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THE EMPLOYMENT SITUATION: MAY 2004

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED EIGHTH CONGRESS

SECOND SESSION

JUNE 4, 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

CHRISTOPHER J. FRENZE, Chief Economist to the Vice Chairman

(III)

CONTENTS

OPENING STATEMENT OF MEMBERS

Representative Jim Saxton, Vice Chairman .......................................................... 1

WITNESSES

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

Statistics, accompanied by: Dr. John Greenlees, Associate Commissioner,

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

Commissioner, Employment and Unemployment Statistics ............................. 2

SUBMISSIONS FOR THE RECORD

Prepared statement of Representative Jim Saxton, Vice Chairman ................... 11

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

Release No. 04-996, entitled, ‘‘The Employment Situation: May 2004,’’

Bureau of Labor Statistics, Department of Labor ............................................. 11

(1)

THE EMPLOYMENT SITUATION:

MAY 2004

FRIDAY, JUNE 4, 2004

CONGRESS OF THE UNITED STATES, 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, Vice

Chairman of the Committee, presiding.

Present: Representative Saxton.

Staff Present: Christopher Frenze, Robert Keleher, Brian

Higginbotham, Colleen J. Healy, Donald Marron, Reed Garfield,

Mike Ashton, and Matthew Salomon.

OPENING STATEMENT OF REPRESENTATIVE JIM SAXTON,

VICE CHAIRMAN

Representative Saxton. Good morning. It is a pleasure to welcome Commissioner Utgoff once again to testify on the monthly employment statistics.

This morning, the Commissioner brings more good news for

American workers. According to the establishment survey, payroll

employment increased by 248,000 in May. Furthermore, upward revisions pushed the level of job gains to 353,000 in March and

346,000 in April. Manufacturing employment increased by 32,000

in May, which is perhaps even more remarkable. So far this year,

payroll employment has increased by more than 1 million jobs.

The diffusion index—an important measure of the breadth of employment gains by industry groups—indicates that employment increases were broad-based. The monthly diffusion index has shown

expansion for 5 months in a row, more than 1.4 million jobs have

been created since last August. According to the household survey,

employment also increased.

The positive employment data reported today are consistent with

other recent economic data on output, investment and consumption. GDP growth in the first quarter was recently revised upward

to 4.4 percent. Over the year, the economy has expanded at a 5

percent rate.

A rebound in investment has made a major contribution to the

acceleration of the economy over the last year, with equipment and

software investment posting an increase of 12.5 percent during this

period. Manufacturing activity is expanding at a brisk pace. Meanwhile, homebuilding and construction are robust. Independent

economists have identified tax relief and accommodative monetary

policy as the two key reasons for the improvement in the economy.

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In summary, economic conditions remain strong. The expansion

is on track and consistent with the Blue Chip Consensus projection

of nearly 5 percent growth in 2004. As I noted many months ago,

healthy economic growth offers the best way to improve labor market conditions and to expand employment. As the numbers show,

the pick up in the economy has indeed boosted payroll employment

growth, and led to the probability of good employment gains

throughout 2004.

[The prepared statement of Representative Saxton appears in the

Submissions for the Record on page 11.]

Representative Saxton. Commissioner, welcome this morning,

and we are ready for your testimony.

OPENING STATEMENT OF HON. KATHLEEN P. UTGOFF, PH.D.,

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 GALVIN,

ASSOCIATE COMMISSIONER, EMPLOYMENT AND UNEMPLOYMENT STATISTICS

Commissioner Utgoff. Thank you, Mr. Chairman.

I appreciate this opportunity to comment on the labor market

data that we released this morning.

Nonfarm payroll employment rose by 248,000 in May, following

even larger job gains in both April and March. Since August 2003,

payroll employment has risen by 1.4 million. In May, job growth

was widespread for the third consecutive month. Employment continued to expand in manufacturing, construction, and several service-providing industries. The unemployment rate held steady at 5.6

percent in May. It has essentially shown no movement since last

December.

Among the goods-producing industries, employment in manufacturing rose by 32,000 and has increased 91,000 since January. The

over-the-month gain was concentrated in the durable goods component, which has accounted for nearly all of the recent job growth

in manufacturing. The factory work week rose by four-tenths of an

hour over the month, more then offsetting declines in the prior 2

months.

The upward trend in construction employment continued in May,

as the industry added 37,000 jobs. Since March 2003, the number

of construction jobs has risen by 248,000. Employment growth in

mining has picked up in recent months. The industry has added

18,000 jobs since January.

In the service-producing sector, employment in professional and

business service increased by 64,000 in May, following an even

larger gain in April. Nearly half of May’s growth in professional

and business services occurred in temporary help. Employment in

temporary help has risen nearly 300,000 since its recent low in

April 2003.

Employment continued to increase in health care and social assistance. Job growth in this industry has accelerated in recent

months. Employment growth in leisure and hospitality was strong

for the third consecutive month. The industry added 40,000 jobs in

May, with food services and drinking places continuing to account

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for most of the gain. So far this year, employment increases in food

services have averaged 32,000 per month.

Elsewhere among the service-providing industries, the financial

sector added 15,000 jobs in May, as employment in real estate and

credit intermediation continued to expand. In retail trade and

wholesale trade, employment continued its upward trend.

One industry which employment has continued to trend down is

telecommunications. Over the month, employment declined by

5,000. Since its peak in March 2001, the industry has shed 283,000

jobs.

In May, average hourly earnings for production and nonsupervisory workers rose by 5 cents, following a 4-cent increase in

April. Over the year, average hourly earnings grew by 2.2 percent.

Looking at some of our measures obtained from the survey of

households, the May unemployment rate was unchanged at 5.6 percent. After trending down during the second half of last year, the

jobless rate has been either 5.6 or 5.7 in each month since December.

In May, 8.2 million persons were unemployed. The number of

persons who have been jobless for 27 weeks or longer held at 1.8

million. The labor force participation rate was 65.9 percent for the

fourth consecutive month.

In summary, nonfarm payroll employment increased by 248,000

in May, by 947,000 over the last 3 months and by 1.4 million since

August. The unemployment rate was unchanged over the month 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. 04-996, appears in the Submissions for the

Record on page 11.]

Representative Saxton. Thank you very much. This is indeed

good news. And we—as I jokingly remarked to you before the hearing started—we have been getting good news almost since the day

you arrived.

Commissioner Utgoff. Not quite.

Representative Saxton. So perhaps that has something to do

with it.

Let me just begin with a question. Obviously, the numbers that

we are here to discuss specifically today are good news.

American families always like to hear that more people are going

back to work. And, in fact, I sharpened my pencil up a little bit

this morning and looked at the last 3 months in particular. It looks

to me like we have created just under a million jobs in the last 3

months, which is good news.

Commissioner Utgoff. That is correct.

Representative Saxton. But, Commissioner, the growth in the

economy has been much broader than just job growth, at least from

my perspective. There are many segments of the economy that

have been showing good growth. And we began to see increases in

payroll employment 9 months ago and, even prior to those, when

we had small gains in employment, there were factors that were

at work in the economy that led us to believe that these employment gains were soon to be felt.

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For example, the housing industry has been strong for quite

some time. And we have seen elevated levels of housing—of employment in the housing area. Another example is retail sales. Retail sales have been trending up since 2002. And so that was an

early indicator that suggested to us that we would soon be seeing

growth in employment.

Real disposable income has been going up. We had, during the

recession and immediately after the recession, some problems with

household net worth, meaning the wealth factor that we talked

about after the bursting of the stock market bubble. But today, we

see that household net worth has rebounded to the level that it was

prior to the recession.

This chart, with the yellow vertical lines, shows that, during and

immediately after the recession, that household net worth was actually in the negative. But now, today, it looks like to me like

changes in household net worth have rebounded to pre-recession

levels.

And in addition to that, fixed investment, which also went into

the negative area, into negative territory during the recession, in

private nonresidential fixed investment in particular, has rebounded. And so for the last four quarters we have been back on

the positive side once again.

In addition to that, profits are up for business. Capital goods orders are up, which is a good indicator for the future. The stock

market has rebounded over the last four quarters and, today, remains well over the 10,000 level (that is, the Dow.)

And inventories—at the same time—inventories are low, which

would indicate that perhaps businesses will have to rebuild inventories, which also speaks well for the future.

So the numbers that we are here to specifically talk about today,

gains in employment, are a factor which shouldn’t surprise us, because the rest of the economy is doing so well also.

Would you expand, if you would, on this notion and tell me

whether or not what I am seeing in other sectors, in various sectors

of the economy is right. Am I interpreting this correctly?

Commissioner Utgoff. Yes, you are.

Representative Saxton. Do you have anything to add that I

may have missed here? Is there any other data that we should be

looking at?

Commissioner Utgoff. Well, the BLS also produces productivity

statistics, and those have remained strong.

Representative Saxton. Let me turn now to a question about

gross domestic product (GDP), which is a very, of course, broad

measure of economic growth.

We have seen over the past—looks like about eight quarters, if

we look at the chart, the graph to your left, we can see, the yellow

lines indicate where we have been with regard to GDP growth. Of

course, we were in negative territory at one point back in the—

some months ago. But we now are projecting that we are going to

see good economic growth into the future. Would you comment on

this chart for us?

Commissioner Utgoff. Yes. The numbers are as I know them

to be. But we do not—the BLS does not make projections for future

growth in GDP.

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Representative Saxton. You would concur that the chart

shows that we have seen, on average, more than 5 percent growth

over the past year?

Commissioner Utgoff. Yes.

Representative Saxton. Thank you. In your testimony, you described payroll employment gains as widespread. Isn’t this confirmed in the May level of the diffusion index which measures the

breadth of employment gains by industry? And why don’t you start

by telling us precisely what the diffusion index is?

Commissioner Utgoff. It is roughly a measure of the percentage of business establishments that are expanding employment,

compared to those that are contracting employment.

Representative Saxton. So the diffusion index is compiled by

looking across the economy and reporting on, if you will, reporting

on the percentage of businesses that are growing. Is that right?

Commissioner Utgoff. Roughly. Yes.

Representative Saxton. And the chart that we have here to

your left indicates that over 60 percent of this Nation’s businesses

are in positive territory, 62 percent to be—I can’t quite read the

number here—62.8 percent of the businesses in the U.S. economy

are growing. Am I interpreting that correctly?

Commissioner Utgoff. Yes.

Representative Saxton. And that number is considered to be

healthy by economists, generally, when it rises above 50 percent?

Commissioner Utgoff. Yes.

Representative Saxton. So we are well into healthy territory

as measured by the diffusion index. Is that right?

Commissioner Utgoff. Gains in employment have been very

widespread for the last 3 months, which is reflected in the diffusion

index.

Representative Saxton. Thank you. Does the level of the diffusion index in manufacturing reflect the improving situation in that

sector as well?

Commissioner Utgoff. Yes.

Representative Saxton. There are about 32,000 employment

gains in the manufacturing sector. Has this been long enough to establish a trend in the manufacturing sector?

Commissioner Utgoff. After many months of contraction, there

have been 4 consecutive months of increases in construction employment.

Representative Saxton. And——

Commissioner Utgoff. Excuse me. In manufacturing employment.

Representative Saxton. Thank you. So we have seen four consecutive months of increase in manufacturing employment. In the

world of economics, does that establish a trend, or does it appear

that there may be a trend underway?

Commissioner Utgoff. We hesitate to, in fact, do not make projections. But it is certainly a much more optimistic pattern than we

have been seeing in the past.

Representative Saxton. And how would you interpret the

32,000 single month gain in May?

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Commissioner Utgoff. That is statistically significant. The

gains for this last month and for the last 4 months have been statistically significant.

Representative Saxton. Okay. Thank you. Are the monthly

employment gains in May entirely due to the private sector growth,

or are there other factors at play here?

Commissioner Utgoff. It is private sector growth. There was a

decline in the Government sector.

Representative Saxton. There was a decline in Government

growth?

Commissioner Utgoff. Yes. So it is all private sector growth.

Representative Saxton. That would seem to be good news to

me. Would you interpret it as good news?

Commissioner Utgoff. Depends on your feeling about the relative size of the Government.

Representative Saxton. Well, many of us think that it is a little too big.

How much has construction employment increased over the last,

let’s say, over the last year?

Commissioner Utgoff. Let me get that for you.

Representative Saxton. Thank you.

Commissioner Utgoff. 194,000. Construction employment is at

an all time high.

Representative Saxton. When you say construction—over the

last year it is 190——

Commissioner Utgoff. 194,000?

Representative Saxton. 194,000 jobs over the last year?

Commissioner Utgoff. Yes.

Representative Saxton. You say that is at an all time high?

Commissioner Utgoff. Yes. The current level is an all time

high.

Representative Saxton. Very good. So let me just back up for

a minute and ask, what are the greatest areas of strength in the

May payroll data?

Commissioner Utgoff. As I said, the gains were fairly widespread. But we see, as in the past, we see gains in the health care

and social service sectors. And that was particularly strong in May.

Representative Saxton. Which industries have expanded fastest?

Commissioner Utgoff. Construction employment, professional

and business services, which includes temporary help, manufacturing, health care and social assistance, leisure and hospitality.

And there were some gains in employment and financial activities.

Representative Saxton. Once again, that would appear to be

fairly widespread?

Commissioner Utgoff. Yes, it is.

Representative Saxton. Have there been any regional differences that you can point to in job growth, that is, regions of the

country? Is one region doing better than another? Or is one region

perhaps lagging more than others?

Commissioner Utgoff. Let me find that for you.

Representative Saxton. Thank you.

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Commissioner Utgoff. The northeast has had a .3 percent increase in employment over the last year. The south, 1.1 percent.

The midwest, .2 percent. And the west, 1.2 percent.

Representative Saxton. And when you—sometimes, I know

you don’t like to venture into speculative answers, but is there

something about these growth numbers that indicate why the regions of the country are doing differently?

Commissioner Utgoff. I think it is fair to say that some of the

explanation has to do with the location of industries within those

particular States. The industries that have had health care and

more services, have done relatively better than the sections of the

country that have been—had the industries that are growing

slightly less rapidly, and that is manufacturing.

Representative Saxton. I can understand that. For example, if

we were in a section of the country where there was a lot of growth

in terms of construction, since the construction sector is doing very

well, then it would follow that sector—then that section of the

country would be growing faster. Wouldn’t it?

Commissioner Utgoff. Yes.

Representative Saxton. Commissioner, let me just look at

some other things. Here in Washington, some people like to talk

about the decline in payroll employment since January of 2001.

The net employment decline since that time is entirely accounted

for by the manufacturing sector. Therefore, I would like to ask you

several questions about recent trends in manufacturing employment to try and examine some of these issues in greater—in some

greater detail.

First, is it not the case that manufacturing employment has been

trending downward for quite some time?

Commissioner Utgoff. Yes.

Representative Saxton. Over what period of time has manufacturing employment been trending downward?

Commissioner Utgoff. Well, the percent of employment in

manufacturing has been declining since virtually the end of the

1940s.

Representative Saxton. So we have seen a trend over the last

several decades?

Commissioner Utgoff. Yes.

Representative Saxton. In loss of jobs in the manufacturing

sector?

Commissioner Utgoff. There have been increases and decreases, and particularly cyclically, in manufacturing, the absolute

number of people in manufacturing. But when you look at the percent of employment in manufacturing, that has been declining for

a very long time.

Representative Saxton. And you say since—for the last half of

the 20th Century?

Commissioner Utgoff. Yes. Roughly.

Representative Saxton. Now, despite this long-term trend,

during business cycles there are ups and downs in the manufacturing employment.

During the economic expansion of the late 1990s, is it not true

that manufacturing employment reached a cyclical peak in March

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of 1998, and that was—according to the numbers I have here—that

was about 17.6 million jobs?

Commissioner Utgoff. That is correct.

Representative Saxton. So we reached a peak in 1998. And

since this peak was reached in March of 1998, how much did manufacturing employment decline through—let’s take through January of 2001?

Commissioner Utgoff. Just a moment.

Representative Saxton. From 1998 to January of 2001?

Commissioner Utgoff. By 544,000.

Representative Saxton. So during that roughly 2-year period,

we lost over a half a million jobs in the manufacturing sector?

Commissioner Utgoff. That is correct.

Representative Saxton. In January 2001, what was the change

in manufacturing employment in that one month?

Commissioner Utgoff. A drop of 82,000.

Representative Saxton. Isn’t this about the same amount as

manufacturing employment declined on average, on an average

monthly basis, between 2001 and then the end of 2003?

Commissioner Utgoff. I think that is roughly correct.

Representative Saxton. Around 80,000 jobs a month that we

saw decline?

Commissioner Utgoff. Yes.

Representative Saxton. So manufacturing employment was in

decline before January of 2001, and the piece of monthly declines

in manufacturing since has been about the same as the decline in

2001. So when did the consecutive monthly declines in manufacturing employment actually begin?

Commissioner Utgoff. In August of 2000.

Representative Saxton. Well, it is very clear that these problems did not originate with the current Administration or its policies and probably had very little to do with the policies of the previous administration as well. This decline started during the late

1940s.

There has been much said recently about what caused this decline. It is obviously a very, very long trend. It is unfortunate that

we have been going in this direction for a long time. Despite attempts to use factory employment as a partisan football, the fact

is that declines in manufacturing employment started in one administration most recently and continued into the next?

Commissioner Utgoff. That is correct.

Representative Saxton. Okay. So we are very pleased, of

course, that we see this trend seemingly, at least for the last several months, reversing. And so we continue to look forward for

more good news.

The good employment gains that we have seen are not surprising

given the strength of the overall economy. I would just like to take

a moment to review the recent economic statistics that provide the

context for the growth of employment.

First, in the first quarter of 2004, the output of goods and services in the U.S., that is our GDP, jumped 4.4 percent after adjustment for inflation. The second quarter is expected to show comparable growth.

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Independent economists have attributed much of the acceleration

of the economy in the last year or so due to the tax relief that provided jobs and growth, the Jobs and Growth Act of 2003, along

with, of course, historically low interest rates.

Investment in particular has picked up, boosting economic

growth. The question is this: Are the strong payroll employment

gains in recent months consistent with good performance of the

economy?

Commissioner Utgoff. Yes.

Representative Saxton. The sector that consistently has performed well in recent years, as we have mentioned before, is housing. Is the health of the housing sector reflected in the recent construction employment data? And perhaps I should ask, how many

construction jobs have been created so far this year?

Commissioner Utgoff. Let me get the exact number for you.

135,000 jobs have been created. But it is clear from the types of

construction jobs that have been created that it is related to the

housing market.

Representative Saxton. Okay. Very good. How does the level

of construction employment compare with its historic highs?

Commissioner Utgoff. The construction employment is now at

an all-time high.

Representative Saxton. Obviously, this is good news for folks

who are in that industry. And so we continue to see—we will continue to see that growth in the future we hope.

Is the average compensation in this sector below average, average, or perhaps above average?

Commissioner Utgoff. It is above average.

Representative Saxton. So compensation in this fastest growing sector is above average.

Commissioner Utgoff. Yes.

Representative Saxton. Thank you.

How much has employment in professional and business services

increased over the past 3 months?

Commissioner Utgoff. It has grown at 78,000 a month.

Representative Saxton. So we see in the professional and business sector, as well, that we have seen very robust growth.

Commissioner Utgoff. Yes.

Representative Saxton. Commissioner, I could go on and ask

an unending number of questions here, but I think we get the picture. We have seen good job growth. It has taken place across the

economy.

We know that we have seen indicators that this has been coming

for quite some time. We know that much of this has been brought

on by tax policy that was a result of action by the Congress and

the Administration.

And we know that there has been another stimulus provided by

the Federal Reserve and monetary policy, i.e. low interest rates.

And so this is a picture that the American people, I know, welcome.

And so, hopefully, it will continue in the many months ahead. And

I would just like to thank you for coming here today as you do each

month to help us review economic data.

Sometimes in the past, it has been pleasant. Sometimes in the

past, it has been discouraging. But today, I must say is one of the

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most encouraging reports that I have seen since I had the privilege

of sitting in this seat.

So thank you for coming here today to share this information

with us. We appreciate it very much. And we look forward to seeing you next month.

Commissioner Utgoff. You are most welcome.

Representative Saxton. Thank you.

[Whereupon, at 10:05 a.m., the hearing was adjourned.]

(11)

Submissions for the Record

PREPARED STATEMENT OF REPRESENTATIVE JIM SAXTON, VICE CHAIRMAN

It is a pleasure to welcome Commissioner Utgoff once again to testify on the

monthly employment statistics.

This morning the Commissioner brings more good news for American workers. According to the establishment survey, payroll employment increased by 248,000 in

May. Furthermore, upward revisions pushed the level of March job gains to 353,000,

and April job growth to 346,000. Manufacturing employment increased by 32,000 in

May. So far this year, payroll employment has increased by more than 1 million

jobs.

The diffusion index—an important measure of the breadth of employment gains

by industry group—indicates that employment increases were broad-based. The

monthly diffusion index has shown expansion for five months in a row. More than

1.4 million jobs have been created since last August. According to the household survey, employment also increased.

The positive employment data reported today are consistent with other recent economic data on output, investment, and consumption. GDP growth in the first quarter was recently revised upward to 4.4 percent. Over the year, the economy has expanded at a 5 percent rate.

A rebound in investment has made a major contribution to the acceleration of the

economy over the last year, with equipment and software investment posting an increase of 12.5 percent during this period. Manufacturing activity is expanding at a

brisk pace. Meanwhile, homebuilding and construction are robust. Independent

economists have identified tax relief and accommodative monetary policy as two key

reasons for the improvement in the economy.

In summary, economic conditions remain strong. The expansion is on track and

consistent with the Blue Chip consensus projection of nearly 5 percent growth in

2004. As I noted many months ago, healthy economic growth offers the best way

to improve labor market conditions and to expand employment. As the numbers

show, the pick-up in the economy has indeed boosted payroll employment growth,

and led to the probability of good employment gains throughout 2004.

PREPARED STATEMENT OF HON. 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 that we released this morning.

Nonfarm payroll employment rose by 248,000 in May, following even larger job

gains in both April and March (346,000 and 353,000, respectively). Since August

2003, payroll employment has risen by 1.4 million. In May, job growth was widespread for the third consecutive month. Employment continued to expand in manufacturing, construction, and several service-providing industries.

The unemployment rate held at 5.6 percent in May; it has shown essentially no

movement since last December.

Among the goods-producing industries, employment in manufacturing rose by

32,000 in May and has increased by 91,000 since January. The over-the-month gain

was concentrated in the durable goods component (26,000), which has accounted for

nearly all of the recent job growth in manufacturing. The factory workweek rose by

four-tenths of an hour over the month, more than offsetting declines in the prior

2 months.

The upward trend in construction employment continued in May, as the industry

added 37,000 jobs. Since March 2003, the number of construction jobs has risen by

248,000. Employment growth in mining has picked up in recent months; the industry has added 18,000 jobs since January.

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In the service-providing sector, employment in professional and business services

increased by 64,000 in May, following an even larger gain in April. Nearly half of

May’s growth in professional and business services occurred in temporary help

(31,000). Employment in temporary help has risen by nearly 300,000 since its recent

low in April 2003.

Employment continued to increase in health care and social assistance (36,000).

Job growth in this industry has accelerated in recent months.

Employment growth in leisure and hospitality was strong for the third straight

month. The industry added 40,000 jobs in May, with food services and drinking

places continuing to account for most of the gain (33,000). So far this year, employment increases in food services have averaged 32,000 per month.

Elsewhere among the service-providing industries, the financial sector added

15,000 jobs in May, as employment in real estate and in credit intermediation continued to expand. In retail trade and wholesale trade, employment sustained its upward trend.

One industry in which employment has continued to trend down is telecommunications. Over the month, employment declined by 5,000; since its peak in March

2001, the industry has shed 283,000 jobs.

In May, average hourly earnings for production or nonsupervisory workers rose

by 5 cents, following a 4-cent increase in April. Over the year, average hourly earnings grew by 2.2 percent.

Looking at some of our measures obtained from the survey of households, the May

unemployment rate was unchanged at 5.6 percent. After trending down during the

second half of last year, the jobless rate has been either 5.6 or 5.7 percent in each

month since December.

In May, 8.2 million persons were unemployed. The number of persons who had

been jobless for 27 weeks or longer held at 1.8 million. The labor force participation

rate was 65.9 percent for the fourth consecutive month.

In summary, nonfarm payroll employment increased by 248,000 in May, by

947,000 over the last 3 months, and by 1.4 million since August. The unemployment

rate was unchanged over the month, at 5.6 percent.

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

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Æ