the employment and
unemployment data we released this morning.
Labor market conditions continued to deteriorate in March. Total
nonfarm payroll employment decreased by 663,000, and the unemployment
rate increased from 8.1 to 8.5 percent. Since the beginning of the
recession in December 2007, job losses have totaled 5.1 million, 3.3
million of which occurred in just the past 5 months. These declines
have been widespread across industry sectors, but particularly sharp in
manufacturing, construction, and temporary help services. Together,
these industries have accounted for nearly two-thirds of the job loss
during the recession.
In March, manufacturing employment fell by 161,000, with job losses
spread throughout the sector. Since the start of the recession,
manufacturing has shed 1.5 million jobs, with about 60 percent of the
loss occurring in the past 5 months. In March, the average workweek in
manufacturing decreased by two-tenths of an hour.
Construction employment declined by 126,000 over the month. Since
the beginning of the recession, employment has dropped by about 1.1
million, with more than half of that total occurring in the past 5
months.
In March, employment continued to contract throughout most of the
service-providing sector. Temporary help services employment shrank by
72,000 over the month. Employment in the industry is down by about
three-quarters of a million since the recession began, with over half
of that coming in the past 5 months. In March, other large job losses
occurred in retail trade (-48,000), financial activities (-43,000),
transportation and warehousing (-34,000), accommodation and food
services (-32,000), and wholesale trade (-31,000).
Health care employment continued to trend up in March, although the
pace of job growth appears to have slowed in the past 3 months. In the
first quarter of 2009, the industry added an average of 17,000 jobs per
month, compared with a monthly average of 30,000 in 2008.
Average hourly earnings for production and nonsupervisory workers
in the private sector rose by 3 cents in March, or 0.2 percent. Over
the past 12 months, average hourly earnings have increased by 3.4
percent. From February 2008 to February 2009, the seasonally adjusted
Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-
W) fell by 0.5 percent.
The major indicators from our household survey also reflect weaker
labor market conditions. In March, the unemployment rate rose by four-
tenths of one percentage point to 8.5 percent, and the number of
unemployed persons reached 13.2 million. Since the recession began in
December 2007, unemployment has surged by 5.6 million; job losers have
accounted for about 80 percent of the increase, with returning workers
and new entrants to the labor market making up smaller portions.
In March, the number of individuals experiencing long spells of
joblessness rose by 265,000 to 3.2 million. Nearly one in four of the
unemployed had been jobless for 27 weeks or more, the highest ratio
since mid-1983.
Over the month, the employment-population ratio slipped to 59.9
percent, 2.8 percentage points lower than at the beginning of the
recession and the lowest level since July 1985. Among the employed, the
number of persons working part time who would prefer to be working full
time increased by 423,000 over the month to 9.0 million. Since December
2007, this measure has risen by 4.4 million.
Summarizing the labor market developments for March, payroll
employment fell by 663,000, and the unemployment rate climbed to 8.5
percent. Since the beginning of the recession in December 2007, job
losses have totaled 5.1 million.
My colleagues and I now would be glad to answer your questions.
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Prepared Statement of Representative Elijah E. Cummings
I'm saddened, though not surprised, by the latest job loss numbers.
In February we heard the staggering totals of 660,000 jobs lost. Today
we find out that 663,000 more jobs were lost in March.
The labor statistics know no sector bounds either. While layoffs
began in the early months of the recession in the housing and
construction and manufacturing sectors, we're now seeing enormous job
loss and mass layoffs in the employment services and professional
services sectors.
Further, we find that our silver lining--the increase in home
sales--is just another storm cloud. The home price index shows prices
are still falling, and a sizeable portion of new home sales are being
made at distressed prices.
Finally, economists predict that unemployment rates will continue
to rise before the recession is over--with the Congressional Budget
Office saying the rate could reach as high as 9.4 percent.
Today's announcement of an 8.5 percent unemployment rate only
confirms CBO's dark predictions.
Those out of work are staying out of work longer, and those lucky
enough to have jobs often only work part-time, due to the want for
full-time jobs.
In February the unemployment rate would have been 14.8 percent if
we had included those folks who were in part-time positions but wanted
to work full time.
I see the impact of the suffering that these numbers add up to
produce in the lives of my constituents every day.
The financial markets have been in such disarray that these hard-
working people are suddenly unable to retire.
After 30-year careers as civil servants, teachers, secretaries and
bus drivers in Baltimore, they have earned the right to a decent and
dignified retirement. Suddenly they are working with no end in sight.
Many of my constituents are also struggling to hang on to their
homes. I have an employee in my district office who spends 100 percent
of her time helping constituents with mortgage issues.
These are honest people who are not in default on their mortgages.
They are not speculators or investors. They are fighting to get by, and
they need help to save their homes.
My only comfort in this rising tide of bad news is that we have
taken decisive action. We know the reality is that the capital markets
are not going to heal themselves, and not in any way that is fair to
all Americans.
So, I'm proud to have voted with so many of my colleagues for the
American Recovery and Reinvestment Act, which constitutes a bold stroke
that will help revive our domestic economy.
Unlike like the fat cats on Wall Street, I'm here on planet earth.
We have to face facts. The research suggests that stimulus money takes
time to show up in the economy.
But it will show up. And I'm confident it will create jobs and help
our constituents stay in their homes.
So, while things may get worse before they get better, I know that
we are on the right track toward helping all Americans.
Thank you, Madam Chair. I yield back.