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S. HRG. 108–781

THE EMPLOYMENT SITUATION: SEPTEMBER 2004

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

OCTOBER 8, 2004

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]

SENATE

ROBERT F. BENNETT, Utah, Chairman

SAM BROWNBACK, Kansas

JEFF SESSIONS, Alabama

JOHN SUNUNU, New Hampshire

LAMAR ALEXANDER, Tennessee

SUSAN COLLINS, Maine

JACK REED, Rhode Island

EDWARD M. KENNEDY, Massachusetts

PAUL S. SARBANES, Maryland

JEFF BINGAMAN, New Mexico

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, Vice Chairman

PAUL RYAN, Wisconsin

JENNIFER DUNN, Washington

PHIL ENGLISH, Pennsylvania

RON PAUL, Texas

PETE STARK, California

CAROLYN B. MALONEY, New York

MELVIN L. WATT, North Carolina

BARON P. HILL, Indiana

PAUL A. YOST, Executive Director

WENDELL PRIMUS, Minority Staff Director

(III)

C O N T E N T S

OPENING STATEMENT OF MEMBERS

Senator Robert F. Bennett, Chairman, U.S. Senator from Utah ........................ 1

Representative Jim Saxton, Vice Chairman, U.S. Representative from New

Jersey .................................................................................................................... 2

Representative Pete Stark, Ranking Minority Member, U.S. Representative

from New Jersey .................................................................................................. 3

Representative Carolyn Maloney, U.S. Representative from New York ............. 4

WITNESSES

Statement of Kathleen P. Utgoff, Commissioner, Bureau of Labor Statistics,

U.S. Department of Labor ................................................................................... 7

SUBMISSIONS FOR THE RECORD

Prepared statement of Senator Robert F. Bennett, Chairman ............................ 21

Prepared statement of Representative Jim Saxton, Vice Chairman ................... 21

Prepared statement of Representative Pete Stark, Ranking Minority Member 22

Prepared statement of Kathleen P. Utgoff, Commissioner, Bureau of Labor

Statistics, U.S. Department of Labor ................................................................. 23

Chart entitled ‘‘Bush Economic Record: Only Administration in 70 Years

With Decline in Private Sector Jobs’’ ................................................................. 49

Chart entitled ‘‘Decline in Nonfarm Payrolls in the Current and Previous

Cycles’’ ................................................................................................................... 50

(1)

THE EMPLOYMENT SITUATION: SEPTEMBER

2004

FRIDAY, OCTOBER 8, 2004

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

The Committee met at 9:30 a.m., in room 628 of the Dirksen

Senate Office Building, the Honorable Robert F. Bennett, chairman

of the Joint Economic Committee, presiding.

Senators present: Senators Bennett and Sarbanes.

Representatives present: Saxton, Stark, and Maloney.

Staff Present: Reed Garfield, Ike Brannon, Mike Ashton, Colleen J. Healy, Chris Frenze, Robert Keleher, Brian Higginbotham,

Wendell Primus, Chad Stone, and Matt Salomon.

OPENING STATEMENT OF SENATOR ROBERT F. BENNETT,

CHAIRMAN, U.S. SENATOR FROM UTAH

Chairman Bennett. The hearing will come to order. Commissioner Utgoff, we welcome you again, and appreciate your persistence in coming back again and again to these hearings.

Today’s unemployment situation report from the Bureau of Labor

Statistics confirms the continued improvement of the country’s job

market. Today’s announcement of 96,000 new jobs in September

means 13 straight months of job growth.

Hurricanes during the month of September appeared, however,

to have held that growth down below what some of us had hoped

for.

Since last August, we’ve created nearly 1.8 million new jobs, and,

according to the household survey, employment has increased by

more than two million since last August.

The unemployment rate has remained steady at 5.4, which is

well below its peak of 6.3 last year, and below the average unemployment rates of all the 1970’s, the 1980’s, and the 1990’s.

I’m interested to notice that the BLS announced today that total

payroll employment through March 2004, was underestimated by

approximately 236,000 jobs, based on its estimate of the next

benchmark revision to the payroll survey.

This means that the actual number of jobs created, when you

add the underestimation in the period described, is 2 million and

not 1.8.

In addition to its monthly revisions to payroll employment, BLS

conducts a standard annual revision that brings its estimates of

payroll employment in line with State unemployment insurance tax

reports, and using these data, past estimates of payroll employVerDate 03-FEB-2003 14:12 May 11, 2005 Jkt 098627 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 D:\JEC\98627.TXT SSC2 PsN: SSC2
2

ment are revised by BLS to more accurately reflect the employment

situation in the United States, and I’m sure we’ll discuss those revisions during the hearing.

Aside from today’s reports, other indicators also confirm continued economic expansion. Americans are going back to work, interest rates and inflation are low, business investment and consumer

spending is strong, business activity is increasing, and the home

ownership rate is at a record high.

Unemployment rates in the past year have fallen in 45 states. I

know that’s not consolation to those who live in the five where it

has not, but overall, that indicates that the recovery is continuing

to grow.

So, I look forward to discussing today’s news with you, and we

welcome you. Now we’ll hear from the Vice Chairman, Mr. Saxton,

and then the Ranking Member, Mr. Stark.

[The prepared statement of Senator Bennett appears in the Submissions for the Record on page 21.]

Vice Chairman Saxton. Mr. Chairman, thank you. Before I

read my opening statement, let me just thank you for the great

leadership you’ve shown here for the last couple of years. We know

that the Chairmanship goes back and forth between the House and

the Senate, so let me just thank you for the very professional job

that you’ve done over the past couple of years.

This is likely the last employment hearing that we’ll have in this

session, and so I just wanted to take a minute to note the fine job

that you and your staff have done in leading us here for the last

couple of years. Thank you very much.

Chairman Bennett. Thank you for the kind words.

OPENING STATEMENT OF REPRESENTATIVE JIM SAXTON,

VICE CHAIRMAN, U.S. REPRESENTATIVE FROM NEW JERSEY

Vice Chairman Saxton. Commission Utgoff, it’s a pleasure to

join in welcoming you before the Committee once again. The September employment data have been affected by four hurricanes

that pounded the United States in August and September.

Even so, according to the payroll survey, employment increased

by 96,000 jobs in September, continuing its upward trend. Over the

past 13 months, payroll employment has increased by about 1.8

million jobs.

In addition, today the BLS announced that the benchmark revision will add about 236,000 jobs to payroll employment for March

2004. According to the household survey, the unemployment rate

has been trending downward, and now stands at 5.4 percent, and,

Mr. Chairman, I’m proud to say that the State of New Jersey has

an unemployment rate of just 4.8 percent, and we’re enjoying that

back home.

Other economic data continue to show healthy economic growth

over the last four quarters. GDP growth has been 4.8 percent, on

average, and a key element in the acceleration of economic growth

over the last year has been the rebound in investment.

Fixed business investment has risen at a rate of 11.6 percent

over the last four quarters, and this has been broadened and accelerated the economic expansion.

3

The pivotal reason for this acceleration in investment and economic growth is the tax relief for investment enacted in 2003. Tax

relief and the low interest rates resulting from Federal Reserve policy have made major contributions to the positive economic situation we see today.

Furthermore, both the Blue-Chip Consensus and the Federal Reserve forecast that healthy economic growth will continue. Thank

you, Mr. Chairman.

[The prepared statement of Representative Saxton appears in the

Submissions for the Record on page 21.]

Chairman Bennett. Thank, you, sir. Again, I appreciate the

kind words. I have enjoyed being the Chairman, and I look forward

to your Chairmanship in the next Congress. I know Congressman

Stark looks forward to his, but we will see what happens. One way

or the other, I hope to be the Vice Chairman next year.

Congressman Stark.

OPENING STATEMENT OF REPRESENTATIVE PETE STARK,

RANKING MINORITY MEMBER, U.S. REPRESENTATIVE FROM

CALIFORNIA

Representative Stark. Mr. Chairman, let me join in, first, if I

may, by thanking Commissioner Utgoff, who has to troop up here

and bear with us frequently during her career. She does it with

grace and charm, and she is able to keep her wits about her and

be nonpartisan and very professional. We appreciate you and your

staff and the good work you do for us.

And as a member of the Minority, my good friend, Jim Saxton,

with whom I am going to battle fiercely for the next 4 weeks to see

which one of us might chair this Committee next term, it’s been a

pleasure working with Jim, and, as always, when he chaired our

Committee.

I guess I’d have to say for you and me, Senator, that I’d advise

the audience that if we get much closer together, they ought to reserve one of the puppies.

[Laughter.]

Representative Stark. The similarities between me and the

Senator are amazing. We both learned to steal money from the

public, he, by taking old Playboy calendars, taking the pictures off,

putting them under his bed and selling the remainder at an outrageous price; I did it by lending people back their own money at

far more than I paid them to keep it in my institution. That’s what

we learned about economics.

But we have been blessed on both sides by staff. Your staff, Mr.

Chairman, has been accommodating, patient, and most willing to

work closely with us, and we appreciate it, and, needless to say,

the staff on our side, both new to this session and some of the old

pros that, as it were, I think has helped us. I know Congresswoman Maloney joins me in saying that we have enjoyed having

the support from our staff.

Having said that, we have spent 2 years, either trying to make

a silk purse out of sows’ ears, or sows ears out of silk purses, depending on which way the political motives have driven us to take

the very professional information that we receive from the Commissioner and spin it to our own ends.

4

I’ve often accused the Senator of basically solving the economic

problems the same way that the President wants to solve the

health problems, and that’s just merely making normal 105 degrees, and then a whole lot more people would be well in this country, and so we can’t change it.

But I think that we would all agree that we’d like to see more

jobs. I’m disappointed that we haven’t. There are some more, and

a little bit of help is always appreciated, but we’ve had a long

slump, and we’re going to have a lot of disagreement, and you’re

going to hear a lot about it in the coming debates and coming conversations in the next 4 weeks as to how best to improve it.

I can only ask the Chair, as I’m sure he will, to join with me in

hoping that we are witnesses to much better news in the next Congress. Thank you very much. I’d like, of course, to put this beautifully prepared statement that the staff has written for me, without objection, into the record.

Chairman Bennett. Without objection, it shall be put into the

record.

[The prepared statement of Representative Stark appears in the

Submissions for the Record on page 22.]

Representative Stark. Thank you, Mr. Chairman.

Chairman Bennett. You remind me of the first time Madeline

Albright appeared before the Senate Appropriations Committee.

She said, Mr. Chairman, I have a prepared statement and according to the people who wrote it, it’s brilliant.

OPENING STATEMENT OF REPRESENTATIVE CAROLYN B.

MALONEY, U.S. REPRESENTATIVE FROM NEW YORK

Representative Maloney. Mr. Chairman, I actually have my

own statement, and I’d like to make it. I worked very hard on it.

But first I’d like to thank you very much for your leadership. I

look forward to the Chairmanship of Mr. Stark next year, but it is

always a pleasure to work with our colleagues, and I join you in

congratulating members of the staff on both sides of the aisle. This

is an important Committee. It’s one that, really, there should be

more focus on, because the strength of our country, part of it, is

our economy.

I would just like to say that these numbers show that September

job growth was considerably weaker than it was in August, and

only about two-thirds of what Wall Street and other economists

projected for this month.

And once again, I do believe that some in our Administration are

not acknowledging the true picture of the economy. Please do not

blame it on the weather. The Bureau of Labor Statistics said clearly that the hurricanes did not change the employment situation

materially.

This is really the result of bad public policy. The record on jobs

of this Administration remains the worst of any President since

Hoover. Despite a year of job gains, there is still a substantial jobs

deficit on President Bush’s watch.

Through August, total non-farm payrolls were down almost a

million jobs; private payrolls were down 1.7 million jobs, and manufacturing payrolls were down 2.7 million jobs. That’s an astonishing loss.

5

Nothing we have learned in today’s report changes this picture.

In fact, it shows that job growth is considerably slower than what

the Administration had led us to expect.

Job growth of less than two million in the past 13 months may

seem like a lot compared with the earlier dismal record in the Bush

Administration, but it is quite weak for an economic recovery and

barely enough to keep up with growth in the working-age population.

The unemployment rate of 5.4 percent is unchanged from last

month, and down from its peak level last summer, but it is still too

high, and it is 1.2 percentage points higher than it was when President Bush took office.

Furthermore, other measures continue to show a weaker labor

market than might be indicated by the unemployment rate.

Through August, labor force participation was down 1.2 percentage

points from what it was in January 2001.

If those people who have left the labor force were counted as

looking for work, the unemployment rate would be substantially

higher. When the number of people who want a job, but are not actively searching for work, and the number of people who are forced

to work part-time because of the weak economy, are taken into account, the unemployment rate is really 9.5 percent.

I would say that most of these people are women who are juggling taking care of families and working part-time, needing that

part-time work to help their families.

Wages have grown only about enough to keep up with inflation

over the past year. Since August 2003, real, inflation-adjusted average hourly earnings are down .2 percentage points; real average

weekly earnings are up .4 percent. I would say that these numbers

show that America is moving in two directions—richer and poorer.

Since early 2001, corporate profits have increased 48 percent,

while workers’ wages have only increased 10 percent. The poverty

figures are tremendously troubling to me and equally alarming,

where 4.3 million more people are living in poverty today than

were living in poverty when President Bush took office. This is as

though an entire segment of our population has become a Third

World country, and growing.

The average increase in the poverty rate during the George W.

Bush Administration is second only to that during his father’s Administration. It contrasts sharply to the declines in the poverty

rate during the Clinton and Kennedy-Johnson Administrations

when there was an active War on Poverty.

These figures are tremendously troubling. I would say they are

a disgrace, and the Administration is struggling to paint a rosy picture, at any cost, but they are closing their eyes to the harsh reality of the unemployment, the job deficit, and the growing number

of Americans living in poverty. Thank you.

Chairman Bennett. Thank you very much. Commissioner

Utgoff, welcome to a rehearsal of tonight’s debate.

[Laughter.]

Chairman Bennett. We’ll be happy to hear from you now.

6

STATEMENT OF KATHLEEN P. UTGOFF, COMMISSIONER; ACCOMPANIED BY JACK GALVIN, ASSOCIATE COMMISSIONER

FOR EMPLOYMENT AND UNEMPLOYMENT STATISTICS, AND

JOHN GREENLEES, ASSOCIATE COMMISSIONER, OFFICE OF

PRICES AND LIVING CONDITIONS, BUREAU OF LABOR STATISTICS, DEPARTMENT OF LABOR, WASHINGTON, DC

Commissioner Utgoff. Thank you very much, Mr. Chairman

and Members of the Committee.

First, I’d like to say I have with me, Jack Galvin, the Associate

Commissioner for Employment and Unemployment Statistics and

John Greenlees, the Associate Commissioner for Prices and Living

Conditions, who will help me with the numbers that you need.

Turning to the employment situation, non-farm payroll employment continued to trend up in September, increasing by 96,000.

The unemployment rate was unchanged at 5.4 percent.

Since August 2003, payroll employment has increased by 1.8 million. About 900,000, or half that gain, occurred in March, April,

and May of this year. Employment gains in the last 4 months have

totaled 405,000.

I know that many people have speculated about the effect of the

recent hurricanes on the September payroll employment data. Four

hurricanes struck the United States during August and September—Charlie, in mid-August; Frances, early in September;

Ivan, in mid-September; and Jeanne, late in the month.

This month, BLS and our State partners made extra efforts to

obtain data from our survey respondents in the hurricane-affected

states. As a result, our total response rate, even in the affected

states, was as good as or better than it normally is for first publication.

Still, our ability to gauge the impact on September’s growth is

limited, for reasons that I will discuss in a minute. First, let me

note how our payroll survey treats employment and businesses

that are affected by weather.

For weather conditions to reduce the estimate of payroll employment, employees have to be off work for an entire pay period and

not paid for the time that was missed. BLS’ review of the sample

data for September in the hurricane affected areas, indicates that

there was a negative impact on employment in those states. We

will know more about the local effects when the official State estimates are available in 2 weeks.

There were negative employment effects on those firms that were

unable to operate, or were operating at a reduced capacity during

the survey period. However, other firms expanded their employment in response to the storms.

There were cleanup and rebuilding efforts following Hurricanes

Charlie and Frances. In addition, some firms adjacent to the hardhit areas, likely added workers to help accommodate evacuees from

Hurricane Ivan.

Overall, we do not believe that the net result of these factors materially changes the national employment situation for September,

but we cannot precisely quantify the weather effects.

In September, job gains occurred in a few service-providing industries. Employment in professional and technical services rose by

24,000.

7

Since August 2003, this industry has added 205,000 jobs. Temporary help employment was up by 33,000 in September. Employment in real estate and rental and leasing services grew by 15,000,

following an increase of 11,000 in August.

Utilities added 2,000 jobs over the month. Within healthcare

services, employment in doctors’ offices rose by 8,000 in September.

Other healthcare industries, however, showed little or no employment growth over the month.

Telecommunications employment fell by 9,000 in September.

Since March 2001, the telecommunications industry has shed

302,000 jobs.

In the goods-producing sector, manufacturing employment edged

down in September, reflecting small, but widespread declines

among component industries. Employment was little changed over

the month in both construction and mining.

Average hourly earnings rose by 3 cents over the month, and

have increased by 2.4 percent over the year. Average hours for private production or non-supervisory workers, were unchanged in

September.

Manufacturing hours declined by one-tenth of an hour. Factory

overtime was unchanged.

Turning now to measures from our survey of households, the unemployment rate held at 5.4 percent in September. This is down

from its most recent high of 6.3 percent in June 2003.

Most of this decline occurred in the second half of last year. The

labor force participation rate was 65.9 percent in September. It has

been at or near this level since late last year. Most other household

survey measures showed little or no change over the month.

Before closing, I would like to mention the upcoming benchmark

revision to the payroll survey. Each fall, we announce the preliminary estimate of the next benchmark revision to payroll employment.

The benchmark revision is a standard annual procedure that adjusts the payroll survey’s sample-based employment estimates, to

incorporate universe employment counts that are derived largely

from unemployment insurance tax records.

Preliminary tabulations of the first quarter of 2004 employment

from State unemployment insurance tax reports indicate that the

estimate of total non-farm payroll employment will require an upward revision of approximately 236,000 or two-tenths of 1 percent

for the March 2004 reference month.

This is slightly below the historical average for benchmark revisions over the past decade, which have been plus or minus threetenths of 1 percent.

In summary, payroll employment continued a trend up in September, and the unemployment rate was unchanged at 5.4 percent.

My colleagues and I would be glad to answer any of your questions.

[The prepared statement of Commissioner Utgoff appears in the

Submissions for the Record on page 23.]

Chairman Bennett. Thank you very much. My memory from

the time I was in private business was fascinated by Congressman’s Stark’s description of what it was we did. I think we should

try that. It sounded like a wonderful idea.

[Laughter.]

8

Chairman Bennett. The word, ‘‘material,’’ as used by accountants, can mean different things to different people. I remember in

a small firm that I ran, ‘‘material’’ would be something, anything

over $10,000, and then when I was running a firm that ended up

on the New York Stock Exchange, why, ‘‘material’’ would be anything over a million dollars.

You say that the hurricane had an effect; you can’t quantify it

exactly, but you have decided that it was not material. Would

20,000 jobs be considered immaterial in the overall scheme of

things?

Commissioner Utgoff. In the overall scheme of things, that

would not be considered a statistically different number.

Chairman Bennett. But that’s my point. We’re dealing with so

many people here that 20,000, 30,000 and so on, would be appropriately immaterial in terms of the overall direction.

Commissioner Utgoff. Right, not material, not only in terms of

total employment, but not material in terms of recent growth

trends.

Chairman Bennett. Yes.

Commissioner Utgoff. Recent growth trends are roughly in line

with this month’s trend.

Chairman Bennett. Yes, and that’s—what you have said is absolutely appropriate. Unfortunately, again, this is taking place in

the context of a political election, and that number of jobs, politically, is hugely material, because we are under the 100,000 figure,

and we’re going to hear a lot about that in the debate tonight.

If only we had been over 100,000, or 120,000, which would have

been what Wall Street was expecting, and so on, the debate would

be very different tonight.

The point I want to make is that the hurricane had an effect; it

had an effect that probably—that undoubtedly is not material in

the overall direction of employment and the analysis you’re doing,

but in the political atmosphere, it can be talked about a great deal.

Now, the participation rate, you talk about the participation rate.

Isn’t this affected in September by 16- to 19-year olds who go back

to school?

Commissioner Utgoff. The participation rate is seasonally adjusted, so the going back to school should not affect the participation rate that we report in our monthly estimates.

Chairman Bennett. And you say this participation rate is—I

say that because the comment has been made, how much it is

down. It is, this participation rate, is in line with previous Septembers?

Commissioner Utgoff. Yes.

Chairman Bennett. OK. Let’s go back to previous Septembers,

talking about that as our benchmark. If we go back to 1976, the

highest level of job growth as 120,000 in 1999, Hurricane Floyd,

and the September average is 41,000. Doesn’t this suggest that

hurricanes had a bigger effect than maybe you’re talking about?

Commissioner Utgoff. I’m sorry, Mr. Chairman, but I’m not familiar with the statistics that you are citing, so I cannot comment

on them.

We have looked at the household survey, asked questions about

whether you were out of work because of weather or your hours

9

were reduced because of weather. That did show an effect, but it

does not account for the jobs that were created by the hurricane,

also, so that when we talk about the number being not material,

we take both of those into account.

Chairman Bennett. Right. Now, again, I understand that, but

just for the record, my staff informs me that 205,000 people in the

household survey reported they missed work in September because

of bad weather. Does that number——

Commissioner Utgoff. That’s correct, yes.

Chairman Bennett. So that is a correct number. So, to take

numbers out of the air, but to illustrate the point, if 100,000 people

found work because of the hurricanes, that gap would not be material, but, again, in the political atmosphere, that would be a very

significant number. Is that within the realm of possibility? Do you

have a number of how many you think found work?

If you have 205,000 that reported they missed work because of

bad weather, do you have a number of those who——

Commissioner Utgoff. The difference would be 100,000.

Chairman Bennett. Oh, I understand that, but you don’t have

a number?

Commissioner Utgoff. No, we do not have a number.

Chairman Bennett. OK. Well, since we don’t have numbers,

that’s a politician’s paradise. We can now postulate any number we

want, and not be able to be contradicted.

I hope I have made my point, which is that the hurricane information, while in the language that you have to use, was not material; in fact, in the political situation, the hurricane had an effect.

Commissioner Utgoff. I understand that.

Chairman Bennett. All right, thank you.

Mr. Saxton.

Vice Chairman Saxton. Thank you, Mr. Chairman. Commissioner, you reported today that in addition to the jobs that were

created this month, you announced that the benchmark revision

will add about 236,000 jobs to payroll employment for the month

of March 2004.

Would you explain how this benchmark revision will affect the

measure of payroll employment through March 2004?

Commissioner Utgoff. When we report to you on a monthly

basis, the employment estimates are based on a large sample of

payroll records that are collected. Once a year, with a lag, we conduct a virtual census of all employment records from the unemployment insurance tax records and from other sources.

In January, with the February announcement of the January

numbers, we will change the reported level of employment to reflect that benchmark level, if that’s clear.

Vice Chairman Saxton. That means that the number of jobs

created will reportedly be increased?

Commissioner Utgoff. That’s right.

Vice Chairman Saxton. Will the benchmark revision be

wedged back to the previous 12 months, adding to employment levels for those months, as well?

Commissioner Utgoff. Yes.

10

Vice Chairman Saxton. How does the upward benchmark revision compare in size to previous revisions over the last, let’s say,

decade or so?

Commissioner Utgoff. It’s been a little smaller. The average revision is .3 percent and this is slightly smaller than that.

Vice Chairman Saxton. And how is the revision linked to unemployment insurance records?

Commissioner Utgoff. As I was saying earlier, we know what

to benchmark the monthly sample to through records filed by employers with the unemployment insurance system, so that they can

assess taxes and pay benefits to people.

So, there are ways this is used to get an estimate, a total estimate of payroll employment.

Vice Chairman Saxton. So, we have been using the number of

jobs created since the job creation began to look positive, of about

1.8 million jobs.

Commissioner Utgoff. Yes.

Vice Chairman Saxton. Including today’s numbers. How does

this revision affect that total job growth number?

Commissioner Utgoff. Well, the number will be wedged back

over a year’s period, and what you’re talking about is a period from

August until now. The number of jobs that was created over that

period, will be increased, but not by the full 236,000, by a fairly

high fraction of that.

Vice Chairman Saxton. Like what kind of a fraction? Is that

a fair question?

Commissioner Utgoff. I would say by at least three-quarters.

Vice Chairman Saxton. So——

Mr. Galvin. Seven-twelfths.

Chairman Bennett. Seven-twelfths, I am told.

Vice Chairman Saxton. Seven-twelfths, OK, so a little bit better than half, so we can use the—of the 236,000 jobs, we can use

120 or 130?

Commissioner Utgoff. Right, yes.

Vice Chairman Saxton. So, we’re getting close to 1.9 or 2 million jobs that have been created over the——

Commissioner Utgoff. Yes, that’s fair to say.

Vice Chairman Saxton. OK, thank you. Let me follow up on

the Chairman’s question, if I may, on the storms. We don’t need

to concentrate on this too much, but there is one aspect of it that

I would like to ask about.

We know that there were jobs lost because of the storms, and we

know there were some jobs created. Presumably, now that the

storms seem to be over the people who lost jobs will be regaining

those jobs, for the most part, and that the cleanup will continue

creating other jobs.

Do you expect that as the recovery efforts from the hurricanes

continue, that there will continue to be jobs created, and what effect are they likely to have on employment data?

Commissioner Utgoff. The BLS reports current data. We do

not make projections for the future.

Vice Chairman Saxton. You didn’t bring your crystal ball?

Commissioner Utgoff. No, no. We don’t even have one.

[Laughter.]

11

Vice Chairman Saxton. But wouldn’t it be fair to assume that

the cleanup effort will, in the months ahead, continue to cause people to be employed, and that that would add jobs to the payroll

number?

Commissioner Utgoff. I expect that the cleanup efforts will

continue.

[Laughter.]

Vice Chairman Saxton. Thank you very much.

[Laughter.]

Vice Chairman Saxton. Mr. Chairman, thank you.

Chairman Bennett. Thank you.

Mr. Stark.

Representative Stark. The sale of brooms will.

Commissioner, you say we’ve got about 1.8 million, and my good

friend, Mr. Saxton, would like to say 1.9 million——

Vice Chairman Saxton. Maybe even two million.

Representative Stark. Maybe even two million, but that would

run us about 135,000 to 140,000 jobs a month for the past 13

months. I’ve got my shoes and socks on, so I can’t do that math,

but I think I’m in the ball park there.

So if we have created 135,000 to 140,000 jobs, what do we need

just to keep pace with the growth in the working-age population for

that same 13-month period?

Commissioner Utgoff. Recently, people have quoted a number

of 150,000, but there has been some recent comment that the

growth in the labor force is expected to slow, so that the number

to keep pace with the growth in the population will be less than

the figure that’s typically used.

Representative Stark. Less than the 135,000 or 140,000? I

mean, what’s the order of magnitude that that would change?

What’s meaningful?

Commissioner Utgoff. What’s meaningful?

Representative Stark. And material.

Commissioner Utgoff. What’s material? I cannot recall the

exact number that’s used in the study.

Representative Stark. The point I’m trying to make for the debate is that with this job growth we’re in the neighborhood of basically just keeping pace with the growth of the working-age population, give or take a couple of thousand jobs a month.

Then we come to the question of we are still, I believe, about

900,000 jobs below the January 2001 level in non-farm employment, and private non-farm payroll, excluding government jobs, is

still about 1.7 million jobs below the January 2001 level, and that

is still the most persistent job slump since the 1930’s.

Does that comport with your number?

Commissioner Utgoff. Yes, the numbers you have cited are correct.

Representative Stark. The third item is that while we talk

about 5.4 percent—which is high enough by itself—that if you include the jobless workers who currently want a job but have given

up searching for work and if you include the part-time workers who

would prefer full-time work but can’t find it, that raises the underutilization rate by about 4 percent, so we’re closer then to a 9.5

12

percent underutilization rate, unemployment and people not working up to their full desires or potential. Is that a fair statement?

Commissioner Utgoff. Yes, we calculate and publish several

different unemployment rates and the one that you talked about is

called U–6.

Representative Stark. It’s called what?

Commissioner Utgoff. It’s called U–6.

Representative Stark. Oh boy, OK.

Commissioner Utgoff. That’s the——

Representative Stark. I think I could——

Commissioner Utgoff. There’s several ways, as you know, to

measure unemployment and we publish them all each month.

What you said was correct.

Senator Sarbanes. What rate do you show for U–6?

Commissioner Utgoff. It is currently 9.4 percent.

Senator Sarbanes. 9.4 percent.

Commissioner Utgoff. Yes.

Representative Stark. Well, Mr. Chairman, I think you’re

right, I think the debate will center around whether we’re doing

well enough. We obviously will blame this all, all the bad news on

the Bush Administration. They blamed the hurricane on us; I don’t

know why I can’t. There will be a discussion which, I think, is more

important is what we do in the future. That’s not Mrs. Utgoff’s or

I suppose it’s not the topic of this hearing, but I think that there

will be some agreement that there aren’t enough jobs currently. I

think what we’re going to hear is a question of for whom we cut

taxes. If we cut taxes for the very rich, your side will say that will

create jobs, and if we cut taxes for those companies, the incentives

to take jobs overseas, my side will probably say that will help us.

We’ll both have to wait until Saturday morning to see what the

public thinks is the correct answer.

Thank you very much.

Chairman Bennett. Thank you.

Ms. Maloney.

Representative Maloney. We have the great Senator from

Maryland, and I would defer to him. Just very briefly, because I

want to certainly hear what Senator Sarbanes has to say. But

there is a chart that the staff prepared and it shows that the Bush

economic record, that this is the only Administration in 70 years

with a decline in private sector jobs. Everybody else is creating

jobs, then you see Hoover and the Bush Administration below the

line. Is this accurate?

[Chart entitled ‘‘Bush Economic Record: Only Administration in

70 Years with Decline in Private Sector Jobs’’ appears in the Submissions for the Record on page 49.]

Commissioner Utgoff. We do not have the data with us to

check all of these numbers, but I believe they are roughly accurate.

Representative Maloney. They’re roughly accurate. Well, how

long, or how many jobs would we have to create to get the Bush

Administration up to the line so that it is not a negative loss but

that you’re just holding, even with when we came into office, how

many jobs would we have to create if it’s a–0.4?

Commissioner Utgoff. 821,000.

13

Representative Maloney. So it would have to create 821,000

jobs between now and January just to get up there?

Commissioner Utgoff. That’s correct.

Representative Maloney. Do you think we could do that, is

that possible?

Commissioner Utgoff. We deny the crystal ball.

Representative Maloney. OK. But this chart is accurate, he

and Hoover are competing.

I want to talk a little bit about women. We talked about the poverty numbers earlier that the gap between the rich and the poor

is growing dramatically. That shows in your numbers; it shows in

the poverty numbers. It is also shown in the poverty report that

for the first time in many years women’s wages have dropped and

that the gap between men and women’s wages is growing larger,

as is the gap between the rich and the poor. Both these trends are

not healthy, in my opinion, for the future of all the people in our

country.

So I would like to ask about women who maintain families. I

would say that in this economy, probably any economy, are especially vulnerable to jobs and that they sometimes slump during this

time. So what was the unemployment rate for women who maintained families at the start of the recession of March 2001?

Commissioner Utgoff. 6.5 percent.

Representative Maloney. What was it when the recession formally ended in November 2001?

Commissioner Utgoff. 7.7 percent.

Representative Maloney. What is it now?

Commissioner Utgoff. 8.2 percent.

Representative Maloney. Well, that is very, very troubling. I

thank you for your report.

Chairman Bennett. Senator Sarbanes.

Senator Sarbanes. Thank you very much, Mr. Chairman.

Mr. Chairman, I’m reminded of a radio news announcer many

years ago, Gabriel Heeter, and he used to start off his programs

every evening, he’d say, ‘‘Oh, there’s bad news tonight.’’ and that’s

how I feel this morning. I think this is bad news.

Chairman Bennett. Not always. I remember Gabriel Heeter

‘‘There’s good news today.’’

Senator Sarbanes. No, no, it was bad news, I remember it.

Chairman Bennett. He did it both ways.

Senator Sarbanes. Commissioner, we’re pleased to welcome you

and your colleagues. I want to say first that I understand and appreciate the professional job which you and your colleagues at the

Bureau of Labor Statistics do and I respect your unwillingness to

be drawn into registering political value judgments, which you do

in a very gentle way. As they say ‘‘just the facts, Ma’am,’’ and

you’ve tried to do that in the very established tradition of the Commissioners of the Bureau of Labor Statistics. I think your legendary predecessor, Janet Norwood, was as good as they come at

that, but you’re obviously developing that talent very well. I like

your ‘‘no crystal ball’’ response to one of the questions. So I’m going

to try to ask you the facts. I may do some interpretation of the

facts, but I won’t ask you about, I hope, about the interpretation

14

and if you feel I’m doing so, you just put me off and I’ll go back

to trying to just get the figures out of you.

Now, as I understand it, the job growth for the past month was

96,000, is that correct?

Commissioner Utgoff. That’s our estimate.

Senator Sarbanes. Now Mr. Chairman, I note that the market

expectations for non-farm payroll growth had been at about

150,000; that was what the general expectation was. So the job

growth that’s being reported this morning is substantially less than

that. Now I just want to review for a moment these various indices

you keep of the unemployment rate. The unemployment rate is at

5.4 percent, is that correct?

Commissioner Utgoff. Yes.

Senator Sarbanes. Now that rate, as I understand it, does not

include those who have dropped out of the workforce because

they’re discouraged about the prospects of finding a job. Of course,

that figure fluctuates, but is that correct?

Commissioner Utgoff. If you haven’t looked for work in the last

4 weeks, you’re not counted as unemployed.

Senator Sarbanes. How many such people are there?

Commissioner Utgoff. Discouraged workers—and this is in

September 2004—were 412,000.

Senator Sarbanes. Then you also have people who are working

part-time but want to work full-time so in a sense they are partially unemployed. Is that correct?

Commissioner Utgoff. Yes.

Senator Sarbanes. Now if you factor both of those groups into

the unemployment rate, in other words, you try to take a more

comprehensive view of the extent of unemployment, what would

the unemployment rate be?

Commissioner Utgoff. That would be 9.4 percent.

Senator Sarbanes. 9.4 percent.

Commissioner Utgoff. Yes.

Senator Sarbanes. Is that the most comprehensive measure of

unemployment of the various measures you do?

Commissioner Utgoff. Let me go back to another analogy that

was used. There are different measures of unemployment. As we

would measure something in Celsius or Fahrenheit, they would

have different numbers attached to them but they would all move

up and down when it got either colder or hotter. So that is why

we produce the different measures. We don’t say one is better than

the other, but they do move together.

Senator Sarbanes. Yes. Now what I’m trying to determine is if

there is another measure, a broader measure that includes some

other group in calculating an unemployment rate figure beyond

this measure—or is this the most comprehensive of all the measures?

Commissioner Utgoff. The measure that you talked about is

the most—includes the——

Senator Sarbanes. Inclusive.

Commissioner Utgoff. Yes, it’s the most inclusive that we publish.

Senator Sarbanes. OK. All right.

15

Now I want to ask about the long-term unemployed for just a

minute. I’ve had a strong interest in this issue because I perceive

it as being related to whether unemployment insurance benefits

should be extended. We’ve had debates about that on the floor of

the Senate; I think also they’ve had them over on the floor of the

House, and regrettably unemployment insurance benefits have not

been extended. I’m very much concerned about that because I think

there are people who are no longer drawing unemployment insurance benefits but they’re working in a labor market where there

aren’t jobs available and they can’t go back to work. They can’t find

a job, and my question is how do they support their family.

How many people are there who have been unemployed for more

than 26 weeks, which I think, is the length of the standard unemployment insurance benefits program? Although we extended it,

that’s expired and I’m using those who’ve been unemployed for

more than 26 weeks and continue to look for work, as the measure

for those who are long-term unemployed.

Commissioner Utgoff. 1.7 million.

Senator Sarbanes. 1.7 million. Was there an increase over the

previous month? How much of an increase from the previous

month?

Commissioner Utgoff. There was an increase over the previous

month of 83,000.

Senator Sarbanes. 83,000 additional people fell into the category of long-term unemployed last month.

Commissioner Utgoff. Yes, that’s right.

Senator Sarbanes. Now what percent of the total unemployed

looking for work are long-term unemployed workers? I mean, this

is often a relevant figure because you have all these unemployed

people and then you look to see, well, how long have they been unemployed and how many of them are long-term unemployed; in

other words, those who have really been looking for work for a very

sustained period and haven’t been able to find it. What percent of

the total unemployed who are looking for work are long-term unemployed workers?

Commissioner Utgoff. In September, that percentage was 21.8

percent.

Senator Sarbanes. 21.8 percent.

Commissioner Utgoff. That’s correct.

Senator Sarbanes. What was it the previous month?

Commissioner Utgoff. 20.7 percent.

Senator Sarbanes. So it went from 20.7 percent the previous

month to 21.8 percent now?

Commissioner Utgoff. That’s correct.

Senator Sarbanes. I have tended to use the 20 percent figure

as sort of a benchmark figure on long-term unemployed. How long

have the long-term unemployed been above 20 percent?

Commissioner Utgoff. Since October 2002.

Senator Sarbanes. For 24 months we’ve been above 20 percent?

Commissioner Utgoff. Yes.

Senator Sarbanes. Twenty-four months. Do we know when the

BLS started tracking this information?

Mr. Galvin. I have data back to 1969.

Senator Sarbanes. 1969.

16

Mr. Galvin. We’ve got it back to 1948, but not with us here.

Senator Sarbanes. Let me ask you this question. Maybe you

can answer it, even though you don’t have the earlier data with

you. It’s my understanding that there has never heretofore been a

stretch of 24 continuous months in which the long-term unemployed figure was above 20 percent. Is that correct?

Mr. Galvin. In the data I have here, since 1969, no, there’s

never been such a stretch.

Senator Sarbanes. Do you know of your own knowledge with

respect to 1948 to 1969?

Mr. Galvin. No, but we could check that and get back with you.

Senator Sarbanes. Would you get that back to us? It’s my understanding that even during that period there’s never been such

a stretch. So this measure has the long-term unemployed at really

record levels.

I spent some time on this point, Mr. Chairman, just to underscore again the urgency in my view of the necessity to extend unemployment insurance benefits. I very much regret that that has

been resisted and we’ve not been able to do it because you’ve got

a very substantial number of people out there looking for work and

they can’t find work. In fact, how many jobs do you have to add

each month just to stay abreast of population growth in the economy?

Commissioner Utgoff. We were talking about that earlier. It’s

on the order of 130,000 to 150,000.

Senator Sarbanes. 130,000 to 150,000.

Commissioner Utgoff. Yes.

Senator Sarbanes. 130,000 to 150,000 new jobs we needed just

to stay abreast of population growth, not to even crack into the existing on the unemployed. So you have this situation where the job

growth last month fell short of staying abreast of population

growth, let alone relieving the problems that the long-term unemployed—which are at record levels—are confronting.

Now I’ve gone on at some length. I presume we will have another

round, if I——

Chairman Bennett. I was not planning another round. Mr.

Stark left on the assumption we were not, but if you want to go

on further, Mr. Saxton has no objection and neither do I. I will

have a few comments when you’re through.

Senator Sarbanes. Well then we will have a comment period at

the end of all of this questioning as well. Well, if I could take just

a couple more minutes.

We are down 821,000 jobs in this Administration from the number of jobs that there were in January 2001, is that correct?

Commissioner Utgoff. That’s correct.

Senator Sarbanes. Now I won’t ask you, but I’m fairly certain

that the last Administration which was down jobs from when it

came in at the end of its 4-year term was with President Hoover.

Every President since Hoover has added jobs in the course of the

Administration although at varying levels, some quite a number of

jobs, some not quite so many.

Now I understand that we’re now 42 months since the recession

began in March 2001. From what you’ve just said, I gather the

economy has fewer jobs today than it had 42 months ago.

17

Commissioner Utgoff. That’s correct.

Senator Sarbanes. Now do you know whether, since World War

II, the economy has ever failed to regain all of the jobs that it had

before a recession within over a 42-month period since the beginning of a recession?

Commissioner Utgoff. I believe the answer to that is no.

Senator Sarbanes. Mr. Chairman, I have a chart here that I

just want to spend a moment on.

[Chart entitled ‘‘Decline in Nonfarm Payrolls in the Current and

Previous Cycles’’ appears in the Submissiom for the Record on page

50.]

Senator Sarbanes. What this chart shows is that the dark line

is the average of post-war recoveries in terms of regaining jobs

from the beginning of the recession and, as you can see, after

around 20 months it has gone back up over the zero mark and then

you have positive additions of jobs.

In this recession, which is contrary to all of the previous patterns, that hasn’t happened. In this recession, we had the downswing in the jobs which sort of paralleled what had been done in

previous recessions, but then the upswing didn’t occur. And so this

economy has trailed along in this sort of light-colored line over here

and it is still below the zero mark—in other words, there’s been no

net gain in jobs over those 42 months—the gain in jobs has not

been enough to get back across the zero mark so that you can say

that you’re now back up and above where we started. In fact, if we

had paralleled previous recoveries, we’d be up about 6 million more

jobs today, as I understand it, if we’d had the typical sort of recovery coming out of this situation. Of course, that hasn’t occurred.

So I know, you know, there will be a lot of efforts to place a spin

on these figures but I think it’s very clear that the job growth this

month is extremely disappointing. The revisions for the 1-year period are substantially below the report of the Council of Economic

Advisers that estimated what the revisions would be. The Council

of Economic Advisers doesn’t have quite the same, I guess, scruples

to be objective that the BLS has——

Chairman Bennett. Reluctance to project is, I think, a better

term.

Senator Sarbanes. Yeah. So they’re quite happy to sort of try

to paint a rosy scenario. Of course, their rosy scenario was that the

revisions would bring somewhere between 290,000 and 385,000

jobs, which, of course, hasn’t happened.

Thank you very much.

Chairman Bennett. Thank you, Senator.

Let me just make a closing comment. Commissioner Utgoff you

undoubtedly are not a party to this discussion, but let me make a

closing comment about the information that Senator Sarbanes has

put before us and that you have laid out before us.

I don’t think there is any question but what this recession and

this recovery are fundamentally different than any we have had,

really, in our history. I won’t say any since the end of the Second

World War because I think it goes back even farther than that.

There are all kinds of things that didn’t happen in this recession

that happened in previous ones, all kinds of surprises.

18

I won’t take the time to list them all, but some of the most obvious ones that showed that this recession and recovery were fundamentally different than others was the fact that consumer spending never, ever went below the line in this recession. That is very

unusual. Recessions almost always see consumer spending turn

negative. In this recession, they never did.

The standard pattern of a recession is that housing goes deeply

down and then you look to the housing sector to bring you out of

the recession. In this recession, housing remained strong all the

way through. When I had a conversation with Alan Greenspan and

said, ‘‘Why is this recovery so sluggish in historic terms,’’ he said,

‘‘It’s because the recession was so shallow in historic terms and you

didn’t get the base for bouncing back that other recessions have

had.’’ Now that’s good news in that you didn’t want the recession

to be so deep that you would get a strong bounce back, but it is

fundamentally different.

My analysis has been that this recession is probably the first recession of the information age. Previous recessions have been driven primarily by inventory buildup that then has to be sold off until

you get rid of your entire backlog in inventory and then you bring

everybody back to work at the factory because all of the excess

goods have been moved.

Now that we’re in a world of just-in-time inventory control, we’re

probably never going to have what Senator Sarbanes and I learned

about in school as a traditional inventory recession. We’re not going

to have that ever again, because inventory recessions were caused

in large measure by lack of real-time data that caused businessmen

and women to overbuild their inventories, not realizing that that’s

what they were doing, because no businessman would deliberately

overbuild an inventory. And then, upon discovery of that fact, have

to make adjustments, which means cut back purchasing, cut back

production, and so on, until the inventory got sold off.

With the information age, that phenomenon doesn’t occur any

more. We live in a world of real-time inventory on many manufacturing lines; the storage bin in which spare parts are stored for

manufacturing is the railroad car in which they arrive. The car

shows up, they open the side of the car and take the parts off and

put them directly onto the item that’s being manufactured so that

there is no inventory buildup. It makes manufacturing enormously

more productive, requires fewer workers, but sees to it that we will

not have an inventory recession.

I think when the economists get through studying this recession—and we’re constantly getting revisions in it: the first time, we

were told the recession began in the third quarter of 2000, then we

had an up—in the fourth quarter of 2000, GDP went down again,

first quarter of 2001, second quarter of 2001 and so on, now the

revisions have come back and say we grew second quarter of 2001.

So that by the technical definition of a recession, we didn’t have

one because we never had two successive quarters of negative GDP.

We had three, but they were not successive, the first one occurring,

as I say, third quarter of 2000, second one the first quarter of 2001,

third one third quarter of 2001 when 9/11 hit us.

This is not a classic pattern of recession and, as the Senator’s

chart very clearly demonstrates, this is not a classic pattern of reVerDate 03-FEB-2003 14:12 May 11, 2005 Jkt 098627 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 D:\JEC\98627.TXT SSC2 PsN: SSC2
19

covery. Now I think we’re going to have to learn a lot more about

this as more data gets brought in and revised and examined and

realize that industrial age solutions probably aren’t going to work

very well in information age challenges.

We’ve been through this before as a Nation when we made the

transition from the agricultural age to the industrial age. The difference between making the transition from the industrial age to

the information age is that it’s coming at us about 10 times as fast,

and therefore we need to be a little humble regardless of how we’re

trying to spin the numbers politically in our ability to get a handle

on what’s really going on.

Senator Sarbanes. Well, Mr. Chairman, let me just make this

observation. I mean all of that may be and, you know, it obviously

calls for analysis, but none of that addresses the problem that

someone working and supporting a family who lost his job through

no fault of his own, became unemployed, then relied on our unemployment insurance system to help sustain him or her and their

family through this trying time until there was an improvement in

the job market. That improvement would enable them to find work

and go back into the job market to confront and deal with the problems that they’re facing. I find it absolutely unfathomable why this

Administration has not supported an extension in the time period

for receiving unemployment insurance benefits for those people

that are long-term unemployed.

Now, you know, the reasons for it may be the changing nature

of the economy and so forth, I mean, we can have long debates

about that. But the reality, the human reality of the situation that

we’re dealing with in the meantime is about people who were working people as you can’t draw unemployment insurance unless you

buildup a work record, that’s a prerequirement. So it’s not welfare.

It’s designed to cushion families at times of an economic downturn.

You know, we have a limited period for unemployment insurance

benefits that because we assume that the economy will pick back

up and people will be able to get back into the job market. We have

in the past extended that period when that wasn’t happening as

quickly as it ought to. We have extended it in this period but not

to the extent we have done in previous recessions and the extension has now run out. As we learned this morning, the long-term

unemployed as a percent of the total unemployed jumped 1.1 percent, jumping from 20.7 percent to 21.8 percent last month. That’s

a jump of better than 5 percent. We’ve tried repeatedly here in the

Congress to try to extend unemployment insurance benefits to help

these people through this difficult time and that effort has been

beaten back. That’s just the human reality that is not being dealt

with in the current situation. We have a system in place which

could alleviate that problem which has, in the past, been used to

alleviate the problem, but it’s not happening this time around.

Chairman Bennett. We will not resolve that in this Committee

this morning. But thank you, Commissioner Utgoff, and thank the

members of the Committee. The hearing is adjourned.

[Whereupon, at 10:40 a.m., the Committee meeting was adjourned.]

(21)

Submissions for the Record

PREPARED STATEMENT OF SENATOR ROBERT F. BENNETT, CHAIRMAN,

U.S. SENATOR FROM UTAH

Today’s employment situation report from the Bureau of Labor Statistics (BLS)

confirms the continued improvement of the country’s job market. Today’s announcement of 96,000 new jobs in September means 13 straight months of job growth. Hurricanes during the month of September appear to have held down employment

growth. Since last August, we’ve created nearly 1.8 million new jobs. According to

the household survey, employment has increased by more than 2 million since last

August.

The unemployment rate remained at 5.4 percent, well below its peak of 6.3 percent last year, and below the average unemployment rates of the 1970’s, 1980’s, and

1990’s.

BLS also announced today that total payroll employment through March 2004

was underestimated by approximately 236,000 jobs, based on its estimate of the

next ‘‘benchmark’’ revision to the payroll survey. In addition to its monthly revisions

to payroll employment, BLS conducts a standard annual revision that brings its estimates of payroll employment in line with State unemployment insurance tax reports. Using these data, past estimates of payroll employment are revised by BLS

to more accurately reflect the employment situation in the U.S. We’ll discuss these

revisions in more detail during today’s hearing.

Aside from today’s report, other indicators also confirm continued economic expansion. Americans are going back to work, interest rates and inflation are low, business investment and consumer spending are strong, business activity is increasing,

and the homeownership rate in the U.S. is at a record high. Over the past year,

unemployment rates have fallen in 45 states.

I look forward to discussing today’s news with you, Commissioner Utgoff. Welcome.

PREPARED STATEMENT OF REPRESENTATIVE JIM SAXTON, VICE CHAIRMAN,

U.S. REPRESENTATIVE FROM NEW JERSEY

Commissioner Utgoff, it is a pleasure to join in welcoming you before the Committee once again.

The September employment data have been affected by the four hurricanes that

pounded the U.S. in August and September. Even so, according to the payroll survey, employment increased by 96,000 jobs in September, continuing its upward

trend.

Over the last 13 months, payroll employment has increased by about 1.8 million

jobs. In addition, today the BLS announced that the benchmark revision will add

about 236,000 jobs to payroll employment for March 2004. According to the household survey, the unemployment rate has been trending downward and now stands

at 5.4 percent.

Other economic data continue to show healthy economic growth. Over the last

four quarters, GDP growth has been 4.8 percent. A key element in the acceleration

of economic growth over the last year has been the rebound in investment. Fixed

business investment has risen at a rate of 11.6 percent over the last four quarters,

and this has both broadened and accelerated the economic expansion.

The pivotal reason for this acceleration in investment and economic growth is the

tax relief for investment enacted in 2003. Tax relief, and the low interest rates resulting from Federal Reserve policy, have made major contributions to the positive

economic situation we have today. Furthermore, both the Blue Chip consensus and

the Federal Reserve forecast that healthy economic growth will continue.

22

PREPARED STATEMENT OF REPRESENTATIVE PETE STARK, U.S. REPRESENTATIVE

FROM CALIFORNIA

Thank you Chairman Bennett, and I welcome Commissioner Utgoff to today’s

hearing.

There is a great deal of interest in today’s employment report, since it’s the last

report on the President’s jobs record before the election. The interpretation of today’s numbers is somewhat complicated by the fact that the Bureau of Labor Statistics (BLS) has also provided a preliminary estimate of their annual ‘‘benchmark’’ revision of payroll jobs, which in January will probably add fewer than 240,000 jobs

to the current total.

Although the recession officially ended nearly 3 years ago, we still have anemic

job growth and a deficit of 821,000 jobs since President Bush took office. Even with

the benchmark revisions taken into account, President Bush still has the worst jobs

record of any President since Herbert Hoover in the Great Depression.

The BLS reports today that only 96,000 payrolls jobs were created in September,

and the unemployment rate was unchanged at 5.4 percent. But the strength of the

job market is still very much in question, because job growth has been weak over

the past year and labor force participation remains depressed. More than 8 million

Americans remain unemployed and long-term unemployment remains near historically high levels.

Announced layoffs rose 45 percent last month and we’re headed into the time of

year when firms traditionally do their heaviest downsizing, according to the outplacement firm of Challenger, Gray, and’ Christmas. This is not good news for workers wondering if theirs is the next job to be outsourced and sent overseas.

The prolonged labor market slump has also taken its toll on workers’ earnings.

Since last August when job losses bottomed out, average hourly earnings have declined by 0.2 percent. Corporate profits, by contrast, have grown by more than 50

percent under President Bush.

The largest tax cut in our nation’s history hasn’t prevented the longest jobs slump

in history. We got little bang for the big bucks we spent on tax giveaways to the

wealthy and now American families are saddled with a historically high Federal

debt burden.

The economy is growing, but middle-class families still face an uncertain jobs picture, stagnant wages, higher gas prices, and rising consumer interest rates. I simply

don’t think American families can afford four more years of President Bush’s economic policies.

Thank you Commissioner Utgoff for coming today and I look forward to your testimony.

WEAK PAYROLL GAINS IN SEPTEMBER; JOBS DEFICIT PERSISTS

WASHINGTON, D.C.—The unemployment rate remained unchanged at 5.4 percent

and only 96,000 total payroll jobs were created in September. Private nonfarm payrolls grew by 59,000 jobs. The Bureau of Labor Statistics (BLS) also provided a preliminary estimate of their annual ‘‘benchmark’’ revision of payroll jobs, which in

January will probably add fewer than 240,000 jobs to the current total.

‘‘Although the recession officially ended nearly 3 years ago, job growth remains

anemic and we still have a jobs deficit,’’ said Rep. Pete Stark (D-CA), Senior Democrat on the Joint Economic Committee (JEC). ‘‘Even taking into account the technical adjustments, President Bush still has the worst jobs record of any president

since Herbert Hoover in the Great Depression. American families simply can’t afford

four more years of President Bush’s economic policies.’’

Job growth has been weak over the last year, barely keeping pace with the growing labor force. Today’s employment report shows that despite 13 months of job

growth, there are still 821,000 fewer nonfarm payroll jobs than there were when

President Bush took office. There are 1.6 million fewer private payroll jobs, including 2.7 million fewer manufacturing jobs.

The Bureau of Labor Statistics today announced preliminary estimates of their

annual ‘‘rebenchmarking’’ of nonfarm payroll statistics. Data back to April 2003 will

be affected by the upward revision of nonfarm employment by 236,000 jobs, but the

actual revisions will not show up in the current total until January 2005.

Overall, there are still 8 million unemployed Americans, and about 4.9 million additional workers who want a job but are not counted among the unemployed. An

additional 4.5 million people work part-time because of the weak economy. The unemployment rate would be 9.4 percent if the figure included those who want to work

but are not counted among the unemployed and those who are forced to work parttime because of the weak economy. More than one in every five unemployed peoVerDate 03-FEB-2003 14:12 May 11, 2005 Jkt 098627 PO 00000 Frm 00026 Fmt 6601 Sfmt 6621 D:\JEC\98627.TXT SSC2 PsN: SSC2
23

ple—1.7 million Americans—has been jobless for more than 26 weeks, the maximum

number of weeks for receiving regular unemployment insurance benefits.

The prolonged labor market slump has also taken its toll on workers’ earnings.

Since last August when job losses bottomed out, average hourly earnings have declined by 0.2 percent, once inflation is taken into account. Corporate profits, by contrast have grown by more than 50 percent under President Bush.

The Joint Economic Committee, established under the Employment Act of 1946,

was created by Congress to review economic conditions and to analyze the effectiveness of economic policy.

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

LABOR STATISTICS

Mr. Chairman and Members of the Committee:

Thank you for the opportunity to discuss the September employment and unemployment statistics that we released this morning.

Nonfarm payroll employment continued to trend up in September, increasing by

96,000. The unemployment rate was unchanged at 5.4 percent. Since August 2003,

payroll employment has increased by 1.8 million. About 900,000, or half of that

gain, occurred in March, April, and May of this year. Employment gains in the last

4 months have totaled 405,000.

I know that many people have speculated about the effect of the recent hurricanes

on the September payroll employment data. Four hurricanes struck the U.S. during

August and September: Charley in mid-August, Frances early in September, Ivan

in mid-September, and Jeanne late in the month. This month, BLS and our State

partners made extra efforts to obtain data from our survey respondents in the hurricane-affected states. As a result, our total response rate, even in the affected states,

was as good as or better than it normally is for first publication. Still, our ability

to gauge the impact on September’s job growth is limited for reasons that I will discuss in a moment.

First, let me note how our payroll survey treats employment in businesses that

are affected by weather events. For weather conditions to reduce the estimate of

payroll employment, employees have to be off work for an entire pay period and not

be paid for the time missed.

BLS’ review of the sample data for September in the hurricane-affected areas indicates that there was a negative impact on employment in those areas. We will

know more about the local effects when the official State estimates are available in

2 weeks.

There were negative employment effects on those firms that were unable to operate or were operating at a reduced capacity during the survey period. However,

other firms expanded their employment in response to the storms. There were cleanup and rebuilding efforts following Hurricanes Charley and Frances. In addition,

some firms adjacent to the hard-hit areas likely added workers to help accommodate

evacuees from Hurricane Ivan.

Overall, we do not believe that the net result of these factors materially changes

the national employment situation for September, but we cannot precisely quantify

the weather effects.

In September, job gains occurred in a few service-providing industries. Employment in professional and technical services rose by 24,000. Since August 2003, this

industry has added 205,000 jobs. Temporary help employment was up by 33,000 in

September. Employment in real estate and rental and leasing services grew by

15,000, following an increase of 11,000 in August. Utilities added 2,000 jobs over

the month.

Within health care services, employment in doctors’ offices rose by 8,000 in September. Other health care industries, however, showed little or no employment

growth over the month.

Telecommunications employment fell by 9,000 in September. Since March 2001,

the telecommunications industry has shed 302,000 jobs.

In the goods-producing sector, manufacturing employment edged down in September, reflecting small but widespread declines among component industries. Employment was little changed over the month in both construction and mining.

Average hourly earnings rose by 3 cents over the month and have increased by

2.4 percent over the year. Average hours for private production or nonsupervisory

workers were unchanged in September. Manufacturing hours declined by one-tenth

of an hour. Factory overtime was unchanged.

Turning now to measures from our survey of households, the unemployment rate

held at 5.4 percent in September. This is down from its most recent high of 6.3 perVerDate 03-FEB-2003 14:12 May 11, 2005 Jkt 098627 PO 00000 Frm 00027 Fmt 6601 Sfmt 6621 D:\JEC\98627.TXT SSC2 PsN: SSC2
24

cent in June 2003; most of this decline occurred in the second half of last year. The

labor force participation rate was 65.9 percent in September; it has been at or near

this level since late last year. Most other household survey measures showed little

or no change over the month.

Before closing, I would like to mention the upcoming benchmark revision to the

payroll survey. Each fall, we announce the preliminary estimate of the next benchmark revision to payroll employment. The benchmark revision is a standard annual

procedure that adjusts the payroll survey’s sample-based employment estimates to

incorporate universe employment counts derived largely from unemployment insurance tax reports.

Preliminary tabulations of first quarter 2004 employment from State unemployment insurance tax reports indicate that the estimate of total nonfarm payroll employment will require an upward revision of approximately 236,000, or two-tenths

of 1 percent, for the March 2004 reference month. This is slightly below the historical average for benchmark revisions over the past decade, which has been plus or

minus three-tenths of 1 percent.

In summary, payroll employment continued to trend up in September, and the unemployment rate was unchanged at 5.4 percent.

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

Hon. PAUL SARBANES,

U.S. Senate,

Washington, D.C.

DEAR SENATOR SARBANES: At the October 8 hearing of the Joint Economic Committee, you asked questions regarding the proportion of unemployed persons who

had been jobless for 27 weeks and over.

I stated at the hearing that long-term joblessness has exceeded 20 percent for 24

consecutive months. I did not have the entire time series at the hearing to confirm

whether this was the longest such span on record. In reviewing the data, the recent

period is the longest stretch during which the incidence of long-term unemployment

has remained so high for so long. I have enclosed the entire historical series for your

information.

During a conversation after the hearing, you also expressed interest in the data

from our American Time Use Survey. I have included a copy of the recent press release which contains the first results from this survey.

I hope this information is helpful to you. Please do not hesitate to contact me if

you have further questions. Also, Thomas Nardone, Assistant Commissioner for

Current Employment Analysis, can be reached at 202-691-6379 and would be happy

to answer any questions you or your staff may have.

Sincerely yours,

KATHLEEN P. UTGOFF,

Commissioner.

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