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21–728 PDF 2005

S. HRG. 109–58

THE EMPLOYMENT SITUATION: APRIL 2005

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

MAY 6, 2005

Printed for the use of the Joint Economic Committee

(

(II)

JOINT ECONOMIC COMMITTEE

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

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, Chairman

PAUL RYAN, Wisconsin

PHIL ENGLISH, Pennsylvania

RON PAUL, Texas

KEVIN BRADY, Texas

THADDEUS G. MCCOTTER, Michigan

CAROLYN B. MALONEY, New York

MAURICE D. HINCHEY, New York

LORETTA SANCHEZ, California

ELIJAH E. CUMMINGS, Maryland

SENATE

ROBERT F. BENNETT, Utah, Vice Chairman

SAM BROWNBACK, Kansas

JOHN E. SUNUNU, New Hampshire

JIM DEMINT, South Carolina

JEFF SESSIONS, Alabama

JOHN CORYNYN, Texas

JACK REED, Rhode Island

EDWARD M. KENNEDY, Massachusetts

PAUL S. SARBANES, Maryland

JEFF BINGAMAN, New Mexico

CHRISTOPHER J. FRENZE, Executive Director

CHAD STONE, Minority Staff Director

(III)

C O N T E N T S

OPENING STATEMENT OF MEMBERS

Representative Jim Saxton, Chairman, a Representative from the State of

New Jersey ........................................................................................................... 1

Representative Carolyn B. Maloney, a Representative from the State of New

York ....................................................................................................................... 2

WITNESSES

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

United States Department of Labor ................................................................... 3

SUBMISSIONS FOR THE RECORD

Prepared statement of Representative Jim Saxton, Chairman ........................... 13

Prepared statement of Representative Carolyn B. Maloney ................................ 13

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

Statistics, United States Department of Labor, together with Press Release

No. 05-788 ............................................................................................................. 14

(1)

THE EMPLOYMENT SITUATION: APRIL 2005

FRIDAY, MAY 6, 2005

UNITED STATES CONGRESS, JOINT ECONOMIC COMMITTEE, Washington, DC

The Committee met, pursuant to call, at 9:30 a.m., in room 1334,

Longworth House Office Building, the Honorable Jim Saxton,

Chairman of the Committee, presiding.

Representatives Present: Representatives Saxton and

Maloney.

Staff Present: Chris Frenze, Robert Keleher, Brian

Higginbotham, Colleen Healy, John Kachtik, Chad Stone, Matt

Salomon, Daphne Clones Federing, Pamela Wilson and Nan Gibson.

OPENING STATEMENT OF REPRESENTATIVE JIM SAXTON,

CHAIRMAN, U.S REPRESENTATIVE FROM NEW JERSEY

Representative Saxton. Good morning.

It is a pleasure to welcome Commissioner Utgoff and her colleagues before the Committee this morning to discuss the latest

employment data.

The April employment data are good news for the American

workers. According to the payroll survey, employment increased by

274,000 jobs in April. Over the last 23 months, 3.5 million jobs

have been created.

According to the household survey, employment also advanced,

while the unemployment rate was 5.2 percent. Over the last year,

most of the net increase in employment has been in the occupations

that pay in the middle range and higher.

The employment data are consistent with other data showing

that the economy continues to grow. In 2004, real GDP increased

about 4 percent, followed by a more sustainable 3.1 percent pace

in the first quarter of 2005. Consumption and investment both continue to rise. The strength of investment over the last 2 years has

been an important factor explaining the vitality of the economy.

The economy seems to have weathered the recent rise in oil

prices quite well, although oil prices have probably had some negative impact on growth. Another factor that bears watching is the

potential impact of the recent expiration of tax provisions permitting expensing, which may affect the robust performance of business investment. Traces of inflation have surfaced in recent

months, but inflation appears to be contained over the long term,

as the Fed has recently noted.

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Looking ahead, the consensus of economic forecasters is that the

U.S. economy will continue to grow at a rate in excess of 3 percent

through the end of 2006. This is consistent with the long-term

growth path of the U.S. economy over the last several decades.

At this time, I will turn to Mrs. Maloney for any statement she

may have.

[The prepared statement of Representative Saxton appears in the

Submissions for the Record on page 13.]

OPENING STATEMENT OF REPRESENTATIVE CAROLYN B.

MALONEY, U.S. REPRESENTATIVE FROM NEW YORK

Representative Maloney. Thank you, Commissioner; and

thank you very much, Chairman Saxton.

The Joint Economic Committee has a long tradition of holding

these hearings with the Commissioner to discuss the latest data on

the employment situation, and I am glad that we are here today

continuing that important tradition.

Now this morning’s news that the economy created 274,000 jobs

in April is absolutely great news for America and for America’s

workers. However, we haven’t seen very many good months of good

job growth in the last 4 years as the economy has gone through the

most protracted job slump since the 1930s.

We continue to see evidence of this job slump. There are still

fewer private sector payroll jobs in April than there were when

President Bush took office in January 2001, and there are 2.8 million fewer manufacturing jobs. Even though we have had nearly 2

years of job growth, the pace of that job creation, about 150,000

jobs per month, is not what one would expect to see in a strong jobs

recovery. It seems as though we are barely treading water. As the

Commissioner has testified, we need to create 120 to 150,000 jobs

just to keep pace with the people coming into the labor force.

Today’s report also shows that the unemployment rate remained

unchanged at 5.2 percent. While it is true that the unemployment

rate has come down from its peak, it is still more than a percentage point higher than the 4 percentage rate that we were able to

achieve by the end of the 1990s. Today’s unemployment rate masks

the fact that 5.1 million people who want to work remain out of the

labor force, and another 4.3 million are working part time for economic reasons. The unemployment rate would be 9 percent if those

people were included. Finally, I am concerned about workers’

wages and earnings, especially over the past year or so. It seems

that no matter what measure of workers take-home pay you look

at lately, you see that it is not keeping up with inflation. For example, in the 12 months ending in March, both average hourly earnings and average weekly earnings of private-sector workers are

down about one-half percentage after accounting for inflation.

Measures of total compensation, which include benefits as well as

wages and salaries, are keeping up with inflation, but just barely.

The problem is that rising costs of health insurance premiums

are adding to employer’s costs, and they are squeezing worker’s

take-home pay at the same time. Not only are earnings generally

not keeping up with inflation, but the distribution of earnings is

becoming more unequal. For example, from the end of 2000 to the

end of 2004, the real earnings of full-time workers in the middle

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of the earnings distribution grew by just .2 percent per year after

inflation. However, those near the top of the distribution rose by

almost 1 percent per year after inflation, while those near the bottom fell by .3 per year on average. More recently, those disparities

have become larger, and only earnings at the very top have exceeded inflation. This growing gap between the haves and the have-nots

is something that is very—I am deeply concerned about, as I believe every American is.

Mr. Chairman, I am especially pleased to have Commissioner

Utgoff here today. I look forward to hearing her comments and testimony, and I appreciate you having this hearing. Thank you.

[The prepared statement of Representative Maloney appears in

the Submissions for the Record on page 13.]

Representative Saxton. Commissioner, thank you for being

here today. We appreciate it, and we are ready for your testimony.

STATEMENT OF KATHLEEN P. UTGOFF, COMMISSIONER, BUREAU OF LABOR STATISTICS; ACCOMPANIED BY JACK

GALVIN, ASSOCIATE COMMISSIONER FOR EMPLOYMENT

AND UNEMPLOYMENT STATISTICS; AND JOHN GREENLEES,

ASSOCIATE COMMISSIONER FOR PRICES

Ms. Utgoff. Thank you.

Mr. Chairman and Congresswoman Maloney, I appreciate this

opportunity to comment on the labor market data we released this

morning.

Sitting with me at the table is Jack Galvin, our Associate Commissioner for Employment and Unemployment, and John

Greenlees, our Associate Commissioner for Prices.

In April, nonfarm payroll employment rose by 274,000, and the

unemployment rate held at 5.2 percent. The increase in payroll jobs

followed revised gains of 300,000 in February and 146,000 in

March. Over the month, employment growth was widespread. Notable gains continued in construction, mining, food services and

health care.

Among the goods-producing industries, construction employment

rose by 47,000, continuing the strong growth trend of the last 2

years. Most of April’s increase occurred in specialty trade contracting, with gains in both its residential and nonresidential components. Mining added 8,000 jobs in April. Over the past 6 months,

mining employment has risen by 31,000, largely reflecting increased hiring for support activities for oil and gas operations.

Manufacturing employment was essentially unchanged both in

April and over the year. The manufacturing work week was up by

one-tenth of an hour over the month, and factory overtime held at

4.5 hours.

In the service-providing sector, food services added 35,000 jobs

over the month. Following a lull in hiring last summer, industry

employment has risen by 183,000 since September. Health care

employment increased by 25,000 in April. The job gain was concentrated in hospitals and doctors’ offices.

Employment in the information industry increased by 12,000

over the month, with gains in motion pictures and telecommunications. Job growth continued in a number of other service-providing industries, including financial activities, professional and

4

technical services, and transportation. Average hourly earnings of

private production or non-supervisory workers rose by 5 cents in

April to $16, following a 4-cent increase in March. Over the year,

average hourly earnings grew 2.7 percent.

Looking at measures from our household survey, total employment rose in April by 598,000, to 141.1 million. The labor force participation rate and the employment-to-population ratio each edged

up by 0.2 percentage points, to 66.0 and 62.6 percent, respectively.

The number of discouraged workers declined by 99,000 over the

year, to 393,000 in April.

Both the number of unemployed persons and the unemployment

rate were unchanged in April. About one in five unemployed persons had been jobless for 27 weeks or longer. The long-term unemployed have accounted for over 20 percent of total unemployment

for 31 consecutive months.

As a part of our mission of reporting on America’s workers each

month and in recognition of Mother’s Day this Sunday I would like

to mention a few facts about working mothers. In today’s labor

market, 7 out of 10 mothers are working moms, compared with 5

out of 10 in 1975. Working moms account for almost one-fifth of all

employed individuals, and nearly three-fourths of employed mothers usually work full time.

Mothers who usually work full time also spend more than 2

hours each week day performing active child care, cleaning house

and preparing meals. In addition, nearly 4 out of 10 mothers who

work full-time perform volunteer work at some point during the

year.

I would also like to note that an updated version of a report by

BLS on women in the labor force, which includes data on working

mothers, will be posted on our Web site next week. This report is

a compilation of information on women workers by various characteristics, including age, education, occupation and earnings.

To summarize, April’s labor market data, nonfarm payroll employment increased by 274,000. The unemployment rate was unchanged over the month, at 5.2 percent.

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

[The prepared statement of Commissioner Utgoff together with

Press Release No. 05-788 appears in the Submissions for the

Record on page 14.]

Representative Saxton. Commissioner, thank you very much.

We particularly appreciate your remark today about working

moms. It is a subject that we continue to see changes, an important

change in our society. I can remember several decades ago there

were very few working moms, and today there are many, and so

your remarks were most appropriate. Thank you for that.

Ms. Utgoff. Thank you.

Representative Saxton. Commissioner, how would you characterize the April data? Didn’t both unemployment surveys show

strong gains in employment?

Ms. Utgoff. Yes, the labor market showed a good deal of

strength this month.

Representative Saxton. And how large were the upward revisions in payroll employment for the months of February and

March?

5

Ms. Utgoff. 57,000 for February.

Representative Saxton. Bringing it to a total of what kind of

growth?

Ms. Utgoff. 146,000.

Representative Saxton. 146,000 in February?

Ms. Utgoff. Yes. Oh, I am sorry, that was March. February is

300,000.

Representative Saxton. 300,000 in February. So we had a

slight downturn on revised numbers in March, but certainly we are

seeing a trend of good growth here over the past 3 months, certainly.

Ms. Utgoff. Both of them were revised upward, so we had

stronger news for the previous 2 months.

Representative Saxton. Okay, thank you. So over the past 3

months, including this month, we have seen, overall, good growth.

Ms. Utgoff. Yes.

Representative Saxton. Is it typical for this stage of a cycle,

or is it unusual?

Ms. Utgoff. I think when we talk about a cycle we have to realize that what we have seen since March, 2001, is very atypical. It

doesn’t look like other recessions. But this kind of growth is normal

for when the labor market starts to recover.

Representative Saxton. Okay. Thank you.

What factors contributed to the revisions of February and

March?

Ms. Utgoff. The revisions for February were in leisure and hospitality, largely eating and drinking. The revisions for March were

spread widely throughout all of the industries.

Representative Saxton. Thank you.

Are there any signs in the April data that workers are choosing

to enter the workforce? Are we seeing any movement of encouraged

workers who may perceive that the labor market conditions continue to improve?

Ms. Utgoff. The household survey shows a very strong increase

in participants in the labor force, and it also shows a strong growth

in employment.

Representative Saxton. So individuals who are unemployed

are becoming more encouraged to seek jobs, is that a fair statement?

Ms. Utgoff. Yes. Over the last year, the number of discouraged

workers has declined.

Representative Saxton. In your statement, you note that the

monthly gain in payroll employment was widespread. Isn’t this reflected in the defusion index which rose to 61.3?

Ms. Utgoff. Yes.

Representative Saxton. What does that mean? 61.3 percent is

a number which means what?

Ms. Utgoff. It reflects roughly the percentage of industries that

have increased employment that month. It is actually the percent

with an increase, half the percent of the industries that had no

change to reflect, so that 50 is the mark for neither contraction or

expansion.

Representative Saxton. So of all the firms in the index, 61.3

percent have growth in employment?

6

Ms. Utgoff. Yes.

Representative Saxton. In your statement you also note an increase in employment related to oil and gas operations. How do you

interpret this increase?

Ms. Utgoff. I think this is related to the increase in fuel prices,

which has led for more exploration and people providing the services for more exploration and drilling.

Representative Saxton. Now I have noted that, with regard to

coal operations—speaking of energy—there have been some reports

that coal mining operations have had trouble finding workers. Is

this reflected in your data?

Ms. Utgoff. There has been an increase of employment in mining over the last 12 months, about 6,300. Now they may have

wanted to hire 20,000, so that there is a shortage, but we do see

an increase in employment over the year.

Representative Saxton. Also in your statement you mention

that over the last 2 years construction employment has been

strong. This strength seems to be quite consistent month after

month over the recovery, hasn’t it?

Ms. Utgoff. Yes.

Representative Saxton. Is that a reflection of something that

has been happening generally in the housing market?

Ms. Utgoff. Yes. The low interest rates have sparked a fairly

strong housing boom. We see that in construction, we see that in

the financial services that deal with mortgages, we see that

throughout the employment situation—that if it is related to the

housing market—it is showing strength.

Representative Saxton. And slightly out of your domain, I

guess, but let me ask this question anyway. We have noted that

the Fed has had a continuing slow increase of short-term interest

rates, but, at the same time, long-term interest rates have continued to at least be stable and in some cases fall. Has this contributed to the housing market, and do you have any thoughts about

what is causing the long-term rate to remain stable while shortterm rates are increasing?

Ms. Utgoff. Chairman Greenspan is far better than I on that—

and that is totally out of my bailiwick.

Representative Saxton. Okay, thank you.

Let me just turn to the rate of unemployment for just a moment.

We have a chart that our great helper is going to help us put up

there.

The point that I want to make here is that Mrs. Maloney pointed

out that the rate of unemployment remained at 5.2 percent this

month. I just wanted to point out that, in spite of the fact that the

rate of unemployment remained at 5.2 percent, we have already

talked here in the last few minutes about the rate of unemployment; and one of the things that, of course, keep it from falling is

that more and more people are attempting to enter the workforce,

and that is good.

Now over the last three and a half decades, this chart shows

the—through the red line—the trends in the rate of unemployment.

And, of course, during the 1970s, we saw unemployment peak out

at around 9 percent; during the 1980s, we saw unemployment peak

out at just under 11 percent; during the 1990s, we saw unemployVerDate 03-FEB-2003 11:21 Aug 24, 2005 Jkt 021728 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 D:\JEC\21728.TXT SSC2 PsN: SSC2
7

ment peak out at just under 8 percent; and in this recession that

we are now recovering from, we saw the rate of employment peak

out at 6.2 percent. So the peak of 9 percent in the 1970s, the peak

of almost 11 percent in the 1980s, the peak of almost 8 percent in

the 1990s far surpassed the peak of unemployment that we saw of

6.2 percent in this cycle. And, further, the average rate of unemployment in the 1970s was 6.2 percent, in the 1980s was 7.3 percent, and in the 1990s was 5.8 percent.

So while we would like to see full employment, whatever that is,

we certainly are in a period when we should be fairly pleased, I

would think, with the way the job recovery and the rate of unemployment have shown great long-term progress here. And I just

wondered if there is anything about this chart that you would like

to remark about or comment on inasmuch as this is—at least over

the last three and a half decades we are in a fairly historic position

in terms of long-term low-unemployment rates.

Ms. Utgoff. Yes. We just checked the numbers, and what you

have there is correct.

Representative Saxton. Okay. Thank you.

Mrs. Maloney.

Representative Maloney. It is always good to hear you are correct. First of all, I would like to thank you very much for including

Mother’s Day employment numbers. They show a tremendous shift,

really, in the framework of our country. Seven out of ten mothers

are now in the labor force.

I think this is such an important issue. One of the areas I work

in is supporting policies in the private and public sector to support

working mothers; and I would like to request a hearing just on

working mothers or, at the very least, the opportunity, Commissioner, to speak with you in depth on the numbers that you see in

this really dramatic change in the way our country is constructed.

But I do want to go back to the Chairman’s chart, and I am glad

that it is correct. Because one of the things that it shows is that

the unemployment numbers are still higher than when President

Bush took office. Although there is a larger participation, it is still

not as large as I would like to see; and I would like to ask specifically, Commissioner, the unemployment rate remains at least a

percentage point higher than it was before the start of the recession, is that correct? And what was the unemployment rate in

April?

Ms. Utgoff. The unemployment rate in April was 5.2 percent. In

March 2001, last business cycle peak, the jobless rate was 4.3.

Representative Maloney. 4.3, okay. So the labor force participation rate I think is tremendously important.

Wouldn’t you expect in an economic recovery that people who

had dropped out of the labor force would begin to come back and

that the labor force participation rate would increase? What has

been the recent level of the labor force participation rate, and how

does that compare with what it was in 2000 and early 2001? And

if I could add, when was the last time the labor force participation

rate was this low?

Ms. Utgoff. In April, the labor force participation rate was 66.0

percent. The rate peaked at 67.3 in the first few months of 2000,

8

and it was at 67.2 percent in March 2001, at the business cycle

peak.

You asked me when the last time we had these kinds of rates.

The labor force participation rate has been at or near 66 percent

since mid-2003. Prior to the 2001 recession, the rate was last in

that general range in 1993.

Representative Maloney. So we would have to go back at least

10 years——

Ms. Utgoff. That is correct.

Representative Maloney [continuing]. For it to be in this

range.

The employment-to-population ratio is very important, and I

would like to understand this more. What fraction of the population was employed in April? And how does the employment-topopulation ratio in recent months compare to what it was in 2000

or early 2001? And when was the last time the employment-to-population rate was as low as it has been recently?

Ms. Utgoff. The employment-to-population ratio now is 62.1—I

am sorry, 62.6; and the annual average in 2000 was 64.4. In January 2001, the employment-to-population ratio was 64.4.

You asked about when the last time it was as low as it is now.

The employment-to-population ratio has been about 62.5 percent

since the middle of last year. The last time it had been at the level

prior to this recession was in mid-1994.

Representative Maloney. The official unemployment rate does

not, as I understand it, include people who want to work but do

not satisfy all of the requirements to be officially classified as unemployed. When people who want a job that are not in the labor

force and people who want to work full time but can only get a part

time job are included, that measure of labor market slack is much

higher than the official unemployment rate. So how many people

are officially counted as unemployed now?

Ms. Utgoff. 7.7 million.

Representative Maloney. 7.7 million. How many people who

are not in the labor force say they want a job now?

Ms. Utgoff. 1.5 million people say that they are not in the labor

force, but they say they want a job, have searched for work in the

prior 12 months, and are available to work now.

Representative Maloney. How many people are working part

time for economic reasons and presumably would want to work full

time if they could get a full-time job?

Ms. Utgoff. In April, 2005, that was 4.3 million.

Representative Maloney. What would the unemployment rate

be if you included people who want a job now but are not in the

labor force and people who are working part time not for economic

reasons but because they cannot get a full time job?

Ms. Utgoff. That is one of the unemployment rates we published. It is called the U–6, and that number would be 9 percent.

Representative Maloney. Nine percent.

May I continue asking questions, Mr. Chairman?

Representative Saxton. Sure.

Representative Maloney. Thank you.

Something that really concerns me deeply and that I, quite

frankly, do not understand, is why are we not seeing stronger wage

9

growth? We see some good employment numbers across the board,

which is great news, but the wage growth does not appear to be

growing.

A few weeks ago—in fact, the last time we had a hearing—the

L.A. Times ran a story entitled, ‘‘Wages Lagging Behind Prices.’’

Inflation has outpaced the rise of salaries for the first time in 14

years, and workers are paying a bigger share of the cost of their

health care.

Then the next day the New York Times ran a story headlined,

‘‘Falling Fortunes of the Wage Earners.’’ What has been happening

to growth and wages and earnings recently compared with what

has been happening to inflation? In other words, have workers’

paychecks been keeping up with inflation?

Ms. Utgoff. There are several measures of earnings. Let me talk

about the ones that are in the report that I testified on today, and

that is real earnings of production or nonsupervisory workers.

That, in real terms, declined a half a percent from March 2004 to

March 2005.

Representative Maloney. But haven’t we seen pretty strong

productivity growth over the past 4 years, and wouldn’t we expect

to see that translated into solid growth and real jobs? Productivity

is growing up faster than real wages.

Ms. Utgoff. That is the theory, that productivity leads to higher

wages. We just have not seen it in the last part of this cycle.

Representative Maloney. Most of this strong growth and labor

productivity has, therefore, translated into profits, not wages,

hasn’t it?

Ms. Utgoff. The Bureau of Labor Statistics has very limited information on profits. Our productivity analysis reports on profits in

the nonfinancial corporations. In 2004, productivity in nonfinancial

corporations increased by 3.9 percent, hourly compensation by 4.4

percent, and unit profits by 20 percent.

Representative Maloney. Employers’ costs—and I am hearing

a lot of this from my constituents that are very concerned that

their costs are not only wages and salaries but also benefits, and

the cost of benefits are going up really dramatically. When employers costs go up because they have to pay more for health insurance,

how does that affect our measure of employee compensation? Aren’t

workers subject to a squeeze on their take-home pay as employers

have to pay more for their health insurance? And if employers are

shifting more of the burden of rising health care costs onto their

workers, does that not reduce the purchasing power of that takehome pay still more?

Ms. Utgoff. You asked how is the compensation measured. We

have an employment cost index which measures wages and salaries

and benefits and then the total compensation package. Wages and

salaries have not risen as quickly as the benefits increases, so I

think it is fair to say that there has been pressure on wages and

salaries because of increases in workers’ benefit costs, particularly

pension and health benefits.

Representative Maloney. I believe that the BLS publishes

data on the usual weekly earnings of full-time workers, including

some information about the wage distribution, is that correct?

Ms. Utgoff. Yes.

10

Representative Maloney. Well, our staff has done some calculations that shows some disturbing trends in that wage distribution. First, they show that from the fourth quarter of 2000 to the

fourth quarter of 2004, median earnings had increased by just .2

percent per year after inflation. Does that seem about right to you?

Ms. Utgoff. We have done the same calculation, and it is about

right. We calculated a gain of about .15 percent.

Representative Maloney. Okay, thank you.

However, earnings near the very top of the earnings distribution,

the 90th percentage, have risen by roughly .9 percent per year,

while earnings near the bottom, the tenth percentile, have fallen

by 3 percent per year. Does that seem about right to you as well?

Ms. Utgoff. Well, let me read the numbers for you.

During that 4-year period, you are talking about nominal earnings. If the ninth decile grew from 1,299 to 1,477, that was up 13.7

percent, while those at the first decile increased from $284–308,

that is up 8.5 percent. Now, inflation over this period rose by 9.6

percent. So, in real terms, those at the ninth decile have seen earnings growth around 1 percent per year, while those in the first decile have seen their earnings decline .3.

Representative Maloney. Thank you.

So in other words, things seem to have gotten worse in the past

year, comparing the first quarter of this year with the comparable

period a year ago. Only the very top of the distribution seems to

have experienced real wage gains, while earnings at the bottom,

the tenth percentile, were down 1.3. Do those numbers sound

roughly right to you, or——

Ms. Utgoff. Yes. From the first quarter of 2004 to the first quarter of 2005, weekly earnings at the ninth decile are up in nominal

terms, and earnings in the first decile are up about 1.6 percent.

Given that the CPI is up about 3 percent over this period, earnings among workers at the ninth decile have seen a small increase

in real terms over this period, while those in the first decile have

experienced a decline of about 1.4 percent.

Representative Maloney. Thank you.

Well, this job growth is really encouraging. 274,000 jobs in this

month is just great news for America. But I would like to know,

how long does it usually take from when the economy first begins

to lose jobs in a recession until the job’s deficit created by that recession is completely erased?

Ms. Utgoff. It varies. It took 28 months to recover from the——

Representative Maloney. It is roughly 2 years, would you say?

Ms. Utgoff. Yes.

Representative Maloney. And hasn’t it taken us nearly 4 years

in this business cycle just to get back to where we were when this

recession started?

Ms. Utgoff. Yes.

Representative Maloney. And when you take out growth in

government jobs, don’t we still have fewer jobs on private payrolls

than there were when President Bush took office in January 2001,

or at the start of the recession in March 2001?

Ms. Utgoff. That is correct.

Representative Maloney. More than 4 years after the start of

a recession, isn’t our usual experience that there are two or three

11

million more payroll jobs than there were when the recession started, instead of a deficit?

Ms. Utgoff. Can we get back to you the average? The question

is, 4 years after a——

Representative Maloney. Start of a recession.

Ms. Utgoff [continuing]. The start of a recession what is the average job growth?

Representative Maloney. Yes, payroll jobs.

Ms. Utgoff. Okay. We don’t have those numbers here with us

today.

Representative Maloney. If you could get back.

[The information referred to may be found on page 41.]

Representative Maloney. And aren’t there significantly fewer

manufacturing jobs than there were in 2001?

Ms. Utgoff. Yes.

Representative Maloney. Roughly 2.6 million less.

Ms. Utgoff. That is right.

Representative Maloney. And those persistent job deficits are

different from anything we have seen in a business cycle for a very

long time, aren’t they?

Ms. Utgoff. Yes.

Representative Maloney. Thank you.

One of the reports that I—it was not in your statement but was

really in the news broadcast this morning—is that Americans are

working longer hours, that the number of hours Americans are

working is longer. And I am just interested, given the fact that you

show how long the women are working and then working at home,

too, is it true that the numbers that Americans are working for

their wages are growing longer? I heard that on a news report this

morning.

Ms. Utgoff. The average hours worked are a function of not just

how many people are working but where they are working. Manufacturing tends to have higher hours than the service industry. So

that over the last several years, as you have seen a shift out of

manufacturing, average hours have fairly gone down.

Representative Maloney. They have gone down.

Thank you very much. I have no further questions. 274,000 jobs

sounds good to me, Mr. Chairman. I hope it continues.

Representative Saxton. Well, I just have one question, and I

guess this is a rhetorical one. Inasmuch as Mrs. Maloney went to

great pains to point out what she perceives as the various weaknesses in this cycle related to Mr. Bush, I wonder if she would give

Mr. Bush credit over the past 3 months for having created an average of 240,000 jobs a month.

Representative Maloney. What I am very concerned about,

Mr. Chairman, are the structural challenges that we face. This is

probably not a question for the BLS, but I am concerned that we

have raised the debt ceiling three times in this administration, that

we have three records——

Representative Saxton. You are not answering my question. It

is my time. I am going to reclaim my time. My question said, do

you give the President credit for having created 240,000 jobs a

month for the last 3 months? That is a very good rate of job creation.

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In addition to that—let me amend my question. Do you criticize

in any way the previous administration for the loss of manufacturing jobs which took place in 1998, 1999, and 2000? Wouldn’t it

be fair to blame that administration for that job loss in manufacturing?

Representative Maloney. Mr. Chairman, I am not blaming

anyone. My questions were very factual and aimed at getting information. The fact that our country is losing manufacturing jobs is

a challenge to both sides of the aisle to try to reverse that disturbing trend, no matter what administration it is in. We have

seen today 4 records—record job growth, record deficits, record

trade deficit, and record debt—and I am concerned about these

structural challenges that this country faces with the growing and

looming debt.

Mr. Chairman, you and I both owe the Federal government $27,000 of what our personal debt price is. I happen to be concerned about that. And until we address the structural challenges,

I don’t feel that continued prosperity for our country long term is

extremely positive.

We are a great country. I hope the stock market goes up. This

is great employment. I hope some of those people that got those

jobs live in my district, in the great State of New York. I am very

happy about this job growth, and let’s work together to come up

with some policies to reverse the disturbing loss of manufacturing

jobs and to try to structurally address the challenges that we confront.

I am concerned that there are some people that want to add another couple of trillion dollars of debt in a structure to go to private

insurance. Now if you want to go to private insurance, don’t add

debt to the American people——

Representative Saxton. I am going to reclaim my time. I am

sorry. The gentlelady is out of order.

Representative Maloney. I was answering your question.

Representative Saxton. I think you were filibustering.

I think the 240,000 average job growth during the last 3 months

speaks for itself.

With regard to manufacturing jobs, I am pleased that the

gentlelady has pointed out that—and has agreed that it is part and

parcel of both administrations. It is a set of issues that we do need

to address on a bipartisan basis. And certainly—I will conclude

with this—the gentlelady’s questions were aimed at pointing out

the weaknesses which she inferred took place because of this administration.

Thank you very much. The hearing is adjourned.

[Whereupon, at 10:13 a.m., the hearing was adjourned.]

(13)

Submissions for the Record

PREPARED STATEMENT OF REPRESENTATIVE JIM SAXTON, CHAIRMAN

It is a pleasure to welcome Commissioner Utgoff and her colleagues before the

Committee this morning to discuss the latest employment data.

The April employment data are good news for American workers. According to the

payroll survey, employment increased by 274,000 jobs in April. Over the last 23

months, 3.5 million jobs have been created.

According to the household survey, employment also advanced, while the unemployment rate was 5.2 percent. Over the last year, most of the net increase in employment has been in occupations that pay in the middle range and higher.

The employment data are consistent with other data showing that the economy

continues to grow. In 2004, real GDP increased about 4 percent, followed by a more

sustainable 3.1 percent pace in the first quarter of 2005. Consumption and investment both continue to rise. The strength of investment over the last 2 years has

been an important factor explaining the vitality of the economy.

The economy seems to have weathered the recent rise in oil prices quite well, although oil prices have probably had some negative impact on growth. Another factor

that bears watching is the potential impact of the recent expiration of tax provisions

permitting expensing, which may affect the robust performance of business investment. Traces of inflation have surfaced in recent months, but inflation appears to

be contained over the long term, as the Fed has recently noted.

Looking ahead, the consensus of economic forecasters is that the U.S. economy

will continue to grow at a rate in excess of 3 percent through the end of 2006. This

is consistent with the long-term growth path of the U.S. economy over the last several decades.

PREPARED STATEMENT OF REPRESENTATIVE CAROLYN B. MALONEY

Thank you, Chairman Saxton. The Joint Economic Committee has a long tradition

of holding these hearings with the Commissioner of the Bureau of Labor Statistics

to discuss the latest data on the employment situation, and I am glad we are able

to continue that tradition today.

This morning’s news that the economy created 274,000 jobs in April is certainly

good news for American workers. However, we haven’t seen very many months of

good job growth in the last 4 years as the economy has gone through the most protracted jobs slump since the 1930’s.

We continue to see evidence of that jobs slump. There were still fewer private sector payroll jobs in April than there were when President Bush took office in January

2001, and there are 2.8 million fewer manufacturing jobs. Even though we have had

nearly 2 years of job growth, the pace of that job creation—about 150,000 jobs per

month—is not what one would expect to see in a strong jobs recovery. It seems as

though we are barely treading water in terms of keeping up with population growth

and encouraging people to come back into the labor force after a long jobs drought.

Today’s report also shows that the unemployment rate remained unchanged at 5.2

percent. While it is true that the unemployment rate has come down from its peak,

it still is more than a percentage point higher than the 4 percent rate we were able

to achieve by the end of the 1990’s. Moreover, today’s unemployment rate masks the

fact that 5.1 million people who want to work remain out of the labor force and another 4.3 million are working part-time for economic reasons. The unemployment

rate would be 9.0 percent if those people were included.

Finally, I am concerned about workers’ wages and earnings, especially over the

past year or so. It seems that no matter what measure of workers’ take-home pay

you look at lately you see that it is not keeping up with inflation. For example, in

the 12 months ending in March, both average hourly earnings and average weekly

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earnings of private sector workers are down about 1⁄2 percent after accounting for

inflation. Measures of total compensation, which include benefits as well as wages

and salaries, are keeping up with inflation—but just barely. The problem is that rising costs of health insurance premiums are adding to employers’ costs but they are

squeezing workers’ take-home pay at the same time.

Not only are earnings generally not keeping up with inflation, but the distribution

of earnings is becoming more unequal. For example, from the end of 2000 to the

end of 2004, the real earnings of full-time workers in the middle of the earnings

distribution grew by just 0.2 percent per year after inflation. However, those near

the top of the distribution rose by almost 1 percent per year after inflation, while

those near the bottom fell by 0.3 percent per year, on average. More recently, those

disparities have become larger and only earnings at the very top have exceeded inflation.

Mr. Chairman, I am very pleased to have Commissioner Utgoff here today and

I look forward to hearing her testimony and pursuing with her some of the concerns

I have raised about the employment situation.

PREPARED STATEMENT OF KATHLEEN P. UTGOFF, COMMISSIONER,

BUREAU OF LABOR STATISTICS

Mr. Chairman and Members of the Committee: I appreciate this opportunity to

comment on the labor market data we released this morning.

Nonfarm payroll employment rose by 274,000 in April, and the unemployment

rate held at 5.2 percent. The increase in payroll jobs followed revised gains of

300,000 in February and 146,000 in March. Over the month, employment growth

was widespread. Notable gains continued in construction, mining, food services, and

health care.

Among the goods-producing industries, construction employment rose by 47,000,

continuing the strong growth trend of the last 2 years. Most of April’s increase occurred in specialty trade contracting (40,000), with gains in both its residential and

nonresidential components. Mining added 8,000 jobs in April. Over the past 6

months, mining employment has risen by 31,000, largely reflecting increased hiring

for support activities for oil and gas operations.

Manufacturing employment was essentially unchanged both in April and over the

year. The manufacturing workweek was up by one-tenth of an hour over the month,

and factory overtime held at 4.5 hours.

In the service-providing sector, food services added 35,000 jobs over the month.

Following a lull in hiring last summer, industry employment has risen by 183,000

since September. Health care employment increased by 25,000 in April. The job gain

was concentrated in hospitals and in doctors’ offices.

Employment in the information industry increased by 12,000 over the month,

with gains in motion pictures and telecommunications. Job growth continued in a

number of other service-providing industries, including financial activities, professional and technical services, and transportation.

Average hourly earnings of private production or nonsupervisory workers rose by

5 cents in April to $16.00, following a 4-cent increase in March. Over the year, average hourly earnings grew by 2.7 percent.

Looking at the measures from our household survey, total employment rose in

April by 598,000 to 141.1 million. The labor force participation rate and the employment population ratio each edged up by 0.2 percentage point to 66.0 and 62.6 percent, respectively. The number of discouraged workers (persons outside the labor

force who had stopped looking for work because they believed their job search efforts

would be fruitless) declined by 99,000 over the year to 393,000 in April (not seasonally adjusted).

Both the number of unemployed persons and the unemployment rate were unchanged in April. About 1 in 5 unemployed persons had been jobless for 27 weeks

or longer. The long-term unemployed have accounted for over 20 percent of total unemployment for 31 consecutive months.

As part of our mission of reporting on America’s workers each month, and in recognition of Mother’s Day this Sunday, I would like to mention a few facts about

working mothers. in today’s labor market, 7 out of 10 mothers are in the labor force,

compared with 5 out of 10 in 1975. Working moms account for almost one-fifth of

all employed individuals, and nearly three-fourths of employed mothers usually

work full time. Mothers who usually work full time also spend more than 2 hours

each weekday performing active childcare, cleaning house, and preparing meals. In

addition, nearly 4 out of 10 mothers who work full time perform volunteer work at

some point during the year.

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I also would note that an updated version of a report by BLS on women in the

labor force, which includes data on working mothers, will be posted on our Web site

next week This report is a compilation of information on women workers by various

characteristics, including age, education, occupation, and earnings.

To summarize April’s labor market data, nonfarm payroll employment increased

by 274,000. The unemployment rate was unchanged over the month, at 5.2 percent.

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

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Change in Nonfarm Payroll Employment 49 Months After Recession Onset

[In thousands]

Recession Onset 49 Months After Recession Onset Change in

Employment Level

Percent

Change

in Employment Month1 Employment Month Employment

Nov-48 ........................................................ 45,194 Dec-52 .............................. 50,164 4,970 11.0

Jul-53 .......................................................... 50,536 Aug-57 .............................. 53,128 2,592 5.1

Apr-60 ......................................................... 54,812 May-64 .............................. 58,089 3,277 6.0

Nov-73 ........................................................ 77,909 Dec-77 .............................. 84,408 6,499 8.3

Jul-81 .......................................................... 91,594 Aug-85 .............................. 96,819 6,225 6.8

Jul-90 .......................................................... 109,773 Aug-94 .............................. 114,801 5,028 4.6

Average ....................................................... ..................................... 4,765 7.0

Mar-01 ........................................................ 132,511 Apr-05 ............................... 133,293 782 0.6

1 As designated by the National Bureau of Economic Research (NBER).

Source: Bureau of Labor Statistics, Current Employment Statistics (CES) Survey.

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