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THE EMPLOYMENT SITUATION: FEBRUARY 2004

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

MARCH 5, 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

ADAM H. PUTNAM, Florida

RON PAUL, Texas

PETE STARK, California

CAROLYN B. MALONEY, New York

MELVIN L. WATT, North Carolina

BARON P. HILL, Indiana

DONALD B. MARRON, Executive Director and Chief Economist

WENDELL PRIMUS, Minority Staff Director

(III)

CONTENTS

OPENING STATEMENT OF MEMBERS

Page

Senator Robert F. Bennett, Chairman ................................................................... 1

Senator Jack Reed, U.S. Senator from the State of Rhode Island ...................... 3

WITNESSES

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

Statistics, Accompanied by Dr. John Greenlees, Associate Commissioner,

Office of Prices and Living Conditions; and John M. Galvin, Associate

Commissioner, Employment and Unemployment Statistics ............................. 4

SUBMISSIONS FOR THE RECORD

Prepared statement of Senator Robert F. Bennett, Chairman ............................ 17

Prepared statement of Senator Jack Reed ............................................................ 19

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

Release No. 04-338, entitled ‘‘The Employment Situation: February 2004,’’

Bureau of Labor Statistics, Department of Labor ............................................. 21

(1)

THE EMPLOYMENT SITUATION:

FEBRUARY 2004

FRIDAY, MARCH 5, 2004

UNITED STATES CONGRESS, JOINT ECONOMIC COMMITTEE, Washington, D.C.

The Committee met, pursuant to notice, at 9:40 a.m., in room

SD-562 of the Dirksen Senate Office Building, the Honorable

Robert F. Bennett, Chairman of the Committee, presiding.

Senators present: Senators Bennett and Reed.

Staff present: Donald Marron, Reed Garfield, Jeff Wrase, Mike

Ashton, Colleen Healy, Wendell Primus, Chad Stone, Matt

Salomon and Daphne Clones.

OPENING STATEMENT OF SENATOR ROBERT F. BENNETT,

CHAIRMAN

Chairman Bennett. The hearing will come to order.

I apologize for the late start. I’m a creature of habit rather than

statistics, and instead of looking at my schedule, I went to the

room where we always go. And discovered that there was a hearing

there, but it was not one that I was presiding over. I apologize for

being late.

We welcome you all to today’s employment hearing. We’re

pleased again to have Commissioner Utgoff join us to talk about

the employment data that were released just an hour ago.

We’ve now had 6 months of growth in employment as measured

by the payroll survey, adding 21,000 jobs in February.

The unemployment rate remained steady at 5.6 percent, still well

below its recent peak of 6.3 percent last June, and it remains below

the average of each of the decades of the 1970s, 1980s and 1990s.

So we are seeing some positive growth, but not as strongly as

we’d all like to see.

Now while our focus today is on employment, I’d like to quickly

point out that there are other indicators that show that the overall

economy continues its strong growth.

Business activity in the manufacturing and service centers remains very strong, as they see their profits and cash flow continue

to improve.

Households continue to benefit from the recent tax relief and

from healthy gains in the housing and stock markets. And last

year’s GDP growth averaged 4.3 percent, which is the strongest in

4 years and well above the average 3.7 percent in the expansion

of the 1990s. And overall, forecasters expect sustained and robust

growth, low inflation, and continuing job gains.

2

But today, we are focusing primarily on jobs. And the number

that we got out of February in terms of growth was disappointing

and below that which many forecasters had expected.

I’d like to continue our discussion on the statistical anomaly between the payroll and household employment surveys.

As we know, the payroll survey measures jobs reported by businesses, while the household survey counts responses about who in

the household has a job.

We’ve seen a large and historically unprecedented gap between

these two surveys. The data on household job growth, the unemployment rate, and claims for unemployment insurance all point to

a healthier job market. Yet, the payroll numbers continue to lag behind.

Now this is not just an academic question. If the measurement

tools we are using are flawed, then the policy we adopt in response

to those tools is likely to be flawed as well.

We must spend more quality time examining this question.

Now, Commissioner Utgoff, you said in your written statement

last month that you preferred the payroll measure and thought it

was tracking the job market well. You also wrote that, ‘‘BLS will

continue to examine the possible sources of the discrepancy between the two surveys and to search for ways to test potential explanations.’’

I was glad to hear that. We want to probe that more deeply this

morning.

I’ve spoken to Chairman Greenspan about the efforts of the Fed

to try to account for this discrepancy. And he replied that the Fed

was taking a very serious look at it and felt that it was a legitimate question for careful analysis.

We would welcome any insight that you might be able to give us

from your own analysis here today.

Now in addition to talking about where we are today with respect to jobs, I would also like to discuss with you a report that

the BLS recently released on future job growth in the United

States.

Many people are concerned that the future is bleak, that America

is losing high-paying jobs such as computer-related jobs, to other

countries.

It’s encouraging to me, therefore, that the BLS report foresees

continued growth in computer-related employment—adding a million jobs as computer specialists by 2012 and expanding employment in network systems and data communication systems by

more than 50 percent.

There are those whenever we refer to the service economy who

give images of flipping hamburgers at McDonald’s or greeting customers at Wal-Marts.

It’s good to have your information that suggests that that is not

the appropriate image of jobs in the service economy. BLS projects

that many of the fastest-growing jobs will pay above-average

wages.

Of the 30 fastest-growing jobs over the next decade that you

project, for example, 13, or close to half, pay in the top 25 percent

of wages and another 6 of the 30 pay above-average wages.

3

So these projections provide optimism about the future of employment in the United States.

Dr. Utgoff, it’s always a pleasure to have you visit us and we

look forward to your testimony and a discussion on the points that

I have raised.

Congressman Stark, the Ranking Member of this Committee, is

unable to be with us this morning. So we welcome Senator Reed

in that role. He has served as Vice Chairman of the Committee in

the past, and we’re delighted to have him here.

Senator.

[The prepared statement of Senator Robert F. Bennett appears

in the Submissions for the Record on page 17.]

OPENING STATEMENT OF SENATOR JACK REED,

U.S. SENATOR FROM RHODE ISLAND

Senator Reed. Thank you very much, Mr. Chairman. Let me

welcome the Commissioner. Thank you for your testimony today.

This is a very disappointing report. The Bureau of Labor Statistics’ February employment situation shows that the unemployment

rate was unchanged at 5.6 percent because people are leaving the

labor force.

More than 8 million Americans remain unemployed—with nearly

2 million out of work for 6 months or more. A paltry 21,000 payroll

jobs were created—apparently none in the private sector.

According to the Chairman of the President’s Council of Economic Advisers, we need 125,000 new jobs each month just to keep

pace with the growing labor force.

Job creation is nowhere near what it should be. A year ago, the

Administration estimated that nearly 2 million jobs would be added

in the second half of 2003—510,000 of them due to the President’s

tax cut. In fact, only 124,000 jobs were created during that period.

We got the tax cuts, but we didn’t get the jobs.

The current slump is the most persistent jobs recession since the

1930s. Overall, the economy has lost 2.2 million payroll jobs since

President Bush took office in January, 2001. And I have a chart

over there that describes the relative job losses.

When you take out growth in government jobs and focus on just

the private sector, the loss is even more staggering—we are 3 million jobs in the hole since President Bush took office.

The manufacturing sector alone has lost 2.8 million jobs.

All of this data comes from the BLS’s survey of establishments.

Some people want to talk about job growth in a different BLS survey—the survey of households—but Commissioner Utgoff has testified here that the establishment survey gives a more accurate picture of current labor market conditions.

The Congressional Budget Office and Federal Reserve Chairman

Alan Greenspan also agree that these data are the ones to look at

to assess job loss.

So I hope we can put that debate to rest once and for all.

The 2004 Economic Report of the President acknowledges that

job performance has been disappointing. On page 48, the report

says: Indeed the performance of employment over the past couple

of years has been appreciably weaker than in the past business cyVerDate 03-FEB-2003 10:36 Mar 09, 2005 Jkt 093760 PO 00000 Frm 00007 Fmt 6601 Sfmt 6601 D:\DOCS\93760.TXT SSC1 PsN: SSC1
4

cles. It has lagged even that of the so-called ‘‘jobless recovery’’ from

the 1990-91 recession.

At this point, in all previous business cycles since the 1930s, we

had already erased all the job losses and were creating net new

jobs.

Clearly, we’re not making much progress in eliminating the jobs

deficit. We’ve been gaining jobs slowly since August, but at the

pace we’ve seen so far, it would take over 3 years to erase the current jobs deficit.

Job creation would have to average over 200,000 jobs per month

from March, 2004 to January, 2005, just to erase the current 2.2

million jobs deficit completely.

We’re a long way from that and even farther away from full employment.

Looking beyond the official unemployment rate, we see many

signs of a weak labor market. Besides the more than 8 million

Americans officially unemployed, another 5 million people want to

work, but are out of the labor force and not counted among the unemployed.

The unemployment rate would be nearly 10 percent if you included them and those who are forced to work part-time because

of the weak economy.

The BLS recently reported that nearly 240,000 workers lost their

jobs in January due to mass lay-offs—the highest number since December, 2002. Job fears drove down consumer confidence in February. And Help-Wanted advertising, an important independent

measure of labor demand, remains near the lowest levels since the

1960s.

The Administration has offered precious little relief to struggling

Americans. We have an obligation to American workers to close tax

loopholes that encourage shipping jobs overseas, restart federal unemployment benefits, modify Trade Adjustment Assistance to cover

more displaced workers, and restore the President’s cuts in education and job training.

It would not be compassionate or sensible to do anything less.

Thank you.

[The prepared statement of Senator Jack Reed appears in the

Submissions for the Record on page 19.]

Chairman Bennett. Commissioner Utgoff, we welcome you this

morning and look forward to your testimony.

OPENING STATEMENT OF HON. KATHLEEN P. UTGOFF,

COMMISSIONER, BUREAU OF LABOR STATISTICS, U.S.

DEPARTMENT OF LABOR; ACCOMPANIED BY: DR. JOHN

GREENLEES, ASSOCIATE COMMISSIONER, OFFICE OF

PRICES AND LIVING CONDITIONS; AND JOHN M. GALVIN,

ASSOCIATE COMMISSIONER, EMPLOYMENT AND UNEMPLOYMENT STATISTICS

Commissioner Utgoff. Thank you, Mr. Chairman, Senator

Reed.

I appreciate this opportunity to comment——

Chairman Bennett. May I? You always have two people with

you. And this time, we have a new person.

Commissioner Utgoff. Okay.

5

Chairman Bennett. Would you introduce Dr. Greenlees to the

Committee?

Commissioner Utgoff. Yes, I will. This is John Greenlees, who

is the new Associate Commissioner for Prices and Living Conditions.

And with me again is Jack Galvin, who is the Associate Commissioner for Employment and Unemployment.

Chairman Bennett. We welcome you both. Thank you for being

here.

Commissioner Utgoff. I appreciate this opportunity to comment on the labor market data that we released this morning.

Non-farm payroll employment was little changed in February, up

21,000, as the number of jobs held steady in most major industries.

Since August of 2003, total payroll employment has risen by

364,000. The unemployment rate was 5.6 percent, unchanged over

the month, but down from its recent peak in June, 2003.

Turning first to our payroll survey data, construction employment declined in February following an increase of 34,000 in January. Taking a longer view, employment in construction has trended

upward since March of last year; over the period, 123,000 jobs have

been added.

Employment in manufacturing basically was unchanged in February, down 3000. The rate of job loss in our Nation’s factories has

moderated quite a bit since last summer. The improvement has

been more pronounced in durable goods.

In fact, employment in a few durable goods industries, such as

fabricated metals and wood products, is up slightly in recent

months.

For manufacturing overall, the factory worksheet edged up in

February to 41 hours, and overtime hours were unchanged at 4.5

hours.

Both measures are up substantially since last summer.

Also within the goods-producing sector, mining employment continued to trend slowly upward in February; oil and gas extraction

has accounted for much of the recent growth.

None of the major segments of the service-providing sector

showed a significant employment change in February. Wholesale

trade employment was unchanged following 3 months of growth.

Among retailers overall, there has been no net job growth since

the onset of the holiday shopping season last fall. Employment in

a few retail components continued to edge up in February, notably

building material and garden supply stores.

Employment was essentially flat in financial activities in February, although the securities component continued to add jobs.

Employment in securities is up by 18,000 since August. Credit

intermediation, which includes mortgage banking, has lost 22,000

jobs over the same period.

The job total in information was little changed in February. Employment declines in the industry have eased since last fall.

As with other industries, this represents somewhat of an improvement, given that the information sector had lost 15 percent of

its jobs between March, 2001 and October, 2003.

6

There was little employment change in professional and business

services overall in February. Within the sector, temporary help

services added 32,000 jobs over the month.

With the exception of a small decline in January, employment in

temporary help has been climbing steadily since April, 2003. Over

the period, there has been a net gain of 215,000 jobs.

Employment in health care and social assistance continued to

trend upward in February. However, the average gain for the first

2 months of this year has been about half the average monthly increase for 2003.

Hospital employment declined over the month, while there was

a job gain in social assistance, largely in child day care services.

Employment in state government rose by 20,000 over the month

and has trended up since last summer. Over the same period, employment is down in local government.

Average hourly earnings for private production or non-supervisory workers rose by 3 cents in February. Over the 12 months

ending in February, hourly earnings increased by 1.6 percent.

Taking a look at some of the measures obtained from our survey

of households, the unemployment rate was unchanged at 5.6 percent in February. The number of unemployed persons also changed

very little at about 8.2 million.

Both measures are below their recent highs of June, 2003. Jobless rates for major worker groups either remained the same or

showed little movement over the month.

The labor force participation rate fell to 65.9 percent in February, reflecting a steep drop-off in the number of men in the labor

force. The employment-population ratio was down over the month

to 62.2 percent. It held at or near that level for most of 2003.

The number of persons working part time who would have preferred full-time employment declined over the month to 4.4 million.

It had been at about 4.8 million during the last several months.

Among those not in the labor force, the number of discouraged

workers—those who have stopped seeking work because of discouragement over their job prospects—was 484,000 in February, about

the same as a year earlier, but well above the levels that existed

prior to the recent recession.

In summary, non-farm payroll employment was little changed in

February as the job totals in most industries held steady, and the

unemployment rate was unchanged at 5.6 percent.

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

[The prepared statement of Commissioner Utgoff together with

Press Release No. 04-338, appear in the Submissions for the Record

on page 21.]

Chairman Bennett. Thank you very much.

I understand that Senator Reed has another appointment that

would require him to leave early. So I will defer my questioning to

him so that he can have his questions answered before he has to

move on.

Senator Reed. Thank you very much, Mr. Chairman. That’s

very gracious. I appreciate it. Thank you.

Thank you, Commissioner, for your testimony.

7

An issue that has come up in both our opening statements is

which survey is the most accurate or the one most dependable—

the establishment survey or the household survey.

Previously, you have indicated that the establishment survey is

the one that you prefer. I think this is the view also of the Congressional Budget Office and Chairman Greenspan.

Could you comment upon which survey is the best representative

of employment?

Commissioner Utgoff. What I said earlier was that the payroll

survey was the best for measuring current job trends.

So that if you want to look from month to month or over a shorter period, the payroll survey is much less volatile. And so, over a

period of time, you want to look at the payroll survey because it’s

a bigger sample. It’s less volatile. And because it is tied to a census

of employers every year.

Senator Reed. Thank you very much, Commissioner.

Commissioner, again, the numbers that I refer to of the job losses

since 2001, those are accurate numbers from your perspective?

Commissioner Utgoff. Yes.

Senator Reed. Thank you. The Chairman of the President’s

Council of Economic Advisers recently told this Committee that it

takes about 125,000 jobs per month just to keep up with population

and labor force growth.

Does that number seem right to you?

Commissioner Utgoff. Yes.

Senator Reed. Thank you. And how many jobs per month have

been created since August of last year?

Commissioner Utgoff. 364,000.

Senator Reed. Per month, that would be about 60,000?

Commissioner Utgoff. Approximately, yes.

Senator Reed. 60,000. So we’re about half of what we need just

to keep up with the labor force growth.

Commissioner Utgoff. You generally need about 125,000 jobs.

Senator Reed. Now one of the issues that’s troubling all of us

is the unusually weak job growth so long after the end of a recession.

In fact, it seems now we’re replacing fewer jobs than we did after

the recession of 1990-1991.

Is that correct?

Commissioner Utgoff. Yes.

Senator Reed. And that was the notorious jobless recovery.

So if that was a jobless recovery, what is this? Do you have

any——

Commissioner Utgoff. In the job market, it is a weak recovery.

Senator Reed. The other factor, too, is that we’ve had many

workers unemployed for more than 26 weeks. And what percentage

of the unemployed is that, those long-term, more than 26-week unemployed persons?

Commissioner Utgoff. In February, the percent of the longterm unemployed as a percent of all unemployed workers was 22.9

percent.

Senator Reed. That is unusually high?

Commissioner Utgoff. Yes.

8

Senator Reed. Yes. And the average duration for unemployment, what’s the average duration or length?

We have a lot of people who are unemployed more than 26

weeks. But it seems that we have a lot of people who are unemployed for a long period of time.

Commissioner Utgoff. The average weeks of unemployment in

February was 20.3 weeks.

Senator Reed. 20.3 weeks. Historically, when is the last time

we had seen that? If you have that data, that long a period of unemployment, on average?

[Pause.]

Commissioner Utgoff. I can’t check every year, but I don’t see

any recent period where it has been that high.

Senator Reed. So you’d have to go back 10 years or more.

[Pause.]

Commissioner Utgoff. January 1984.

Senator Reed. 1984. Well, again, these are very disturbing

numbers and a very disappointing report.

We’re in a situation where we have a huge deficit already to

make up. And then we have new entries to the work force who are

looking for work and the economy is not producing those types of

jobs.

And I would hope that it would cause a serious re-evaluation of

our policies.

Thank you, Commissioner. And again, thank you, Mr. Chairman,

for your graciousness and your kindness.

Thank you.

Chairman Bennett. Thank you. I’m sorry that you can’t be here

for the ensuing discussion because I want to get into the issues

that Senator Reed has raised.

There’s a recent comment, I believe it’s out of the New York Fed.

It’s rather rough and global in its comment, rather than with the

precision that you go after statistics.

It is, I think, a straw in the wind to which we must pay attention.

The suggestion—or, rather, the comment is this. That the rule of

thumb is that whenever we have a recession and then get into a

recovery, we get about 50 percent of the jobs that were lost in the

recession back.

The traditional recession for the industrial age is that it’s an inventory recession. You build up too much inventory. You recognize

that you have done that. You lay everybody off until you sell off

your inventory. And then once the inventory is gone and you have

to start manufacturing again, you bring everybody back.

That’s a vastly over-simplified discussion of what an inventory

recession is.

But the rule of thumb is that in the bringing the people back,

you discover that you can do it more efficiently than you thought.

And only 50 percent of the workers are brought back. The other 50

percent don’t come back because their jobs are pretty much lost forever, as the business gets more efficient.

And the New York Fed did a statistical analysis of this and came

to the conclusion that that was, in fact, the case, that after just

9

about every recession, about 50 percent of the job loss that was

caused by the recession, came back in the recovery.

They said, as nearly as they could tell, in this recession, however,

that ratio was now 75/25. That is, 75 percent of the jobs that disappeared because of the recession disappeared forever, and only 25

percent of the workers could be expected to be called back.

We’re seeing extraordinarily high productivity numbers that

would tend to validate that observation.

That is, by virtue of the information revolution—we are in the

Information Age now instead of the Industrial Age—employers who

wrung the inefficiency out of their operation in response to the recession found that when the time came to hire people back, by virtue of the information revolution, they could be that much more efficient than otherwise and their productivity went very high, and

they only needed to call about 25 percent of the workers back.

I lay this out because if it’s true, and these are just indications

and guesses, but if it’s true, it suggests that something structural

is going on in the economy, and that past guidelines are not valid.

This is a very important point for the Bureau of Labor Statistics

because we depend upon your statistics to make our policy, and I

don’t think we can dismiss it by just saying, well, historically,

we’ve always accepted this set of numbers. So we’ll continue to accept this set of numbers.

If, in fact, something structural is going on in the economy, and

it’s as big a structural change by moving from the Industrial Age

to the Information Age as it was moving from the Agricultural Age

to the Industrial Age, we do need to take a very careful look at the

measures we have used, however reliable they may have been in

the past and however reliable the construct upon which they are

built seems to be.

We nonetheless need to look at them to see if the time has come

when perhaps they need to be changed or even abandoned.

This is the point I made with Chairman Greenspan. And his response was, we at the Fed are very concerned about the gap between the household survey and the industrial survey. And we are

looking at it very closely. And his specific response to me was, Mr.

Chairman, we can’t tell you what’s causing it.

We still don’t know.

I find that fairly significant. If we don’t know what’s causing an

historic anomaly, there is the very real possibility that something

fairly significant and structural is happening, and I want to know

before I abandon the issue.

Now, we put up a chart here. I’ve charged the staff of the JEC

to look at this. And I will say quickly, they don’t know any more

than the Fed knows or you know why this is. But they have looked

at this disparity from a different angle than the last chart that I

showed when you were here.

Before I just showed the gap between the jobs according to the

payroll survey and the jobs according to the household survey.

Here, the staff has done their best to take the non-payroll jobs

out of the household survey. If they can do that successfully in

their analysis of the statistics, the two ought to track exactly.

10

Now we go back to—what is it? 1994? Okay. And you see that

the two do track through the 1990s. And then, in the late 1990s,

something happens.

The payroll survey represented by the red line starts going much

higher than the household survey.

Now this is different from the previous charts which showed—

the household survey always shows more jobs than the payroll survey. But when you take the differences out and try statistically to

make them match, which they do, for the first 5 or 6 years there,

then the payroll survey shows significantly higher than the household survey. And now, they have come back together again.

I think that is worth the kind of intellectual discipline that you

have at the BLS to take a look at it.

There are those who look at this and suggest that the household

survey may have, in fact, through this period been the more accurate of the two, and that the payroll survey overstated the jobs,

even though the household survey, when you take the raw numbers, shows more jobs than the payroll survey.

But you deduct again, just to repeat so that everybody knows

what we’ve done—if you deduct from the household survey those

jobs that we know are in addition to the payroll survey—that is,

agriculture and self-employed, jobs of that kind—you deduct those

from the household survey and then super-impose the two of them

together, you find an historical anomaly where they separate, starting in the middle of the 1990s, and they have not come back together where they historically were until you get to the present

time.

I share that with you not with any firm conclusion, but with the

request that you and your experts take a look at this and see if we

can’t really understand if, in fact, something structural is changing

in the economy.

If it is, and I happen to believe that it is, if something structural

is changing, then we need to change the way that we measure so

that we can have more accurate measures.

If we have inaccurate measures and then we as policy-makers

make decisions as to what we have to do based on inaccurate measures, we’re going to make inaccurate policy.

Now, I’ve taken advantage of the fact that I have no other Members of the Committee here to take the time to lay that out. But

I would appreciate any response that you or your associates might

have to that whole question.

Commissioner Utgoff. You raise a very serious issue. And we

have that graph on our website and we’ve been spending a good

deal of energy looking at why that gap exists, why the payroll survey grew faster during the recovery in the late 1990s and why the

payroll survey declined more in the recent recession.

And we’re trying to leave no stone unturned.

But there are some things where we hypothesize that there may

be an effect on the two surveys and that it might be cyclical. But

we just can’t measure it.

Let me give you just one example.

And that is undocumented workers, estimates of which have a

big effect on the population controls in the household survey. They

11

also therefore have a big effect on the household versus payroll employment gap.

There are some people who believe——

Chairman Bennett. That’s Senator Alexander’s point, by the

way. He keeps coming at me on that issue.

Commissioner Utgoff. There also are some people who believe

that undocumented immigrants would show up on the household

survey and not on the payroll survey.

There are other people who believe just as strenuously that it

would be the opposite, that illegal immigrants would present papers to their employers and they would be filed, yet they would not

answer a government worker coming to the household.

And then there are people who believe that net illegal immigration is going up and net illegal immigration is going down.

So we’ve looked at all these theories. But the truth is that it’s

extremely hard to measure illegal immigration, and it’s very important to this issue.

So although I say we leave no stone unturned, sometimes we

overturn a stone and we say, that’s a possibility, but we just can’t

measure it.

Chairman Bennett. I recognize how difficult it is. If it were

easy, we would all have done it by now. And I applaud you for your

persistence in keeping at it because, once again, it’s very important

that we have accurate measures.

I’m not challenging any measure that you have given us or saying that you have not been diligent or you’ve not been competent.

I’m just saying that the evidence suggests that there’s something

significant going on in the economy that hasn’t gone on before.

If I may, in the context in an election year, I don’t think it has

anything to do with who happens to be President. I think structural changes in the economy come out of the dynamics of the economy and not out of the politics of who happens to be on Face The

Nation on this particular weekend.

Any other comment on this one before we move on?

Commissioner Utgoff. We will continue to work on this. We’ve

posted virtually everything we know from our investigations on our

website, so that people can comment and have additional suggestions.

And all I can say is we will continue to look at this issue.

Chairman Bennett. Could I get your reaction to the 50/50

versus 75/25 job recall rate?

Does the 50/50 thing sound about right to you?

Commissioner Utgoff. I can’t answer that question. But we do

know that over the course of the last few decades, the people who

say that they are on lay-off and expect to be recalled to work has

decreased. And the people who are on permanent lay-off has increased.

So we do know that there has been a structural change where

just going from your old job and then returning to it is not the typical kind of unemployment.

Chairman Bennett. Okay. I’m glad to have that observation. I

wouldn’t expect you to be able to validate the 50/50, 75/25 speculation that we got out of this other group.

But you have identified a trend.

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Commissioner Utgoff. Yes.

Chairman Bennett. That with each succeeding recession now,

the number of laid-off workers who expect to be called back continues to go down.

Commissioner Utgoff. I haven’t looked at the data. I can’t say

with each recession. But there is a long-term trend.

Chairman Bennett. Okay. We have a lot of conversation up

here about the loss of manufacturing jobs.

Isn’t it true that the trend of the loss of manufacturing jobs is

steady for over half a century, that manufacturing jobs have been

going down for more than 50 years?

Commissioner Utgoff. At approximately the same rate.

Chairman Bennett. At approximately the same rate.

Commissioner Utgoff. Yes.

Chairman Bennett. Again, regardless of who controls the Congress or who controls the White House.

Commissioner Utgoff. That’s right.

Chairman Bennett. A noted economist addressing this issue in

a group where I was present made this comment. He said, ‘‘If we

had been having this conversation in 1904 instead of 2004, and I

had said to you, ‘69 percent of American workers are employed on

the farm. A hundred years from now, that number will be 2 percent. We will lose 67 percent of our jobs over the next 100 years.’ ’’

everyone would have been terrified.

Now, he said, ‘‘The 2 percent that remain in agriculture produce

more food and fiber than the 69 percent produced.’’ The output per

farm worker has gone up so tremendously, that with only 2 percent

of our working population involved in agriculture, we produce more

food than Americans consume—in spite of the fact that obesity is

our number-one health problem. We have to have markets overseas

to take care of the excess food. And we do it with only 2 percent

of our workforce.

And that’s a demonstration of the vastly increased productivity

of the agricultural worker.

His point was that the same thing is happening in manufacturing and it is just as inexorable in manufacturing as it is in agriculture, and no one would want to stop it.

No one would want to say, we’re going to freeze the number of

jobs on the farm, not allow anybody to leave the farm and not allow

farm workers to become more productive and not put new technology into agriculture to produce this kind of situation.

I make this comment because we’re getting much of the same

panic over the loss of manufacturing jobs that he projected we

would have had if someone had made that comment 100 years ago

about the loss of agricultural jobs.

And I can’t resist. I was on the television this morning with this

issue being raised, with concern that it is just awful that we’ve lost

all these manufacturing jobs.

Before I could say it, the interviewer raised this response with

steel mills. There was a time when steel manufacturing was the

backbone of manufacturing in this country. And with the openhearth furnaces, we employed a whole lot of people in the steel

mills.

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Today, a steel mill that has replaced the open-hearth furnace has

roughly one-tenth of the number of jobs that the old mill had and

produces 5 times as much steel.

And is there anybody who wants to go back to open-hearth furnaces in the name of need those jobs? I don’t think so.

So let’s talk about productivity.

Really, that’s the driving force behind everything I’ve said here,

increased productivity of farm workers, increased productivity of

steel workers. Increased productivity is reducing the number of

jobs in manufacturing in a way that ultimately benefits all of us.

What kind of measures of productivity do you make at the BLS?

Commissioner Utgoff. We have major sector productivity. We

have productivity for non-farm business, and for the overall business sector. We have multi-factor productivity. We do some of these

measures for many detailed industries.

Chairman Bennett. Taking the macro number, do you have a

number for productivity growth for 2003?

Commissioner Utgoff. 4.4 percent.

Chairman Bennett. 4.4 percent.

Commissioner Utgoff. That’s right.

Chairman Bennett. In my opening statement, I said that the

GDP growth in 2003 was 4.3 percent. Rule of thumb says, therefore, we should have lost jobs in 2003.

Isn’t that true?

Commissioner Utgoff. Yes.

Chairman Bennett. Did we lose jobs in 2003?

Commissioner Utgoff. Over the year, it looks like we gained

about 122,000 jobs.

Chairman Bennett. Okay. 122,000 jobs is pretty anemic. And

if Senator Reed were here, he would say that that’s a disgraceful

record.

There’s no question that in historic terms, that’s not good for a

recovery.

Commissioner Utgoff. Can I correct the record here?

Chairman Bennett. Yes.

Commissioner Utgoff. I was reading a different series.

The number is——

Mr. Galvin. We dropped about 60,000.

Chairman Bennett. You dropped about 60,000. That’s worse

than anemic.

But doesn’t that fit with a productivity number of 4.4 and a GDP

growth of 4.3?

Commissioner Utgoff. Yes.

Chairman Bennett. The implications of that are pretty serious.

If productivity remains enormously high, that means in order to

create new jobs, we’ve got to have GDP growth of 5 percent or

more, if the productivity growth remains at roughly 4.5, if we’re

going to get the kind of job growth that we’re looking at.

Is that in the ballpark?

Commissioner Utgoff. Yes, that’s the usual rule of thumb.

Chairman Bennett. GDP growth of 5 percent or more for Xnumber of years is something that you only get in a country like

China, where somebody that’s coming off a very low base.

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For the most developed and mature economy in the world, which

we are, a GDP growth of 5 percent per year is almost unattainable.

Commissioner Utgoff. But productivity growth is high now because we’re in the recovering stages from the recession when productivity growth is normally higher.

You could expect as the recovery matures to see some diminution

in productivity.

Chairman Bennett. Okay. That’s where I was going next.

Thank you.

So you’re suggesting that the productivity growth will come down

as we come out of the early stages of the recovery.

Commissioner Utgoff. That’s the usual pattern.

Chairman Bennett. Do you have any idea as to how far down

it will come so that we can see what our GDP target has to be?

Commissioner Utgoff. I can’t answer that.

Chairman Bennett. Anybody else got an educated guess, or

even an uneducated guess?

[No response.]

Nobody wants to say that on the record, I think. Okay. I understand. This is the dilemma we have, I think, here on this Committee, which is charged by the law of looking at the entire economic picture.

We have the luxury, if you will, of having no legislative authority

and therefore, no responsibility to try to craft a particular piece of

legislation.

We have the charge to look at the entire economy and where it

is going and what overall economic policies need to be addressed

here.

And I think what we’re seeing in this recovery and in the statistical anomalies that are coming out here is that we are in an economy that is quite different than the one that we have historically

seen.

And we need to have a degree of wisdom and a degree of flexibility in analyzing this that maybe we have not shown in previous

recoveries that have taken place in economies where we felt more

comfortable with the data.

This is by no means a criticism of you and the excellent work

that you do. But I’m nervous about the reliability of the data that

you, that the Fed, that the Finance Committee and the Ways and

Means Committee and others are looking at as they make monetary policy decisions and fiscal policy decisions.

We’re grateful to you for your willingness to help us try to probe

into this.

I would hope that this Committee would not spend its time in

political slogans on either side. The tendency to do that is very

strong on both sides. And that we would accept our charge from the

Congress to try to understand exactly what’s happening in the

economy as a whole. And then, once we do get that understanding,

we share it with our colleagues.

Since I have no other colleagues here today and have filibustered

about as far as I want to filibuster on this particular issue, unless

you have anything further that you wish to call to the attention of

the Committee, I’m prepared to adjourn the hearing.

Commissioner Utgoff. Thank you, Mr. Chairman.

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Chairman Bennett. Thank you very much.

The hearing is adjourned.

[Whereupon, at 10:25 a.m., the hearing was adjourned.]

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