[Joint House and Senate Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 111-541
THE EMPLOYMENT SITUATION: FEBRUARY 2009
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 6, 2009
__________
Printed for the use of the Joint Economic Committee
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. Carolyn B. Maloney, Chair, a U.S. Representative from New
York........................................................... 1
Hon. Kevin Brady, a U.S. Representative from Texas............... 3
Hon. Elijah E. Cummings, a U.S. Representative from Maryland..... 4
Witnesses
Dr. Keith Hall, Commissioner, Bureau of Labor Statistics;
Accompanied by: Mr. Philip Rones, Deputy Commissioner, Bureau
of Labor Statistics; and Dr. Michael Horrigan, Associate
Commissioner for Prices and Living Conditions, Bureau of Labor
Statistics..................................................... 5
Submissions for the Record
Prepared statement of Representative Carolyn B. Maloney, Chair... 18
Prepared statement of Representative Kevin Brady................. 18
Prepared Statement of Dr. Keith Hall, Commissioner, Bureau of
Labor Statistics, together with Press Release No. 09-0224...... 19
THE EMPLOYMENT SITUATION:
FEBRUARY 2009
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FRIDAY, MARCH 6, 2009
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met, pursuant to call, at 9:30 a.m. in Room
106 of the Dirksen Senate Office Building, The Honorable
Carolyn B. Maloney (Chair) presiding.
Representatives present: Maloney, Hinchey, Cummings,
Snyder, Brady, and Campbell.
Staff present: Molly Ahearn, Gail Cohen, Eleni Constantine,
Nan Gibson, Colleen Healy, Aaron Kabaker, Justin Ungson, Andrew
Wilson, Jeff Wrase, Chris Frenze, Bob Keleher, and Robert
O'Quinn.
Chair Maloney. The meeting will come to order.
Commissioner Hall, we thank you for testifying today, and
we also thank your colleagues for joining you. Please introduce
your colleagues.
Commissioner Hall. I have with me Deputy Commissioner
Philip Rones on the right and Dr. Michael Horrigan, Associate
Commissioner for Prices and Living Conditions on my left.
Chair Maloney. Thank you. I recognize myself for five
minutes.
OPENING STATEMENT OF THE HONORABLE CAROLYN B. MALONEY, CHAIR, A
U.S. REPRESENTATIVE FROM NEW YORK
Chair Maloney. The gut-wrenching job losses in today's
report highlight the misery and dislocation that American
families have been enduring since the start of this recession
more than a year ago.
Nearly four and a half million Americans have lost their
jobs over the past 14 months--more than half of them in the
last 4 months as losses have topped 600,000 jobs a month, as
this chart shows. The unemployment rate now stands at 8.1
percent, the highest level in a quarter of a century.
I am particularly troubled by groups who are being
particularly hard hit in this recession: women heads of
households whose unemployment rate is 10.3 percent; African
Americans whose unemployment rate is 13.4 percent; and Latinos
whose unemployment rate is 10.9 percent.
This recession is on a path to be the worst since the Great
Depression. The job losses have been widespread throughout the
economy as employers have cut jobs at an even faster pace over
the last several months.
Congress worked closely with President Obama to swiftly
pass the American Recovery and Reinvestment Act last month in
order to stem job losses and put people back to work as quickly
as possible.
Our recovery package will create or save at least 3.5
million jobs across a variety of sectors over the next several
years, which will soften the downturn and foster a solid
economic recovery that benefits all Americans.
The payments to states, unemployment benefit increases, and
middle-class tax relief are set to take effect shortly, and I
am hopeful that the employment figures will soon reflect this
in our economy.
The stimulus will need time to kick in, but the magnitude
of the job losses we have seen indicate that additional
measures may be needed.
Rising unemployment adds urgency for the Senate to act on
the Helping Families Save Their Homes bill that just passed the
House of Representatives yesterday.
More than 2 million homes have gone into foreclosure and
millions of other homeowners find themselves owing more to the
bank than their homes are worth.
Not surprisingly, most of the states with the highest
foreclosure rates also have unemployment rates much higher than
the national average: California, Florida, Nevada, Arizona, and
Ohio.
Our bill would eliminate an anomaly in the current
bankruptcy code which prevents a court from lowering the
principal on a homeowner's primary residence despite the
court's ability to lower the principal on a second home, a
third, a fourth, or a fifth. Given trends in the labor market,
this anomaly is giving greater force to the foreclosure wave.
When homeowners with negative equity lose their jobs, the
result is too often foreclosure and financial disaster.
Homeowners who have lost their jobs are less mobile when they
owe more than their house is worth. Taking a job in another
area of the country would entail coming up with money to pay
off their mortgage, or taking a serious hit to their credit
rating by going through bankruptcy. And without this change in
the Bankruptcy Code, negative home equity will be an albatross
that follows them forever.
Without modifications to the Bankruptcy Code, lenders do
not have the incentive to negotiate with borrowers, even though
lenders may be better off by taking a haircut on the principal
owed rather than enduring foreclosure costs.
President Obama and the Democrats have embarked on a bold,
common-sense plan to turn this economy around by enacting a
recovery plan, rescuing the financial system, and addressing
the housing problems that are at the root of the financial
crisis.
Today's unemployment numbers underscore the need to
continue our focus on working to solve these complex and
intertwined problems.
[The prepared statement of Representative Maloney appears
in the Submissions for the Record on page 18.]
Chair Maloney. The Chair now recognizes Ranking Member,
Congressman Brady, for five minutes.
OPENING STATEMENT OF THE HONORABLE KEVIN BRADY, A U.S.
REPRESENTATIVE FROM TEXAS
Representative Brady. Thank you, Madam Chairman. I would
like to join you in welcoming Commissioner Hall before the
Committee this morning.
The data released this morning reflects the deepening
recession. Payroll employment in February declined by 651,000
jobs. The unemployment rate climbed to 8.1 percent. Overall
labor market conditions continue to deteriorate.
The economic outlook for this year is quite bleak. Now the
bursting of the credit bubble has sharply reduced asset values,
but the high debt levels associated with the boom remain,
burdening this economy.
Unfortunately, the Administration's solution to the
problems posed by this excessive debt burden is to propose an
avalanche of more deficit spending and higher federal debt.
The Administration's use of giddily optimistic economic
assumptions make skyrocketing deficit spending appear less
threatening relative to the size of the economy, but this is an
illusion.
The Administration projects that real GDP will fall only
1.2 percent in 2009 and rise to 3.2 percent next year, compared
with a Blue Chip Consensus forecast of a decline of 1.9 percent
this year, and an increase of only 2.1 next.
More realistic economic assumptions would push the
Administration's projected budget for this year to a deficit
closer to $2 trillion. Furthermore, a recent study released by
the Brookings Institution estimates that deficits will average
over $1 trillion in each of the next 10 years based on what the
authors consider to be favorable assumptions.
The Administration's projections of lower future deficits
after 2010 thus appear to be very optimistic, especially given
the ongoing push for even more spending on entitlements and
various financial bailouts. As Clinton Treasury official Roger
Altman wrote this week, a weaker economy than that projected by
the Administration ``means even bigger deficits than the scary
ones projected.''
Ultimately, the likelihood of a timely economic recovery
will depend largely on government policy regarding the toxic
assets of banks. Credit is the life blood of the economy and
without functioning credit markets the economy will continue to
wither. Unfortunately, the Administration so far has failed to
produce a transparent and effective financial rescue plan.
As the Financial Times noted yesterday, since the Treasury
Secretary made this, quote, ``terribly received speech on loans
for the bank sector, the S&P has dropped 20 percent. Markets
may not have expected a `silver bullet,' but did expect the new
administration to have a clearly stated `plan A.' The
realization that it did not was a severe blow to confidence.''
Close quote.
The Administration needs to produce a clear and effective
plan to deal with the toxic asset problem of the banks soon if
the economy is to have a reasonable prospect of a timely
recovery.
Furthermore, it should drop its plans to drastically
increase the tax burden on the economy, including its cap and
trade proposal that would be especially devastating for the
manufacturing workers. More taxes, deficit spending, and debt
will only further burden an already weak economy.
Madam Chairman, I yield back.
[The prepared statement of Representative Kevin Brady
appears in the Submissions for the Record on page 18.]
Chair Maloney. Thank you very much, and I now recognize
Congressman Cummings for five minutes.
OPENING STATEMENT OF THE HONORABLE ELIJAH E. CUMMINGS, A U.S.
REPRESENTATIVE FROM MARYLAND
Representative Cummings. Thank you very much, Madam
Chairlady.
Let me start out by saying that, to repeat some of the
words of the President: While we may be in dismal times, this
is America. And I think that we have to take the attitude that
we will get through this, and we will.
The key is, as I told my staff this morning, the key is to
make sure that Americans come through this difficult time and
come out whole at the end of it; and that we put our Nation in
a better position so that this does not happen again, so that
no other President inherits this kind of mess.
I do believe that we are capable of doing it, and we will
do it. And I believe in this President, and I know that as this
situation changes from day to day, hour by hour, it is indeed a
very difficult moving target but we will hit the target.
Last week Chairman of the Federal Reserve Ben Bernanke
acknowledged that the U.S. is facing a severe contraction. He
indicated that it will take us years to fully recover from this
economic downturn, and that the speed of our recovery will
depend in large part on the success of concerted actions being
taken right now by the Federal Government.
Today's Unemployment Report, which shows that in February
of this year another 651,000 Americans were caught in the grip
of this tightening contraction, is an urgent reminder of why
decisive and urgent actions are needed to respond to our
deepening recession.
Last week we learned that our economy experienced a 6.2
percent drop in the Gross Domestic Product during the fourth
quarter of last year. Parallel to this steep drop in the GDP
has been a widely reported acceleration in the rate of job
losses, a trend which continued in February.
In fact, today's report shows that more than half of the
job losses we have experienced during this recession have
occurred since November of last year.
Those who have lost their jobs face truly hard times. Many
are suddenly confronting a situation in which they may not be
able to afford the homes they have worked their entire lives to
own. And some are surely among the one in five homeowners whose
homes are now under water according to a study released just
this week.
Others are confronting a situation in which they cannot pay
for needed medical care, a child's education, or even the basic
necessities of life. Even those who have not lost their jobs
stare at their futures with almost paralyzing uncertainty
because they do not know if their jobs will continue to exist
if the economic decline continues to spread.
At this time, our immediate priority must be to preserve
and create jobs; to help those of our neighbors who have been
hit hardest by this downturn, and to make the kind of public
investments that will carry a recovering economy forward.
The accomplishment of these objectives will be supported by
the implementation of the American Recovery and Reinvestment
Act which I joined a majority of the Members of the House of
Representatives in supporting.
Importantly, given the intertwining elements of the crisis
we now face, our response must continue to be multi-faceted.
I am pleased to report that yesterday the House passed the
Helping Families Save Their Homes Act, which will begin
implementation of part of President Obama's Homeowner
Affordability and Stability Plan by helping to make the
mortgages of millions of current homeowners facing foreclosure
or bankruptcy more affordable to them, and I urge the Senate to
adopt this measure as quickly as possible.
Like President Obama, I know without a shadow of a doubt
that we will emerge from this crisis stronger than we were
before and with a restored economy capable of recovering the
ground we have lost, and creating new wealth for all Americans.
However, if we have learned anything from our current
crisis it is that achieving a sustainable and lasting recovery
will require a new willingness to be honest about the true
nature and extent of risk, as well as a renewed commitment to
the idea that, for the good of our National economy, government
must require, through strict regulatory measures, responsible
actions.
I look forward to hearing the testimony, and with that I
yield back.
Chair Maloney. Thank you very much. I would now like to
introduce Commissioner Hall. 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
Advisers during the Bush Administration. Prior to that, he was
the Chief Economist for the U.S. Department of Commerce. Dr.
Hall received his B.A. Degree from the University of Virginia
and his M.S. and Ph.D. Degrees in Economics from Purdue
University.
Thank you so much for coming, and you may proceed for five
minutes.
STATEMENT OF DR. KEITH HALL, COMMISSIONER, BUREAU OF LABOR
STATISTICS; ACCOMPANIED BY: MR. PHILIP RONES, DEPUTY
COMMISSIONER, BUREAU OF LABOR STATISTICS; AND DR. MICHAEL
HORRIGAN, ASSOCIATE COMMISSIONER FOR PRICES AND LIVING
CONDITIONS, BUREAU OF LABOR STATISTICS
Commissioner Hall. Madam Chair, Members of the Committee:
Thank you for the opportunity to discuss the employment and
unemployment data we released this morning.
The sharp and widespread contraction in the labor market
continued in February. Nonfarm payroll employment fell by
651,000, following declines of 681,000 in December and 655,000
in January.
Since the recession began in December of 2007, job losses
have totaled 4.4 million, well more than half of which occurred
in the past 4 months. In February, the unemployment rate
climbed from 7.6 to 8.1 percent, the highest rate in over 25
years.
Manufacturing employment declined by 168,000 in February
and has dropped by 1.3 million since the start of the
recession.
Construction employment fell by 104,000 in February with
losses throughout the sector.
In February, employment continued to decline sharply
throughout most of the service-providing sector. Professional
and business services employment dropped by 180,000, including
78,000 jobs lost at temporary help service agencies.
Elsewhere in the service-providing sector, health care
employment continued to grow with an increase of 27,000 in
February, about in line with its recent trend.
Average hourly earnings for private-sector production and
nonsupervisory workers increased by 3 cents, or 0.2 percent, in
February. Over the past 12 months, average hourly earnings have
risen by 3.6 percent.
From January 2008 to January 2009, the seasonally adjusted
Consumer Price Index for Urban Wage Earners and Clerical
Workers fell by 0.7 percent.
Measures from the survey of households also showed
continued deterioration of the labor market conditions. The
unemployment rate jumped by half a percentage point in February
to 8.1 percent, the highest rate since December 1983.
Jobless rates continued to trend up across the major
demographic groups in February. The number of unemployed
swelled by 851,000 to 12.5 million.
Since the recession began, the rise in unemployment has
been concentrated among persons who lost jobs, as opposed to
job leavers or people joining the labor force. From December
2007 to February 2009, the number of job losers has doubled to
7.7 million, and their share of total unemployment has risen
from 50 percent to 62.3 percent.
The number of unemployed individuals experiencing long
spells of joblessness has also risen. In February, 2.9 million
persons had been unemployed for 6 months or longer, up from 1.3
million at the start of the recession.
The employment-to-population ratio was 60.3 percent in
February, down slightly over the month and well below its 62.7
percent level at the start of the recession.
Among the employed, the number of persons working part time
who would prefer to be working full time climbed sharply over
the month.
There were 8.6 million such workers in February, an
increase of 787,000 over the month and nearly 4 million since
the recession began.
Among persons who were neither working nor looking for work
in February, about 2.1 million were classified as marginally
attached to the labor force, up from about 1.6 million a year
earlier.
The number of discouraged workers, a subset of the
marginally attached who believed no jobs were available for
them, has nearly doubled over the past 12 months to 731,000.
In summary, nonfarm payroll employment fell by 651,000 in
February and the unemployment rate rose to 8.1 percent. Since
the beginning of the recession in December 2007, job losses
have totaled 4.4 million.
My colleagues and I now would be glad to answer your
questions.
[The prepared statement of Commissioner Hall appears in the
Submissions for the Record on page 19.]
Chair Maloney. Thank you very much.
These are very gut-wrenching numbers, and I would like to
ask a question that many of my constituents would like to know:
Are there any bright spots in this month's Jobs Report? Is
there any good news in our economy?
Commissioner Hall. There are very few bright spots, if any,
in this report. Labor market weakness is deep and broad across
all industries and all demographic groups.
Chair Maloney. Have you ever seen anything like this
before? When was the last time that the economy lost more than
600,000 jobs each month for this many months in a row?
Commissioner Hall. The answer to that is: Never. We have
never had four straight months of job loss in excess of
600,000.
Chair Maloney. The unemployment rate spiked this month to
8.1 percent, a half a percentage point increase. When was the
last time that the unemployment rate jumped by half a
percentage point or more?
Commissioner Hall. That is a good question. We have to look
that one up. The level is the highest in about 25 years.
Chair Maloney. Okay. Get back to me on that.
Commissioner Hall. We will.
Chair Maloney. Consumer confidence has fallen to a record
low as GDP fell by 6.2 percent in the last quarter of 2008, and
the Fed expects growth to remain in negative territory in the
coming year. So are there any indications that job losses will
stop accelerating or slow any time soon?
Commissioner Hall. I would have to say the answer is
probably no, right now. In fact, this report may show a slight
acceleration in job loss compared to even previous months. And
the answer to your earlier question about the jump in the
unemployment rate, it jumped that high in May of last year also
during the recession.
Chair Maloney. At the rate this economy is shedding jobs,
is there any way to avoid historic job losses?
Commissioner Hall. I would have to say we are already very
close to historical levels in job losses. As long as we do not
get economic growth we are probably not going to get job loss--
job gains, sorry.
Chair Maloney. This Congress is considering a number of
initiatives to help homeowners stay in their home. I would like
to explore with you the correlation between unemployment and
the loss of home ownership and foreclosure.
A JEC Study that Congress, found a correlation between
unemployment and foreclosures at least for subprime borrowers,
and the most recent data on foreclosure rates that I have seen
show that Florida, Nevada, Arizona, and California had the
highest foreclosure rates at the end of 2008.
Do these States have high unemployment rates? Or have they
had large jumps in unemployment?
Commissioner Hall. Yes. I think for the most part it is
states that have had large, large--high unemployment rates that
have had the higher foreclosures. I think, I think I agree. I
have not done detailed work on this. I do not want to oversell
it, but looking at the data there does seem to clearly be a
relationship between the unemployment rate and foreclosures.
Chair Maloney. And have we seen a recession that is
comparable to this period with respect to foreclosures and
unemployment? Have we ever seen anything like this before?
Commissioner Hall. Certainly not with foreclosures at all.
Chair Maloney. Well my time has expired and I recognize my
good friend and colleague, Congressman Brady.
Representative Brady. Thank you, Madam Chairman, very much.
Commissioner, obviously the numbers are troubling today. I
want to ask a little about, and I am concerned about, the
future accuracy of these numbers. It seems to me the Bureau of
Labor Statistics has a long tradition of professionalism that
includes an aversion to any hint of political interference. I
think you would agree with me on that.
I think that independence has been important to maintain
the statistical integrity of your data on employment,
unemployment, earnings, weekly hours, and other important
details. I think it has been critical that the BLS has no hint
of actual or appearance of political influence.
My question is: Who collects the Household Data for you?
Commissioner Hall. The Household Data is collected by the
Census Bureau. We have a contract with them. They collect the
data for us. We design the survey. We tabulate the data.
Representative Brady. There has been a concerted effort
recently to move the Census Bureau out of the Commerce
Department and under the thumb of political appointees in the
White House.
We have heard some assurances in the last days by the new
Commerce Secretary that he hopes to block that. But there is a
worry that these numbers will be politically manipulated in the
future.
I think most American public does not want the Census to be
politically manipulated. Those of us who are following closely
the labor data do not want our unemployment numbers to be
politically manipulated, as well.
Is it important for your data that the Census Bureau be
completely free of any political appearance or interference by
either party?
Commissioner Hall. Absolutely.
Representative Brady. Let me ask you this: We have seen the
Obama budget projections as extremely optimistic. They are
projecting for their budget purposes only a 1.2 percent
contraction this year, over a 3 percent expansion next year.
The Federal Reserve Board Chairman just this week said almost
the opposite, 2 percent contraction this year and 2 percent
expansion next year.
Given the statistics we are looking at today between the
Obama budget leaders and the Federal Reserve Chairman, based on
the numbers you are seeing which projection do you think is
more accurate?
Commissioner Hall. Well I'll tell you, having some
experience doing these projections, just let me say that it is
very difficult to project something like GDP. It is very
difficult. And the only thing you know when you're projecting
something like GDP is you know you're going to be wrong,
because things always change.
So rather than tell you which one I prefer, I will tell you
that they have got a very tough job trying to project data in
the best of times, let alone during a recession.
Representative Brady. But I mean if you were assuring us of
a GDP projection, would you stake your reputation on a 1.2
percent contraction this year?
Commissioner Hall. To be honest, I have not looked at it
that carefully and I am now in sort of a position where,
because we produce data that I want to stay out of the whole
arena of projecting data.
Representative Brady. Sure. Well given the unemployment
rate today and the labor market trends you are seeing, what
evidence would you bring forward to assure us it is only going
to be a 1.2 percent contraction, looking at the numbers before
you?
Commissioner Hall. Um----
Representative Brady. Or could you?
Commissioner Hall [continuing]. I couldn't. I, I, I don't
think I, I don't think I would try to project looking at just
the employment numbers.
Representative Brady. Well I just think both parties are
hopeful that we can get the Administration to bring back a new
budget with new numbers. I think we can take the bad news. I
think we can deal with it. But I think these rosy scenarios are
really undermining credibility at a time when we all need
credibility.
Thank you, sir.
Chair Maloney. Thank you. And I just would like to respond
to my good friend and colleague's allegations about the Census
Bureau and efforts to move it to the White House.
There are absolutely no efforts to move the Census Bureau
to the White House. Democrats share your concern that we need
accurate data in order to make informed decisions.
We hear that Commissioner Hall, among many other agencies,
rely on accurate data from the Census Bureau. And towards that
end, there is a bipartisan bill that Congressman Dent and I
have put out to create a separate, independent agency for the
Census so that it is totally separate and not under anyone's
thumb.
One of the concerns is that in the Commerce Department
often their budget is raided. Sometimes there are allegations
that there has been some political influence there, but
whatever. So let's end this debate and create a separate and
independent Census Bureau that is fully funded and capable of
doing the work, the surveys that help Commissioner Hall and
others come up with projections of where our country is going
so that we in a bipartisan way can come up with the best policy
decisions.
So I hope my colleagues on the other side of the aisle will
support me in this effort to create an independent, strong
Census Bureau separate from all other influences so they can
come forward with the best scientific data to help our country
move forward.
The Chair recognizes----
Representative Brady. Madam Chairman, may I ask, I agree
with you on the independence. Would that agency report directly
to the White House?
Chair Maloney [continuing]. The agency would report, like
any other agency does, to the Congress, to the American
Taxpayers, to the American Public, and to everyone involved in
Government.
Representative Brady. But its direct line is under White
House control? Well I agree with you on the independence----
Chair Maloney. We want it independent----
Representative Brady [continuing]. I hope the White House--
--
Chair Maloney [continuing]. But----
Representative Brady [continuing]. Is with you, but it is a
real concern today about the partisanship----
Chair Maloney [continuing]. I think the way to handle that
concern is to create a separate, independent well-funded
Census. We do know that in past years there have been sort of a
raiding of their budgets, and they don't have the money to do
their work, and then they cannot produce an accurate Census.
There was a report that came out yesterday that they are
not ready to go forward with the Census that is before us in
2010, and I believe a separate and independent body, an
organization separate like any other independent agency, would
be appropriate and serve the interests of the American public.
I would now like to recognize Congressman Snyder, a new
member of the Committee from the Great State of California.
Representative Snyder. Actually I am from the Great State
of Arkansas----
Chair Maloney. Oh, my---- [Laughter.]
The Chair stands corrected.
Representative Snyder [continuing]. That's right.
[Laughter.]
Mr. Commissioner, I wanted to talk about--because I am new
to this Committee, I am new to your information, your form of
report--I want to go to Table B-1, which does not have a page
number here, but there are several pages there.
I am going to ask you specifically--I have about 15 or 20
questions I want to ask you, but what I--I have gone through it
just very quickly and circled the ones that in fact showed an
increase in seasonally adjusted numbers of people employed, and
just ask for your comments, if you have any, on why that number
went up. It may be that it is not statistically significant. It
may be that you do not have any comment.
But I notice that logging is up by .4. Why would logging
have gone up?
Commissioner Hall. That actually is a sector that has not
seen a lot of job loss over the past few months. It has been
hovering around zero, and I would say point four is not
statistically significant.
Representative Snyder. I notice oil and gas extraction has
it up by point four. This is in thousands, correct? So you're
talking about 400 people----
Commissioner Hall. Yes.
Representative Snyder [continuing]. Over a national survey.
Commissioner Hall. Right. Exactly.
Representative Snyder. So although it still is wintertime--
you know, wintertime is not exactly the best logging time in a
lot of parts of the country, but oil and gas extraction, I
assume that's in parts of the country, including Arkansas, with
a lot of natural gas drilling going on? Is that your
impression?
Commissioner Hall. Yes.
Representative Snyder. Down at the bottom, again near the
bottom, Nondurable goods, Petroleum and coal products? I
assume, is that related to natural gas, or more coal?
Commissioner Hall. Um, I'm not sure if it is related to
natural gas, but----
Representative Snyder. Petroleum and coal?
Commissioner Hall [continuing]. Yes, energy products.
Representative Snyder. Then on the next page in the Retail
Trade, Electronics and Appliance Stores, the numbers are up by
1800. What segments of the electronics and appliance stores are
putting on help?
Commissioner Hall. I don't know. We can follow up a little
on that, but I will say that 1.8 thousand is not a significant
change. So it's not significantly different from zero.
Representative Snyder. Well, I'll skip down then to, do you
consider the Motion Picture and Sound Recording Industries up
by 6.5, that's 6500 people? How do we account for that?
Commissioner Hall. That one jumps around a bit. If you sort
of look at the month-to-month change, that one actually has
been jumping around a little bit.
Representative Snyder. My time is about out, but I wanted
to ask, going over to Education and Health Services, Health
Care and Social Assistance and Health Care in general, what is
happening with those numbers? Have there been a lot of help
wanted signs on hospitals and nursing homes and home health
agencies? Are there people that are shifting out of other
segments of the economy as things are not going so well taking
these jobs? And what do you think is going on with those
numbers going up fairly dramatically?
Commissioner Hall. Yes, I think that is a reasonable
expectation for part of that. Health care has always been
countercyclical. In fact, the health care spending oftentimes
increases a bit in the early parts of a recession.
Representative Snyder. Thank you. My time is up.
Chair Maloney. The Chair recognizes Congressman Campbell
for five minutes.
Representative Campbell. Thank you. I am from California.
[Laughter.]
Welcome to California, Mr. Snyder.
Chair Maloney. A great State.
Representative Campbell. Thank you, Madam Chair. Thank you,
Commissioner Hall.
You mentioned now that we have had three months in a row of
job losses in the 600,000s. Based on your looking at history,
or the trends in these things, is there any silver lining there
that perhaps the job losses have stopped at least accelerating,
or is there perhaps any history that would say, gee, you can
bounce along the bottom here for an extended period of time? Or
is there any message from that?
Commissioner Hall. Probably not a good message. It is easy
to sort of think of these numbers as being relatively stable,
but remember it is a stable loss. Losing over 600,000 jobs a
month is very significant.
Just to put it into perspective, we have only had maybe 10
months where we have lost 500,000 jobs or more in the history
of our series since 1940. This is 4 of the 10 all in a row.
Representative Campbell. Okay. At this rate, do you have
any feel--I mean, we will get to double digits, meaning 10
percent or higher, pretty quickly at this kind of rate--again,
any feel? Does prior history tell you anything about that? Or
how long would this have to continue to get us there? Or what?
Commissioner Hall. You mean to get to double digits?
Representative Campbell. Yes.
Commissioner Hall. You know, I don't know. It is hard to
say. I think--for example, I think to get the unemployment rate
up to something like 10 percent we are talking about losing
well over 2 million additional jobs, if that were to happen.
Representative Campbell. Okay. I have heard some people
talk about that the real unemployment rate is actually higher
than the statistic you put out, arguing that there are new
graduates from high school and college that are not yet in the
workforce but they cannot get a job, so they are not counted;
or that there are people who have given up on getting a job and
they are not counted.
Any validity to those arguments?
Commissioner Hall. Well we do collect a lot of data. We
collect a lot of data on people who are not in the labor force,
for example. And to be in the labor force you have to be either
employed, or unemployed and currently looking. But we do have
categories of folks who want a job, can't find a job, and have
looked in the past year for example.
They are not typically counted in the unemployment rate.
But we do have some other measures that include those. That
would be the marginally attached.
We also have some measures that include people who are
part-time but want to be full-time. And we have some measures
that capture that.
Representative Campbell. Okay, and finally as my time is
running out, two questions. One, I thought I heard in your
statistics that perhaps real wages have actually increased, if
you take into account the increase in wages and then your cost-
of-living increase. And secondly, do you have any figures on
what is happening with productivity. Because without--we can't
ever have sustained growth without productivity.
Commissioner Hall. Right. You're correct, real wages have
been growing. The down side of that is of course it has been
growing primarily because energy prices have dropped so
significantly. So it is less a function of the labor market;
more a function of declining energy prices.
Of course that is good news, because declining energy
prices is actually itself a bit of a stimulus for the economy.
And with respect to productivity, actually productivity has
been surprisingly high for a recession. To be honest, though,
the measure of productivity is fairly volatile at this point.
For example, we just saw the GDP revised down significantly.
I would anticipate that is going to cause us to revise down
our productivity numbers recently. So there is a real cyclical
component to productivity, where it will go up initially in a
recession and then go down.
So I am not sure right at the moment the near-term
productivity tells you very much about the long-run growth
prospects.
Representative Campbell. Thank you.
Chair Maloney. Mr. Cummings.
Representative Cummings. Thank you very much, Madam Chair.
Given the growing constraints on state and local budgets
and the record federal deficit, what do you think will happen
to government employment in the months to come? And what will
this mean to the overall labor market?
Commissioner Hall. It is typical in recessions for state
governments--at least noneducational state government
employment--to eventually decline in a recession, but typically
it's at least a year into a recession.
What we are seeing now, we have actually seen that start to
decline a bit earlier than most recessions, the state
employment, state government. So if that is an indication, that
has started a bit early.
With respect to local government employment, typically in
past recessions local government employment has not fallen at
all; it has continued to grow. And we have had flat local
government employment, and that has been unusual so far in this
recession.
Representative Cummings. As of January 2008, the
unemployment rate for African Americans and Latinos had jumped
about 4.1 percentage points since the recession began.
Is it typical for unemployment rates to increase this much
during a recession?
Commissioner Hall. Well this is--it's not typical for the
unemployment rate to increase this much during recessions. It
is not unprecedented. It rose this much back in the 1970s for
example.
But with respect to African Americans in particular, it is
typical that they start with a higher unemployment rate and
they have a larger increase in the unemployment rate during a
recession than other groups, certainly with whites.
Representative Cummings. And what do you account for the
difference?
Commissioner Hall. I'm not sure I would account for all of
it. I have not done a lot of work in this, so I am not sure I
can tell you what the answer is on that.
Representative Cummings. Tell me about the difference
between the trends when you compare people with degrees and
those without degrees, as far as unemployment? I mean, who is
losing jobs the fastest, at a greater amount?
Commissioner Hall. Sure. Well again the pattern this
recession has been typical of past recessions. Those without
high school degrees start with the higher unemployment rate and
have had a bigger increase. For example, they have had an
increase over the past 12 months of about 5.2 percentage
points.
Representative Cummings. And that is who, now?
Commissioner Hall. These are folks without high school
degrees. And then people with high school degrees but no
college, they have a slightly lower unemployment rate but again
it has gone up more.
Then you get all the way up to people with a college
degree, and they have the lowest unemployment rate, but that
rate itself has also gone up.
Representative Cummings. And so as far as--now going back
to something you said that was very interesting, you said that
there had been 10 months where we have had, what was it----
Commissioner Hall. When we have lost over a half a million
jobs.
Representative Cummings [continuing]. And we now have four
of them.
Commissioner Hall. Yes.
Representative Cummings. What does that tell you? I mean, I
know you don't like to predict, but would you be surprised if
we have a fifth?
Commissioner Hall. Let me just say that the trend in the
labor market up to now, there has been no trend of improvement.
Representative Cummings. So you're not answering the
question, or what?
Commissioner Hall. I don't want to forecast, but I will
tell you there are no signs of improvement in this report. And
if anything there is a slight deterioration in the decline in
the labor market in this report.
Representative Cummings. Thank you. I see my time is up.
Thank you, Madam Chairlady.
Chair Maloney. Congressman Hinchey.
Representative Hinchey. Thank you very much, Madam
Chairman, and thank you, gentlemen, very much, for your
information today and for the work that you do.
It is quite clear that we are facing one of the most
difficult economic conditions that this country has ever had to
deal with, and the circumstances are getting increasingly
worse.
It is remarkable that over the course of the last two years
members of this Committee and others on the Appropriations
Committee, for example, have tried to get attention focused on
this problem by a number of people in the previous
Administration, including the Secretary of the Treasury, who
continued to deny that there was any upcoming problem in the
economy, which was increasingly obvious to anyone who was
looking at this, and it was also obvious based upon the
information that we have received from your offices over the
course of the last couple of years.
So this situation is dire, deep and is getting desperate.
We need to deal with this in an appropriate way. Look what
happened with the so-called ``Stimulus Bill,'' the Reinvestment
Package that was passed by the Congress and signed by the
President, how politicized that became, how difficult it was to
get people on the other side of the aisle to vote for it.
And the circumstances that we are now facing with the
Omnibus Appropriations bill, which is being blocked in the
Senate, and all of that is causing this economy to get
increasingly worse.
We know what has to be done. We know what has to be
changed. We know what the causes are: the tax cuts of the Bush
Administration which concentrated the wealth in the hands of
fewer and fewer people than we have experienced since 1929.
And, the reckless spending in which they engaged--particularly
outside of the country in places like Iraq.
So the circumstances that we are dealing with all derive
from that incompetence, and even forms of corruption that we
have experienced over the course of the last number of years.
Last month the economy lost 651,000 jobs, increasing the
unemployment rate to 8.1 percent, which was much higher than
was forecast in December. The payroll drop in January was
revised up, as you have said, to 655,000. December now shows a
681,000 drop, up from the 577,000 which was previously
estimated.
That December decline in employment is now the worst we
have seen since October of 1949. The U.S. economy has now lost
almost 4.5 million jobs since the recession officially began in
December of 2007. But what drove it was in existence prior to
that and was having its impact prior to December of 2007.
It is the biggest employment slump of any economic downturn
since the end of the Second World War. Long-term unemployment
has increased by 270,000 to almost 3 million people across the
country now. Over the past 12 months, the number of long-term
unemployed has increased by 1.6 million. More than half of the
long-term unemployment we are experiencing has occurred over
the course of just the last 12 months.
The anticipation is that we are going to lose 2 million
more jobs that are likely to be lost over the course of this
year and into next year. And the unemployment rate is likely to
continue to go up to hit 9 percent or 10 percent.
All of that is going to happen unless--unless we change the
economic policies of this Congress, which is now being very
positively driven by this new Administration.
So what do you think? What do you think of that? Don't you
think we should be acting in a strong and positive way to get
this economy back on line?
Commissioner Hall. Well I certainly think the economy is in
trouble, and I think you have accurately identified a lot of
the problems and how serious this problem is. And the trend so
far has not been encouraging with the economy.
Representative Hinchey. It is not encouraging at all. And
the only way to make it encouraging is for us to stimulate the
economy, stimulate the economy by the economic development, so-
called ``stimulus bill'' which was signed by the President and
is now being put into motion, but also by the normal budget
bills that we have to pass.
The budget bill for this fiscal year, which is now
essentially almost half over, refused to be signed by the
previous President because it was contained as a result of the
initiatives by this Congress, it contained internal investment,
internal investment in the needs of our country, to upgrade
jobs, to increase economic circumstances, to correct all the--
begin to correct at least all the problems that we have been
facing.
And that is what we are dealing with now. And we are
dealing with the problem in the Senate where some people are
just unwilling to face up to their obligations and
responsibilities, unwilling to pass the normal budget bill that
we need right now in this fiscal year.
What they are trying to do is drive it down so that we do
not have enough economic development, economic stimulus, which
is going to combat this downturn in jobs, and which is going to
drive up employment, increase employment.
If you look at the unemployment in the manufacturing
industry, for example, how dark that is, and so many other
aspects of the economy in this country, the service economy,
the manufacturing economy, the construction economy, all of
that is going down.
We will correct that in the context of this Appropriations
bill, in the context of this budget bill which is now being
stalled in the Senate.
Chair Maloney. Thank you.
Representative Hinchey. That needs to be done.
Chair Maloney. That is a forceful statement, and we have
been called for a vote. I have a series of other questions that
I would like to present to you in writing, and invite the other
members of the panel to do the same.
Chair Maloney. We thank you for your professional work, and
we thank your colleagues for being here today to talk about the
unemployment situation. These numbers are sobering, and I look
forward to the continuing focus on labor market conditions by
this Committee and working with the Democrats and Republicans
to advance policies to reverse these conditions and move our
economy forward.
I thank you for being here today. The meeting is adjourned.
[Whereupon, at 10:18 a.m., Friday, March 6, 2009, the
hearing adjourned.]
SUBMISSIONS FOR THE RECORD
Prepared Statement of Carolyn Maloney, Chair, Joint Economic Committee
The gut-wrenching job losses in today's report highlight the misery
and dislocation that American families have been enduring since the
start of this recession more than a year ago. Nearly 4 and a half
million Americans have lost their jobs over the past 14 months--more
than half of them in the last 4 months as losses have topped 600,000
jobs a month. The unemployment rate now stands at 8.1 percent--the
highest level in a quarter of a century.
I am particularly troubled by groups who are being particularly
hard-hit in this recession--women heads of households, whose
unemployment rate is 10.3 percent; African Americans, whose
unemployment rate is 13.4 percent; and Latinos, whose unemployment rate
is 10.9 percent.
This recession is on a path to be the worst since the Great
Depression. The job losses have been widespread throughout the economy
as employers have cut jobs at an even faster pace over the last several
months. Congress worked closely with President Obama to swiftly pass
the American Recovery and Reinvestment Act last month in order to stem
job losses and put people back to work as quickly as possible.
Our recovery package will create or save at least 3.5 million jobs
across a variety of sectors over the next several years, which will
soften the downturn and foster a solid economic recovery that benefits
all Americans. The payments to states, unemployment benefit increases,
and middle-class tax relief are set to take effect shortly, and I am
hopeful that the employment figures will reflect this soon. The
stimulus will need time to kick in, but the magnitude of the job losses
we've seen indicate that additional measures may be needed.
Rising unemployment adds urgency for the Senate to act on the
Helping Families Save Their Homes bill that just passed in the House of
Representatives yesterday. More than 2 million homes have gone into
foreclosure, and millions of other homeowners find themselves owing
more to the bank than their homes are worth. Not surprisingly, most of
the states with the highest foreclosure rates also have unemployment
rates much higher than the national average--California, Florida,
Nevada, Arizona, and Ohio.
Our bill would eliminate an anomaly in the current bankruptcy code,
which prevents a court from lowering the principal on a homeowner's
primary residence despite the court's ability to lower the principal on
a second home. Given trends in the labor market, that anomaly is giving
greater force to the foreclosure wave.
When homeowners with negative equity lose their jobs, the result is
too often foreclosure and financial disaster. These homeowners cannot
meet their mortgage payments, they cannot sell their homes for enough
money to cover their mortgage, and they cannot reduce their debt to a
manageable level through bankruptcy. As a result they lose their homes
to foreclosure, their credit rating is destroyed, and they have a
continuing burden of debt.
In this way rising unemployment is aggravating an already serious
crisis in the housing market. As more people lose their homes to
foreclosure, the stock of unsold houses increases, putting more
downward pressure on house prices. This leads to more homeowners owing
more than their house is worth, which leads to still more foreclosures.
Some unemployed workers are simply trapped by falling home prices.
Homeowners who have lost their jobs are less mobile when they owe more
than their house is worth--taking a job in another area of the country
would entail coming up with money to pay off their mortgage or taking a
serious hit to their credit rating by going through bankruptcy. And
without this change in the bankruptcy code, negative home equity will
be an albatross that follows them forever.
Without modifications to the bankruptcy code, lenders don't have
the incentive to negotiate with borrowers, even though lenders may be
better off by taking a haircut on the principal owed rather than
enduring foreclosure costs.
President Obama and the Democrats have embarked on a bold, common
sense plan to turn this economy around by enacting a recovery plan,
rescuing the financial system and addressing the housing problems that
are at the root of the financial crisis.
Today's unemployment numbers underscore the need to continue our
focus on working to solve these complex and intertwined problems.
__________
Prepared Statement of Representative Kevin Brady, Senior House
Republican
I would like to join in welcoming Commissioner Hall before the
Committee this morning.
The data released this morning reflect a deepening recession.
Payroll employment in February declined by 651,000. The unemployment
rate climbed from 7.6 to 8.1 percent. Overall labor market conditions
continue to deteriorate.
The economic outlook for the year is quite bleak. The bursting of
the credit bubble has sharply reduced asset values, but the high debt
levels associated with the boom remain, burdening the economy.
Unfortunately, the administration's solution to the problems posed by
this excessive debt burden is to propose an avalanche of more deficit
spending and higher federal debt.
The administration's use of relatively optimistic economic
assumptions make skyrocketing deficit spending appear less threatening
relative to the size of the economy, but this is an illusion. 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 1.9 percent in 2009 and an increase of 2.1 percent in
2010. More realistic economic assumptions would push the
administration's projected 2009 budget deficit of $1.75 trillion closer
to $2 trillion. Furthermore, a recent study released by the Brookings
Institution estimates that deficits will average over $1 trillion in
each of the next ten years, based on what the authors consider to be
favorable assumptions.
The administration's projections of lower future deficits after
2010 thus appear to be optimistic, especially given the ongoing push
for even more spending on entitlements and various financial bailouts.
As Clinton Treasury official Roger Altman wrote this week, a weaker
economy than that projected by the administration ``means even bigger
deficits than the scary ones projected.''
Ultimately, the likelihood of a timely economic recovery will
depend largely on government policy regarding the toxic assets of
banks. Credit is the life blood of the economy, and without functioning
credit markets the economy will continue to wither. Unfortunately, the
administration so far has failed to produce a transparent and effective
financial rescue plan.
As the Financial Times noted yesterday, since the Treasury
Secretary made ``his terribly received speech on loans for the bank
sector, the S&P has dropped 20 percent. Markets may not have expected a
`silver bullet,' but did expect the new administration to have a
clearly stated `plan A.' The realization that it did not was a severe
blow to confidence.''
The administration needs to produce a clear and effective plan to
deal with the toxic asset problem of the banks soon, if the economy is
to have a reasonable prospect of a timely recovery. Furthermore, it
should drop its plans to drastically increase the tax burden on the
economy, including its cap and trade proposal that would be especially
devastating for manufacturing workers. More taxes, deficit spending,
and debt will only further burden an already weak economy.
__________
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.
The sharp and widespread contraction in the labor market continued
in February. Nonfarm payroll employment fell by 651,000, following
declines of 681,000 in December and 655,000 in January. Since the
recession began in December 2007, job losses have totaled 4.4 million,
well more than half of which occurred in the past 4 months. In
February, the unemployment rate climbed from 7.6 to 8.1 percent, the
highest rate in over 25 years.
Manufacturing employment declined by 168,000 in February and has
dropped by 1.3 million since the start of the recession. Employment has
fallen in nearly all manufacturing industries during this period. In
February, manufacturing hours decreased by two-tenths of an hour, as
did factory overtime hours.
Construction employment fell by 104,000 in February with losses
throughout the sector. This industry has shed 904,000 jobs since the
recession began, with about half of the decline occurring in the past 4
months.
In February, employment continued to decline sharply throughout
most of the service-providing sector. Professional and business
services employment dropped by 180,000, including 78,000 jobs lost at
temporary help agencies. Employment in temporary help has fallen by
686,000 since the recession began. Other large over-the-month job
losses occurred in transportation and warehousing (-49,000), especially
trucking; financial activities (-44,000); retail trade (-40,000); and
wholesale trade (-37,000).
Elsewhere in the service-providing sector, health care employment
continued to grow with an increase of 27,000 in February, about in line
with its recent trend.
Average hourly earnings for private-sector production and
nonsupervisory workers increased by 3 cents, or 0.2 percent, in
February. Over the past 12 months, average hourly earnings have risen
by 3.6 percent. From January 2008 to January 2009, the seasonally
adjusted Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W) fell by 0.7 percent.
Measures from the survey of households also showed continued
deterioration of labor market conditions. The unemployment rate jumped
by half a percentage point in February to 8.1 percent, the highest rate
since December 1983. Jobless rates continued to trend up across the
major demographic groups in February. The number of unemployed swelled
by 851,000 to 12.5 million.
Since the recession began, the rise in unemployment has been
concentrated among persons who lost jobs, as opposed to job leavers or
people joining the labor force. From December 2007 to February 2009,
the number of job losers has doubled to 7.7 million, and their share of
total unemployment has risen from 50.0 to 62.3 percent.
The number of unemployed individuals experiencing long spells of
joblessness also has risen. In February, 2.9 million persons had been
unemployed for 27 weeks or longer, up from 1.3 million at the start of
the recession.
The employment-population ratio was 60.3 percent in February, down
slightly over the month and well below its 62.7 percent level at the
start of the recession. Among the employed, the number of persons
working part time who would prefer to be working full time climbed
sharply over the month. There were 8.6 million such workers in
February, an increase of 787,000 over the month and nearly 4 million
since the recession began.
Among persons who were neither working nor looking for work in
February, about 2.1 million were classified as marginally attached to
the labor force, up from about 1.6 million a year earlier. These
individuals wanted a job, were available for work, and had looked for a
job within the last 12 months. The number of discouraged workers, a
subset of the marginally attached who believed no jobs were available
for them, has nearly doubled over the past 12 months to 731,000.
In summary, nonfarm payroll employment fell by 651,000 in February,
and the unemployment rate rose to 8.1 percent. Since the beginning of
the recession in December 2007, job losses have totaled 4.4 million.
My colleagues and I now would be glad to answer your questions.
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