U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

41–712 PDF 2008

S. HRG. 110–498

THE EMPLOYMENT SITUATION: JANUARY 2008

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED TENTH CONGRESS

SECOND SESSION

FEBRUARY 1, 2008

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

CHARLES E. SCHUMER, New York, Chairman

EDWARD M. KENNEDY, Massachusetts

JEFF BINGAMAN, New Mexico

AMY KLOBUCHAR, Minnesota

ROBERT P. CASEY, JR., Pennsylvania

JIM WEBB, Virginia

SAM BROWNBACK, Kansas

JOHN E. SUNUNU, New Hampshire

JIM DEMINT, South Carolina

ROBERT F. BENNETT, Utah

HOUSE OF REPRESENTATIVES

CAROLYN B. MALONEY, New York, Vice Chair

MAURICE D. HINCHEY, New York

BARON P. HILL, Indiana

LORETTA SANCHEZ, California

ELIJAH E. CUMMINGS, Maryland

LLOYD DOGGETT, Texas

JIM SAXTON, New Jersey, Ranking Minority

KEVIN BRADY, Texas

PHIL ENGLISH, Pennsylvania

RON PAUL, Texas

MICHAEL LASKAWY, Executive Director

CHRISTOPHER J. FRENZE, Republican Staff Director

(III)

C O N T E N T S

MEMBERS

Hon. Charles E. Schumer, Chairman, a U.S. Senator from New York ............... 1

Hon. Elijah E. Cummings, a U.S. Representative from Maryland ...................... 3

WITNESSES

Statement of Dr. Keith Hall, Commissioner, Bureau of Labor Statistics, U.S.

Department of Labor, Washington, DC .............................................................. 5

SUBMISSIONS FOR THE RECORD

Prepared statement of Senator Charles E. Schumer, Chairman ......................... 15

Prepared statement of Representative Elijah E. Cummings ............................... 16

Prepared statement of Representative Carolyn B. Maloney, Vice Chair ............ 18

Prepared statement of Dr. Keith Hall, Commissioner, Bureau of Labor

Statistics, U.S. Department of Labor, Washington, DC ................................... 18

Press Release: Establishment and household survey data ........................... 20

(1)

THE EMPLOYMENT SITUATION: JANUARY 2008

FRIDAY, FEBRUARY 1, 2008

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

The Committee met at 9:30 a.m. in room 216 of the Hart Senate

Office Building, the Honorable Charles E. Schumer (Chairman)

presiding.

Senators present: Schumer.

Representatives present: Cummings.

Staff Present: Christina Baumgardner, Heather Boushey,

Stephanie Dreyer, Chris Frenze, Tamara Fucile, Nan Gibson, Colleen Healy, Tim Kane, Bob Keleher, and Michael Laskawy.

OPENING STATEMENT OF HON. CHARLES E. SCHUMER,

CHAIRMAN, A U.S. SENATOR FROM NEW YORK

Chairman Schumer. Good morning. I am pleased to call this

hearing to order, a hearing that resumes the longstanding tradition

of the Bureau of Labor Statistics coming before the Joint Economic

Committee to present findings of its Monthly Jobs Report.

Given the important information these numbers can provide us

on the health of the economy, I am hopeful that this is only the

beginning of a conversation that we’ll have throughout the course

of the year.

I am also pleased to be the first to welcome Dr. Keith Hall to his

first hearing on Capitol Hill as the Senate-confirmed Commissioner

of the Bureau of Labor Statistics. Congratulations, Commissioner,

and welcome.

Today, unlike 6 months ago, everyone, from the board room table

to our kitchen table, is keenly aware of our economic problems and

looking for ways to secure our economic future.

But now the new worry is jobs, even more troublesome to our

economy. In fact, I’m concerned that the last few years of lowerthan-expected job growth will look good compared to the shrinkage

we may well see in coming months.

First, it was housing, then with the decline in housing prices,

lower consumer spending, and a tightening of consumer credit, and

now it is jobs.

Our economic problems started last year with the subprime

mortgage crisis, but they have expanded outward and gotten much

worse as that mess spread to the broader housing market,

squeezed credit markets, cut consumer spending, and now has ultimately affected the job market.

2

The numbers this morning should be a wakeup call for the Administration. Given today’s job numbers, the Administration should

abandon its ideological opposition to spending stimuli such as unemployment insurance because every economist will tell us that

stimulus spending will get into the economy much quicker than a

tax rebate which we’re all for.

The Administration needs to take off its ideological handcuffs to

enact an economic stimulus package quickly, a package that is

strong and directed and not limited by ideological constraints.

Any doubts that we’re heading into a recession should be erased

with today’s employment report. This morning we learned officially

that the U.S. labor market is faltering.

Today’s labor statistics show that job growth, which we already

knew was bad, is even worse than we thought. According to this

morning’s report, annual job growth for 2007 was less than 1 percent for the first time since 2003, and during the month of January, for the first time in 4 years, our economy actually lost 17,000

jobs.

In a normal period of economic expansion, just to keep pace with

the growing population, we should expect a monthly jobs report to

show that the U.S. economy added 150,000 to 200,000 jobs each

month, but this morning’s report tells a very different story.

Declines in the housing sector have negatively impacted construction jobs, and workers in the mortgage and credit industry.

Over the past year, construction has lost 278,000 jobs, and 104,000

jobs have been lost in the credit industry.

Since 2000 we have seen productivity rising at an average of 2.5

percent a year, but economic growth has not been shared by all.

For years, wages have lagged behind the growth in productivity.

While today’s numbers might be news to some here in Washington, they’re not news to millions of American families trying to

make ends meet. As employers have stopped hiring, we’ve seen millions of Americans struggling to find employment.

Today, approximately 7.6 million Americans are out of work and

are actively looking for a new job. Our Nation’s unemployment rate

was 4.9 percent in January, and that was almost a full point higher than it was when the President took office in 2001.

This rate doesn’t even include those who are working part-time

but need full-time work or those who have given up their job

searches entirely. If we include these Americans, the full underemployment rate would be 9 percent.

The employment picture is particularly bleak in minority communities. The unemployment rate for Blacks was more than double

that of Whites, and at 6.3 percent, the Hispanic unemployment

rate was also significantly higher than that of Whites.

At the same time, long-term unemployment has soared. Almost

20 percent of the unemployed have been out of work for more than

26 weeks. Under current law, these people are no longer eligible to

receive unemployment insurance, making a difficult time even

more trying.

While lower than expected job growth has been characteristic of

this Administration, if it continues it can be a dangerous situation

for a growing population and the global economy.

3

In the last month in particular, economists—from conservative

former Federal Reserve Chairman Alan Greenspan to liberal New

York Times columnist Paul Krugman and others—have suggested

that we’re teetering on the brink of recession.

The data that has been released today seems to bear that out,

and the bad numbers are not in jobs alone. This week we have seen

new reports showing record drops in home prices, sales, construction, and equity, thrusting Americans into the worst housing market in over 20 years.

On Wednesday we learned that the U.S. economy last quarter

just about stalled. The Commerce Department measured a mere

0.6 percent growth in gross domestic product.

All the warnings signs that Washington should give the economy

a good shot in the arm are there, and I’m hopeful we can deliver

on that very soon.

I was pleased to join my colleagues on the Senate Finance Committee in passing an economic stimulus package that protects those

who have been out of work for more than 6 months and are struggling to make ends meet.

I am hopeful the Senate can soon pass a stimulus package that

provides quick aid to those who have been most directly affected

by the economic downturn, and that the President will quickly approve such a package.

Unemployment insurance is a highly effective form of economic stimulus generating $1.73 of economic growth for every dollar

spent. We should not abandon this proven stimulus message simply because the Administration is ideologically opposed to such a

program.

I look forward to hearing more about today’s labor statistics from

Commissioner Hall, but I must say that the numbers today are a

shot across the bow to this Administration to move quickly, take

its off ideological blinders, and do what’s best for the economy

which includes both tax cuts and spending stimuli.

[The prepared statement of Chairman Schumer appears in the

Submissions of the Record on page 15.]

Chairman Schumer. Congressman Cummings.

STATEMENT OF HON. ELIJAH E. CUMMINGS, A U.S.

REPRESENTATIVE FROM MARYLAND

Representative Cummings. Thank you very much, Mr. Chairman, for holding this very important hearing on the employment

situation in January of 2008.

We are convened today, having recently learned that economic

growth in the last quarter of 2007 fell to just 0.6 percent while

prices showed a troubling increase.

The ‘‘middle class squeeze’’ is an expression becoming all too

common at dinner tables across the country, as working Americans

reflect on their situation. These are precisely the numbers that are

putting the squeeze on families’ pocketbooks.

At the same time, as we will discuss today, the Bureau of Labor

Statistics has reported that in January the economy lost some

17,000 jobs, the first time we have seen such job losses since 2003.

The overall number of unemployed persons stands at 7.6 million

people, and unemployment is reported to stand at 4.9 percent.

4

This situation is even worse among Americans of color. In the

third quarter of 2007, the quarterly average unemployment among

African Americans was 8 percent. Today, it was reported by the

Bureau of Labor Statistics to be 9.2 percent in January.

Additional reports demonstrate that 22 percent of all unemployed

workers have been unemployed for 6 months or more.

Even those who are fortunate enough to have steady employment

are finding their paychecks will not reach as far as they once did.

Thus, though we did experience some wage gains last year, these

increases were not nearly enough to keep up with inflation.

During the December congressional recess, many of my constituents told me, often with a look of mixed both determination and

anxiety, that they simply cannot make ends meet. Some families

are even having to make the difficult choice of which bills to skip

this month in order to pay record prices for heat.

Gas prices have risen 10 cents a gallon in the last 3 weeks, and new projections suggest prices could reach a staggering $3.50 a gallon by spring. Many of my constituents in Baltimore also confront

the possibility that they may lose the homes for which they have

been saving their entire lives while those who are not at risk of

foreclosure are scared that the value of their homes will plummet.

Earlier this week the House passed an economic stimulus package that makes some important strides in bolstering the U.S. economy. Unfortunately, I believe the House Plan will not reach all of

those who are most in need.

Over more than 100 million families will be receiving tax rebates

under this plan; two of the most effective and efficient methods for

providing a quick economic boost are missing. As the Chairman

said, extension of unemployment insurance benefits is one of those

and the other one is increases in food stamp benefits.

These two critical measures would provide direct help for workers and families hardest hit by the economic downturn. Indeed,

among all the tax and spending stimulus options that CBO examined, the only two that were found to create a large bang for the

buck as a stimulus and to have the ability to be put in place fast

enough to really boost the economy were unemployment insurance

and food stamp provisions.

Both could start injecting more consumer purchasing power into

the economy within 1 to 2 months while helping those who have

too long been forgotten as the Bush administration focused its economic policies on passing tax cut after tax cut for the wealthiest

Americans.

Thus, while the House’s economic stimulus plan takes a step in

the right direction, we need to make sure that the step our Nation

eventually takes lifts all of our citizens up.

It is now up to the Senate, Mr. Chairman, to use our stimulus

package as a foundation and extend unemployment benefits and increase food stamps to get money into the hands of those who will

spend it the quickest and need it the most.

With that, I look forward to Dr. Hall’s testimony and to a closer

examination of the troubling unemployment trends in our Nation,

and with that, Mr. Chairman, I yield back.

[The prepared statement of Representative Cummings appears in

the Submissions for the Record on page 16.]

5

Chairman Schumer. Thank you, Congressman Cummings. Our

Vice Chair, Carolyn Maloney, who attends our hearings religiously,

is unable to attend today because of the caucus, but we ask that

her entire statement be submitted for the record which I’ll place in

there without objection.

[The prepared statement of Vice Chair Maloney appears in the

Submissions for the Record on page 18.]

Chairman Schumer. Now let me introduce our only witness

this morning. I’d like to welcome Dr. Keith Hall to this hearing, his

first, as I mentioned, as BLS Commissioner.

Prior to becoming Commissioner, Dr. Hall was the Chief Economist for the White House Council of Economic Advisers for 2 years.

He also served as the Chief Economist for the U.S. Department of

Commerce, and was on the U.S. International Trade Commission

for 10 years.

Before entering Government, Dr. Hall was an economics professor on the faculties of both the University of Arkansas and the

University of Missouri. He received his Ph.D. in economics from

Purdue University.

You may proceed, Commissioner Hall, and welcome.

STATEMENT OF DR. KEITH HALL, COMMISSIONER, BUREAU OF

LABOR STATISTICS, U.S. DEPARTMENT OF COMMERCE,

WASHINGTON, DC

Commissioner Hall. Thank you, Mr. Chairman and Members of

the Committee. I appreciate this opportunity to comment on the

employment and unemployment data that we released this morning, and I look forward to working with you in the future.

Non-farm payroll employment was essentially unchanged in January at 138.1 million, as was the unemployment rate at 4.9 percent.

Employment declined in construction and in manufacturing,

while the number of jobs increased in healthcare. In 2007, payroll

employment grew by an average of 95,000 jobs per month, compared with an average of 175,000 jobs per month in 2006.

Average hourly earnings rose by 4 cents in January, or twotenths of 1 percent. From December 2006 to December 2007, average hourly earnings rose by 3.7 percent, compared with the rise in

the Consumer Price Index for urban wage earners and clerical

workers of 4.4 percent.

In January, construction employment decreased by 27,000, with

the decline concentrated among residential components. Construction has now lost 284,000 jobs since its employment peak in September of 2006. The residential component lost about 315,000 jobs

over that period.

Manufacturing employment fell by 28,000 jobs in January, with

small but widespread declines occurring in both durable and nondurable goods.

Manufacturing has lost 269,000 jobs over the past 12 months,

and both the factory and work week and overtime were unchanged

in January at 41.1 and 4.0 hours, respectively.

In the service-providing sector, employment in healthcare continued to increase in January. Over the year ending in January, this

6

industry added 367,000 jobs, accounting for more than one-third of

the growth in total non-farm employment.

In January, employment rose in ambulatory healthcare, which

includes doctors’ offices and in hospitals. Food services employment

also continued its upward trend over the month, though employment growth in that industry slowed recently.

From November 2007 through January, food services added an

average of 16,000 jobs per month; the average growth during the

12-month period ending October 2007 was 28,000 jobs per month.

Following a large increase in December, employment in professional and technical services was little changed in January. In

2007 this industry added 335,000 jobs.

Within administrative support and services, business support

services lost jobs in January.

Elsewhere in the service-providing sector, retail trade employment was little changed both over the month and over the year.

Wholesale trade employment has been flat since October 2007.

The industry had been adding jobs for several years. Within financial activities, employment in credit intermediation, which includes

mortgage lending, continued to trend down in January and has

fallen by 111,000 jobs since its recent high point in October of

2006.

Now, the Establishment Survey data released today reflects a

couple of additional things: It reflects the incorporation of our annual benchmark revisions; it reflects updated seasonal adjustment

factors and a minor revision to the industry classification system.

The benchmark revision caused a decrease in the level of nonfarm payroll employment—or caused a decrease in our measurement of that in March of 2007 of 293,000 jobs or about two-tenths

of 1 percent.

Over the past 10 years, benchmark revisions have averaged plus

or minus about two-tenths of 1 percent.

All these seasonally-adjusted Establishment Survey data from

January 2003 forward have been revised to incorporate additional

seasonal adjustment factors, and then of course, the last thing that

we did change is we updated to the 2007 North American Industry

Classification System.

Turning now to some of our measures from the Household Survey, both the number of unemployed persons at 7.6 million and the

unemployment rate at 4.9 percent were essentially unchanged over

the month.

However, both measures were up over the past 12 months. In

January, 18.3 percent of unemployed persons had been unemployed

for 27 weeks or longer, up from 16.2 percent the year before.

Civilian employment rose in January, after accounting for an adjustment to the population controls, and the employment-to-population ratio edged up to 62.9 percent.

We also added some updated population controls for the Household Survey. The updated controls resulted in a decline of 745,000

to our estimated size of the civilian non-institutional population of

16 years and over for December so what this essentially did was,

this lowered our estimate of the population, the labor force, employment, and the number of unemployed, but it left our unemployment rate the same.

7

And so to summarize January’s labor market developments, payroll employment was essentially unchanged at minus 17,000 as was

the unemployment rate at 4.9 percent.

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

[The prepared statement of Commissioner Keith Hall and supporting documents appear in the Submissions for the Record on

page 18.]

Chairman Schumer. Thank you, Commissioner Hall. So in January, the actual number went down 17,000, the number of jobs?

Commissioner Hall. That’s correct.

Chairman Schumer. When was the last time we actually had

a decline?

Commissioner Hall. It has been something over 50 months.

Chairman Schumer. It’s over 4 years?

Commissioner Hall. Yes.

Chairman Schumer. This if the first time in 4 years that we’ve

had an actual decline in the number of jobs.

Commissioner Hall. Correct.

Chairman Schumer. Thank you. OK, how does the—now, I’m

troubled by the numbers, obviously, that show that job growth has

come to a halt over the last several months so I want to ask you

how does this level of job creation compare with the past few years

and with the economic expansion in the 1990s?

Commissioner Hall. Sure. Well, over the past year in 2007, we

averaged about 95,000 jobs a month, and in the fourth quarter of

last year the average was about 95,000 jobs a month.

That’s down from about 175,000 in 2006 and about 211,000 in

2005.

Chairman Schumer. Right.

Commissioner Hall. Now, with respect to periods of expansion—let me see, I’ve got some numbers here.

[Pause.]

I apologize for shuffling papers here.

Chairman Schumer. It’s OK; we all do it, Commissioner.

Commissioner Hall. OK, great. All right, the job creation during this expansion since the business cycle trough averaged about

97,000 jobs a month.

During the previous business cycle recovery and expansionary

period the average gain was about 200,000 jobs a month.

Chairman Schumer. That’s it; that’s a rather large change.

And what would jobs have to grow just to keep up with the population growth in the country?

Commissioner Hall. I don’t have that calculation. The number

you mentioned, about 150,000——

Chairman Schumer. Right.

Commissioner Hall [continuing]. Is about——

Chairman Schumer. So actually, this year job growth was

slower than in other expansions and also fewer jobs were created

than the number that should keep up, if we were keeping consistent with population growth?

Commissioner Hall. That’s correct.

Chairman Schumer. OK. So far, is it fair to say that job creation over the economic recovery that began in 2001 has been weak

in historical terms?

8

Commissioner Hall. Yes, with respect to the labor market, certainly the labor market took a bit longer to recover than in past

business cycles.

Chairman Schumer. Right. And when it did, it didn’t recover

as robustly.

Commissioner Hall. The job growth wasn’t. The job growth was

enough that our unemployment rate went down, as it has in other

business cycles. That’s an important thing.

And there probably are some things that go into the monthly job

growth like the growth in population, the growth in the labor force,

et cetera.

Chairman Schumer. Right. In your opinion, is there any reason

to believe this situation will improve?

Commissioner Hall. Well, I don’t want to speculate since we

handle the data. I will say that the labor market data is important

data to watch as we go forward in looking to see how we recover

out of this.

We want to look at things like the continued job growth and look

at the unemployment rate and look at some other things like that.

Chairman Schumer. All right OK, Commissioner, today’s report includes several revisions that show job growth is even slower

than previously reported; is that correct?

Commissioner Hall. That’s correct.

Chairman Schumer. And I’m particularly concerned about the

revisions to job creation. Can you tell me what the revised annual

rate of job creation for 2007 is now, and what was the number before the revision?

Commissioner Hall. Before the revision in 2007 we averaged

about 111,000 jobs per month, and after the revision we averaged

about 95,000 jobs per month.

Chairman Schumer. Right, so in percentage terms, the growth

was about 1 percent, but now it’s .8 percent; is that fair to say?

Commissioner Hall. That sounds about right.

Chairman Schumer. Mr. Rones, is that right?

Mr. Rones. That’s correct.

Chairman Schumer. Mr. Rones seems to be your little slide

rule over there.

[Laughter.]

Chairman Schumer. OK, wouldn’t you agree that a downward

revision, regardless of how small, changes our picture of how well

the labor market has been performing in recent years and indicates

that our overall economy is weaker than previously thought?

Commissioner Hall. Well, it wasn’t a really large revision, and

I hesitate to judge whether and how much of an effect that’s had.

It’s certainly clear that we’ve had a slowdown in job growth from

2006 to 2007.

Chairman Schumer. Right.

Commissioner Hall. That’s certainly pretty clear.

Chairman Schumer. And I just want to talk a little bit about

housing and its effect on job losses. We have known for months

that as a result of the subprime crisis, housing-related industries

such as the construction and credit industries have experienced

large job losses. Have we seen job losses fanning out across industries beyond the housing sector, and if so, where?

9

Commissioner Hall. We have seen job loss fairly widely spread.

I can tell you, for example, that we’ve done a tabulation of housingrelated jobs. These are jobs that are directly related to residential

construction or things related to construction.

In 2007, the housing-related jobs declined by about 440,000 jobs,

so that puts it a little bit less than half of the deceleration in job

growth in 2007, housing-related, so that meant about half was from

other areas.

Chairman Schumer. Right. I mean, I would just add a comment here that, again, a good stimulus package would focus on

housing to a far greater extent than this one has done, and the reason, again, is the Administration’s sort of ideological view that government shouldn’t get involved in any kind of situation.

It’s good that we’re going to raise the conforming loan limits

which I believe will be part of the package, but there’s so many

more things to do, and housing is at the bull’s-eye of this economic

crisis, and we’re skirting around the edges of it but not attacking

it directly, and I think that’s wrong. I think we should do much

more.

OK, on unemployment, this morning’s report shows that the unemployment rate is unchanged from last month, but the trend has

been upwards in recent months. It’s now half a percent higher than

where it was in March of 2007.

Does the unemployment rate typically rise this fast?

Commissioner Hall. It’s not atypical for it to rise like that, but

certainly a more severe rise over a shorter time period would be

a much, much worse signal.

Chairman Schumer. Right. And you mentioned that when it

comes to long-term unemployment that the percentage of unemployed without a job for more than 26 weeks has gone up to 18.3

percent. Do you recall when the last time this ratio was that high?

Commissioner Hall. Yes. Actually, it was that high about 2

months ago, but it’s about 2 percentage points higher than it was

a year ago.

Chairman Schumer. Got it, OK. So, people—in general, the

trend in the economy is when people are out of work, they’re looking for work over a longer period of time.

Commissioner Hall. Over the year.

Chairman Schumer. Yes. OK, if we look at the employment-topopulation ratio—that is, the fraction of working-age population

with a job—we see that it also is lower at .5 percent less than it

was 2 years ago; is that right?

Commissioner Hall. [The employment-population ratio, at 62.9

percent in January, was 0.4 percentage points lower 1 year ago and

the same proportion 2 years ago.] * Corrected by BLS.

Chairman Schumer. This morning’s report also showed that

the labor force participation rate remains quite low. In fact, this

rate is lower than it was before the start of the recession in 2001;

is that right?

Commissioner Hall. Yes.

Chairman Schumer. OK, so let me get this straight: What this

morning’s employment numbers tell us is that even though unemployment didn’t rise last month, we see from the Establishment

Survey that the economy hasn’t created new jobs in 2 months.

10

Further, the share of people with a job is lower than it was just

a couple of years ago, and more people are having a difficult time

finding a new job and becoming long-term unemployed. Doesn’t

that make it pretty clear that the labor market, at least as of now,

is just not creating new jobs, net?

Commissioner Hall. I would say that certainly the job growth

has slowed quite a bit, and there have been periods during expansions when there has been a pause in job growth like this so I’d

say it’s a little early to talk about this being a real issue yet, because it’s only one datapoint, but yes.

Chairman Schumer. All right. Now, I’d like to talk a little bit

about—well, one other question: Would you agree that all of these

factors combined means, at the very least, we’re entering a labor

market downturn and quite possibly a recession?

Commissioner Hall. I shouldn’t speculate on that.

Chairman Schumer. How about the first part? I understand

that you don’t want to mention the R-word.

Commissioner Hall. Right.

Chairman Schumer. Although it seems clear to me, at least,

that it seems that’s what the data shows we’re headed. But what

about—we are entering a labor market downturn; doesn’t that

seem pretty clear?

Commissioner Hall. Well, I’d say we’ve had pauses like this before, but we don’t want this to continue.

Chairman Schumer. Well, I think we can all agree with that,

Commissioner.

Let me go to wages and earnings for a minute. What has happened to growth in wages and earnings recently, compared with

what has been happening to inflation? In other words, have workers’ paychecks kept up with inflation?

Commissioner Hall. Actually, as I mentioned in my statement,

the average hourly earnings in 2007 rose by about 3.7 percent over

the 12 months, and the Consumer Price Index for wage earners increased about 4.4 percent.

Chairman Schumer. So actually, it was a loss of .7 percent in

earning power?

Commissioner Hall. Correct.

Chairman Schumer. OK. We’ve seen strong productivity

growth over the last few years. Wouldn’t we expect to translate

that growth into wages keeping ahead of or at least up with inflation?

Commissioner Hall. Yes. Actually, it’s widely recognized that

productivity growth is an important condition for growth in real

wages.

Chairman Schumer. But for some reason—and I’m not asking

you to speculate on the reasons here; that’s not your job, but for

some reason, that productivity growth has not translated itself into

wage gains for the average worker.

Commissioner Hall. From 2000 to 2006, productivity grew

about 2.7 percent, and during that same time period, real hourly

compensation of workers grew about 1.2 percent.

Chairman Schumer. Right. OK, finally on—I think this is my

last series—on earnings, I believe that the BLS publishes data on

11

the usual weekly earnings of full-time workers, including some information about wage distributions; is that right?

Commissioner Hall. That’s correct.

Chairman Schumer. OK, our staff at the Joint Economic Committee has done some calculations that show some disturbing

trends in that wage distribution.

First, they show that from the fourth quarter of 2000 to the

fourth quarter of 2007, median earnings, right in the middle, have

fallen by .9 percent or about .1 percent per year after inflation.

Does that number seem about right to you?

Commissioner Hall. That’s roughly in line with our calculations.

Chairman Schumer. However, over that same period, earnings

at the very top of that distribution, the 90th percentile, have risen

by 4.5 percent or .6 percent a year after inflation while earnings

near the bottom of the distribution, the 10th percentile, have fallen

by 2.3 percent or 3 percent a year after inflation. Does that seem

right to you as well?

Commissioner Hall. Yes, it does.

Chairman Schumer. OK. Well, what these numbers bear out

is, if you look at average figures, the economy looks a lot better

than if you look at median figures, because the distribution, the

gains that we have made over the last year—and we can, again,

speculate at the reasons—but they have been disproportionate to

the highest income earners; is that fair to say by definition?

Commissioner Hall. Well, yes.

Chairman Schumer. Yes?

Commissioner Hall. Yes.

Chairman Schumer. OK, thank you. Congressman Cummings?

Representative Cummings. Thank you very much, Mr. Chairman. Dr. Hall, I just want to ask you a few questions about minorities and the unemployment rate.

A recession hurts everybody, but it especially hurts minorities

who are often described as experiencing a permanent recession.

The official unemployment rate only includes people who are actively looking for work, and it shows that the unemployment rate

for African Americans is about twice as great as the rate for the

population as a whole. Is that right?

Commissioner Hall. That seems about right, yes.

Representative Cummings. Is it the case that African American men, especially younger, less educated African American men,

are more likely to be detached from the labor force than other population groups according to what you’ve got? Mr. Rones, you look

like you’re ready to jump over the table.

[Laughter.]

Mr. Rones. It is certainly the case that the labor force participation for minorities in general would be lower than it is for Whites,

and participation rates for minority men are particularly lower

than they are for White men.

Representative Cummings. What does it mean to be detached

from the labor force, and does that mean that we should be looking

at other statistics besides the unemployment rate to get an accurate picture of labor market outcomes for African American males,

especially younger, less educated African American males?

12

Commissioner Hall. Well, we do produce a number of broader

measures of the unemployment rate. I’m not sure they fully fill the

bill for what you’re talking about.

We do have measures that include marginally-attached and people working part-time for economic reasons.

Representative Cummings. And do you have those figures

there?

Commissioner Hall. Well, they’ve all moved similarly to the

regular unemployment rate. Our broadest measure which includes

the unemployed, marginally-attached, and part-time, that’s about 9

percent.

Representative Cummings. OK. What is the relationship between the unemployment rate, the labor force participation rate,

and the employment-to-population ratio?

Commissioner Hall. In a sense, those are the different pieces

that you use to calculate the unemployment rate. The unemployment rate is the number of people who are unemployed divided by

the labor force.

Representative Cummings. Now, if you know, what happened

to African American unemployment rates during the last recession?

Did it grow more than the population as a whole? If so, can we expect that to be the case again?

Commissioner Hall. The gap between the African American unemployment rate and, say, the White unemployment rate did in

fact decrease during the last recession.

Representative Cummings. And what was that—what kind of

gap was there?

Commissioner Hall. It got about 2.2 times as high.

Representative Cummings. So that means that it grows at a

greater rate in non-recessionary times than in recessionary times;

is that right?

Commissioner Hall. Correct.

Representative Cummings. So I guess that’s about twice as

much in non-recessionary times?

Commissioner Hall. Yes.

Representative Cummings. In the data of the Bureau of Labor

Statistics released today, it showed that the African American unemployment rate increased from 8.4 percent in November of 2007

to 9.2 percent in January of 2008. Meanwhile, Hispanics had an

unemployment rate of 5.7 percent in November of 2007 which rose

to 6.3 percent in January of 2008.

In comparison, the Caucasian unemployment rate, which hovered

at 4.4 percent in December and January, the data for African

Americans and Hispanics was strikingly higher. In your opinion,

how can Congress assist African Americans and Hispanics from experiencing strikingly higher unemployment rates in comparison to

the general population, and what exactly should the Senate consider adding to this economic stimulus package? I guess you want

to see more jobs.

I mean I know you keep the records. You’re examining the stats.

I understand that, but to improve those numbers, what—I would

assume that you would want to see more jobs.

Commissioner Hall. Absolutely. I don’t want to make too many

policy comments.

13

Representative Cummings. I understand that. That’s why I

tried to qualify everything I said. But I cannot imagine you looking

at these numbers and not having thoughts.

Commissioner Hall. Absolutely, yes. Job growth is extremely

important, and I think in some respects, what’s important about

economic expansions is that they support job growth; they support

strong job growth. That’s why you’d like to see, among other things,

why you would like to see strong economic growth.

Representative Cummings. I want to go back to something the

Chairman asked you a few minutes ago. You were talking about in

2007, you said there was a decline of 440,000 housing-related jobs;

is that right, 440,000? I think that’s the figure I wrote down here.

Commissioner Hall. That sounds—yes, that’s correct.

Representative Cummings. Now, how does that—what other

areas of employment would that affect the most, based upon the

statistics that you’ve seen? Are you following my question?

In other words, if you’ve got people who are—those are probably

earning decent wages, right, pretty livable wages.

So I guess if you don’t have people in the housing market doing

fairly well and you lose 440,000 jobs, what would you say would

be the impact on, say, other types of things like the barber shops

and the stores, things of that nature?

Commissioner Hall. Well, the things most obviously directly related are the housing-related like the homebuilding materials, providers of services to homebuilders, et cetera.

But you’re correct to a degree that this lowers, generally lowers,

economic activity. It can impact jobs across the economy.

Representative Cummings. And so the 440,000 would have

quite a bit of impact; is that what you find based upon your statistical reviews?

Commissioner Hall. It’s hard to draw conclusions about how

much the housing sector affected non-housing sectors.

Representative Cummings. I got you. Mr. Rones, did you want

to say something?

Mr. Rones. No.

Representative Cummings. You’re making me nervous.

[Laughter.]

Representative Cummings. You just looked like you wanted to

say something.

In the past when recessions have occurred in the U.S. economy,

how soon after were they later found to have begun? Was their impact registered in the unemployment figures?

Commissioner Hall. To some degree, I think recessions are almost defined by the labor market. At least in my mind, a recession

is where economic growth slows enough that you are no longer creating jobs for a sustained period of time.

So for example, if you look at the last recession, the recession

started in March, and that’s exactly where the job growth turned

negative and stayed negative for several months.

Representative Cummings. You know, economists at Goldman

Sachs say once the 3-month average of unemployment rate has

risen 0.3 percentage points, the economy has always either been in

or about to enter a recession. Do you agree with that assessment?

14

Commissioner Hall. I’m not familiar with that work, but that

sounds about right.

Representative Cummings. OK. Just a few more questions,

Mr. Chairman.

According to the data recently released by the Internal Revenue

Service, Americans’ average income in 2005 was less than in 2000,

the fifth consecutive year in which this was the case and the first

time since World War II that this has happened.

We also see that the income and wealth are becoming increasingly concentrated in the hands of a very few. Thus, those making

more than a million dollars received just under 50 percent of all

the income gain that occurred in 2005.

Can you comment on why this is occurring and what you’ve seen

from your review of the stats, and is that—and what potential impact on the unemployment—on the employment rate, does that—

you know, I mean, what do you forecast with regard to trends?

Commissioner Hall. It’s hard for me to know what’s causing

things like that. In part, given my job, I don’t want to speculate

too much.

Representative Cummings. I understand.

Commissioner Hall. And I don’t really want to forecast about

the trends, going forward.

Representative Cummings. OK. If the long-term unemployed

were counted in the unemployment rate, what would the figure actually be? That’s in your purview, is it not?

Commissioner Hall. Actually, they are included for people who

are unemployed for 27 weeks or longer.

Representative Cummings. Say that again. You just sort of

trailed off a little bit.

Commissioner Hall. I’m sorry. The people who are unemployed

for 27 weeks or longer, those are included in our unemployment

numbers.

Representative Cummings. OK, I have nothing else, Mr.

Chairman.

Chairman Schumer. Commissioner, I want to thank you, and,

as I said, the Joint Economic Committee is very interested in these

statistics, and we may do this again, but thank you all for coming.

I want to thank you, Mr. Horrigan and Mr. Rones, and my colleague, Congressman Cummings. The hearing is adjourned.

[Whereupon, at 10:14 a.m., the hearing was adjourned.]

(15)

Submissions for the Record

PREPARED STATEMENT OF SENATOR CHARLES E. SCHUMER, CHAIRMAN

Good morning. I am pleased to call this hearing to order—a hearing that resumes

the long-standing tradition of the Bureau of Labor Statistics coming before the Joint

Economic Committee to present the findings of its monthly jobs report. Given the

important information these numbers can provide us on the health of the economy,

I am hopeful that this is only the beginning of a conversation we will have throughout the course of the year.

I am also pleased to be the first to welcome Dr. Keith Hall, to his first hearing

on Capitol Hill as the Senate-confirmed Commissioner of the Bureau of Labor Statistics.

Today, unlike 6 months ago, everyone from the boardroom table to our kitchen

table is keenly aware of our economic problems and looking for ways to secure our

economic future.

But now the new worry is jobs—even more troublesome to our economy. In fact,

I’m concerned that the last few years of lower than expected job growth will look

good compared to the job shrinkage we may well see in the coming months.

First it was housing, then it was consumer credit and consumer spending, and

now it is jobs. Our economic problems started last year with the subprime mortgage

crisis, but they have gotten much worse as that mess spread to the broader housing

market, squeezed credit markets, cut consumer spending, and now has affected the

job market.

This should be a wake up call for the administration. Given today’s jobs numbers,

they should abandon their ideological opposition to spending stimuli, such as unemployment insurance, because every economist will tell you that stimulus spending

will get into the economy much quicker than a tax rebate, which we’re all for.

The administration needs to take off its ideological handcuffs to enact an economic

stimulus package quickly, which is strong and directed, and not limited by ideological constraints.

Any doubts that we are heading into a recession should be erased with today’s

employment report.

This morning, we learned officially that the U.S. labor market is faltering. Today’s

labor statistics show that job growth—which we already knew was bad, is even

worse than we thought. According to this morning’s report, annual job growth for

2007 was less than 1 percent for the first time since 2003.

During the month of January, our economy actually lost 17,000 jobs. In a normal

period of economic expansion, just to keep pace with a growing population, we

should expect a monthly job report to show that the U.S. economy added 150,000

to 200,000 jobs in 1 month. But this morning’s report tells a very different story.

Declines in the housing sector have negatively impacted construction jobs, and

workers in the mortgage and credit industry. Over the past year, construction has

lost 278,000 jobs and 104,000 jobs have been lost in the credit industry.

Since 2000 we have seen productivity rise an average of 2.5 percent per year. But

economic growth has not been shared by all. For years, wages have lagged far behind growth in productivity.

16

While today’s numbers might be news to some here in Washington, they certainly

are not news to millions of American families trying to make ends meet.

As employers have stopped hiring, we have seen millions of Americans struggling

to find employment. Today, approximately 7.6 million are out of work and actively

looking for a new job. Our nation’s unemployment rate was 4.9 percent in January;

almost a full point higher than it was when President Bush took office in 2001.

This rate doesn’t even include those who are working part time but need full time

work or those who have given up their job searches entirely. If we include these

Americans, the full UNDER-employment rate would be 9.0 percent.

The employment picture is particularly bleak in minority communities. The unemployment rate for blacks was more than double that of whites. And at 6.3 percent,

the Hispanic unemployment rate was also significantly higher than that of whites.

At the same time, long term unemployment has soared. Almost 20 percent of the

unemployed have been out of work for more than 26 weeks. Under current law,

these people are no longer eligible to receive unemployment insurance—making a

difficult time even more trying.

While lower than expected job growth has been characteristic of this administration, if it continues, it can be a dangerous situation for a growing population and

a global economy.

In the last month in particular economists from conservative former Federal Reserve Chairman Alan Greenspan to liberal New York Times columnist Paul

Krugman and others have suggested that we are teetering on the brink of a recession. The data that has been released today seems to bears that out.

And the bad numbers are not in jobs alone. This week we have also seen new

reports showing record drops in home prices, sales, construction, and equity—

thrusting Americans into the worst housing market in over 20 years.

On Wednesday we learned that the U.S. economy last quarter just about stalled—

the Commerce Department measured a mere 0.6 percent growth in Gross Domestic

Product (GDP). All the warning signs indicate that Washington should give the

economy a good shot in the arm, and I’m hopeful we can deliver that very soon.

I was pleased to join my colleagues on the Senate Finance Committee on Wednesday in passing an economic stimulus package that protects those who have been out

of work for more than 6 months and are struggling to make ends meet. I am hopeful

that the Senate can soon pass a stimulus package that provides quick aid to those

who have been most directly affected by this economic downturn and that the President will quickly approve such a package. Unemployment insurance is a highly effective form of economic stimulus, generating $1.73 of economic growth for every $1

spent. We should not abandon this proven stimulus measure because the administration is ideologically opposed to such a program.

I look forward to hearing more about today’s labor statistics from Commissioner

Hall, and am hopeful that today’s hearing will shed even greater light on what we

in Washington must do to protect American workers from the sagging economy.

PREPARED STATEMENT OF REPRESENTATIVE ELIJAH E. CUMMINGS

Thank you, Mr. Chairman, for holding this important hearing on the employment

situation in January 2008.

We convene today having recently learned that economic growth in the last quarter of 2007 fell to just .6 percent while prices showed a troubling increase.

The ‘‘middle class squeeze’’ is an expression becoming all too common at dinner

tables across the country as working Americans reflect on their situation—and these

are precisely the numbers that are putting the squeeze on families’ pocketbooks.

At the same time, as we will discuss today, the Bureau of Labor Statistics has

reported that in January, the economy lost 17,000 jobs—the first time we have seen

a job loss since 2003.

The overall number of unemployed persons stands at 7.6 million people—and unemployment is reported to stand at 4.9 percent.

This situation is even worse among Americans of color. In the third quarter of

2007, the quarterly average unemployment among African Americans was 8 percent. Today, it was reported by the Bureau of Labor Statistics to be 9.2 percent in

January.

Even those who are fortunate enough to have steady employment are finding that

their paychecks do not reach as far as they once did. Thus, though we did experience some wage gains last year, these increases were not nearly enough to keep up

with inflation.

During the December Congressional recess, many of my constituents told me—

often with a look that mixed both determination and anxiety—that they simply canVerDate 11-MAY-2000 13:45 Sep 17, 2008 Jkt 041712 PO 00000 Frm 00020 Fmt 6601 Sfmt 6621 C:\DOCS\41712.TXT DianeA PsN: DianeA
17

not make ends meet. Some families are even having to make the difficult choice of

which bills to skip this month in order to pay record prices to heat their homes.

Gas prices have risen 10 cents a gallon in the last 3 weeks, and new projections

suggest prices they could reach a staggering $3.50 a gallon by spring.

Many of my constituents also confront the possibility that they may lose the

homes for which they have been saving their entire lives—while those who are not

at risk of foreclosure are scared that the value of their homes will fall.

Earlier this week, the House passed an economic stimulus package that makes

some important strides toward bolstering the U.S. economy.

Unfortunately, I believe the House plan will not reach all of those who are most

in need.

Although more than 100 million families will be receiving tax rebates under this

plan, two of the most important and effective methods of providing a quick economic

boost are missing: extension of unemployment insurance benefits and increases in

food stamp benefits.

These two critical measures would provide direct help for the workers and families hardest hit by the economic downturn.

Indeed, among all of the tax and spending stimulus options that CBO examined,

the only two that were found to create a large ‘‘bang-for-the-buck’’ as a stimulus and

to have the ability to be put in place fast enough to really boost the economy were

unemployment insurance and food stamp provisions.

Both could start injecting more consumer purchasing power into the economy

within one to 2 months while helping those who have too long been forgotten as the

Bush administration focused its economic policies on passing tax cut after tax cut

for the wealthiest Americans.

Thus, while the House’s economic stimulus plan takes a step in the right direction, we need to make sure that the step our nation eventually takes lifts all of our

citizens.

It is now up to the Senate to use our stimulus package as a foundation and extend

unemployment benefits and increase food stamps to get money into the hands of

those who will spend it quickest and need it most.

With that, I look forward to Dr. Hall’s testimony and to a closer examination of

the troubling unemployment trends in our nation.

18

PREPARED STATEMENT OF REPRESENTATIVE CAROLYN B. MALONEY, VICE CHAIR

Good morning. I would like to thank Chairman Schumer for holding this hearing

on the employment situation in January. It is critically important to fully examine

labor market conditions during this downturn. I want to welcome Commissioner

Hall and thank him for testifying here today.

The unemployment rate was essentially unchanged at 4.9 percent and the economy shed 17,000 jobs last month. Clearly, danger signs for the labor market remain.

Over the last month, new evidence has emerged that a significant downturn in the

economy may be underway. Economic growth stalled last quarter, retailers have

posted disappointing sales, and manufacturing began to contract again, despite a

weak dollar that has spurred exports. Forecasters expect the economy to slow as

high energy prices, falling home prices, and stagnant wages squeeze American families.

The housing wealth that consumers once relied on to fuel their spending—and the

economy relied on to grow—is quickly evaporating as house prices continue their

downward spiral. All of which points to a gathering storm that could drag down the

economy, taking thousands of American jobs with it.

This dismal employment report is further evidence that the economy could use a

booster shot. The House of Representatives has passed a bipartisan economic stimulus package that is timely, temporary, and targeted. Under the plan, more than

100 million families squeezed by the high costs of basic living expenses will get a

meaningful tax rebate, millions of Americans can get help to avoid losing their

homes, and small businesses can take advantage of tax cuts to help spur investment

and job creation.

This package will provide a boost to the economy by putting hundreds of dollars

in the hands of middle- and lower-income families who will generate demand, without the fear of igniting inflation. I welcome efforts by the Senate to enhance this

package and hope that it can be accomplished without delay.

Long-term unemployment persists, and evidence of hidden unemployment is reflected in the continued depressed levels of the labor force participation rate and

falling fraction of the population with a job. In short, jobs have become harder to

find. Providing an extension of unemployment benefits is critically needed.

A stimulus package is an important first step, but there is more to do to blunt

the effects of this downturn and to get the economy back on track.

Mr. Chairman, thank you for holding this hearing and I look forward to the continued focus on labor market conditions by this committee.

PREPARED STATEMENT OF DR. KEITH HALL, COMMISSIONER, BUREAU OF LABOR

STATISTICS

Mr. Chairman and Members of the Committee:

I appreciate this opportunity to comment on the employment and unemployment

data that we released this morning.

Nonfarm payroll employment was essentially unchanged in January, at 138.1 million, as was the unemployment rate, at 4.9 percent. Employment declined in construction and in manufacturing, while the number of jobs increased in health care.

In 2007, payroll employment grew by an average of 95,000 per month, compared

with an average of 175,000 per month in 2006. Average hourly earnings rose by 4

cents in January, or 0.2 percent. From December 2006 to December 2007, average

hourly earnings rose by 3.7 percent, compared with a rise in the Consumer Price

Index for Urban Wage Earners and Clerical Workers of 4.4 percent.

Construction employment decreased by 27,000 in January, with the decline concentrated among the residential components. Construction has lost 284,000 jobs

since its employment peak in September 2006; the residential components lost

315,000 jobs over that period.

Manufacturing employment fell by 28,000 in January, with small but widespread

declines occurring in both durable and nondurable goods industries. Manufacturing

19

has lost 269,000 jobs over the last 12 months. Both the factory workweek and overtime were unchanged in January, at 41.1 and 4.0 hours, respectively.

In the service-providing sector, employment in health care continued to increase

in January (27,000). Over the year ending in January, this industry added 367,000

jobs, accounting for more than one-third of the growth in total nonfarm employment.

In January, employment rose in ambulatory health care, which includes doctors’ offices, and in hospitals.

Food services employment also continued its upward trend over the month,

though employment growth in this industry has slowed recently. From November

2007 through January, food services added an average of 16,000 jobs per month; the

average growth during the 12–month period ending in October 2007 was 28,000 jobs

per month.

Following a large increase in December (49,000), employment in professional and

technical services was little changed in January. In 2007, this industry added

335,000 jobs. Within administrative and support services, business support services

lost jobs in January.

Elsewhere in the service-providing sector, retail trade employment was little

changed, both over the month and over the year. Wholesale trade employment has

been flat since October 2007; the industry had been adding jobs for several years.

Within financial activities, employment in credit intermediation, which includes

mortgage lending, continued to trend down in January and has fallen by 111,000

since its most recent high point in October 2006.

The establishment survey data released today reflect the incorporation of annual

benchmark revisions, updated seasonal adjustment factors, and a minor revision to

the industry classification system. Each year, we re-anchor our sample-based survey

estimates to full universe counts of employment, primarily derived from administrative records of the unemployment insurance tax system. The benchmark revision

caused a decrease in the level of nonfarm payroll employment in March 2007 of

293,000 (not seasonally adjusted) or 0.2 percent. Over the past 10 years, benchmark

revisions have averaged plus or minus 0.2 percent.

All seasonally adjusted establishment survey data from January 2003 forward

have been revised to incorporate updated seasonal adjustment factors. Another

change effective with this release is an update to the 2007 North American Industry

Classification System (NAICS) from the 2002 NAICS. The update to NAICS 2007

resulted in minor definitional changes. All affected historical time series data for the

establishment survey beginning in January 1990 have been reconstructed based on

NAICS 2007.

Turning now to some of our measures from the household survey, both the number of unemployed persons (7.6 million) and the unemployment rate (4.9 percent)

were essentially unchanged over the month. However, both measures are up over

the past 12 months. In January, 18.3 percent of unemployed persons had been unemployed 27 weeks and over, up from 16.2 percent a year earlier. Civilian employment rose in January (after accounting for an adjustment to the population controls

used in the survey), and the employment-population ratio edged up to 62.9 percent.

Household survey data beginning in January 2008 reflect updated population controls. As part of its annual review of intercensal population estimates, the U.S. Census Bureau determined that a downward adjustment should be made to the population controls. This adjustment stems from revised estimates of net international

migration and the institutional population, along with updated vital statistics information. The updated controls would have resulted in a decline of 745,000 in the estimated size of the civilian noninstitutional population age 16 years and over for December 2007. In accordance with our usual practice, official estimates for December

2007 and earlier months will not be revised.

A comparison of December 2007 not seasonally adjusted data based on the old and

new controls shows that the population adjustment caused decreases in the levels

for the labor force (–637,000), employment (–598,000), and unemployment (–40,000).

The unemployment rate was unaffected by the new population controls; there was

a negligible impact on other percentage estimates.

To summarize January’s labor market developments, payroll employment was essentially unchanged (–17,000), as was the unemployment rate at 4.9 percent.

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

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

47

48

49

50

Æ