[Joint House and Senate Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 113-335
THE EMPLOYMENT SITUATION: MARCH 2014
=======================================================================
HEARING
before the
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
APRIL 4, 2014
__________
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
Kevin Brady, Texas, Chairman Amy Klobuchar, Minnesota, Vice
John Campbell, California Chair
Sean P. Duffy, Wisconsin Robert P. Casey, Jr., Pennsylvania
Justin Amash, Michigan Bernard Sanders, Vermont
Erik Paulsen, Minnesota Christopher Murphy, Connecticut
Richard L. Hanna, New York Martin Heinrich, New Mexico
Carolyn B. Maloney, New York Mark L. Pryor, Arkansas
Loretta Sanchez, California Dan Coats, Indiana
Elijah E. Cummings, Maryland Mike Lee, Utah
John Delaney, Maryland Roger F. Wicker, Mississippi
Pat Toomey, Pennsylvania
Robert P. O'Quinn, Executive Director
Niles Godes, Democratic Staff Director
C O N T E N T S
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Opening Statements of Members
Hon. Hon. Erik Paulsen, Presiding Chairman, a U.S. Representative
from Minnesota................................................. 1
Hon. Amy Klobuchar, Vice Chair, a U.S. Senator from Minnesota.... 3
Witnesses
Hon. Erica L. Groshen, Commissioner, Bureau of Labor Statistics,
U.S. Department of Labor, Washington, D.C. Accompanied by: Dr.
Michael Horrigan, Associate Commissioner for Prices and Living
Conditions, Bureau of Labor Statistics, U.S. Department of
Labor, Washington, DC; and Ms. Sandra L. Mason, Assistant
Commissioner for Current Employment Analysis, Bureau of Labor
Statistics, U.S. Department of Labor, Washington, DC........... 5
Submissions for the Record
Prepared statement of Hon. Erik Paulsen.......................... 18
Prepared statement of Hon. Erica L. Groshen...................... 19
Chart titled ``49 Months of Private-Sector Job Growth'' submitted
by Vice Chair Klobuchar........................................ 21
Chart titled ``Unemployed Workers per Job Opening'' submitted by
Vice Chair Klobuchar........................................... 22
Response from Hon. Erica L. Groshen to Question for the Record
posed by Vice Chair Klobuchar.................................. 23
THE EMPLOYMENT SITUATION: MARCH 2014
----------
FRIDAY, APRIL 4, 2014
Congress of the United States,
Joint Economic Committee,
Washington, DC.
The committee met, pursuant to call, at 9:32 a.m. in Room
216 of the Hart Senate Office Building, the Honorable Erik
Paulsen, presiding.
Representatives present: Paulsen, Hanna, Cummings, Delaney,
and Carolyn B. Maloney of New York.
Senators present: Klobuchar.
Staff present: Ted Boll, Gail Cohen, Connie Foster, Niles
Godes, Paige Halen, Colleen Healy, J.D. Mateus, Patrick Miller,
Robert O'Quinn, and Andrew Silvia.
OPENING STATEMENT OF HON. ERIK PAULSEN, PRESIDING CHAIRMAN, A
U.S. REPRESENTATIVE FROM MINNESOTA
Representative Paulsen. We'll call the Joint Economic
Committee to order. Vice Chair Klobuchar is not here yet, but
Members and Commissioner Groshen:
Chairman Brady went to Dallas this morning to attend the
funeral of Ray Hutchinson, the Chairman's friend and also the
husband of the former Senator Kay Bailey Hutchinson. In
Chairman Brady's absence, he asked me to preside at this
hearing this morning. I was hoping we would have a little bit
of the Minnesota Mafia starting off the hearing this morning.
Senator Klobuchar will be here shortly, though.
The recovery that began in June 2009 is now nearly five
years old. Yet, a NBC News/Wall Street Journal poll last month
found that 57 percent of Americans still think the economy is
in a recession. This is likely due to the persistent weakness
in our labor market.
The fact that nonfarm payrolls increased by 192,000 and the
official unemployment rate remained unchanged at 6.7 percent
last month is positive news, but it is simply not enough.
I agree with Federal Reserve Chair Janet Yellen's recent
assessment of our economy. In a speech on Monday at the 2014
National Interagency Community Reinvestment Conference, she
said, ``[w]hile there has been steady progress, there is also
no doubt that the economy and the job market are not back to
normal health.''
By several measures, the recovery from the most recent
recession is far below the average of prior recoveries over the
last 50 years. Here at the Joint Economic Committee we often
refer to that as the Growth Gap.
Since the recession ended in June 2009:
Real GDP growth is a cumulative 9 percentage points below
the average recovery;
Private payroll employment growth is more than 5 percentage
points below the average recovery; and
The real disposable income of a family of four grew by
$13,032 less than it did during an average recovery. Clearly
our economy is underperforming, and we should be doing better
than five consecutive years of below average.
In her speech, Chair Yellen cited a number of statistics
indicating that our labor market is weaker than the official
unemployment rate would suggest. For example: More than seven
million people are working part-time even though they would
prefer full-time jobs.
The falling unemployment rate has not sparked a significant
increase in real wages. Real average weekly earnings for all
private, nonfarm employees are up by less than 1 percent since
the recession ended.
Nearly 36 percent of the unemployed have been unemployed
six months or longer. I'll say that again: More than one-third
of the unemployed in this country have been unemployed for six
months or more.
The labor force participation rate has fallen from 66
percent in December 2007 to 63.2 percent, and only half of this
decline may be attributable to demographic factors.
Some may blame the housing bubble, its collapse and the
ensuing financial panic for this persistent weakness in our
labor market. While the collapse of the housing bubble
undoubtedly has some lingering effects, it is not the main
factor, let alone the only factor, for this weakness.
What is unique about this recovery is the combination of
the economic policies that the President has pursued.
From 1982 to 2000, federal spending declined as a percent
of GDP, and the private sector created more than 37 million
jobs. Under President Obama, federal spending reached a post-
World War II high of 24.4 percent of GDP and remains above its
postwar average of 18.9 percent of GDP.
Presidents Kennedy and Reagan passed tax cuts that
encouraged new business investment. This Committee has shown a
strong correlation between new business investment and the
creation of new private-sector jobs. In contrast, President
Obama increased taxes on successful small businesses, capital
gains, and dividends.
Presidents Reagan and Clinton took a balanced approach
toward environmental, health, and safety regulations. In
contrast, the Obama Administration has pursued an aggressive
agenda of regulation without carefully weighing costs and
benefits.
Presidents Reagan, Kennedy, and Clinton opened new markets
to American products through international trade agreements.
There are several trade opportunities on the horizon that are
proven job creators, but the Administration has not yet fully
engaged on this issue. There's been bipartisan support for
trade in the past, and I am confident that there is bipartisan
support in Congress for trade agreements today.
Presidents Kennedy, Reagan, and Clinton did not burden a
weak economy with costly new entitlement programs. In contrast,
President Obama pushed forward the Affordable Care Act through
Congress on party-line votes.
The President's health care law has increased uncertainty,
raised taxes by nearly half a trillion dollars, undermined the
medical device industry that is so important to our home State
of Minnesota--as Senator Klobuchar knows--and has caused
millions of Americans to lose access to some of the doctors and
health insurance plans that they liked.
The economic policies that America needs now are well
known: stable prices, a gradual decline in federal spending as
a percent of GDP, tax reform that encourages new business
investment, balanced regulation, and trade liberalization.
It is the best way to strengthen our economy, create good
jobs, and boost the wages of hardworking Americans; and it is
time that the Administration work together with both
Republicans and Democrats to move our country forward.
With that, Commissioner Groshen, I look forward to your
testimony, but Senator Klobuchar has arrived so I recognize the
Vice Chair for her opening statement.
[The prepared statement of Hon. Erik Paulsen appears in the
Submissions for the Record on page 18.]
OPENING STATEMENT OF HON. AMY KLOBUCHAR, VICE CHAIR, A U.S.
SENATOR FROM MINNESOTA
Vice Chair Klobuchar. Well thank you very much. Sorry I was
a few minutes late. I was in a dentist's chair--can you kind of
tell? Well, all right. But how much more fun to be here with
all of you.
[Laughter.]
It is great to be here with Representative Paulsen chairing
this hearing, as well as Commissioner Groshen. It's good to see
you again. And I would like to welcome Sandy Mason who is the
Assistant Commissioner for the Office of Current Employment
Analysis.
I am pleased we are having this hearing on the monthly
employment situation. I think we all know these hearings give
us an opportunity to dig deeper into the numbers, March, as we
discuss a gain of 192,000 total nonfarm gains with all of these
job gains in the private sector--something we like to hear.
Recent economic news, as we know, has been encouraging. The
economy has grown for 11 straight quarters, and the 2.6 percent
GDP growth over the course of 2013 exceeds the gains in 2011
and in 2012.
Manufacturing, which is the engine of innovation and
generates 90 percent of all patents, has rebounded, adding more
than 600,000 jobs since February of 2010.
Exporting has been another bright spot, with exports
growing in each of the past four years, and exceeding the
prerecession peak.
All of this is good news, and I think we all know that we
have a lot of room to go, but we also have accomplished much in
terms of the private sector adding jobs.
I think back to the first half of 2009 when we shed more
jobs in this country. We were losing jobs at a rate of 700,000
per month. We shed more jobs in one month than there are people
in Vermont.
Five years later we are now adding jobs. We have recorded
49 straight months, as you can see from that graph, 49 straight
months of private-sector job growth. And with this month's gain
of 192,000 private-sector jobs, we have now regained all of the
8.8 million private-sector jobs that were lost during the
recession.
So this is the month that we finally have gotten to where
we were, and now I hope we are going to expand from there.
The number of unemployed workers per job opening has
decreased from nearly 7 in July 2009 to 2.6 in January of 2014,
approaching the prerecession level of roughly 2 unemployed
workers for every job opening.
The unemployment rate currently is at 6.7 percent and is
down nearly a full percentage point from last March when it was
7.5 percent. The unemployment rate is better than average at
4.8 percent in the State of Minnesota.
For most workers, the job market is better today than it
has been in years, but we all know that recovery has not
reached everyone, particularly the long-term unemployed, those
who have been out of work for more than six months.
Nearly 4 million Americans, over one-third of unemployed
workers, have been out of work for more than six months. As
this Committee has discussed, long periods of joblessness do
significant damage to affect workers' future earnings and to
our Nation's productivity.
I am pleased that the Senate is moving forward on Monday to
pass an extension of Unemployment Insurance, and I hope the
House will act as well.
It would help people like Linda and her husband from Little
Falls, Minnesota, who lost their jobs, are both over 55, and
who need some support as they continue to look for work.
Linda wrote me recently, urging Congress to extend
unemployment. She wrote: ``I feel like the people who are still
jobless are being forgotten.''
We've got to approach this issue from all sides. Obviously
there are openings in some parts of the country, and in certain
industries, and we need to make sure the workers are trained to
do those jobs. That is a major part of this, is the skills'
training.
The second part of it is to continue to increase our
exports. The third part of it is to get more kids to go into
math and science and engineering and technology.
The next is immigration reform, which I think would be very
helpful to the economy, as the numbers have shown, in
decreasing the debt by $160 billion in ten years, nearly $700
billion in ten years, according to the CBO.
One of the things that I'll want to ask you, Commissioner
Groshen, is just about the unemployment with Veterans, with
young people, where we are as we move forward on that. We have
made some improvement, with more to go.
Our focus should be on long-term policies that create jobs
in the short term, while laying the groundwork for prosperity
in the long term. I am very much looking forward to hearing
about the numbers today, and to get some analysis from all of
you.
Thank you very much. Thank you, Chairman Paulsen.
Representative Paulsen. Well thank you. Erica Groshen is
the 14th Commissioner of the Bureau of Labor Statistics. Prior
to joining the BLS, she was Vice President in the Research and
Statistics Group at the Federal Reserve Bank of New York. She
has also been a Visiting Assistant Professor of Economics at
Columbia University, and a Visiting Economist at the Bank for
International Settlements in Basil, Switzerland.
She earned a Ph.D. in Economics from Harvard University,
and a Bachelor's Degree in Economics and Mathematics from the
University of Wisconsin-Madison. I was a mathematics major, as
well, so welcome back to the Committee and you are recognized
for five minutes, Commissioner Groshen.
STATEMENT OF HON. ERICA L. GROSHEN, COMMISSIONER, UNITED STATES
DEPARTMENT OF LABOR, WASHINGTON, DC; ACCOMPANIED BY: DR.
MICHAEL HORRIGAN, ASSOCIATE COMMISSIONER FOR PRICES AND LIVING
CONDITIONS; AND MS. SANDRA L. MASON, ASSISTANT COMMISSIONER FOR
CURRENT EMPLOYMENT ANALYSIS
Commissioner Groshen. Thank you, Mr. Chairman.
Mr. Chairman and Members of the Committee, thank you for
the opportunity to discuss the employment and unemployment data
that we released this morning.
Nonfarm payroll employment rose by 192,000 in March, and
the unemployment rate was unchanged at 6.7 percent. Employment
increased in professional and business services, in health
care, and in mining and logging.
Incorporating the revisions for January and February which
increased total nonfarm employment by 37,000 on net, monthly
job gains have averaged 178,000 over the past 3 months. In the
past 12 months prior to March, employment growth averaged
183,000 per month.
All of the net job growth in March occurred in the private
sector which has now exceeded its employment level in December
2007 when the most recent recession began.
So this is a milestone.
The private sector lost 8.8 million jobs during the job
market downturn, and it has now gained 8.9 million jobs since
the employment low in February 2010.
However government employment is down since the recession
began, and therefore total nonfarm employment remains below its
December 2007 peak.
In March, employment in professional and business services
rose. It rose in line with the prior 12-month average. Within
the industry, temporary help services added 29,000 jobs in
March.
Health care employment rose by 19,000 in March with gains
in ambulatory services. In the prior 12 months, job growth in
health care had averaged 17,000 per month, with most of the
growth occurring in ambulatory care.
Employment in mining and logging rose by 7,000 in March,
led by gains in support activities for mining.
Employment in food services and drinking places continued
to trend up in March. This industry has added 323,000 jobs over
the year.
Employment continued to trend up in construction in March,
and is up by 151,000 over the past 12 months.
Employment in other major industries--including
manufacturing, wholesale trade, and retail trade--changed
little in March.
Average hourly earnings of all employees on private nonfarm
payrolls edged lower by 1 cent in March, after rising by 9
cents in February. Over the past 12 months, average hourly
earnings have risen by 2.1 percent. In comparison from February
2013 to February 2014, the Consumer Price Index rose by 1.1
percent.
In March, the average workweek for all employees increased
to 34.5 hours, offsetting a net decline over the prior 3
months.
Turning now to our survey of households, the unemployment
rate at 6.7 percent was unchanged in March, and the number of
unemployed persons remained at 10.5 million.
The number of unemployed persons who had been jobless for
27 weeks or more was also little changed. These individuals
accounted for 35.8 percent of the unemployed.
Both the civilian labor force and total employment
increased in March. The labor force participation rate and the
employment to population ratio though changed little over the
month.
Among persons who were neither working nor looking for work
in March, 2.2 million were classified as marginally attached to
the labor force. And this is little changed from a year
earlier.
The number of discouraged workers who believed that no jobs
were available for them edged down over the year to 698,000 in
March.
In summary, employment rose by 192,000 in March, and the
unemployment rate was unchanged at 6.7 percent.
My colleagues and I now would be glad to answer your
questions.
[The prepared statement of Commissioner Erica L. Groshen
appears in the Submissions for the Record on page 19.]
Representative Paulsen. Thank you, Commissioner.
Federal Reserve Chair Janet Yellen earlier this week gave a
speech in which she listed signs of weakness in the U.S. labor
market that indicate conditions are worse than the unemployment
rate suggests.
Chair Yellen, among other things, specifically mentioned
the meager increases in labor compensation, an average of
little more than 2 percent a year since the Recession, and the
large number of part-time workers of more than 7 million, as
you referenced as well, who want full-time work, many more than
one would expect when you have a 6.7 percent unemployment rate.
Could you explain why, and give some thoughts about why the
unemployment rate does not convey the same extent of weakness
as these other labor market indicators might show?
Commissioner Groshen. The employment situation contains--
the release that we released today, contains I think it's over
1,000 numbers in them, all of which give you different
perspectives on what is going on in the labor market. So no one
particular number is going to be able to convey all facets of
what is the largest market in the country.
So it is really important for educated users like
yourselves to look at many different measures, as Janet Yellen
has done as well. And some part of the answer to the question
lies in not only what the numbers have been doing lately, but
also how they are compared to what is normal for the economy
for what are pre-Recession levels.
So that is all to preface saying that we have had a lot of
improvement lately since the Recession was over, but we have
not made--we have not fully returned to pre-Recession levels.
Representative Paulsen. Yes.
Commissioner Groshen. So, for example, the number of people
who are part-time for economic reasons, who would like a full-
time job but who do not have one, or who have had their hours
cut, has come down dramatically since the Recession began, but
it is still much higher than its pre-Recession levels. And this
is a measure of under-utilization of labor in the economy, and
those continue to be high.
Even the unemployment rate, although it has come down a
lot, is still much higher than its pre-Recession levels.
Representative Paulsen. Do you have some thoughts on why
those indicators might be so weak, those other indicators might
appear more weak?
Commissioner Groshen. Well, I guess we at the BLS are more
about counting the way things are than, you know, measuring the
current conditions than on actually dividing this up. But we
know that the labor market is large and complex, and so what
happens when you have this big decline in aggregate demand is
that this under-utilization of labor goes into many different
ways. It goes into people working fewer hours. It goes into
more people unemployed. It goes--it spreads through all
different parts of the labor market, and it takes awhile for
all of these different parts of the labor market to return.
Representative Paulsen. Maybe you could explain, too, the
linkage that exists between private investment and economic
growth on the one hand, and then on the other hand labor
demand, employment, and the labor force participation rate.
Commissioner Groshen. Well, we know we have had a lot of--
there has been a very--during the Recession we had--the biggest
hit in the Recession immediately was a big increase in job
destruction.
We had a huge number of layoffs of workers. At the same
time, we had a slowing in the hiring. We have now returned to
normal in our job destruction rates by most measures. What has
not returned to normal have been the job creation rates. Job
creation rates have not been high enough to absorb all of the
slack that has remained in the labor market.
Representative Paulsen. Is it fair to say that the slower
economic growth we've had is the root cause of the labor market
problems? And that the unemployment rate has been declining
mostly because more and more people are disengaged from the
labor market?
Commissioner Groshen. I--so going to the labor force
participation, about--the estimates are that about half of the
decline in the labor force participation rate is due to
demographic factors. So that would not be associated with the
slowdown.
About half of the remaining part--and this is work being
done largely in the Federal Reserve, rather than at the BLS--
estimates there are that about half of the remaining part is
due to changing behavior of various demographic groups. For
example, young people enrolling in college more and staying in
high school longer; and women no longer increasing their labor
force participation rates.
The remaining quarter seems to be associated with the
downturn in the economy, with the assumption that when the
economy--as the economy improves, that part will generally go
away. And so we will see at least a slower decline in labor
force participation.
So not that much of decline in participation by these
estimates is due to the slower economy.
Representative Paulsen. Thank you, Commissioner.
With that, Vice Chair Klobuchar is recognized for five
minutes.
Vice Chair Klobuchar. Thank you very much. Thank you, and
also welcome to you, Dr. Horrigan.
As we have talked about, there have been some improvements.
I think the last few months, looking at our weekly/monthly
reports, were affected somewhat by the cold weather. Did that
have a negative impact the last few months, Ms. Groshen, as I
look at 10 more inches of snow in Minnesota as we speak this
morning?
Commissioner Groshen. Yes. We see some--we definitely see
some evidence that is consistent with the weather having had an
impact on the last few months of the employment reports,
particularly in hours.
So we have now--in March, we recovered most of the decline
in hours that we were seeing. So that is the clearest part.
The impact on job creation is a little harder to judge.
Vice Chair Klobuchar. I just think it had a very temporary
effect over the last few months. The Recession was especially
tough on younger workers, we know that, who were faced with
very high levels of unemployment, and older workers who faced
longer durations of unemployment.
What is the unemployment rate for workers who are like 20
to 24 years old? And how about the long-term unemployment rate
for them?
Commissioner Groshen. So the unemployment rate for 20 to
24-year-olds declined over the year from 13.3 percent to 12.2
percent in March. And of those people in that age range, 31
percent were unemployed long term for 27 weeks.
Vice Chair Klobuchar. Do you know--and you may not have
this right now; you can get it to me later--but what it was
pre-Recession, like the year before the Recession? That age
group?
Commissioner Groshen. Much lower. Let me see if I've got it
here.
Vice Chair Klobuchar. Okay. That's okay. We'll get it. But
you think it was lower.
Commissioner Groshen. Yes.
[Commissioner Erica L. Groshen's response to Vice Chair
Klobuchar's question appears in the Submissions for the Record
on page 23.]
The unemployment rate was 7.7% in March of 2007, before the
recession, and 13 percent of the unemployed had looked for work
for 27 weeks or longer.
Vice Chair Klobuchar. It's something we clearly have to be
focused on. Older workers? What's the unemployment rate for
workers 55 and older?
Commissioner Groshen. 4.7 percent.
Vice Chair Klobuchar. Wow. Okay. And did that improve over
the last year, too?
Commissioner Groshen. Yes. It was 5.5 percent a year ago.
Vice Chair Klobuchar. And do you know how that was in pre-
Recession?
Commissioner Groshen. It was 3.2% in December 2007 when the
recession began.
Vice Chair Klobuchar. Women now have about a half a million
more jobs than when the Recession began, while men still need
to add over a million jobs to return to the December 2007
level. Is that right?
Commissioner Groshen. Yes, it's about a million jobs for
men.
Vice Chair Klobuchar. So I think they call it the
``mansession''?
[Laughter.]
And I still think we have an issue, and I touched on this,
with the long-term unemployed, we have an issue with some of
the wages that people make; that even though they have jobs,
that they are not able to support their families.
And one of the ways we know works here is education. A two-
year or a four-year college degree makes a big difference. What
is the unemployment rate for college graduates right now?
Commissioner Groshen. Um, let's see.
[Pause.]
Let me see if we've got that.
[Pause.]
Vice Chair Klobuchar. That's okay. You can give it to me
later. I'm just trying to see--I used to ask this every month
to try to get where we were in relation----
Commissioner Groshen. Oh, here we go. Unemployment rates.
Got it. For college graduates, 3.7 percent.
Vice Chair Klobuchar. Okay. And then do you know what it is
for high school, or even for people who didn't complete high
school?
Commissioner Groshen. 7.5 percent for high school graduates
with no college, and 11 percent for those without a high school
diploma.
Vice Chair Klobuchar. Okay. And have there been any trends
on that over the last few years?
Commissioner Groshen. All of these have been declining
since the Recession was over.
Vice Chair Klobuchar. And how about the Veteran
unemployment rate? We've had a major focus all across the
country, really, on private employers focusing on trying to
employ some of our post-Gulf War II Era Veterans and trying to
make sure that we are getting people employed that left,
especially while the numbers were--when they left, the numbers
were high, and then the Recession happened and they had trouble
getting employed. Where is it now for Veterans?
Commissioner Groshen. Well focusing on the unemployment
rate for Gulf War Era II Veterans, that is at 6.9 percent in
March.
Vice Chair Klobuchar. Oh, yes, that has improved I think.
Commissioner Groshen. Yes.
Vice Chair Klobuchar. Do you know where it was before?
Commissioner Groshen. Oh, yeah. Last month it was 9.2
percent, so this is a huge drop--although these numbers can be
somewhat volatile.
Vice Chair Klobuchar. Yes, they are a smaller group of
people. I just was thinking more over the long term it has
improved because it was for many years--so it is around the
same as our Nation's unemployment rate.
Commissioner Groshen. Yes, yes.
Vice Chair Klobuchar. That is a big shift, because for a
long time it was a number of percentage points above the
Nation's unemployment rate.
Commissioner Groshen. Yes.
Vice Chair Klobuchar. So this is probably some of the best
news out of the report. So thank you, very much.
I think I am out of time. I had one last question on rural
areas. Is there a difference in unemployment numbers between
rural and urban?
Commissioner Groshen. Yes, there is. And I think I have
this--okay. Yes, the unemployment rate for urban areas was 7.5
percent; but for rural areas it was 6.7 percent. So lower in
the rural areas than urban areas.
Vice Chair Klobuchar. That is surprising. Okay, thank you
very much. I appreciate it.
Commissioner Groshen. You're welcome.
Representative Paulsen. Mr. Hanna is recognized for five
minutes.
Representative Hanna. Thank you. Thank you, very much.
There is a purported skill, or education job gap, and it is
suggested that it poses a hindrance to employment and may
relate to a decline in labor force participation rate, and the
employment-to-population ratio.
When the economy is growing at a healthy pace and demand
for labor is strong, are skill differentials as great a factor
in getting a job offer as when there is excessive labor?
Perhaps that is a subjective question, but--I mean, it is, but
if you have any ideas I'd appreciate it.
Commissioner Groshen. Generally speaking, the lower skilled
people have bigger increases in their unemployment rate during
recessions than higher skilled people. So it's possible that
the wages of higher skilled people and employment of higher
skilled people are preserved much more than lower skilled
people during recessions.
Representative Hanna. So using that suggestion, do you
believe that we have a long-term structural problem in terms of
what Senator Klobuchar referred to in terms of matching those
skills up and education? And therefore is it somehow something
that is structural in a way that we have to respond to
differently than we are? And are many of these people
permanently displaced? Do you see some change in that? Does the
demand in a growing economy help that, whatever you think.
Commissioner Groshen. Sure. So generally speaking the BLS
does not have data about the specific skills required for job
vacancies that employers are trying to fill. However, we would
say that from what we can see there does not appear to be a
larger than normal mismatch between the skills employers are
seeking and those that job seekers have.
One of the reasons why we say this is because we have not
seen an increase in wages. And that is what you would--that is
what you would expect if you had a big, sudden mismatch in what
the employers--between what employers were demanding and the
skills that workers had.
You would see an increase in wages for those workers who
had those skills. So we are not seeing that.
Representative Hanna. But other things could be the reason
for that, as well. I mean, you are talking about basic supply
and demand, but wage growth in general has been relatively
stagnant in some areas, even in the decline.
Commissioner Groshen. That's right. But if you had some
employers who were--you know, a group of employers who really
wanted to get workers with a certain skill, you would expect
that they would start hiring, they'd start poaching each
other's workers. And in response, employers would then raise
their wages to be able to retain them.
Representative Hanna. Thank you. Perhaps this has been
asked, but do you think that the--there has been some
conversation about there is a population in our country that
has not really been well prepared for retirement. We know that.
And even young people going towards--50-year-olds, and 55-and-
older, are not prepared. We have seen a lot of elderly old
people that might otherwise wish to be retired, or not,
engaging in the laborforce. And there is also suggestion that
there is a displacement because of that for younger people who
might enter that same workforce, for those same jobs.
Would you talk a little about that, if you actually think
that is the case? Or what that maybe will look like on the
ground?
Commissioner Groshen. The increase in labor force
participation amongst older workers seems to be an important--
well, an important part of that may be that the jobs that they
are in are increasingly ones that one can do later in life. So
they are less likely to be blue collar jobs where the physical
demands become difficult for people at older ages.
So this is seen as one of the most--you know, an important
factor in an increasing participation rate for the elders.
Representative Hanna. Well wouldn't those same jobs be the
ones that people entering the workforce would also be likely to
take?
Commissioner Groshen. Usually the sort of crowding out that
people think about is not, you know--internationally has not
been seen as that much of a factor in whether or not you have
overall wage and employment growth.
Usually when you have a growing economy, then you can
accommodate all the workers who come in.
Representative Hanna. So growth helps everyone.
Commissioner Groshen. Growth helps everyone.
Representative Hanna. Thank you.
Representative Paulsen. Thank you. Mr. Cummings is
recognized for five minutes.
Representative Cummings. Thank you, very much.
Commissioner, while the unemployment rate among African
Americans had been declining, last month it increased to 12.4
percent. Why did the rate of unemployment for African Americans
increase in March? Do you have any idea? Do the numbers tell us
anything?
Commissioner Groshen. Yeah. It didn't--while it did
increase, so our point estimate of it went up, this is based on
a small enough sample, unfortunately, that it is not
statistically significant. So my best guess is that this is
noise around a high level. I mean, clearly the unemployment
rate for African Americans is very high. But this particular
tick up is probably noise, although it will take another couple
of months for us to see if it sticks or goes higher.
Representative Cummings. Well when we are looking at the
situation with Latinos, we see the unemployment rate has gone
down significantly. Is that accurate?
Commissioner Groshen. Not in this particular month.
Representative Cummings. But overall?
Commissioner Groshen. But it has been--the change over the
year is a decline of 1.3 percentage points; whereas the decline
for Black and African Americans is .08 of a percentage point.
Representative Cummings. So today's jobs report shows that
in March the unemployment rate for Hispanic workers is 7.9
percent? Is that right?
Commissioner Groshen. That's right.
Representative Cummings. And 5.2 percentage points lower
than the peak?
Commissioner Groshen. Let's see. For--let's see.
Representative Cummings. The peak I think was 16.8.
Commissioner Groshen. Well, for Hispanics I have a decline
of 4.3 percent since January '09.
Representative Cummings. That is significant, is it not?
Commissioner Groshen. Yes.
Representative Cummings. And do we know why that is? I
mean, do the numbers tell us anything?
Commissioner Groshen. Well this is consistent with what has
been happening with all of--you know, throughout the labor
market. And since they had a particularly large increase in
unemployment over the course of the Recession, then they would
expect them to have a larger decrease when the labor market
returns to normal.
Representative Cummings. You know, I was at the University
of Maryland Law School, which is where I went to school, and
they were telling me that law schools throughout the country
are having less and less people apply. And they said there were
reasons for that, and one being people do not have the money;
and two, they do not see the jobs.
I always ask this question when you all come in: For
somebody watching this right now who does not have a job, what
would you tell them? I mean, are there certain areas of the
country that are doing well? What areas might one who graduated
from high school, or getting ready to enter college, want to go
into?
Because I think more and more people are concerned that
when they get out of college they will not have a job. So based
upon the numbers--I know you do not give a lot of advice--but
just putting the numbers out there, what would you say to young
people who are trying to figure out their way? And who do not
want to go back and live with their mother and father after
they get out of college?
Commissioner Groshen. Well the main advice I would give
them is to get a good education; that there is one thing that
is under people's control and has a very important role in
determining people's unemployment rate, is how much education
they have. So that would be the main thing.
And then the choice of industry makes a difference. We
project that occupations and industries related to health care
will add the most new jobs over the next 10 years. So we think
health care and social assistance jobs, we project them to add
nearly a third of all new jobs, 5 million of the 15.6 million
total jobs expected to be added between now and 2022.
We also actually project large gains in construction jobs,
primarily to reflect recovery from the very severe downturn
that we had in construction jobs.
Representative Cummings. Are there any particular regions
of the country that you would tell them that they might want to
travel to?
Commissioner Groshen. Well of late the regions that have
had most--the most job growth have been in the South and the
West. So for instance the average, let's see, the average
change in employment in the South, the South has been adding
about 49,000 jobs per month from June 2009 to February 2014 and
the West has been adding 32,000 jobs per month. So these are
the areas where we have seen most of the job growth regionally.
Representative Cummings. Thank you, very much.
Commissioner Groshen. You're welcome.
Representative Paulsen. Mr. Delaney is recognized for five
minutes.
Representative Delaney. Thank you, Mr. Chairman.
And thank you, Commissioner, for being here today to
provide what I view as a positive report with a fair amount of
evidence that things are getting back on track after a winter
slowdown. And there was some very good news in the numbers you
reported--not that there is not a lot for us to do, but
certainly some good things to build upon.
My question is in keeping with my friend and colleague's
theme of, of--mine are more kind of direct questions as opposed
to advice--is trying to disaggregate some of this data.
Do you compile any analysis of how jobs break down between
low, middle, and high skilled in terms of their profile? Now
those are obviously subjective categorizations, but do you
disaggregate any of your data along those lines? And if so, can
you observe any trends that are relevant?
Commissioner Groshen. Okay, let's see.
[Pause.]
I am looking for . . .
Representative Delaney. Or while you are looking for that,
I will add another question which is related, which is: The
concern I have is obviously the headline unemployment number,
and kind of subsidiary numbers that flow from that, are largely
affected by choices people are making about the type of jobs
they want to pursue.
Do you compile any data about trends in the standard of
living of average jobs, which would effectively be an
aggregation of the low, middle, and high skilled composite, if
you will?
Commissioner Groshen. Yes, let me try--yes. So we have--
let's see.
Representative Delaney. If it's easier, you can get me the
information after the fact.
Commissioner Groshen. Right.
Well, so what we have been finding is that the largest
over-the-year employment increases have come in professional
and business services. And this industry has a relatively high
earnings.
Representative Delaney. Right. And high skills.
Commissioner Groshen. And high skills, right.
Representative Delaney. So those are growing.
Commissioner Groshen. Yes. But the next highest job gains
occurred in the industry which has the lowest average hourly
earnings, leisure and hospitality. So we are having growth at
both ends of the spectrum.
Representative Delaney. So would that lead us to conclude
that we continue to see this kind of barbell job creation where
we are creating high-skill jobs at a decent rate, reflecting
kind of the country's competitiveness position in industries
like technology, medical devices, et cetera, et cetera? And
that the income driven by those high-skill jobs is actually
creating a fair amount of low-skill jobs. But we continue to
see a hollowing out, if you will, of the middle-skill jobs?
Would the data suggest that is continuing, or decelerating, or
accelerating?
Commissioner Groshen. I would say it is continuing,
certainly by industry. It is a little more mixed by occupation.
Representative Delaney. Got it. And a related point, you
talked about this ratio, this kind of framing the job
destruction rate over the job creation rate.
Commissioner Groshen. Yes.
Representative Delaney. The impact of technology on the
workforce here is obviously fairly profound as it relates to
those two statistics, the job creation rate and the job
destruction rate. Obviously technology is destroying a lot of
jobs, and technology is also creating a lot of jobs.
Do you have a view as to what that ratio is based on
technology? And is it changing? In other words, is technology
creating more jobs relative to the number it is destroying? Or
is it going the other way? Do you have a view on that?
Commissioner Groshen. Well the simplest question is that by
and large it is balanced. Within any net job change that we
observe for the economy as a whole, the amount of churn in the
U.S., in this dynamic U.S. economy that we have, is very high.
So we will, you know, for every job, every net job we
create, we probably destroy eight or nine jobs. And we have a
huge number of--at the same time, we have a huge number of jobs
being created, you know, nine gross jobs for every eight jobs.
Representative Delaney. Got it.
Commissioner Groshen. So getting back to one of the
questions you had, the STEM jobs, if we want to focus on those,
have grown much faster than total employment during this time.
They grew at 5.1 percent between 2009 and 2013, while total
employment grew by just 1.5 percent.
So certainly our demand for STEM jobs is much faster than
for other jobs.
Representative Delaney. We may follow up with some more
specific questions on some of that. Thank you.
Commissioner Groshen. You're welcome.
Representative Paulsen. Thank you, Commissioner, for taking
the time to be here with your team and testifying this morning.
I know that Senator Klobuchar and I are getting ready to head
back to several inches of snow in Minnesota, and we thank
everyone for being here this morning. The Committee is
adjourned.
(Whereupon, at 10:16 a.m., Friday, April 4, 2014, the
hearing in the above-entitled matter was adjourned.)
SUBMISSIONS FOR THE RECORD
Prepared Statement of Hon. Erik Paulsen, Presiding Chairman, Joint
Economic Committee
Vice Chair Klobuchar, Members, and Commissioner Groshen:
Chairman Brady went to Dallas this morning to attend the funeral of
Ray Hutchinson, the Chairman's friend and the husband of former Senator
Kay Bailey Hutchinson. In Chairman Brady's absence, he asked me to
preside at this hearing.
The recovery that began in June 2009 is now nearly five years old.
Yet, a NBC News/Wall Street Journal poll last month found that 57% of
Americans still think the economy is in a recession. This is likely due
to the persistent weakness in our labor market.
The fact that nonfarm payrolls increased by 192,000 and the
official unemployment rate remained unchanged at 6.7% last month is
positive news, but it's simply not enough. I agree with Federal Reserve
Chair Janet Yellen's recent assessment of our economy. In a speech on
Monday at the 2014 National Interagency Community Reinvestment
Conference, she said, ``[w]hile there has been steady progress, there
is also no doubt that the economy and the job market are not back to
normal health.''
By several measures, the recovery from the most recent recession is
far below the average of prior recoveries over the last 50 years. Here
at the Joint Economic Committee, we often refer to that as the Growth
Gap. Since the recession ended in June 2009,
Real GDP growth is a cumulative 9 percentage points below
the average recovery;
Private payroll employment growth is more than 5
percentage points below the average recovery; and
The real disposable income of a family of four grew by
$13,032 less than it did during an average recovery.
Clearly, our economy is underperforming. We should be doing better
than five consecutive years of below average.
In her speech, Chair Yellen cited a number of statistics indicating
that our labor market is weaker than the official unemployment rate
would suggest. For example,
More than seven million people are working part-time even
though they would prefer full-time jobs.
The falling unemployment rate has not sparked a
significant increase in real wages. Real average weekly earnings for
all private, nonfarm employees are up by less than 1% since the
recession ended.
35.8% of the unemployed have been unemployed six months
or longer. I'll say that again. More than one-third of the unemployed
in this country have been unemployed for six months or more.
The labor force participation rate has fallen from 66.0%
in December 2007 to 63.2%. Only half of this decline may be
attributable to demographic factors.
Some blame the housing bubble, its collapse, and the ensuing
financial panic for this persistent weakness in our labor market. While
the collapse of the housing bubble undoubtedly has some lingering
effects, it is not the main factor, let alone the only factor, for this
weakness.
What is unique about this recovery is the combination of the
economic policies that President Obama has pursued:
From 1982 to 2000, federal spending declined as a percent
of GDP, and the private sector created more than 37 million jobs. Under
President Obama, federal spending reached a post-World War II high of
24.4% of GDP and remains above its postwar average of 18.9% of GDP.
Presidents Kennedy and Reagan passed tax cuts that
encouraged new business investment. This Committee has shown a strong
correlation between new business investment and the creation of new
private-sector jobs. In contrast, President Obama increased taxes on
successful small businesses, capital gains, and dividends.
Presidents Reagan and Clinton took a balanced approach
toward environmental, health, and safety regulations. In contrast, the
Obama Administration has pursued an aggressive agenda of regulation
without carefully weighing costs and benefits.
Presidents Kennedy, Reagan, and Clinton opened new
markets to American products through international trade agreements.
There are several trade opportunities on the horizon that are proven
job creators, but the Administration has not fully engaged on this
issue. There's been bipartisan support for trade in the past, and I'm
confident that there's bipartisan support in Congress for trade
agreements today.
Presidents Kennedy, Reagan, and Clinton did not burden a
weak economy with costly new entitlement programs. In contrast,
President Obama pushed the Affordable Care Act through Congress on
party-line votes.
The President's health care law has increased
uncertainty, raised taxes by nearly half a trillion dollars, undermined
the medical device industry that is so important to my home state of
Minnesota, and caused millions of Americans to lose access to the
doctors and health insurance plans they liked.
The economic policies America needs now are well known--stable
prices, a gradual decline in federal spending as a percent of GDP, tax
reform that encourages new business investment, balanced regulation,
and trade liberalization.
It's the best way to strengthen our economy, create good jobs, and
boost the wages of hardworking Americans; and it's time that the
Administration work with Republicans and Democrats in Congress to move
our country forward.
With that, Commissioner Groshen, I look forward to your testimony.
__________
Prepared Statement of Erica L. Groshen, Commissioner, Bureau of Labor
Statistics
Mr. Chairman and Members of the Committee:
Thank you for the opportunity to discuss the employment and
unemployment data we released this morning.
Nonfarm payroll employment rose by 192,000 in March, and the
unemployment rate was unchanged at 6.7 percent. Employment increased in
professional and business services, in health care, and in mining and
logging.
Incorporating the revisions for January and February, which
increased total nonfarm employment by 37,000 on net, monthly job gains
have averaged 178,000 over the past 3 months. In the 12 months prior to
March, employment growth averaged 183,000 per month.
All of the net job growth in March occurred in the private sector,
which now has exceeded its employment level in December 2007, when the
most recent recession began. The private sector lost 8.8 million jobs
during the labor market downturn and has gained 8.9 million since the
employment low in February 2010. However, government employment is down
since the recession began (-535,000), and therefore total nonfarm
employment remains below (-422,000) its December 2007 level.
In March, employment in professional and business services rose
(+57,000) in line with the prior 12-month average. Within the industry,
temporary help services added 29,000 jobs in March. Employment growth
in temporary help services had averaged 20,000 per month in the prior
12 months.
Health care employment rose by 19,000 in March, with gains in
ambulatory health care services (which includes home health care and
outpatient care centers). In the prior 12 months, job growth in health
care had averaged 17,000 per month, with most of the growth occurring
in ambulatory care. In March, nursing care facilities lost 5,000 jobs.
Employment in mining and logging rose by 7,000 in March, led by
gains in support activities for mining (+5,000). Mining and logging has
added 38,000 jobs over the year.
Employment in food services and drinking places continued to trend
up in March (+30,000). This industry has added 323,000 jobs over the
year.
Employment continued to trend up in construction in March (+19,000)
and is up by 151,000 over the past 12 months.
Employment in other major industries, including manufacturing,
wholesale trade, and retail trade, changed little in March.
Average hourly earnings of all employees on private nonfarm
payrolls edged lower by 1 cent in March, after rising by 9 cents in
February. Over the past 12 months, average hourly earnings have risen
by 2.1 percent. From February 2013 to February 2014, the Consumer Price
Index for All Urban Consumers (CPI-U) rose by 11.1 percent.
In March, the average workweek for all employees on private nonfarm
payrolls increased to 34.5 hours, offsetting a net decline over the
prior 3 months.
Turning now to our survey of households, the unemployment rate, at
6.7 percent, was unchanged in March, and the number of unemployed
persons remained at 10.5 million. The number of unemployed persons who
had been jobless for 27 weeks or more was little changed (3.7 million).
These individuals accounted for 35.8 percent of the unemployed.
Both the civilian labor force and total employment increased in
March. The labor force participation rate (63.2 percent) and the
employment-population ratio (58.9 percent) changed little over the
month.
Among persons who were neither working nor looking for work in
March, 2.2 million were classified as marginally attached to the labor
force, little changed from a year earlier. (These individuals had not
looked for work in the 4 weeks prior to the survey but 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 that no jobs were available for them, edged down
over the year to 698,000 in March.
In summary, employment rose by 192,000 in March, and the
unemployment rate was unchanged at 6.7 percent.
My colleagues and I now would be glad to answer your questions.
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