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28–135 PDF 2006

S. HRG. 109–635

THE EMPLOYMENT SITUATION: JANUARY 2006

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

FEBRUARY 3, 2006

Printed for the use of the Joint Economic Committee

(

(II)

JOINT ECONOMIC COMMITTEE

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

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, Chairman

PAUL RYAN, Wisconsin

PHIL ENGLISH, Pennsylvania

RON PAUL, Texas

KEVIN BRADY, Texas

THADDEUS G. MCCOTTER, Michigan

CAROLYN B. MALONEY, New York

MAURICE D. HINCHEY, New York

LORETTA SANCHEZ, California

ELIJAH 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 CORNYN, Texas

JACK REED, Rhode Island

EDWARD M. KENNEDY, Massachusetts

PAUL S. SARBANES, Maryland

JEFF BINGAMAN, New Mexico

CHRISTOPHER J. FRENZE, Executive Director

CHAD STONE, Minority Staff Director

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C O N T E N T S

OPENING STATEMENT OF MEMBERS

Hon. Jim Saxton, Chairman, a U.S. Representative from the State of New

Jersey .................................................................................................................... 1

WITNESSES

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

accompanied by John S. Greenlees, Associate Commissioner, Offices of

Prices and Living Conditions; and John M. Galvin, Associate Commissioner,

Employment and Unemployment Statistics ...................................................... 2

SUBMISSIONS FOR THE RECORD

Prepared statement of Representative Jim Saxton, Chairman ........................... 9

Prepared statement of Senator Jack Reed, Ranking Minority ............................ 10

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

Statistics, together with press release USDL 06–160, entitled, ‘‘The Employment Situation: January 2006’’ ........................................................................... 11

Response from Commissioner Utgoff to Chairman Saxton .................................. 43

The New York Times article, entitled, ‘‘The Nation of the Future’’ .................... 46

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THE EMPLOYMENT SITUATION: JANUARY 2006

FRIDAY, FEBRUARY 3, 2006

CONGRESS OF THE UNITED STATES,

JOINT ECONOMIC COMMITTEE,

Washington, DC

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

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

of the Committee, presiding.

Present: Representative Saxton; Senator Sessions.

Staff Present: Chris Frenze, Colleen Healy, Brian Higginbotham, John Kachtik, Jeff Schlagenhauf, Nan Gibson, Matthew

Salomon, Chad Stone and Rachel Thomson.

OPENING STATEMENT OF HON. JIM SAXTON, CHAIRMAN,

A 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 January employment data are good news for American workers. According to the payroll survey, employment has increased by

193,000 jobs in January. Since May 2003, more than 4.7 million

jobs have been created. According to the household survey, employment also advanced, while the unemployment rate fell to 4.7 percent. Over the last year, most of the net increase in employment

has been in occupations that pay in the middle range or higher.

The employment data are consistent with other data showing

that the economy continues to grow. In 2005, the real GDP increased 3.5 percent. Although economic growth slowed to only 1.1

percent in the fourth quarter of 2005, this advance figure is incomplete and may be revived upward. Most forecasters project a rebound in economic growth in the first quarter of 2006.

As an important Federal Reserve policy statement recently

noted, the expansion in economic activity appears solid. According

to the Federal Reserve, the Congressional Budget Office and private economists, economic growth this year will be comparable to

the healthy pace set in 2005.

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. Inflation appears to be contained over the

long run, as the Fed recently stated. In conclusion, U.S. economic

growth has been healthy in recent years and significantly higher

than most other advanced economies.

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The U.S. unemployment rate also remains below comparable

rates in many other economies. Most recent forecasters expect good

economic and employment growth to continue.

Commissioner Utgoff, we are pleased that you are here this

morning, and we look forward to hearing your statement.

[The prepared statement of Representative Jim Saxton appears

in the Submissions for the Record on page 9.]

STATEMENT OF HON. KATHLEEN P. UTGOFF, COMMISSIONER,

BUREAU OF LABOR STATISTICS; ACCOMPANIED BY JOHN S.

GREENLEES AND JOHN M. GALVIN

Commissioner Utgoff. Thank you, Mr. Chairman. I appreciate

this opportunity to comment on the labor market data we released

this morning.

Nonfarm payroll employment increased by 193,000 in January,

and the unemployment rate fell to 4.7 percent. Payroll employment

was up by 140,000 in December and by 354,000 in November. Over

the year, payroll employment increased by 2.1 million. In January,

employment growth occurred in construction, mining, and in several service-producing industries.

Employment in construction rose by 46,000 over the month and

by 345,000 over the year. Above-average temperatures in most of

the country may have contributed to fewer seasonal layoffs than

usual in January.

Manufacturing employment was little changed in January. A few

manufacturing industries have some small job gains in recent

months, including wood products, fabricated metals, and electrical

equipment.

Mining added 6,000 jobs in January. Since its most recent low

in April 2003, mining employment has increased by 91,000.

In the service-providing sector, employment growth continued in

health care over the month. Jobs were added in doctors’ offices,

hospitals and nursing and residential care facilities.

In January, employment in food services and drinking places

grew by 31,000. Over the year, this industry has added 214,000

jobs.

Employment in professional and business services was up by

24,000 in January, following 2 months of unusually large gains

that totaled 138,000. In January, accounting services lost jobs,

while employment trended up in computer systems design and in

management and consulting services.

In January, financial activities added 21,000 jobs. Wholesale

trade employment was up by 15,000, while retail employment was

little changed.

Average hourly earnings for production or nonsupervisory workers on private payrolls rose by 7 cents in January to $16.41. Over

the year average hourly earnings grew by 3.3 percent.

The establishment survey data released today reflect the incorporation of annual benchmark revisions and updated seasonal adjustment factors. Each year we anchor our sample-based survey estimate to full universe counts of employment derived principally

from administrative records of the unemployment insurance tax

system.

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The benchmark revision increased the level of nonfarm payroll

employment in March 2005 by 158,000, or about 1⁄10th of 1 percent.

Over the past decade, benchmark revisions have averaged plus or

minus 2⁄10th of 1 percent. The seasonally adjusted establishment

survey data from January 2001 forward have been revised to incorporate updated seasonal adjustment factors.

Turning now to measures from our household survey, the unemployment rate declined to 4.7 percent in January, and the number

of unemployed persons fell to 7 million. The number of long-term

unemployed persons, those unemployed for 27 weeks or more, declined to 1.2 million in January. They constituted 16.3 percent of

all unemployed persons down from 21 percent a year earlier. The

number of discouraged workers fell over the year to 396,000. Discouraged workers are those persons outside the labor force who had

stopped looking for work because they believed their job search efforts would be unsuccessful.

With today’s release, we again report on the labor force status of

survey respondents who evacuated from their homes due to Hurricane Katrina. The data are derived from a special set of questions

that have been included in the household survey since October to

identify and gather information from evacuees. The estimates do

not account for all persons who evacuated from their homes due to

Hurricane Katrina. We do not gather information on those evacuees who remain outside the scope of the survey, such as those currently living in hotels or shelters.

The January data indicate that there were about 1.2 million persons age 16 and over who have evacuated from their August residence due to Hurricane Katrina. By January, about one-half of the

evacuees had returned to the homes they vacated in August.

Among Katrina evacuees in January, 56.8 percent were in the

labor force, and their unemployment rate was 14.7 percent. Unemployment rates were much lower for those evacuees who had returned home than for those evacuees who had not. The January

unemployment rate for those who had returned was 2.9 percent. It

was 26.3 percent for those who had not yet returned to their residences.

To summarize, the labor market data for January payroll employment rose by 193,000, and the unemployment rate declined to

4.7 percent.

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

[The prepared statement of Commissioner Utgoff appears in the

Submissions for the Record on page 11.]

Representative Saxton. Commissioner, thank you again for

being with us again this month.

As I noted in my opening statement, the economy’s growth in the

fourth quarter of last year fell to 1.1 percent, and, in spite of that,

we continued to see significant job growth through most of that

quarter.

Can you review with us the number of jobs created during the

fourth quarter of last year?

Commissioner Utgoff. Five hundred thirty-one thousand.

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Representative Saxton. Five hundred thirty-one thousand jobs

were created during the fourth quarter, and yet GDP sunk to—I

think it was 1.1 percent.

Do you expect that there will be some revisions in the GDP number for the fourth quarter of last year?

Commissioner Utgoff. Yes.

Representative Saxton. Can you shed any light on that at this

point, or is it too early for us to?

Commissioner Utgoff. It is too early.

Representative Saxton. What are the factors that would account for the revision of GDP growth in the fourth quarter of last

year?

Commissioner Utgoff. New information on wages and salaries,

new information on exports and imports, new information on all

the components of GDP.

Representative Saxton. Can you give us any idea what those

adjustments might look like as they begin to come in?

Commissioner Utgoff. I can’t predict whether those adjustments will be upward or downward.

Representative Saxton. Right. But we expect, as a normal

course of events that there will be some adjustments in the GDP

figure from the fourth quarter.

Commissioner Utgoff. Yes. This is called a preliminary GDP

number, and for good reason.

Representative Saxton. And do you have any idea as to when

we may see those adjustments take place?

Commissioner Utgoff. Approximately 3 weeks.

Representative Saxton. Is the increase in January payroll employment a solid number, or is it significantly inflated by special

factors?

Commissioner Utgoff. It is a solid number, and with the upward revisions that we had for the previous 2 months from late reporters, it is a very solid report.

Representative Saxton. And once again, what was the number

of jobs created in January?

Commissioner Utgoff. One hundred ninety-three thousand.

Representative Saxton. One hundred ninety-three thousand.

And is that a significant number?

How much did the revisions in November and December of 2005

payroll employment figures add to total employment for those

months?

Commissioner Utgoff. Eighty-one thousand.

Representative Saxton. Eighty-one thousand.

And so once again when we talk about preliminary numbers and

adjusted numbers, we may see this number revise upward?

Commissioner Utgoff. Yes.

Representative Saxton. In January the diffusion index rose to

60.6 percent. What does this figure say about the breadth of job

gains in January?

Commissioner Utgoff. It says that they were widespread.

Representative Saxton. So we are not seeing job growth confined to a specific sector, but it is widespread throughout the economy?

Commissioner Utgoff. That is correct.

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Representative Saxton. Is the decline in unemployment to 4.7

percent statistically significant?

Commissioner Utgoff. Yes.

Representative Saxton. And when we talk about the 4.7 percent unemployment rate, can you give us an idea as to how that

compares with the unemployment rate over the last, let’s say, 3

years?

Commissioner Utgoff. It is the lowest rate since January—July

2001.

Representative Saxton. July of 2001.

Commissioner Utgoff. Yes.

Representative Saxton. So that obviously is also good news.

What is the unemployment rate for men 20 and over?

Commissioner Utgoff. 4.0.

Representative Saxton. So we continue to have good news

there.

What is the unemployment rate for women aged 20 and over?

Commissioner Utgoff. 4.3 percent.

Representative Saxton. 4.3 percent.

We used to say that when we got to these low levels—we used

to talk about that being full employment. Are we reaching what

you would consider full employment?

Commissioner Utgoff. These are the lowest unemployment

rates for men and women since summer 2001.

Representative Saxton. Historically low unemployment rates.

Very good.

At this point how would you interpret the apparent effects of the

hurricanes on payroll employment over the last 5 months?

Commissioner Utgoff. There were 2 months, September and

October, where the unemployment rate was clearly held down by

the effects of Hurricane Katrina. In the subsequent months, the

economy appears to have recovered, and job growth has been—job

growth has been substantial.

Representative Saxton. Could you spend a few moments explaining the benchmark revisions to the payroll employment survey?

Commissioner Utgoff. Yes. Let me see if I can do this simply

is we have—when I testify before you each month, we have an estimate of payroll employment that comes from a sample of 400,000

establishments. That is large, but that is not all the establishments.

Once a year we take a census of all establishments largely taken

from unemployment insurance records, and we tie the census to the

sample so that in this year and March they are the same, and then

adjust the other numbers to meet that census number.

Representative Saxton. Thank you.

Mr. Sessions.

Senator Sessions. Thank you, Mr. Chairman, and, Commissioner, I am pleased to welcome you here and to see continued good

news.

I guess, Mr. Chairman, good news doesn’t attract as many Members as bad news.

Representative Saxton. Airplanes attract Members on Fridays.

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Senator Sessions. Maybe you are right, airplanes attract Members.

Commissioner, we are having a little excitement in Alabama. Everybody is trying to claim credit for the unemployment rate. Our

unemployment rate, Mr. Chairman, is 3.5 percent, the lowest ever

recorded in the State. Job training program is first rate and been

ranked, I think, No. 1 one in the country, but now is the challenge

to get people trained for the good jobs that are out there.

Have you had occasion, Commissioner, to be able to consider

whether if we could get people trained quicker, turn them around

more readily with skills that are needed in the workplace, we could

not only find more jobs, but we could move people up into higherpaying jobs and better benefits?

Commissioner Utgoff. Yes.

Senator Sessions. What could you tell us about your observation there? I think the reason I raise that is I don’t think it is a

coincidence that Alabama’s low unemployment rate coincides with

the fact that the job training program for the State was rated

No. 1 in the country. Do you have any thoughts about that?

Commissioner Utgoff. Yes. Job training programs are incredibly important in getting people into their first jobs, which is important, and then moving them up into higher-paying jobs. And the

one-stop centers have been doing an excellent job in taking in people and moving them through the entire process of getting them

into good jobs.

Senator Sessions. There has been a good bit of interest on behalf of Governors in consolidating Federal workforce programs. And

we are trying to do that, although our Senate bill is not as good

as I would like; frankly, I think it is far short of what the Governor

has requested, but I remain hopeful.

Do you have any information and received any feedback from the

fact that a lot of these stovepipe programs are contradictory and

duplicative and would be much more efficient if they were merged

together?

Commissioner Utgoff. Yes. There are duplicative programs for

the same groups of people, and moving them together will allow

better service for these people. I have to say that I, from the BLS,

am well aware of the work that the Employment and Training Administration is doing to improve the training, and particularly tie

training to the local workforce needs. But I think the Assistant

Secretary for Employment Training would be a better witness for

all of the things that are going on in that area.

Senator Sessions. Well, I think we can do better. Our commissioner, Dr. Roy Johnson, the chancellor of the system, made this

statement to me as we were going to a meeting, and he said, an

individual 28 years old with 2 kids can’t go—he is chairman of the

community college system in the State, where you have 2-year programs for the most part traditionally, when you think in terms of

the 2-year program—they don’t have 2 years. What we need to do,

he says, and he is doing, is create specific programs that prepare

people in 6 months or less for a high-paying job, and he believes

it can be done and is doing that.

Would you agree that that has an important role in our system—

as well as our classical interest in degrees in 4 years and 2-year

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degrees—but this kind of more specific focus on training persons

for a job that exists in that community, can we do better than that?

Commissioner Utgoff. Yes. We can do better than that.

Senator Sessions. And would you share with us some thoughts

on that subject?

Commissioner Utgoff. Well, I would note that in the military

people are taken in for specific jobs and trained in far less than 2

years for specific jobs and come out with skills that are often good

for the private sector, and that we can’t afford to have someone in

for 4 years of service spending 2 years in a job training program.

So that 6 months is certainly a much better target period than for

2 years, especially for someone who is 28 years old and has 2 children.

Senator Sessions. I think that was a very insightful comment.

I hadn’t thought about the military. They absolutely don’t have—

they can’t spend 2 years preparing somebody, and they train them

for highly technical jobs in very short order, and then when they

get out, businesses line up to hire them. They are very pleased to

have them because of the way they have been trained.

Mr. Chairman, I was just looking at the February 2 New York

Times article by David Brooks that made this point. And I think

in our country, we get a little too down on ourselves, and when

things are good, people start thinking, well, next week it is going

to be bad; you know, it can’t stay good. But look at this. David

Brooks points out, has the American economy shrunk as a part of

the world economy? In 1971, the United States economy accounted

for 30.52 percent of the world’s GDP. 30.52.

Now, we have seen China surge; Japan really over the last 30

years has been a tremendous force; India, the Asian tigers; production in Europe and all; and today, he notes, our percentage of GDP

is 30.74, a larger percentage of the world’s GDP in the United

States today than it was 30 years ago. And if you listen to a lot

of our commentators out there, you would think the United States

is in a period of decline.

That is a phenomenal achievement in light of the productivity

growth in other areas of the world. It is not as if they shrank. They

have been surging, and we still are doing that, and our job numbers are going down. And we only have a couple of things to fear,

I think, and that is making sure our children are properly trained

and educated and really motivated to take advantage of this economy, and to be positive and to see that if they work hard, they can

actually sustain a good lifestyle for themselves and their children

in the future.

Thank you for your leadership, Mr. Chairman, and I was pleased

to be here today. And, Commissioner, you should take a bow on the

job growth, too. Everybody else is. I am trying to. If it were going

up, they would blame me, so I might as well claim some credit.

[The New York Times article entitled, ‘‘The Nation of the Future,’’ appears in the Submissions for the Record on page 46.]

Representative Saxton. Thank you very much, Senator. I have

said in jest a couple of times that people were running for airplanes. Actually, the Democrat Minority party has their retreat

today, and so that is the reason that they are not here. And so I

just wanted to make that part of the record.

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Let me just ask one final short question. Manufacturing employment has been a concern to the Members of the Committee, and

I am sure to you, also, Commissioner, over the last several years.

But manufacturing employment showed some small increases in

January, and I am curious to know in what sectors of manufacturing did job gains actually take place. Can you talk about that

a little bit?

Commissioner Utgoff. Wood products, electrical equipment,

and there was one other, fabricated metals.

Representative Saxton. And what percentage of the manufacturing sector would that involve? Can you give us an estimate?

Commissioner Utgoff. I can’t give you that estimate now, but

I will—we will provide that to you in a letter.

[The response from Commissioner Utgoff to Chairman Saxton appears in the Submissions for the Record on page 43.]

Representative Saxton. We would certainly appreciate that.

But in general, the manufacturing sector showed some job gains

in January; is that right?

Commissioner Utgoff. Yes. Yes.

Representative Saxton. And was it statistically significant?

Commissioner Utgoff. No.

Representative Saxton. But it was an indicator that there is

life in terms of growth in the manufacturing sector?

Commissioner Utgoff. Yes.

Representative Saxton. Thank you. I have no other questions

at this point, and we want to thank you for being with us here

today. It is always a pleasure to see you, and it is even more of

a pleasure when you have good news like the news you brought us

today. Thank you very much.

Commissioner Utgoff. I hope it will continue.

Representative Saxton. We do, too. Thank you.

[Whereupon, at 9:56 a.m., the Committee was adjourned.]

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