[Joint House and Senate Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 111-308
THE EMPLOYMENT SITUATION: APRIL 2009
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MAY 8, 2009
__________
Printed for the use of the Joint Economic Committee
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
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 C. 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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Members
Hon. Amy Klobuchar, a U.S. Senator from Minnesota, presiding..... 1
Hon. Kevin Brady, a U.S. Representative from Texas............... 2
Witnesses
Dr. Keith Hall, Commissioner, Bureau of Labor Statistics; Mr.
Philip L. Rones, Deputy Commissioner, Bureau of Labor
Statistics; and Dr. Michael W. Horrigan, Associate Commissioner
for Prices and Living Conditions, Bureau of Labor Statistics,
U.S. Department of Labor....................................... 4
Submissions for the Record
Prepared statement of Representative Kevin Brady................. 22
Prepared statement of Dr. Keith Hall, Commissioner, Bureau of
Labor Statistics, together with Press Release No. 09-0482...... 22
THE EMPLOYMENT SITUATION: APRIL 2009
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FRIDAY, MAY 8, 2009
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met, pursuant to call, at 9:35 a.m. in Room
104 of the Dirksen Senate Office Building, The Honorable
Senator Amy Klobuchar presiding.
Representatives present: Brady.
Senators present: Casey.
Staff present: Gail Cohen, Nan Gibson, Colleen Healy,
Elisabeth Jacobs, Annabelle Tamerjan, Andrew Wilson, Chris
Frenze, Bob Keleher, Robert O'Quinn, Lydia Mashburn, and Jeff
Wrase.
OPENING STATEMENT OF THE HONORABLE AMY KLOBUCHAR, A U.S.
SENATOR FROM MINNESOTA
Senator Klobuchar. The Joint Economic Committee will come
to order. Welcome to our witnesses, Mr. Horrigan, Commissioner
Hall, Mr. Rones, and Congressman Brady is here with me today. I
want to welcome all of you. Thank you for being here for this
important hearing. I also want to thank Chair Maloney for the
opportunity to chair today's April hearing on the employment
situation in our country.
Ironically, the last time I presented over a hearing of
this exact topic was almost exactly one year ago. Commissioner
Hall, clearly we've seen some changes since then. I was looking
back over the questions that you and I had going back and forth
when we were talking about whether certain statistics were
indicators of things to come, and as it turned out, they were.
The Joint Economic Committee has held a series of hearings,
as you know, on the economic outlook recently. We heard from
both the chair of the President's Council of Economic Advisers,
Christina Romer, and Federal Reserve Chairman Ben Bernanke,
that there are reasons for some optimism regarding the state of
our economy. We noted that there are green shoots in the form
of an increase in consumer demand, and indications that the
housing market may be bottoming out.
On the other hand, as you all know, there's some extreme
challenges as we see from the announcement of today's
unemployment figures. As you know, the Bureau of Economic
Analysis reported recently that consumer spending did rise 2.2
percent on an annualized basis in the last quarter, the most in
two years. Dr. Romer recently testified before this committee
that because only a small part of the spending and tax relief
called for in the Recovery Act had taken place, and because
much of the economy's response to stimulus occurs with a lag,
most of the benefits are yet to come.
But then we have this employment situation that we're here
to talk about today. Private employers have slashed over
600,000 jobs. Total job losses have totaled over 5.7 million
since the start of the last recession, 5.7 million. When I
think about these statistics, I also try to remind myself that
these are not just numbers. These are real people that we know,
that we see in the grocery stores, that we see when we all get
home in Congress to our home states.
I just got this letter in fact about a week ago from
someone in my state, from one of the smaller towns. She writes
``We're almost at our wits end for our daughter and her
husband. He is an unemployed plumber who will be out of
unemployment help in June. This economy is ruining lives. Our
daughter works part-time as an LPN in a clinic, and can't
afford to finish. There are three small children. My daughter
has no health insurance. Both Angie and her husband want to
work, but there are no jobs. They are in danger of losing their
homes. We have been helping financially as much as we can, but
there's a limit to what we can do. What do we do for our
kids?''
The unemployment rate now stands at 8.9, a jump of four
percentage points since the downturn began 16 months ago, and
the broadest measure of unemployment or underemployment that
the Bureau of Labor Statistics publishes now is at 15.8
percent. These are real families. These are the families that
we are supposed to help, and that we are trying very hard to
help with some of the new policies of the Administration and
this Congress. I think today's unemployment numbers underscores
a need for a continuing focus, a continuing bold direction with
this economy, that we can't back down, that we can't just let
things take care of themselves.
So I'm looking forward to diving into these numbers again,
Commissioner Hall. I know we had some good exchanges last time.
To figure out what all of this means, and what it means for our
policies going forward. As I said, we see some glimmers of
hope. I think that's very good, and the increasing consumer
confidence. We also know that this is a very difficult time for
many Americans. Thank you very much. I will turn it over to
Congressman Brady.
OPENING STATEMENT OF THE HONORABLE KEVIN BRADY, A U.S.
REPRESENTATIVE FROM TEXAS
Representative Brady. Thank you Chairwoman. Thank you.
Welcome Commissioner Hall before the Committee, as well as the
other witnesses. The labor market data reported today reflects
continued economic weakness. Overall, employment declined by
539,000, with losses spread across many industries. Private
sector payroll employment declined by 611,000, while government
employment increased by 72,000.
The unemployment rate rose to 8.9 percent. These data are
not surprising, given recent economic trends. Real GDP declined
by 6.1 percent in the first quarter of this year, with business
investment plunging by 38 percent. There are some preliminary
signs and some other data that the rapid rate of economic
decline may be slowing. But more evidence is needed before
reaching any firm conclusions.
The condition of the housing sector and the contraction of
the auto industry are among many factors that make the economic
outlook especially murky. Despite recent economic developments,
including the rising unemployment rate, unfortunately the
Administration has failed to update its unrealistic economic
assumptions in its budget submission. For example, this week
the Administration predicts an 8.1 percent unemployment rate
for this year, even though it is clear the rate will
unfortunately be much, much higher.
The Administration projects that the economy will decline
by only 1.2 percent in 2009, compared to the blue chip
consensus forecast decline of almost double that, 2.6 percent.
The Economist magazine and other experts call these economic
assumptions deeply flawed, and the reason it's important to
point this out is these faulty and rosy scenarios are
dangerous, because they produce an understatement of the real
cost of the Administration's expensive new spending proposals.
The result will be huge budget deficits and a doubling of
the national debt as a share of GDP by 2017, according to the
Congressional Budget Office. In the short term, the steps the
Fed has taken, including the huge expansion of its balance
sheet, have helped to stabilize financial markets and will
eventually provide a boost to the economy. However, the ongoing
need for households and banks to reduce their outstanding debt
does suggest that when the recovery comes, it will probably be
weak.
Under Administration policy, the excessive levels of
deficits, debt, taxes and inflation will undermine long-term
economic growth. Unfortunately, increasing the burden of
government on an already weak economy is only going to further
undermine economic and job growth in the years ahead.
The Administration's proposed reductions of the incentives
for work, saving and investment is the not the right way to
boost the productivity, innovation and competitiveness of the
U.S. economy in the years ahead. With that, Madam Chairman, I
will yield back.
[The prepared statement of Representative Brady appears in
the Submissions for the Record on page 22.]
Senator Klobuchar. Thank you very much, Representative
Brady. I'd like now to introduce Commissioner Hall, the
Commissioner of the Bureau of Labor Statistics (BLS) for the
U.S. Department of Labor. The BLS is an independent national
statistical agency. The Bureau of Labor Statistics processes,
analyzes and disseminates essential statistical data for the
American public, the U.S. Congress and federal agencies, state
and local governments, businesses and labor.
Dr. Hall also served as the Chief Economist for the White
House Council of Economic Advisers for two years under
President George W. Bush. Prior to that, he was Chief Economist
for the U.S. Department of Commerce. Dr. Hall has spent ten
years at the U.S. International Trade Commission. He received
his B.A. from the University of Virginia and his M.S. and Ph.D.
degrees in Economics from Purdue University. Commissioner Hall.
STATEMENT OF DR. KEITH HALL, COMMISSIONER, BUREAU OF LABOR
STATISTICS, U.S. DEPARTMENT OF LABOR, WASHINGTON, DC;
ACCOMPANIED BY: MR. PHILIP L. RONES, DEPUTY COMMISSIONER,
BUREAU OF LABOR STATISTICS; AND DR. MICHAEL W. HORRIGAN,
ASSOCIATE COMMISSIONER FOR PRICES AND LIVING CONDITIONS
Commissioner Hall. Thank you. Madam Chairman, members of
the Committee, thank you for the opportunity to discuss the
unemployment data we released this morning. Non-farm payroll
employment declined by 539,000 in April, and the unemployment
rate rose from 8.5 to 8.9 percent. Since the start of the
recession in December 2007, job losses have totaled 5.7
million, and the unemployment rate has increased by four
percentage points.
In April, widespread job losses continued throughout the
private sector. Private employment fell by 611,000, compared to
an average monthly decline of 700,000 in the prior four months.
Over the month, federal government employment rose by 66,000,
mainly due to hiring of 63,000 temporary workers, in
preparation for the Census 2010.
Manufacturing employment fell by 149,000 over the month,
and job losses continue to be widespread. Since the recession
began, this industry has shed 1.6 million jobs, representing
more than a quarter of the total non-farm job decline during
the period. Construction employment decreased by 110,000 in
April. Job losses have averaged 120,000 per month in the last
six months, compared with 46,000 per month from December 2007
to October 2008.
Also in the goods-producing sector, mining employment fell
by 10,000 in April. From the start of the recession through
September 2008, this industry has continued to add jobs, mainly
those related to oil and gas production. Since September,
mining employment has declined by 44,000.
In April, employment in professional and business services
dropped by 122,000. Temporary help services accounted for about
half of the job losses. Since the start of the recession,
temporary help employment has fallen by 825,000, nearly a third
of its total. The health care industry added 17,000 jobs over
the month, in line with its average monthly gain since January.
In 2008, the average gain was 30,000 jobs per month.
In April, average hourly earnings for production and non-
supervisory workers in the private sector were essentially
unchanged.
Over the past 12 months, average hourly earnings have risen
by 3.2 percent. From March 2008 to March 2009, the Consumer
Price Index for Urban Wage Earners and Clerical Workers
declined by one percentage point. Turning now to measures of
the Survey of Households, the unemployment rate rose to 8.9
percent in April, an increase of 4/10ths of a percentage point.
The number of unemployed persons increased by 563,000 to 13.7
million. Since the start of the recession in December 2007, the
number of unemployed has risen by 6.2 million, pushing the
jobless rate up by four percentage points.
Over the month, the number of long-term unemployed
continued to grow, rising by 498,000 to 3.7 million. The long
term jobless represented 27.2 percent of all unemployed persons
in April, the highest proportion on record. The employment to
population ratio held at 59.9 percent in April. When the
recession began in December 2007, it was at 62.7 percent. Among
the employed, the number of persons working part-time who would
prefer full-time work was little changed over the month, at 8.9
million.
In summary, non-farm payroll employment fell by 539,000 in
April. Private sector employment dropped by 611,000. Job losses
continued to be widespread across most major industries. Since
the recession began, payroll employment has fallen by 5.7
million. Over the month, the unemployment rate rose by 4/10ths
of a percentage point to 8.9 percent. My colleagues and I would
be glad to answer your questions.
[The prepared statement of Commissioner Hall appears in the
Submissions for the Record on page 22.]
Senator Klobuchar. Thank you very much, Dr. Hall. Just to
summarize, there were 611,000 jobs lost in the private sector
last month, is that right?
Commissioner Hall. Yes.
Senator Klobuchar. How many jobs have been lost since
December 2007?
Commissioner Hall. Nearly six million private sector jobs.
Senator Klobuchar. What would you say, just to summarize,
have been the biggest areas of loss for the types of jobs
across the country?
Commissioner Hall. I would say the job loss has been very
widespread. Almost every sector has had job loss with the
exception of health care and education, and even those
industries have had a slowing of job growth. The sectors with
the biggest job loss have probably been manufacturing and
construction.
Senator Klobuchar. How about for parts of the country? I
remember when we talked about this a year ago, which was
probably a precursor of things to come, we were trying to
figure out if it's just a Michigan or just a regional problem.
I remember at that point you gave me the states that were
having problems, and in fact it wasn't just regional. The
highest unemployment states were spread out across the country.
What's the status of that now?
Commissioner Hall. That's still true. We've seen literally
every state has had significant rise in the unemployment rate
over the past year. That continues to be the case. The job loss
is widespread. Certain states have had bigger increases in the
unemployment rate, job loss. For example, Oregon, South
Carolina, North Carolina and Michigan have been the largest.
Senator Klobuchar. I can understand Michigan, with the auto
industry, but what do you point to when you look at Oregon and
South Carolina and North Carolina?
Commissioner Hall. It's hard to say, because the exact mix
of industries vary by state. I'd probably have to spend a
little time looking at those, to give a good answer to you. We
can do that for you, but I don't have an obvious answer.
Senator Klobuchar. Sometimes I wonder if you have areas
which have seen a big increase recently, and then suddenly
they've gone down. Just as I know in Florida and northern
Minnesota, the mines have not been doing that well for decades,
and suddenly in the last few years, because of the
international economy, our iron ore mines are on the increase
and people were going to work.
Then suddenly with this economic crash worldwide, you saw a
big decline. Maybe part of this, it's not just about mining.
What you pointed out is an issue nationwide, but areas where
they are benefiting because of an increase in either
manufacturing or those types of jobs.
Commissioner Hall. I suspect that there are a number of
stories like that. There do seem to be states that even prior
to the recession were running higher unemployment rates, and
those states have had a bigger increase in their unemployment
for some reason.
Senator Klobuchar. Maybe part of that, that this was bigger
than just a blip on the radar screen, that this was a longer-
term recession?
Commissioner Hall. Yes.
Senator Klobuchar. The recession, as we've talked about,
seems to be different from previous recessions, given the
severe housing slump, the credit crunch and the global nature
of the economic downturn. Based on what you're seeing here, how
long do you think this is going to last? I know when I ask this
question you never answer it, but I thought I'd try. How long
do you think this is going to last? We'll have another round of
questions this morning, but do you see any glimmers of hope
here?
Commissioner Hall. You're quite correct. I don't want to
speculate on how long this will last. This was another bad
report. There wasn't anything to cherish in the labor market
again this month. I think the story continues to be pretty
close to the same story. The job loss is large and it's
widespread, and it's sucking in every industry sector and every
demographic group. If you're looking for a glimmer of hope, I
suppose the fact that the private sector job loss is about
611,000 and it's been averaging around 700,000. That looks like
it might be a moderation. But it's only one month and it's not
a large change.
Senator Klobuchar. We've seen an increase in consumer
confidence, which is pretty marked. We've seen consumer
spending rise in the last quarter, and also just a little thumb
story. Target, which is based in Minnesota, they reported they
did better in the last four weeks than they did in the four
weeks during this exact same time period during the last year.
So I've heard some of these stories, but they seem very
different from what we were seeing in December and January.
Commissioner Hall. That's probably the most encouraging
news that I've seen. Consumer confidence obviously leads to
consumer spending. Consumer spending is 70 percent of GDP.
Frankly, if consumer spending picks up everything else will
pick up to match it. So that is the best sort of news we can
get, if it continues to pick up in consumer spending.
Senator Klobuchar. Thank you. I'll turn it over to
Congressman Brady.
Representative Brady. Thank you, Senator Klobuchar. I think
we're all hoping to see the American economy turn up sooner
rather than later. We're looking for indications of that. On
the surface, the 539,000 number looks sobering. Tell us a
little more about the private sector payroll employment decline
of 611,000. It's down slightly from last month, but we haven't
hit the bottom of the well yet. Can you put that in
perspective?
Commissioner Hall. I suppose I'd say that a job loss of
611,000 is a large job loss. It only looks slightly encouraging
because the job losses have been so high in the last three
months. It's still a very large loss. It's still a very large
spread. So the pattern of job loss really hasn't changed.
Representative Brady. That's what I sense too. Mr. Rones,
government jobs are growing by some 70 thousand. Is that
attributable to Census hiring?
Commissioner Hall. The increase in the temporary census
hiring was 63,000. So that really accounts for the vast
majority of the increase in government.
Representative Brady. Just a couple of months in January,
top Administration officials claimed that the stimulus plan
would keep the unemployment rate at or below eight percent for
this year.
Obviously, we're at a much higher level already, 8.9
percent. Any projection on what that will be for the entire
year? Deputy Commissioner Rones.
Mr. Rones. As you know, we don't do projections. Basically,
we know now that we're at 8.9 percent already in April. So that
certainly puts that number in perspective.
Representative Brady. We're fortunate on this Committee. We
do have a lot of experts come before us, some of the best and
brightest. The Chairwoman of the Economic Advisers, Chair
Romer, who is very sharp, before the Committee here recently
cited a 150,000 job creation figure in her testimony before
this Committee, related to the stimulus. Do your numbers
substantiate that claim, Commissioner Hall?
Commissioner Hall. There's no way for us to connect job
change with the stimulus. We just don't do that sort of work.
Representative Brady. What indicators would you be looking
for on that? Honestly, we want a few jobs created in this
country. We want to know if we're touching the bottom of the
well. We can't do it? The numbers don't justify it at this
point.
Commissioner Hall. Right, yes. Particularly in a period of
such significant job loss, it would be very hard to sort or
parse out as to what would the job loss be if it weren't for
something else going on. I will say for us to see improvement,
certainly improvement in the unemployment rate, we're going to
have to see the job loss moderate, and we're going to have to
see the job loss eventually stop, and we're going to have to
see job growth before we see the unemployment rate start to
level off and eventually decline.
Representative Brady. Do you think consumer confidence is
an important measure? The uptick in consumer spending is good
in the first quarter. Two questions. It appears like the
biggest uptick, Deputy Commissioner Rones, that the biggest
uptick was in January and February. Some attribute that to IRS
tax refund checks getting back into households and people doing
the stimulus tax incentives that equate to $1.10 per day,
excuse me.
In April, is there any evidence that in this data, that
that is having an impact on consumer spending? First, what do
you attribute to it in the first quarter? Second, do you see
any uptick, any change because of the Obama tax cuts?
Mr. Rones. As Commissioner Hall said, it's difficult for us
to take that one single factor and somehow disentangle that
from all the other things going on in the economy. Right now,
we're still seeing rapid job loss despite any efforts. We still
have 611,000 private sector job loss. Again, would it have been
worse but for the stimulus? We can't really know that.
Representative Brady. And the uptick in consumer spending
in January and February?
Mr. Rones. Again, it's one of the few positive signs that
we have. Any money that goes into consumer's pockets has to be
helpful. So I'm sure that that's part of what's going on with
consumer confidence.
Representative Brady. My question is since the stimulus
credit of $1.10 a day didn't start until April, what's the
reason for January and February?
Mr. Rones. Again, it's hard for us to be sure. But surveys
had seemed to indicate that there is some increase in consumer
confidence. I'm not exactly sure why that is. Certainly, in our
employment centers there hasn't been a lot of positive news
over that period.
Representative Brady. Thank you, and before the Chairwoman
attributes it to the election of a new president, let me just
say I respectfully disagree. I yield back, Madam Chair.
Senator Klobuchar. Senator Casey.
Senator Casey. Madam Chair, thank you very much. I know I
got here late, and I want to make sure I ask unanimous consent
to submit a statement for the record.
Senator Klobuchar. Without objection, it will be included
in the record.
[The prepared statement of the Honorable Robert P. Casey
was not available at the time of publication.]
Senator Casey. I wanted to first of all address
Commissioner Hall with regard to the question of minority
unemployment. I want to make sure I got this right. The numbers
for African-American unemployment this month, the number is 15
percent, is that right?
Commissioner Hall. Yes.
Senator Casey. The number for Hispanics, I had 11.3. Is
that right?
Commissioner Hall. Yes, that is.
Senator Casey. But I guess the month to month number for
African-Americans went from 13.3 to 15, is that right?
Commissioner Hall. That's correct.
Senator Casey. What do you attribute that to? The Hispanic
numbers stayed consistent month to month, is that correct?
Commissioner Hall. Yes. It should not amount to too much.
The numbers should not move you too much, because there's some
volatility in these numbers to begin with. I can say that the
increase in black unemployment was statistically significant,
so we would characterize it as an increase. But as far as an
explanation, I just don't know for a one month change.
Senator Casey. I know it's difficult, and month to month
numbers can be--I guess sometimes they can be significant. You
can attribute it to something at times and maybe not in other
circumstances. But the fact remains whether we're talking about
this month or the previous month, that African-American
unemployment is almost double what it is for whites; is that
correct?
Commissioner Hall. That's correct.
Senator Casey. That alone is disturbing, because we keep
hearing these commentators talking about the fact that there
may be parts of the economy that are improving, as you said,
glimmers of hope, and other places, where there's some degree
of positive news. We also hear this ``lagging indicator''
phrase. I'll tell you, that's a great candy-coated way of
describing a terrible economy, because of course if you lost
your job or your house or your hopes and your dreams, a lagging
indicator doesn't really do it for you. It's not really an
accurate assessment of your life as you're going through that.
I do want to ask you also about what you're seeing, kind of
state by state. Fortunately for Pennsylvania, in a very
relative sense the numbers are extraordinarily high. But we've
gone from basically from February to March, 7.0, 7.5, whereas
the nation in that time period was going above eight, and I
guess in February or January. But in March to April, going from
8.5 to 8.9. Is that where we are now?
Commissioner Hall. Yes.
Senator Casey. In Pennsylvania, we've been averaging about
40,000 jobs lost month to month. When you look at some of the
states that are highest, in terms of the unemployment rate by
percentage, what are the three highest and what's driving most
of that? Is it housing or is it a combination of factors? I
know several states are in double figures. I just don't know
the listing of them.
Commissioner Hall. We have the data, not on my fingertips
but----
Mr. Rones. California is about 12.
Commissioner Hall [continuing]. I think they're in double
digits.
Senator Casey. About 11 to 12.
Mr. Rones. 11.2 percent.
Senator Casey. That's California. Do you know the next two?
I'm just trying to get a sense of----
Commissioner Hall. Michigan has an unemployment rate of
12.6; Oregon has an unemployment rate of 12.1; Indiana has an
unemployment rate of 10; Nevada, 10.4; North Carolina, 10.8;
South Carolina, 11.4. There are several states that are now in
double digits.
Senator Casey [continuing]. There's no thread you
necessarily can identify. I would say in Michigan, the auto
industry contributes to that. So there's no real thread that's
really state or region-specific would you say?
Commissioner Hall. Yes, I would say that. All the states
have had a rise in the unemployment rate. It's been very broad
across demographic groups, across industries, across states.
The other states that started with higher unemployment rates
tend to have a bigger increase for whatever reason. If you
would look at regions, I suppose the regions that have been
hardest-hit have been the West and the Midwest, but all the
regions have been hit.
Senator Casey. I know I'm over time. Just real quickly,
Chairman Bernanke was here just a couple of days ago, and I
asked him about unemployment data and a lot of similar
questions that we're examining today. But he commented that the
labor market is dynamic, and that even as we shed jobs, people
are gaining jobs, and the overall picture is dynamic. That's a
paraphrase. That's not an exact quotation from Chairman
Bernanke.
But that idea that there is a dynamic quality to this, and
there may be areas where there's actual significant growth,
where is the job growth, if there is any? Is there a sector
that's growing, or are we just kidding ourselves to say that
there's a positive dynamism to it?
Commissioner Hall. I would guess that the dynamism he's
referring to, which I would characterize as job churn, people
are losing jobs in net, but there are an amount of people who
are switching jobs, people who are switching jobs and gaining
jobs. But in terms of net gains on a monthly basis, there's
very few industries that have job growth. Government and
education and health care have had some, but to be honest, even
education and health care have had a real decline in their job
growth in the last few months. They're still growing, but it's
been moderating.
Senator Casey. Thank you very much.
Senator Klobuchar. Thank you very much. I keep wanting to
bring up some real examples. I think it's just illustrative of
some of the issues, and this is the story of two people in
Minnesota, Matt and Eva Johnson, who have got college degrees.
They thought that was the smart thing to do, and now they're
$69,000 in debt from their college education.
They pay about $800 a month in student loans, and they're
having difficulty getting work. They got a house a year ago,
before this really hit. They bought a modest two-bedroom, one-
bathroom house in Blaine, Minnesota, which is an exurban area
for $172,000. That house has actually maintained its value, but
they can't afford the mortgage payment. So the woman's 22-year-
old brother moved into their basement. He pays $400 a month for
rent, utilities and groceries. If they didn't have that, they
wouldn't be able to make it, their mortgage, and they talk
about how they had money a few years ago. They talk about how
they've decided not to have a child right now. They're going to
wait four or five years. They want to, but they don't think
they can afford it.
They have--they push off buying groceries. They eat a lot
of chicken noodle soup and potatoes, and the husband goes on
Craig's List daily to try to pick up side jobs, which are
getting harder to come by. The wife coaches soccer seven months
of the year, which brings in about $1,000. Those are real
stories, and I guess my question there is we've always been
told to pursue this American dream, and a college education is
a huge piece of this.
I believe that, but what are the differences for the
unemployment rates for people with college degrees and people
without college degrees?
Commissioner Hall. They vary significantly by education.
This recession has been interesting, in the sense that it's
affected everybody. It's affected people at all education
ranges. Unemployment rates have gone up for people with college
degrees and with people with less than a high school education.
If they didn't start equal and the effect hasn't been equal,
the unemployment rate for people without a high school degree
is 14.8 percent. For people with a college degree, it's 4.4
percent. So a huge difference.
Senator Klobuchar. Could you go over that again for me?
Commissioner Hall. For people without a high school degree,
the unemployment rate is 14.8 percent. With a high school
degree, it goes to 9.3 percent, and then with some college, it
goes down to 7.4 percent. Then with a Bachelor's degree, a
college degree, it's 4.4 percent. All these numbers have gone
up, but they're nowhere near equal.
Senator Klobuchar. You can see why the President is devoted
to trying to make sure that people get some college. Not
everyone has to be the same, but at least a year of post high
school education, and one of the issues is the expense of
college. As we can see, if we're going to compete in this world
economy, it seems like the more we can do to try to get some
post high school degree and at least finish high school, it
makes a major difference in employment. Is that a correct
assessment?
Commissioner Hall. Absolutely. People with higher education
have higher labor force participation rates. You get higher
wages; they have lower unemployment rates.
Senator Klobuchar. Another follow-up from the story that I
just gave you of the Johnsons in Blaine, Minnesota. It will be
something we talked about a year ago, which is what you call
the marginally unemployed, people who would like to work longer
hours but then their hours are reduced. That is not included.
Those people aren't included in the 8.9 percent unemployment
rate that we just announced today; is that correct?
Commissioner Hall. That's correct.
Senator Klobuchar. When you include them, where do we go
and what are their numbers looking like?
Commissioner Hall. When you include marginally attached.
Senator Klobuchar. They're not necessarily like moms, who
want to reduce their hours because they have kids, and they
want to reduce it. You have people that are pushed to reduced
hours when they don't want to reduce them.
Commissioner Hall. The marginally attached are people who
want to work but for whatever reason they haven't been looking
lately. They include discouraged workers.
Senator Klobuchar. Discouraged workers?
Commissioner Hall. Part-time for economic reasons, is what
you're talking about. People who want to work full-time but
they can only find part-time work. If you include those folks
as well, you get a percentage of 15.8 percent.
Senator Klobuchar. Where is that compared to where we were
a year ago or two years ago?
Commissioner Hall. That's up about 6.6 percentage points
over the last 12 months.
Senator Klobuchar. So these are people that are discouraged
workers, that can't quite get the money they need or the hours
they need? It's exactly I think this kind of situation. Maybe
they have a job, but it's getting harder and harder for them to
pay for the mortgage and things like that.
Commissioner Hall. Yes.
Senator Klobuchar. And that trend is similar to the regular
unemployment rate?
Commissioner Hall. Yes. All are issues of labor force
underemployment as well as unemployment, and they have all gone
up in similar fashion. They're all showing a distressed labor
market.
Senator Klobuchar. And again, these are remarkable figures
in the unemployment rate, depending on people who don't finish
high school are at 14.8 percent; with high school, 9.3 percent;
with some college, 7.4 percent; college degree, 4.4 percent. Is
that similar to what we saw in some of these last recessions
that didn't last this long?
Commissioner Hall. These are all higher, and the recessions
that lasted a short time period didn't have such a large
increase in the unemployment rate. All of these numbers are
higher than either of the last two recessions.
Senator Klobuchar. How about the variation between the
categories? You know what I'm trying to get at here. In these
last recessions, did you see as much of an increase of say
people without high school degrees?
Commissioner Hall. I don't think a precise comparison, but
I think that is pretty similar. Generally, for example, people
with at least a high school degree, their unemployment rate
starts higher. It goes up more during a recession. That's been
true in this recession.
Senator Klobuchar. That's historically true if we're going
to look at long-term situations. That should make a difference.
Congressman Brady.
Representative Brady. Those numbers, as to the value of
college education and stronger education, the housing financial
sector, Commissioner, has been especially weak in recent years.
Can you describe what's happening in those sectors?
Commissioner Hall. Sure. Construction employment. We lost
about 1.4 million jobs in construction. Housing-related
industries include some other things, for a total of two
million jobs.
Representative Brady. In the last month?
Commissioner Hall. In the last month, construction lost
110,000. Job loss continues to be in triple digits there.
Representative Brady. It's been averaging about 120,000 in
losses in recent months. So it's a little uptick.
Commissioner Hall. It's around the same.
Representative Brady. How about housing and financial?
Commissioner Hall. Credit union intermediation has now lost
about 14,000. That's roughly in line, I think, with the last
few months.
Representative Brady. Is it the second week of each month
you do the surveys?
Commissioner Hall. Yes.
Representative Brady. Any seasonal adjustments related to
that? People here, I take it, have to pay their taxes on April
15th. Were there any seasonal adjustments that you know about?
Commissioner Hall. Our seasonals, I'm not sure what the
seasonals were like this month. But we always take the
seasonality into account when we do these numbers.
Representative Brady. Nothing significant?
Commissioner Hall. Nothing to mention. We didn't have any
difficulties with the seasonality.
Representative Brady. Do you measure the real hourly
compensation figures, what payroll, what compensation is?
Commissioner Hall. We measure wage, average hourly
earnings.
Representative Brady. What is going on there?
Commissioner Hall. In nominal terms, the average hourly
earnings have been growing maybe 3.2 percent, I believe, over
the last 12 months. They had been going a little bit faster.
They've gotten up to almost four percent prior to recession. So
wages are growing, but not as fast as before. Once you define
them in real terms, we actually have growth in real average
hourly earnings, plus we have declining energy prices.
Representative Brady. I don't see pressure on Consumer
Price Index, that number at this point. Do you?
Commissioner Hall. No. Most of the unusual action is still
in energy. In particular, energy prices have still declined.
Representative Brady. That takes some of the pressure off
inflation figures, doesn't it?
Commissioner Hall. Yes.
Representative Brady. Business families, you get a little
further. I understand. Great. Thank you, Madam Chairman very
much. I appreciate it.
Senator Klobuchar. Thank you very much Congressman Brady.
One area that we haven't focused on is the veterans
unemployment. I always like to bring this up, because I don't
think people think about this as much as they should, and these
are people who have served our country and that have come back.
Maybe even before this recession, maybe they're serving for two
or three years and then they came back. Their percentage of the
total workforce, all that have been serving after September
2001 is what I'm looking at.
So soldiers who served recently and the percentage of young
male veterans serving after 2001, what's the unemployment rate?
So what we're seeing now is from 13.9 percent of young male
veterans serving after September 2001, are now unemployed,
which is higher than the national unemployment rate of 8.9
percent. Are those numbers right? What do you have for those?
Commissioner Hall. I have about 10.3 percent as the
unemployment rate for Gulf War era veterans since 2001.
Senator Klobuchar. It is higher, and I think the number I
may have had was male veterans. So it's 10.3 percent. As we
look at this, you would think these people who have served our
country, most like I know in Minnesota we don't have many
active duty, but we have a huge number of National Guard and
Reserve that served, that have left their jobs. They are called
up as citizen soldiers.
We have the longest-serving unit, the Red Bulls in Iraq,
the Minnesota National Guard. So the thought that they're
coming back and the job isn't there anymore makes them so
disadvantaged. Some people can hold onto their jobs when they
were in the work force and they were gone. So I'm trying to
figure out why we would see these higher numbers with these
returning veterans? What do you think the reason is?
Commissioner Hall. I can't say. I have to look a little
more at the data and see if I see a pattern. But it is true
that Gulf era veterans started at a slightly higher
unemployment rate, and it's increased by more during this
recession. For example, it's gone from 5.6 percent to 10.3
percent over the last 12 months. I don't know a good
explanation for it.
Senator Klobuchar. If you could look into that. I'm just
curious, because it's very depressing to me. These are people
that served our country and they have come back, and their
unemployment is even higher than the national average. I think
it's very troublesome. I wanted to shift a little bit to your
past job, when you were Chief Economist for the White House
Council of Economic Advisers.
If a few of your colleagues there could put your professor
hats back on for a second, and you had to give a lecture about
jobs and this recession, how would you explain this moment in
our economic history? If you look at it more broadly, what
factors led us to these unemployment numbers and having
identified the solutions that you would suggest from an
economic standpoint, based on the historical data, what caused
this and what do you see to help us get out of it, with your
overall experience? Commissioner Hall.
Commissioner Hall. I would say that for the first part of
this recession, we had job loss, but it wasn't large job loss.
Senator Klobuchar. When you're talking about the first
part, what time period are you talking about?
Commissioner Hall. Say from December 2007 to something like
September 2008. In fact, I would probably say that was a mild
recession. Maybe it may not have been called a recession if
things had improved. My feeling is that it was probably related
to the housing market, to people losing value in their homes,
and that affecting consumer spending. We didn't have really,
really strong job loss like we're seeing now until the credit
markets really locked up in September.
So now we have this period of downturn that affected the
housing market directly, and then the financial markets locked
up. We have all three of these things really impacting the
economy. We've had a severe recession now for the last six
months, I think as a result. As far as what would fix it,
that's out of my current job. I will say it's hard to see that
unless the labor market's going to improve, unless some of
these three things, the housing market, the credit markets and
the global economy; if some of those, at least one or more of
those things don't improve.
Senator Klobuchar. I was actually just talking to Senator
McCain about Asia, China, Japan and Vietnam. They're seeing
very similar things, especially Japan, with somewhat similar
policy focus with the recovery plans, and trying to make the
market move again in that way, and hopefully some worldwide
efforts, to stem some of the abuses that went on in the
financial markets, which we know will take a while to turn that
around.
Yesterday, we learned that the number of workers applying
for benefits dropped to 601,000 last week, which was slightly
better than what we thought it was going to be, which we
thought it was 635,000. However, we also learned that the total
number of people receiving unemployment benefits climbed to
6.35 million, which is a record for the 14th straight week.
Looking behind these numbers, what does this tell you about
our employment situation and how long term this is for these
people?
Commissioner Hall. Let me mention that the new initial
claims for unemployment insurance, it's volatile. You can't
read too much into one data point. But it does seem to have
some ability to predict the labor market. The fact that the
initial claims went down is potentially a good sign. But this
doesn't mean that we're talking about today; we're talking
about two weeks before that. So if you're looking for
improvements in the labor market, we won't see that until next
month.
But the claims are at a level that's an all-time high.
That's basically consistent with the large number of long-term
unemployed that we have. I think the number I quoted in the
statement about the percentage unemployed and the long-term
unemployed is at a record right now.
Senator Klobuchar. Congressman Brady.
Representative Brady. Thanks, Madam Chair. I think most
people recognize now, a growing number in America, that it's
not simply enough to buy American. You have to sell American
products and services throughout the world, especially with 95
percent of the world's customers living outside the United
States. Exports until this year, until the global financial
collapse, have been a huge part of our economy.
Our ability to sell our products around the world has been
a life line to our economy, until demand started to shrink.
Looking at the numbers for a minute from an economic
standpoint, how critical is it that we do what we can to
restore the demand for the sales of our American products
around the world?
Commissioner Hall. It is potentially important. I think
exports have been as high as two percent. I think it's exactly
why the interconnectedness of markets, I think, is a real
strength for the United States, and the fact that we can sell
abroad, actually the fact that we can buy from abroad, both
things help our economy.
Representative Brady. Experts estimate that because of our
free trade agreements, the ability for consumers to have more
choices in America, a typical family in Texas or Minnesota can
go to the grocery store once a month for free, because of the
savings and the choices they have. Whether it's at the
supermarket, at the mall or when they're shopping for cars or
other things.
Because our ability to sell American products is so
critical around the world, I am concerned about some new
proposals that would actually double tax our companies that
sell those products overseas. Some of our companies are able to
access those foreign markets from here in the United States.
Others, because the products they sell or the market is
limited, actually are confined to sell U.S. products in our
country.
Our tax code is one of the few in the world that taxes
worldwide income, regardless of where our companies get this
income. Most countries tax only within their boundaries
themselves. As a result, our U.S. companies have often faced
double taxation.
The tax code over a century has tried to be more
competitive in two ways, one by saying ``Look, you can deduct
those foreign taxes you pay over in those foreign countries
from what you owe us, and pay us the difference.'' Another has
been that we won't tax that income until you bring it back to
the United States. So under the same philosophy, we don't tax
people on their dividends when the company earns it, but when
they actually distribute it as dividends. There is a concern
that if we remove the ability to deduct foreign taxes, if we
remove the ability to tax when that income comes back to the
States, that we may well drive our U.S. companies overseas,
where they have a more stable tax climate.
I'm not asking your opinion on some of these tax proposals,
but as an economist, don't new tax regimes of various countries
have an impact on economic growth, and where economic decisions
are made within the private sector?
Commissioner Hall. I would say that's almost certainly
true, that tax codes do have in fact differential treatment.
Differential tax codes between countries can have this effect
not only with trade costs but investment.
Representative Brady. I think we see the difference in
2004. Congress worried about the number of jobs being created
overseas and created a tax code, where if companies and
manufacturers produced, invested and create jobs in the U.S.
they have a lower tax rate, than if you do the same thing
overseas. That's the way the tax code is today.
Unfortunately, this Administration and some in Congress
have singled out certain industries like America's energy
industry and basically said that no longer applies to you.
We're going to tax you when you invest in the United States,
just as if you were creating those jobs overseas. It's actually
the opposite, I think, of what we need to do.
I think the point you made, that tax codes do matter in job
creation and location of companies, is very important for
Congress to consider as we wade into the complicated area of
international tax issues. With that, I yield.
Senator Klobuchar. Thank you very much, Congressman Brady.
A few more questions here. I know we discussed last year the
health care effect here and the burden on workers of the cost
of health care in this country, and employers, which is more
expensive than it is in other countries. I remember that you
suggested that to the extent the employer bears the greater
share of the health care costs, this crowds out wage increases
to employees.
Obviously, to the extent that employees have the higher
costs, it makes it more difficult for them to afford things,
whether it's goods that we want them to buy out there or to
stay in their homes. What does the data show regarding the
impact of rising health care costs on wages and in general?
Commissioner Hall. I think in general, and I'm talking back
probably prior to the recession, because I haven't looked at
the data a lot during the recession, but there surely has been
evidence that the faster growing health care costs are, the
slower growing are the wages. As you say, there's evidence of
that. Rising health care costs can crowd out wage increases.
This is primarily because health care is provided through work
in this country.
Senator Klobuchar. And as you know, we're going to be
working on health care reform this year, and if we're able to
bring some costs down and make it more affordable and do it in
a different way, do you think that would help people with their
wages?
Commissioner Hall. That is what the research suggests,
since obviously if health care is crowding out wage growth,
then reducing health care costs would have the opposite effect.
Senator Klobuchar. Just to answer with a few questions
about the indicators, which can show some change or some
positive things. I know the unemployment rates have gone up
this month, and there are still way too many people out of
jobs. We talked about the consumer spending, the 2.2 percent on
an annualized basis in the last quarter, the most in two years.
Does that tend to be an indicator that there is some glimmer of
hope here?
Commissioner Hall. Absolutely. I think consumer spending is
probably going to be the key to everything. If consumers
continue to spend, if consumer spending picks up, then I think
everything else follows.
Senator Klobuchar. The other thing you identified when you
looked at your three-legged stool, I guess, was that consumer
spending--I'll go back to that again--with the target numbers I
gave you, which is for the four weeks which ended May 2, net
retail sales for Target increased 4.5 percent when compared to
the same four weeks ending May 3, 2008. On the same basis
actually, April comparable store sales increased .3 percent.
What is the usual correlation between increased sales and
employment?
Commissioner Hall. There is a positive relationship. If
consumers start to spend and you start to get growth, once you
start to get growth I think the job loss would start to
moderate over time. If you get enough growth, then eventually
the job loss will turn into job gain, and we'll see the labor
market stabilize.
Senator Klobuchar. But as you said, the other parts of this
three-legged stool are the housing market. Have you seen any
changes in that market yet?
Commissioner Hall. Just what everybody else has seen. Some
small glimmers of hope perhaps in construction, but I don't
know that we have a real pattern yet. It's kind of like
consumer spending. If we see consumer spending pick up, what we
really need to see is both those things continue to improve.
Senator Klobuchar. Then the third part you identified is
just the credit markets, and as you know, just recently, the
Treasury Department and the Fed announced a stress test. So
we'll wait to see the effects of that. Some of our financial
institutions didn't need any more to go out and capitalize and
get increased funds. Some of them did, with this also
affecting, since we started to get a credit market going again
and more stabilized.
Commissioner Hall. Absolutely. I think the real meltdown in
the credit markets has been the biggest single problem, I
think, in this recession. And so that's the thing that probably
most needs to turn around.
Senator Klobuchar. Very good. So you'll tell our
constituents that when they call and are angry, that we're
trying to stabilize the credit markets. I'm sure you will,
Commissioner Hall. That's a major part of this as well. I just
wanted to conclude here, summarizing what we've heard today,
sort of from a layman's way of looking at this. This past
month, we have seen 563,000 more people that are basically
unemployed. Is that right?
Commissioner Hall. Correct.
Senator Klobuchar. Since the start of the recession, how
many people are now unemployed?
Commissioner Hall. The number of unemployed is now 13.7
million.
Senator Klobuchar. 13.7 million. I would think these
numbers are important. People have to realize across the
country that it's not just one person messing up here. There
are a lot of people that have been affected by this recession,
through no fault of their own. We've seen a rise in the
unemployment rate from last month from 8.5 percent. Now it's
8.9 percent.
Commissioner Hall. Yes.
Senator Klobuchar. That group that is so hard for people to
get their arms around, the group I was talking about like the
Johnsons of Blaine, Minnesota, who would like to work more
hours but are discouraged. What do you call them, marginal
workers who are trying to increase those hours and just can't
find a job, and include them? We're at 15.9 percent
unemployment.
Commissioner Hall. 15.8.
Senator Klobuchar. 15.8 percent unemployment. We also
talked about the fact that a certain group of workers--Senator
Casey talked about those minority workers--and we were talking
here about when Representative Brady focused on some of the
different industries, where you see the difference in
construction and things like that.
But clearly, for those who do not have a high school
degree, what was that unemployment again?
Commissioner Hall. 14.8 percent.
Senator Klobuchar. Then you go down to people that have a
high school degree. You get----
Commissioner Hall. 9.3 percent.
Senator Klobuchar [continuing]. People who have at least a
year of college but haven't finished, it's----
Commissioner Hall. 7.4.
Senator Klobuchar [continuing]. And people with a college
degree is at?
Commissioner Hall. 4.4 percent.
Senator Klobuchar. We talked about the fact that we have
some new policies in place, and Christina Romer pointed out
this past week that while the stimulus package has made some
difference, it's going to take a while to see that in terms of
the unemployment. Is that fair to say?
Commissioner Hall. That is, although I will say that the
job, the apparent job gains or losses are concurrent
indicators. When the economy starts to improve, you should see
the job loss start to decline. But it's lagging in the sense
that we need actually a job gain of a certain amount for the
unemployment rate to stabilize. The unemployment rate is likely
to continue to increase even after we start to get jobs.
Senator Klobuchar. And I think the President and Congress
were pretty clear about this, that we aren't suddenly going to
see this uptick. A lot of this economic recovery was actually
replacing jobs that were lost or have been lost. The other
parts of the policies that we pursued are putting more money in
the hands of taxpayers, with the middle class tax cut.
Do you think that that could be contributing some to
consumer confidence, or also the increase, that 2.2 percent
increase we've seen in consumer spending? Or do you think it's
just a better feeling, that the economy has stabilized?
Commissioner Hall. I can't say. I do think the improvement
in consumer confidence, for whatever reason, is certainly
related to the pickup in consumer spending. I think that part's
very important.
Senator Klobuchar. And as we go forward here, you do not
predict any dramatic changes in the next month or two without
the unemployment improving; correct?
Commissioner Hall. I would say I wouldn't predict.
Senator Klobuchar. Thank you, Commissioner Hall. But I
think you said that we're in a longer-term recession, as
opposed to just something that's a blip for the month of April?
Commissioner Hall. Yes. We're having really significant job
loss. Although things may improve, the job loss is not likely
to end.
Senator Klobuchar. And that is what led us in Congress to
extend unemployment benefits, something that we always did in
the past, when there's a history of looking like it's going to
last longer than just a few months.
Commissioner Hall. Remember I said the number of long-term
unemployed is very high, and that number typically continues to
rise until after the recession's over.
Senator Klobuchar. And as we look at these potential
hopeful signs, we see when we talk about the increase in
consumer spending. There are surveys that show an increase in
consumer confidence. We have some industries that haven't been
hit as hard as others, like say health care and a few others.
We have some evidence in some industries of some increased
sales or stability.
The other piece of it, just to summarize, housing market,
we haven't seen much change. But it appears that there's some
signs, as we heard last week, that it may have bottomed out.
But we're not certain. Then we also have the financial
institutions again appearing to be, though we're not certain, a
little more stable than we saw in the fall. Are those fair
assessments?
Commissioner Hall. Those are fair.
Senator Klobuchar. Good. I don't want to get out on a limb
with you, Commissioner Hall. So I would just summarize this by
saying that these can be viewed as grim, especially for the
people experiencing them. You can't tell someone who has lost
their job ``Hey, we've seen some good increases in consumer
confidence.'' That's not going to help them.
I think it's a testament to the continuing involvement, in
making sure that unemployment compensation is available, making
sure that we are looking out for people who have lost their
jobs, and also seeing this glimmer of hope, where we're putting
in place policies, a better infrastructure for our future,
whether it is broadband, whether it's the electricity grid, so
that when the economy starts moving again, we are better
equipped to handle this.
The last thing I would end with from my perspective is just
the need to put in place some more sensible, pragmatic
financial regulations that don't go in any way to hurt our
economy, but to stabilize it. Because some of the issues we saw
that caused this credit crunch, whether it's deals that people
didn't understand, or too highly-leveraged financial
institutions, or agencies, in the case of the SEC, that didn't
do anything about it.
We need to get our act together here in terms of these
financial regulations. The last word I would say, and maybe
Representative Brady would like to add something here, is just
that as we talk about these numbers, we always have to remember
the people behind these numbers. One of the most moving letters
I got in the last year was a woman who wrote in and said that
she and her husband had put their three kids to bed, and they
kissed them good-night on the forehead and then they sat at
their kitchen table and put their heads in their hands, and
wondered how are we going to make it, how are we going to make
it tomorrow? How are we going to pick up an extra job?
I know you think about those people every day, Commissioner
Hall. That's your job. I want to thank you for that. Let us all
remember that there are real people behind these statistics.
Congressman Brady.
[No response.]
Senator Klobuchar. Thank you everyone. The hearing is
adjourned.
[Whereupon, at 10:45 a.m., the hearing was adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Kevin Brady, Senior House Republican
I am pleased to join in welcoming Commissioner Hall before the
Committee this morning.
The labor market data reported today reflect continued economic
weakness. Payroll employment declined by 539,000, with losses
widespread across many industries. Private sector payroll employment
declined by 611,000, while government employment increased by 72,000.
The unemployment rate rose to 8.9 percent.
These data are not surprising given recent economic trends. Real
GDP declined by 6.1 percent in the first quarter of this year, with
business investment plunging by 38 percent.
There are some preliminary signs in some other data that the rapid
rate of economic decline may be slowing, but more evidence is needed
before reaching any firm conclusions. The condition of the housing
sector and the contraction of the auto industry are among many factors
that make the economic outlook especially murky.
Despite recent economic developments, including the rising
unemployment rate, the Administration failed to update its unrealistic
economic assumptions in its budget submission. For example, the
Administration projects an 8.1 percent unemployment rate for 2009, even
though it is clear the rate will unfortunately be much higher. The
Administration projects that the economy will decline by 1.2 percent in
2009, compared to the Blue Chip Consensus forecast decline of 2.6
percent.
The Economist magazine called the economic assumptions in the
Administration's budget ``deeply flawed'' in an article entitled,
``Wishful, and dangerous, thinking.'' These faulty economic assumptions
are dangerous because they produce an understatement of the real cost
of the Administration's expensive new spending proposals. The result
will be huge budget deficits and a doubling of the national debt as a
share of GDP by 2017, according to CBO.
In the short-term, the steps the Fed has taken, including the huge
expansion of its balance sheet, have helped to stabilize financial
markets and will eventually provide a boost to the economy. However,
the ongoing need for households and banks to reduce their outstanding
debts does suggest that when the recovery comes it will probably be
weak.
Under Administration policies the excessive levels of deficits,
debt, taxes, and inflation will undermine long-term economic growth.
Unfortunately, increasing the burden of government on an already weak
economy is only going to further undermine economic and job growth in
the years ahead. The Administration's proposed reduction of the
incentives for work, saving, and investment is not the way to boost the
productivity, innovation, and competitiveness of the U.S. economy in
the years ahead.
__________
Prepared Statement of Keith Hall, Commissioner, 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.
Nonfarm payroll employment declined by 539,000 in April, and the
unemployment rate rose from 8.5 to 8.9 percent. Since the start of the
recession in December 2007, job losses have totaled 5.7 million, and
the unemployment rate has increased by 4 percentage points.
In April, widespread job losses continued throughout the private
sector. Private employment fell by 611,000, compared with average
monthly declines of 700,000 in the prior 4 months. Over the month,
federal government employment rose by 66,000, mainly due to hiring of
temporary workers in preparation for Census 2010.
Manufacturing employment fell by 149,000 over the month, and job
losses continued to be widespread. Since the recession began, this
industry has shed 1.6 million jobs, representing more than a quarter of
the total nonfarm job decline during the period.
Construction employment decreased by 110,000 in April. Job losses
have averaged 120,000 per month in the last 6 months, compared with
46,000 per month from December 2007 to October 2008.
Elsewhere in the goods-producing sector, mining employment fell by
10,000 in April. From the start of the recession through September
2008, this industry had continued to add jobs, mainly those related to
oil and gas production. Since September, mining employment has declined
by 44,000.
In April, employment in professional and business services dropped
by 122,000. Temporary help services accounted for about half of the job
loss. Since the start of the recession, temporary help employment has
fallen by 825,000, nearly a third of its total.
The health care industry added 17,000 jobs over the month, in line
with its average monthly gain since January. In 2008, the average gain
was 30,000 jobs per month.
In April, average hourly earnings for production and nonsupervisory
workers in the private sector were essentially unchanged. Over the past
12 months, average hourly earnings have risen by 3.2 percent. From
March 2008 to March 2009, the Consumer Price Index for Urban Wage
Earners and Clerical Workers declined by 1.0 percent.
Turning now to measures from the survey of households, the
unemployment rate rose to 8.9 percent in April, an increase of four-
tenths of a percentage point. The number of unemployed persons
increased by 563,000 to 13.7 million. Since the start of the recession
in December 2007, the number of unemployed has risen by 6.2 million,
pushing the jobless rate up by 4 percentage points.
Over the month, the number of long-term unemployed continued to
grow, rising by 498,000 to 3.7 million. The long-term jobless
represented 27.2 percent of all unemployed persons in April, the
highest proportion on record.
The employment-population ratio held at 59.9 percent in April. When
the recession began in December 2007, it was 62.7 percent. Among the
employed, the number of persons working part time who would prefer
full-time work was little changed over the month at 8.9 million.
In summary, nonfarm payroll employment fell by 539,000 in April.
Private-sector employment dropped by 611,000. Job losses continued to
be widespread across most major industries. Since the recession began,
payroll employment has fallen by 5.7 million. Over the month, the
unemployment rate rose by four-tenths of a percentage point to 8.9
percent.
My colleagues and I now would be glad to answer your questions.
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