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S. HRG. 109–687

THE EMPLOYMENT SITUATION: FEBRUARY 2006

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

MARCH 10, 2006

Printed for the use of the Joint Economic Committee

(

(II)

JOINT ECONOMIC COMMITTEE

[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, Chairman

PAUL RYAN, Wisconsin

PHIL ENGLISH, Pennsylvania

RON PAUL, Texas

KEVIN BRADY, Texas

THADDEUS G. MCCOTTER, Michigan

CAROLYN B. MALONEY, New York

MAURICE D. HINCHEY, New York

LORETTA SANCHEZ, California

ELIJAH CUMMINGS, Maryland

SENATE

ROBERT F. BENNETT, Utah, Vice Chairman

SAM BROWNBACK, Kansas

JOHN SUNUNU, New Hampshire

JIM DEMINT, South Carolina

JEFF SESSIONS, Alabama

JOHN CORNYN, Texas

JACK REED, Rhode Island

EDWARD M. KENNEDY, Massachusetts

PAUL S. SARBANES, Maryland

JEFF BINGAMAN, New Mexico

CHRISTOPHER J. FRENZE, Executive Director

CHAD STONE, Minority Staff Director

(III)

C O N T E N T S

OPENING STATEMENT OF MEMBERS

Hon. Jim Saxton, Chairman, a U.S. Representative from New Jersey ............... 1

WITNESSES

Statement of Hon. Kathleen P. Utgoff, Commissioner, Bureau of Labor Statistics, accompanied by John Galvin, Associate Commissioner for Employment

and Unemployment Statistics; and John Greenlees, Associate Commissioner

for Prices and Living Conditions ........................................................................ 2

SUBMISSIONS FOR THE RECORD

Prepared statement of Representative Jim Saxton, Chairman ........................... 8

Prepared statement of Senator Jack Reed, Ranking Minority Member ............. 9

Prepared statement of Hon. Kathleen P. Utgoff, Commissioner, together with

Press Release No. 06-396, entitled, ‘‘The Employment Situation: February

2006,’’ Bureau of Labor Statistics, Department of Labor ................................. 10

(1)

THE EMPLOYMENT SITUATION:

FEBRUARY 2006

FRIDAY, MARCH 10, 2006

CONGRESS OF THE UNITED STATES, JOINT ECONOMIC COMMITTEE, Washington, DC.

The Committee met, pursuant to notice, at 9:30 a.m., in room

2212, Rayburn House Office Building, Hon. Jim Saxton (Chairman

of the Committee) presiding.

Present: Representative Saxton.

Staff present: Chris Frenze, Robert Keleher, Brian

Higginbotham, Colleen Healy, Katie Jones, Chad Stone, Matt

Salomon and Nan Gibson.

OPENING STATEMENT OF HON. JIM SAXTON, CHAIRMAN, A

U.S. REPRESENTATIVE FROM NEW JERSY

Chairman Saxton. Good morning. Commissioner Utgoff, it is a

pleasure to welcome you once again to testify before the Joint Economic Committee.

The economic figures released today reflect more good news for

American workers. According to the payroll survey, 243,000 jobs

were created during the month of February. The level of the diffusion index shows that job gains were widespread last month. According to the household survey, the unemployment rate at 4.8 percent was statistically unchanged.

The U.S. economy has created 5 million jobs since August of

2003. The strength of the economy since 2003 has led to sustained

job growth and downward pressure on unemployment. The resilience and flexibility of the economy have overcome a number of serious shocks, most recently the hurricanes of last year.

The pick-up in economic growth since 2003 is explained by a rebound in investment activity. The bursting of the stock market and

technology bubbles in the first quarter of 2000 had exposed a lot

of bad investments. These investments took years to liquefy and

had a negative effect on investment. Falling investment was a drag

on economic growth and undermined the early expansion period.

In 2003, the new policy mix caused a sharp rebound in investment activity. The combination of low interest rates set by the Fed,

together with increased tax for investment, led to a sustained upward trend in investment that boosted economic and employment

growth. The result is that the economic expansion is healthy, and

the outlook is good.

In a recent policy report to Congress, the Fed noted that, quote,

‘‘The U.S. economy delivered a solid performance in 2005.’’ FurtherVerDate 11-MAY-2000 09:14 Jan 08, 2007 Jkt 030053 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 C:\DOCS\30053.TXT DianeA PsN: DianeA
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more, the Fed observed that the U.S. economy should continue to

perform well in 2006 and 2007. The Fed, along with a number of

private and Government agencies, expects economic growth in 2006

to be about 31⁄2 percent. The economic growth will continue to expand employment and further reduce unemployment.

[The prepared statement of Representative Saxton appears in the

Submissions for the Record on page 8.]

Chairman Saxton. At this time I would like to ask unanimous

consent that Senator Reed’s statement be included in the record.

He had fully intended to be here today, but another hearing on the

Senate side, which was originally scheduled for 10, was moved forward to 9:30, so he will be unable to be here.

[The prepared statement of Senator Reed appears in the Submissions for the Record on page 9.]

Chairman Saxton. Commissioner Utgoff, we are ready for your

testimony.

STATEMENT OF HON. KATHLEEN P. UTGOFF, COMMISSIONER,

BUREAU OF LABOR STATISTICS, ACCOMPANIED BY JOHN

GALVIN, ASSOCIATE COMMISSIONER FOR EMPLOYMENT

AND UNEMPLOYMENT STATISTICS; AND JOHN GREENLEES,

ASSOCIATE COMMISSIONER FOR PRICES AND LIVING

CONDITIONS

Commissioner Utgoff. Mr. Chairman, I appreciate this opportunity to comment on the employment and unemployment data we

released this morning.

Nonfarm payroll employment rose by 243,000 in February, and

the unemployment rate was little changed at 4.8 percent. February’s employment increase reflected gains in construction, mining, and several service-producing industries.

Within the goods-producing sector, construction employment increased by 41,000 in February following another sizable gain in

January. Over the past 12 months, job growth in construction has

totaled 346,000. In February, employment continued to rise in mining, mainly in support activities, especially for those for oil and gas

operations.

Manufacturing employment overall was virtually unchanged in

February. There were, however, offsetting movements in several industries. The largest job losses were in motor vehicles and parts

and primary metals. Job gains occurred in machinery, petroleum

products, and computers and electronic products. The manufacturing workweek and factory overtime each rose by 1/10 of an hour.

Over the month, financial activities added 22,000 jobs, reflecting

increases in depository institutions and in insurance carriers.

Health care employment expanded by 18,000, with continued

growth in hospitals, doctors’ offices and home health care. Professional and business services, private education, food services and

drinking places, and government also had job gains in February.

Average hourly earnings for private production or nonsupervisory

workers rose by 5 cents in February, following increases of 7 cents

in both December and January. Over the year, hourly earnings increased by 3.5 percent. The average workweek was down by 1/10

of an hour in February to 33.7 hours.

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Turning to data from the household survey, both the number of

unemployed persons and the unemployment rate were little

changed over the month. The number of persons employed for 27

weeks or more returned to its December level of 1.4 million after

declining in January. These long-term unemployed constituted 19.0

percent of all unemployed persons, down slightly from a year earlier.

Total employment in the labor force continued to trend up in

February. However, the employment-to-population ratio has held

steady in recent months, and the labor force participation rate has

shown little movement for about 21⁄2 years.

This month we again report on the labor force status of survey

respondents who evacuated from their homes due to Hurricane

Katrina. The data are derived from a special set of questions that

have been included in the household survey since October to gather

information about evacuees. The estimates do not account for all

persons who evacuated from their homes due to Hurricane Katrina.

Information is not gathered on those evacuees who remain outside

the scope of the survey, such as those currently living in hotels or

shelters.

The February data indicate that there were about 1 million persons age 16 and over who evacuated from their August residences

due to Hurricane Katrina. In February, about one-half of the evacuees were back in the homes they vacated in August. Among

Katrina evacuees identified in February, 58.1 percent were in the

labor force, and their unemployment rate was 12.6 percent. Unemployment rates were much lower for those evacuees who returned

home than for those evacuees who had not.

To summarize February’s labor market data, nonfarm payroll

employment rose by 243,000, and the unemployment rate was little

changed at 4.8 percent. Payroll employment has increased by 2.1

million over the year, and the unemployment rate is down by half

a percentage point.

My colleagues and I would now be glad to respond to your questions.

[The prepared statement of Commissioner Utgoff, together with

Press Release No. 06-396, appears in the Submissions for the

Record on page 10.]

Chairman Saxton. Commissioner, thank you very much.

Commissioner, let me ask this question. You mentioned that

there was a slight change in the unemployment rate. It actually increased from 4.7 to 4.8 percent.

Commissioner Utgoff. Yes.

Chairman Saxton. Is that a statistically significant change?

Commissioner Utgoff. No, it was not.

Chairman Saxton. Are there any special factors distorting or

overstating the payroll job gains reported this month?

Commissioner Utgoff. No. We haven’t identified any special

factors.

Chairman Saxton. You mentioned Katrina a minute ago. Has

the aftermath of Katrina continued to have some effect on the economy generally, or is that more of a regional phenomenon?

Commissioner Utgoff. I wouldn’t know about the economy in

general, but the unemployment rate in Louisiana is quite low, and

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about half of the people who evacuated from their homes in

Katrina have returned, and they have an unemployment rate of 4.8

percent.

Chairman Saxton. You mentioned that the evacuees who have

not returned home have a higher unemployment rate; is that right?

Commissioner Utgoff. Yes; 22.6 percent.

Chairman Saxton. And they are in Houston and in other

places?

Commissioner Utgoff. Yes.

Chairman Saxton. And continue to live in temporary housing?

Commissioner Utgoff. Yes.

Chairman Saxton. Does the current level of the diffusion index

indicate that payroll job gains in February were fairly widespread?

Commissioner Utgoff. Yes, it does.

Chairman Saxton. Were there any sectors of the economy

where job creation was significantly higher than others?

Commissioner Utgoff. In construction and in several service industries.

Chairman Saxton. You mention construction. Is that business

construction or residential construction? Do you have those indicators?

Commissioner Utgoff. Most of the increase was in specialty

trade.

Mr. Galvin. I think our analysis indicates most of the increase

was in residential construction.

Chairman Saxton. I am curious. There has been some evidence

of cooling in the real estate sector. Do your statistics shed any light

on what is happening with real estate generally, real estate construction?

Commissioner Utgoff. As Mr. Galvin said, previous to this,

most of the increase had been in residential construction, and last

month it was in—much more in heavy construction. I should also

note that for many months the increase in—there was a marked

increase in mortgage bankers and brokers, and for the last 2

months we have seen a flattening of that.

Chairman Saxton. So your figures on residential construction

would tend to bolster the notion that the real estate market has

cooled some?

Commissioner Utgoff. The very limited evidence that we have

would.

Chairman Saxton. January was the warmest January in recorded history, and some attributed the job growth in January to

climatological factors, warm weather. Was there anything about

February’s weather that you can attribute to the very healthy job

growth that we saw?

Commissioner Utgoff. There was a snowstorm in the Northeast, but it occurred on a Saturday and Sunday, and it was the

kind of snow that was easily removable, so we didn’t see anything

in the data that would indicate that there were special weather factors in February.

Chairman Saxton. What do payroll job gains suggest about the

strength of commission growth in the first quarter of 2006, which

many forecasts expect to be strong? Are the payroll job gains consistent with solid economic growth?

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Commissioner Utgoff. The payroll job gains are very consistent

with solid economic growth. I can’t predict what will happen for the

rest of the quarter. There is 1 month left in the quarter.

Chairman Saxton. The last quarter of last year was weaker

than we expected. Has there been any change in the rate of growth

as measured by your statistics in the last quarter of last year?

Commissioner Utgoff. Compared to the first quarter of this

year?

Chairman Saxton. No. The last quarter of last year was 1.6

percent GDP growth, and we expected that figure to be adjusted.

Was there an adjustment?

Commissioner Utgoff. Yes, there was an adjustment. From the

preliminary announcement of GDP to the revised announcement,

there was an increase in measured GDP.

Chairman Saxton. Mr. Frenze tells me that it was adjusted

from 1.1 percent to 1.6 percent. Is that correct?

Commissioner Utgoff. That is correct.

Chairman Saxton. Thank you.

Do you have any indicators as to what we can expect? Can we

expect a rebound during the first quarter of this year?

Commissioner Utgoff. I can’t predict that.

Chairman Saxton. OK. Thank you.

What can you tell us about the revisions in the recent payroll

data?

Commissioner Utgoff. They were very small.

Chairman Saxton. And is the gain in February payroll employment statistically significant?

Commissioner Utgoff. Yes, it is.

Chairman Saxton. How do we account for the slight tick up in

the unemployment rate while we see such healthy job growth?

Commissioner Utgoff. Household survey and the payroll survey, as you know, come from different sources, and the unemployment rate has to do with participation and a number of other factors so that there can be an increase in the unemployment rate.

There really wasn’t an increase. It was the same. So that what

happened was the employment-to-population ratio stayed the same,

and the unemployment rate stayed the same.

I have to say the answer is every month household and payroll

series can show differences, and in this month they do that.

Chairman Saxton. Of course, I ask you questions, and you say

that you can’t speculate, but let me just ask one anyway. With the

trend in job creation being, now, 5 million jobs since August of

2003, and seeing good job growth this month, I might be able to

anticipate some downward trends in the unemployment rate in the

months ahead, couldn’t I?

Commissioner Utgoff. Right. Right. Certainly that is your

right.

Chairman Saxton. Seasonal adjustment factors affected the

February numbers? And if so, which sectors are affected most significantly by these seasonals?

Commissioner Utgoff. It is going to take me a minute.

Mr. Galvin. It is not really a very seasonal month. Normal seasonal movements are about 600,000 at the total nonfarm level. And

the sector with the biggest normal seasonal movement looks to be

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education and health services. But we did not see anything unusual from a seasonal perspective this month.

Chairman Saxton. And are there any other particular statistical anomalies affecting this month’s payroll or household numbers?

Commissioner Utgoff. We don’t see any.

Chairman Saxton. OK. I thank you for being here this morning. We always enjoy it when you come with good news and good

numbers. And we will look forward to seeing you in the months

ahead. Thank you very much.

[Whereupon, at 9:49 a.m., the Joint Committee was adjourned.]

(7)

Submissions for the Record

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9

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PREPARED STATEMENT OF HON. KATHLEEN P. UTGOFF, COMMISSIONER,

DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS

Mr. Chairman and Members of the Committee:

I appreciate this opportunity to comment on the employment and unemployment

data that we released this morning.

Nonfarm payroll employment rose by 243,000 in February, and the unemployment

rate was little changed at 4.8 percent. February’s employment increase reflected

gains in construction, mining, and several service-providing industries.

Within the goods-producing sector, construction employment increased by 41,000

in February, following another sizeable gain in January. Over the past 12 months,

job growth in construction has totaled 346,000. In February, employment continued

to rise in mining, mainly in support activities, especially those for oil and gas operations.

Manufacturing employment overall was virtually unchanged in February. There

were, however, offsetting movements in several industries. The largest job losses

were in motor vehicles and parts and primary metals. Job gains occurred in machinery, petroleum products, and computer and electronic products. The manufacturing

workweek (at 41.0 hours) and factory overtime (at 4.6 hours) each rose by 0.1 hour.

Over the month, financial activities added 22,000 jobs, reflecting increases in depository institutions and in insurance carriers. Health care employment expanded

by 18,000, with continued growth in hospitals, doctors offices, and home health care.

Professional and business services, private education, food services and drinking

places, and government also had job gains in February.

Average hourly earnings for private production or nonsupervisory workers rose by

5 cents in February, following increases of 7 cents in both December and January.

Over the year, hourly earnings increased by 3.5 percent. The average workweek was

down by 0.1 hour in February to 33.7 hours.

Turning to data from the household survey, both the number of unemployed persons (7.2 million) and the unemployment rate (4.8 percent) were little changed over

the month. The number of persons unemployed for 27 weeks or more returned to

its December level of 1.4 million, after declining in January. These long-term unemployed constituted 19.0 percent of all unemployed persons, down slightly from a year

earlier.

Total employment and the labor force continued to trend up in February. However, the employment-population ratio has held steady in recent months, and the

labor force participation rate has shown little movement for about 21⁄2 years.

This month, we again report on the labor force status of survey respondents who

evacuated from their homes due to Hurricane Katrina. The data are derived from

a special set of questions that have been included in the household survey since October to gather information about evacuees. The estimates do not account for all persons who evacuated from their homes due to Hurricane Katrina. Information is not

gathered on those evacuees who remain outside the scope of the survey, such as

those currently living in hotels or shelters.

The February data indicate that there were about 1 million persons age 16 and

over who evacuated from their August residences due to Hurricane Katrina. In February, about one-half of the evacuees were back in the homes they vacated in August. Among Katrina evacuees identified in February, 58.1 percent were in the labor

force, and their unemployment rate was 12.6 percent. Unemployment rates were

much lower for those evacuees who had returned home (4.8 percent) than for those

evacuees who had not (22.6 percent).

To summarize February’s labor market data, nonfarm payroll employment rose by

243,000, and the unemployment rate was little changed at 4.8 percent. Payroll employment has increased by 2.1 million over the year, and the unemployment rate

is down by about half a percentage point.

My colleagues and I now would be glad to respond to your questions.

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