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90–958 PDF 2004

S. HRG. 108–269

THE EMPLOYMENT SITUATION: AUGUST 2003

HEARING

BEFORE THE

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

SEPTEMBER 5, 2003

Printed for the use of the Joint Economic Committee

(

(II)

JOINT ECONOMIC COMMITTEE

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

SENATE

ROBERT F. BENNETT, Utah, Chairman

SAM BROWNBACK, Kansas

JEFF SESSIONS, Alabama

JOHN SUNUNU, New Hampshire

LAMAR ALEXANDER, Tennessee

SUSAN COLLINS, Maine

JACK REED, Rhode Island

EDWARD M. KENNEDY, Massachusetts

PAUL S. SARBANES, Maryland

JEFF BINGAMAN, New Mexico

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, Vice Chairman

PAUL RYAN, Wisconsin

JENNIFER DUNN, Washington

PHIL ENGLISH, Pennsylvania

ADAM H. PUTNAM, Florida

RON PAUL, Texas

PETE STARK, California

CAROLYN B. MALONEY, New York

MELVIN L. WATT, North Carolina

BARON P. HILL, Indiana

DONALD B. MARRON, Executive Director and Chief Economist

WENDELL PRIMUS, Minority Staff Director

(III)

CONTENTS

OPENING STATEMENTS OF MEMBERS

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

Senator Jack Reed ................................................................................................... 3

Representative Jim Saxton, Vice Chairman .......................................................... 4

Representative Pete Stark, Ranking Minority Member ....................................... 5

WITNESSES

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

Accompanied by Kenneth V. Dalton, Associate Commissioner, Office of

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

Employment and Unemployment Statistics ...................................................... 6

SUBMISSIONS FOR THE RECORD

Prepared Statement of Senator Robert F. Bennett, Chairman ........................... 21

Prepared Statement of Representative Jim Saxton .............................................. 21

Prepared Statement of Representative Pete Stark, Ranking Minority Member 22

Spiegel Online interview with George A. Akerlof, Professor of Economics,

University of California, Berkeley submitted by Representative Stark .......... 24

Prepared Statement of Commissioner Utgoff, together with Press Release

No. 03–467, entitled, ‘‘The Employment Situation: August 2003,’’ Bureau

of Labor Statistics, Department of Labor .......................................................... 29

Questions submitted by Senator Bennett to Commissioner Utgoff ..................... 58

Response of Commissioner Utgoff to questions submitted by Senator Bennett . 60

Response of Commissioner Utgoff to questions asked by Representative

Saxton ................................................................................................................... 65

(1)

THE EMPLOYMENT SITUATION: AUGUST 2003

FRIDAY, SEPTEMBER 5, 2003

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

The Committee met, pursuant to notice, at 9:35 a.m., in Room

628, Dirksen Senate Office Building, the Honorable Robert Bennett, Chairman of the Committee, presiding.

Present: Senators Bennett, Reed, and Sarbanes; Representatives

Saxton, Stark, and Maloney.

Staff Present: Donald Marron, Tim Kane, Colleen Healy, Gary

Blank, Melissa Barnson, Rebecca Wilder, Chris Frenze, Brian

Higginbotham, Nan Gibson, Bob Keleher, Rachel Klastorin, Wendell Primus, Matthew Solomon, Chad Stone.

OPENING STATEMENT OF SENATOR ROBERT F. BENNETT,

CHAIRMAN

Senator Bennett. The Committee will come to order. I will

begin by warning our witnesses that Congress is getting in the way

of the Committee’s work. There’s usually safety in scheduling a Friday morning hearing because the House isn’t usually in session on

Friday morning, and the Senate very often is not. This morning the

House is holding a vote. It started at 9:15. And the Senate just

started a vote, which I will have to go respond to within the next

few minutes.

Mr. Saxton, who is the Vice Chairman of the Committee, is on

his way, we’re told. We’re never quite sure in the Congressional

world what ‘‘on his way’’ really means in terms of time.

But I will make my opening statement. I hope someone out there

is listening or watching when there are no members of the Committee here to respond, but the witnesses at least will be here.

I understand Mr. Stark is on his way, and that he too has an

opening statement. So we will do our best to maximize the amount

of time when members are here and hope that at some time after

about 10:15 or so everyone can be here and everyone can participate.

During the month of August, when the Congress was out of session, the economy was very much in session. It not only kept operating, it kept improving, and many measures suggest that the

economy may in fact have fully turned the corner, and that the recovery, which has been so sluggish, has now achieved traction, as

the politicians like to say.

This morning, we’re going to face the interesting statistics that

we have from the Bureau of Labor Statistics. The unemployment

2

rate declined slightly but not significantly in a statistical fashion

from 6.2 percent to 6.1 percent. However, the payroll survey indicates that although unemployment—as a percentage—declined,

93,000 jobs were lost.

The thing that I want to get into in this hearing is the fact that

there is a discrepancy between the household survey, which is used

to determine the unemployment rate, and the payroll survey, which

is used to determine how many jobs are lost.

The chart that I’m now displaying here takes as its beginning

point November of 2001. That date was chosen because it is the official date of the end of the recession according to the Bureau that

makes decisions as to when recessions start and end.

If you take the payroll survey, which is the lower line in red,

there’s been a steady loss of jobs since the end of the recession.

That is the number that is most commonly reported in the press.

However, if you take the blue line, which is the household survey,

that indicates that in fact, since the end of the recession, a number

of jobs have been added.

Now for the uninitiated that don’t understand the difference between the payroll survey and the household survey, one of which

I was until my staff prepared me for this hearing, the payroll survey is conducted by calling businesses and asking them if they

have added to or subtracted from their payrolls.

The household survey is taken by calling people at home and

saying, do you have a job? That’s an over simplification of the

methodology but is straightforward enough for our purposes.

The two should be the same, if they are both accurate. The fact

that they are as widely divergent as that chart indicates, says that

we need to probe behind the raw numbers and get more information as to what is really going on.

I would hope that the Commissioner, the Bureau of Labor Statistics, Kathleen Utgoff, who is with us this morning, can help us understand this. I’m not coming at this, Commissioner Utgoff, in any

way in an adversarial situation. I’m coming at it with the desire

to achieve some understanding.

Those of us who are, at least by our job description, policymakers, need to be sure that we are acting on the best possible information and the most accurate statistics we can have. So it is a

bit of an anomaly that today’s news reports that the unemployment

rate declined while the number of jobs went down.

If we take the household survey as our benchmark, then we can

say the unemployment rate declined while the number of jobs increased.

The first statement, the unemployment rate goes down while the

number of jobs decreases, is counterintuitive. It doesn’t mean it’s

wrong but it’s counterintuitive.

The second statement that says the unemployment rate goes

down, and the number of new jobs created goes up, feels like it’s

the more accurate one.

I would hope in this hearing we can have a discussion of that in

some depth, and get an understanding of how these surveys are

conducted, how the Bureau of Labor Statistics might enlighten us

as to why the disparity between the two, and get us on the track

3

of having a clearer picture of what’s really going on with the job

information.

One other point that I would make is that these numbers, that

is, employment numbers, are always a lagging indicator of economic health. The tendency on the part of a business man or

woman, when the economy starts to go soft, is to delay laying people off as long as possible in the hope that the soft figures are simply a one-time anomaly and not a signal of things to come. So unemployment stays low even as the economy starts slipping into a

recession.

Conversely, when the economy starts coming out of a recession,

and we are in a recovery, as we are now, business people are loath

to make new hires until they’re absolutely sure that the recovery

is going to be strong. Once again, the unemployment number is always the last indicator to change and turn in the direction of the

other economic statistics that are before us.

With that information, at least as I have it before us, that concludes the things that I want to discuss in an opening statement.

The five lights are on telling me that I’d better get to the floor, and

Senator Reed, who has been the Vice Chairman of this Committee,

is here and is trustworthy, so I’m happy to turn it over to him.

Senator Bennett. I’m fairly sure that he would have a somewhat different view than the one I’ve just expressed but I’m willing

to hear it.

Senator Reed.

[The prepared statement of Senator Bennett appears in the Submissions for the Record on page 21.]

Senator Reed. I’m going to make a brief statement, Mr. Chairman, and then I’m going to vote also. May I make a brief statement?

Senator Bennett. Absolutely, and we’ll go over together.

OPENING STATEMENT OF SENATOR JACK REED

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

Thank you, Commissioner, for joining us this morning.

It seems that this report is more bad news. Unemployment was

essentially unchanged and still at recessionary levels. The Chairman did point out that employment tends to be a lagging variable,

but there are some indications that there are structural changes

going on which might suggest that unemployment might not come

back as robustly in the next few months, even if there is an expansion of the economy. That’s something I think we hopefully can

touch upon in our questions.

Nearly 9 million people are unemployed in August, even though

I do feel, as the Chairman does, that this might be the last indicator that changes. For most families it’s the first thing they look

at. Can they get jobs, can their children get jobs? Are jobs still

being shed in their communities? I think it’s terribly important.

What I think is also of significance in these numbers is it appears that payroll employment plunged again. As the protracted

slump in payrolls continues intact really to become the most extensive, really, since the 1930s. Payroll employment shrank by 93,000

jobs, for the seventh consecutive month. Indeed, government payrolls shrank. I would suspect that is a combination of federal, state,

4

and municipal because I noted today that the federal workforce is

the largest it’s been in over a decade because of security considerations primarily.

These payroll declines where pervasive factory payrolls are down

for the 37th consecutive month. I met with a manufacturer yesterday from my home state of Rhode Island, and he pointed out that

the company is doing pretty well but they’re not going to be hiring.

In fact, they expect to be making more money in a year with fewer

people.

These are some of the changes I’m sensing out in the communities as I talk to people. I note also the productivity numbers for

manufacturing were significantly higher, yet employment is declining. So we’re looking at some very significant changes that affect

whether or not people have jobs.

Again, one other number that I think is significant, total weekly

hours recorded on private, non-farm payrolls which some would say

is the most influential monthly indicator of the economy’s health,

fell by .1 percent in August. This is not good news for people who

are looking for work and who are looking for that sort of sense that

there is a recovery. We’re sort of in the initial phases, I think it

could go either way. But if there is a recovery, without jobs, then

we’re not doing our part to give people the opportunity to work.

I thank the Chairman for his comments. Thank you.

Senator Bennett. The hearing will stand in recess.

[Recess.]

OPENING STATEMENT OF REPRESENTATIVE JIM SAXTON,

VICE CHAIRMAN

Representative Saxton. [presiding.] It’s a pleasure to join in

welcoming you again before the Joint Economic Committee.

The August unemployment data reflects the past weaknesses in

the economy. Payroll employment declined by 93,000 including a

44,000 drop in the manufacturing sector. Meanwhile, the unemployment rate slipped to a level of 6.1 percent.

The data show that the consecutive monthly declines in manufacturing employment account for most of the unemployment losses in

recent years. These declines began in the second half of 2000.

Measures of manufacturing output and activity indicate that the

manufacturing sector started contracting about that time.

The other indicators show that an economic slowdown was underway in 2000. In the wake of the bursting of the stock market

bubble in the first quarter of 2000, business investment and economic growth also fell sharply in the last two quarters of 2000.

As Joseph Stiglitz, President Clinton’s Chairman of the Council

of Economic Advisers said, ‘‘the economy was slipping into recession even before Bush took office and the corporate scandals that

are rocking America began much earlier.’’

Although the economy has been expanding since the end of 2001,

the pace of economic growth has been disappointing until very recently.

The weakness of business investment after the bursting of the

stock market bubble has been a major drag on economic growth.

Fortunately, President Bush and the Congress succeeded in lowVerDate 03-FEB-2003 12:35 Feb 19, 2004 Jkt 090958 PO 00000 Frm 00008 Fmt 6601 Sfmt 6601 90958.TXT SSC3 PsN: SSC3
5

ering the tax burden on the struggling economy and providing important incentives for business to invest.

Data released in the last several months indicate that the longawaited rebound in business investment has finally begun and second quarter GDP is much stronger than expected at 3.1 percent.

Many economists expect that a period of strong economic growth

will emerge over the next several quarters. A sustained period of

such economic growth is what is needed to expand payrolls once

again and this must remain the top priority of economic policy.

Let me turn, at this point, to Mr. Stark to any comments he may

have at this time. Then we’ll turn to the Commissioner.

[The prepared statement of Representative Saxton apprears in

the Submissions for the Record on page 21.]

OPENING STATEMENT OF REPRESENTATIVE PETE STARK,

RANKING MINORITY MEMBER

Representative Stark. I’d like to thank the distinguished Vice

Chairman. It’s a joy to be with one of the few Republicans in the

whole world who doesn’t have a miserable record, and it’s a pleasure to be here with you this morning.

I’d like to also thank the Chairman in absentia. I know he’s voting and will be with us shortly.

And welcome, Commissioner Utgoff. Thank you for testifying

today. I’d hope to have Dr. George Akerloff, an economics professor

from Berkeley, here. He was quoted as saying that the president’s

fiscal policies is a form of looting and his economic policies are the

worst in our 200-year history. And I thought we could talk about

that a little. But I’ll just submit an interview that he did for the

record, if I may, Mr. Chair.

The Bureau of Labor Statistics August report continued to paint

a disappointing labor market picture. While the unemployment

rate was essentially unchanged at 6.1 percent, the jobless recovery

drags on as another 93,000 payroll jobs were lost in August. Nearly

9 million Americans remain unemployed with nearly 2 million out

of work for 6 months or more.

I’d refer you to chart one. Probably I’m the only person in the

room who was there when that left hand negative column occurred,

and I’m still here when the little red column on the right occurs.

But basically this Administration belongs in what we’re going to

call the job loss hall of shame. It’s the only Administration in 70

year, since Herbert Hoover, with a decline in private sector jobs.

Now we’ll go to chart two, since the 1930s. The longest it’s taken

to recover private sector jobs lost in recession has been 33 months.

This is during the original Bush 1990 to 1991 recession, and subsequent jobless recovery. As you can see, the current slump is just

dragging along and not catching up.

In order for the current president not to surpass the achievement

of his father, the economy would have to create 818,000 jobs a

month between now and the end of the year, a rather unlikely

piece of job creation. The one job that’s been created, as a result

of the president’s policy, is a new Assistant Secretary of Commerce

to focus on manufacturing. But the collapse of manufacturing jobs

is a serious problem that requires our serious attention, not a cynical campaign offensive.

6

A much better way for the Administration to show their concern

for the unemployed in the near term would be to provide additional

weeks of and broadened coverage of the unemployment insurance

benefits.

We’ve lost 3.3 million private sector jobs since President Bush

took office and there are still no signs of a jobs recovery. The unemployment rate is not anticipated to fall quickly from its current

level. The Congressional Budget Office [CBO] expects that the unemployment rate will average 6.2 percent, its current level—for the

calendar year 2003 and 2004.

I learned this morning that in Iraq, we’re paying 120 bucks a

month to the unemployed Iraqi military to keep their economy

moving. And here we are with millions of people who get no unemployment benefits in our country. It just doesn’t seem right.

The Congressional Budget Office [CBO] also says the record of

unemployment growth over the past 2 years has been even worse

than in the jobless recovery of 1991 to 1993. I hope, Commissioner,

you’ll be able to characterize the current jobless recovery and put

it into the proper historical context for us.

Thank you, Mr. Chairman. I look forward to your testimony, Madame Commissioner.

[The prepared statement of Representative Stark appears in the

Submissions for the Record on page 22; a Spiegel Online interview

with Dr. Akerloff appears in the Submissions for the Record on

page 24.]

Representative Saxton. Commissioner, thank you for being

with us. The floor is yours. We are anxious to hear your testimony

this morning.

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

KENNETH V. DALTON, ASSOCIATE COMMISSIONER, OFFICE

OF PRICES AND LIVING CONDITIONS; AND JOHN GALVIN,

ASSOCIATE COMMISSIONER, EMPLOYMENT AND UNEMPLOYMENT STATISTICS

Dr. Utgoff. Mr. Vice Chairman and Members of the Committee,

thank you for this opportunity to comment on the employment and

unemployment data that we released this morning.

The unemployment rate, at 6.1 percent, was essentially unchanged in August. Non-farm payroll employment declined by

93,000 over the month. Manufacturers again made substantial job

cuts, and employment in several other industries continued to

trend down. On the positive side, employment continued to trend

up in health care and construction.

Manufacturing employment fell by 44,000 in August. Job losses

continued to be pervasive, with some of the more notable over-themonth declines occurring in textiles and apparel, wood products,

and electrical equipment. In the past 3 years, some 2.7 million

manufacturing jobs have been lost, including a decline of 431,000

this year. In August, the factory work week was unchanged at 40.1

hours.

Within the information sector, the telecommunications industry

continued to shed jobs. Employment in this industry has declined

by 212,000 from its peak of 1.3 million in March 2001. Other secVerDate 03-FEB-2003 12:35 Feb 19, 2004 Jkt 090958 PO 00000 Frm 00010 Fmt 6601 Sfmt 6601 90958.TXT SSC3 PsN: SSC3
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tors in which employment continued to trend down over the month

were wholesale trade and transportation and warehousing.

Offsetting some of these losses, employment in the health care

industry resumed growth, after showing little change in July.

Health care has added over a quarter of a million jobs in the past

twelve months.

Construction sector employment was up by 19,000 in August and

has increased by 122,000 over the past 6 months. Temporary help

employment continued to trend up, although the increases in July

and August were notably smaller than the gains in May and June.

Average hourly earnings increased by 2 cents in August, following a 5-cent increase in July. Over the year, hourly earnings

have risen by 2.9 percent.

Turning to data from our household survey, the number of unemployed persons and the unemployment rate were essentially unchanged over the month. The long-term unemployed continued to

make up a little more than one-fifth of the jobless.

The civilian labor force was little changed over the month. Over

the year, the number of persons marginally attached to the labor

force was up. The subset of these persons who cited discouragement over job prospects as their reason for not searching for work

also rose over the year. In August, they numbered half a million.

As a side note, I would like to point out that the blackout, which

affected parts of the northeast and midwest, beginning August

14th, occurred during the survey periods for both our payroll and

household surveys. While this event caused significant disruptions

to economic activities, it is unlikely to have had any effect on the

employment estimates from either of our surveys.

In the establishment survey, persons paid for any part of the pay

period that included the 12th were considered employed. In the

household survey, persons who worked any part of that week, as

well as those who were prevented working because of the blackout,

were also considered employed.

Business closings resulting from the blackout did reduce the

number of hours people worked. However, some people received

pay for the hours not worked, and the payroll survey measures

hours paid rather than hours actually worked.

In addition, the blackout required some workers to put in extra

hours, and other workers made up the time they lost. Thus, while

the net effect from the blackout on payroll hours estimates cannot

be quantified, it is likely to have been small. In fact, the measure

of average weekly hours was unchanged over the month.

Before closing, I would like to comment on employment trends as

measured by the payroll and household surveys, an issue that has

been receiving some attention recently. I know the Chairman

talked about it in his opening statement.

Since November 2001, the NBER-designated trough of the most

recent business cycle, payroll employment has fallen while non-agricultural wage and salary employment from the household survey

has been essentially flat. That’s a slightly different measure than

the one that was on the original graph, because we take out agricultural workers and self-employed workers who are not included

in the payroll survey. So we try to make them more comparable.

8

Some observers have speculated that the household survey provides a better indication of the trend in employment at and around

points in the business cycle. It is our judgment that the payroll

survey provides more reliable information on the current trend in

wage and salary employment. The payroll survey has a much larger sample than the household survey—400,000 business establishments covering about one-third of the total non-farm payroll employment. Moreover, the payroll survey estimates are regularly anchored to he comprehensive count of non-farm payroll employment

derived from the unemployment insurance tax records.

To summarize the August data released today, payroll employment declined over the month, and the unemployment rate, at 6.1

percent, was about unchanged.

Thank you.

My colleagues and I would be glad to answer any questions that

you have.

[The prepared statement of Commissioner Utgoff, together with

Press Release No.03–467, entitled, ‘‘The Employment situation: August 2003,’’ appears in the Submissions for the Record on page 29.]

Representative Saxton. Commissioner, thank you very much.

Commissioner, let me start with a question. Recent data on GDP

growth, investment, durable goods orders, and other indicators

show that the economy is in fact accelerating. That’s great news.

Some forecasters are projecting growth, as a matter of fact, for

the third and fourth quarter in excess of 5 percent. That’s optimistic and America is very pleased to see those kinds of projections.

However, isn’t it the case that labor market indicators often lag

behind improvements in the economy?

Dr. Utgoff. That’s true.

Representative Saxton. I had my staff look at this point, Commissioner. Maybe you can just verify these facts for us. We’ve had

a number of recessions and we have identified four major recessions. One in the early 1970s, one in 1981–1982, another recession

in 1990–91 and the most recent recession.

They all have one characteristic with regard to labor statistics.

That is that following the official end of the recession, in 1971, for

example, it appears, from information that we have here, that

there was no significant diminution of the unemployment rate for

approximately 18 months.

At the close of the official end of the 1980 recession, it would appear that there was no significant diminution of the unemployment

rate for 18 months.

At the close of the 1991 recession, it would appear that the unemployment rate actually accelerated—went up—for the better

part of 2 years.

And so with the end of the most recent recession in November

1991, we continue to see the same kind of pattern that was exhibited in 1970–71, 1980–81, 1991–92, and again in this recession.

Would you speak to those four recessions and verify or say whether

or not what I’m reading into these statistics is correct.

Dr. Utgoff. As you mentioned before, the unemployment rate is

a lagging indicator and I can’t verify the exact numbers that you

9

gave. In general, post-recession movements in the unemployment

rate differ historically.

Representative Saxton. So you wouldn’t take exception with

the examples that I gave over those four decades of unfortunate

slow economic times, recessions?

Dr. Utgoff. Let me get back with you and check exactly those

numbers. I don’t have them here with me today. We will get back

to you as soon as possible to verify those.

Representative Saxton. Thank you. Let me go on to another

issue. As the economic outlook improves, many businesses will tend

to be conservative about hiring decisions and delay expanding their

workforce until they are certain the economic rebound will be sustained. Isn’t this a typical pattern that we’ll be expecting to see in

the current situation?

Dr. Utgoff. Yes. Employers tend to add hours and temporary

help workers before they add employees.

Representative Saxton. In addition to that, isn’t it also true

that in the current set of economic circumstances, one of the positive issues that we have seen develop is a dramatic increase in productivity?

Dr. Utgoff. Yes. Productivity has been very high.

Representative Saxton. So in addition to the uncertainties

that always seem to follow a recession, the follow-on to this recession also includes an element of increased productivity which would

tend to diminish somewhat the necessity to rehire laid off workers.

Dr. Utgoff. That’s correct.

Representative Saxton. Thank you. I’ll go on to another issue.

In recent weeks, some people have realized that the manufacturing

employment decline is the main factor behind the overall decline

of payroll employment in recent years.

First of all, hasn’t manufacturing employment tended downward

for several decades, independent of economic conditions?

Dr. Utgoff. That’s correct.

Representative Saxton. In recent years, isn’t it true that economic employment has been on a downward trend since 1998?

Dr. Utgoff. Yes.

Representative Saxton. Wasn’t the most recent expansion

peak in the manufacturing employment actually reached in 1998,

and we’ve been in a continuous decline since 2000?

Dr. Utgoff. I think there’s been about 37 months of continuous

decline, so that would be roughly in—let us look at that up for you.

Representative Saxton. Go ahead.

[Pause.]

Dr. Utgoff. Mr. Galvin tells me that the most recent peak was

in July 2000.

Representative Saxton. So the decline has been underway

since July of 2000?

Dr. Utgoff. That’s correct.

Representative Saxton. With the release of today’s data, can

you tell us how well the two surveys are tracking one another?

Dr. Utgoff. Over the last year, they’ve been tracking each other

fairly closely. In the prior year, from November through November,

they had diverged.

10

Representative Saxton. I know Chairman Bennett is particularly interested in this point, and he’ll be back soon. I think I’ll

stop there and he can pick up on this issue when he feels like it.

[Laughter.]

I heard your great interview on television this morning, Mr.

Chairman, and we just began to touch on the issue of why the

household and the payroll survey don’t seem to be tracking each

other. But inasmuch as you’re interested in that issue, I was just

saying that I would leave that for you.

Senator Bennett [presiding.] Thank you very much. I appreciate your indulgence while we voted. Has Mr. Stark been heard

from as the ranking member?

Representative Stark. More than you’ll ever want.

[Laughter.]

Representative Saxton. Mr. Stark read his opening statement

but has not asked questions yet.

Senator Bennett. Then let’s go directly to Dr. Utgoff.

Dr. Utgoff. I’ve already made it.

Senator Bennett. So we are on the question period. You’ve just

completed yours. You’ve not completed yours. Have you given an

opening statement or been heard from at all?

Representative Maloney. I just have questions.

Senator Bennett. Do you want to flip a coin?

Representative Stark. Why don’t I ask a question. Do you

want to make an opening statement?

Senator Bennett. I did, unimpeded by any wisdom from the minority side.

Representative Stark. I said in my opening statement that it’s

nice to be with a few of the Republicans in this world who don’t

have miserable records, and I’m just happy to be here with you this

morning and thank you for calling the hearing.

The question basically follows from what Representative Saxton

was discussing. Let’s see if I have this straight.

We’re 29 months after the start of the recession, and in July the

number of private sector jobs was more than 3 million lower than

it was when the recession began. Jump in here and correct me if

I’m wrong.

Today’s report doesn’t change that very much. So this, according

to my figures, is the largest job deficit that has lasted so long after

the start of a recession since the 1930s. I was here then so I know

that; none of the rest of you were.

Senator Bennett. Don’t be too sure.

[Laughter.]

Representative Stark. More than a million jobs have been lost

since November of 2001, which is, I guess, when the recession officially ended. So I made the statement that no other post- or business cycle recovery has had such persistent job losses, and that this

job slump is worse than the jobless recovery following the 1991 recession, and basically doesn’t look like the typical patterns we’ve

had in the past.

Am I correct that there’s nearly a gap of 3 percent between the

private payroll employment at the beginning of the recession and

now? And when was the last time in your knowledge that we had

a gap that large, this late after the start of the recession?

11

Dr. Utgoff. I think it’s usual for me to divide the period you’re

talking about into the recessionary period, and the post-recessionary period.

It is the post-recessionary period that has been very weak, and

we continue to have job losses, 21 months after the end of the recession, which is greater than previous recessions.

Representative Stark. Since the 1930s?

Dr. Utgoff. Yes.

Representative Stark. So I’m just making the bad news worse.

Thank you. Mr. Chairman, I’m at a loss for what else to ask.

Senator Bennett. Senator Reed discussed this whole thing as

well when he was here. I don’t want to put words in his mouth,

but as I understand it from his questions, or from his comments,

whether or not there’s something structural going on here, we are

in a new economy. There are arguments as to what that term

means, and there are many definitions of it, but we have the example in the second quarter of 2003. Productivity went up 6.7 percent,

which is an absolutely—that’s the number that sticks in my mind.

I don’t know if that’s exactly right.

Dr. Utgoff. It’s 6.8.

Senator Bennett. Productivity went up 6.8 percent. Now, my

memory says, from what I learned in college, that if productivity

went up 6.8 percent, GDP would have to grow at 7 percent in order

to create new jobs.

There’s no way in the world GDP is going to grow at 7 percent

with productivity that high. I don’t expect the productivity number

to stay that high, by any means, but even if we have productivity

at—pick a nice sounding number of 3.5 percent, and GDP is growing at 3 percent, which, historically, is pretty good growth, doesn’t

that mean even though GDP is growing at 3 percent, we are shedding jobs?

Dr. Utgoff. Yes, in general, the economy has to grow faster than

the rate of productivity growth.

Senator Bennett. All the indications are that the economy is

now growing quite rapidly. The very strong numbers out of the second quarter of 2003 have led to higher forecasts for the third and

fourth quarters and for 2004.

But if productivity continues to be this high, we will have the situation of a very robust and strongly-growing economy without creating new jobs, and that does indicate, as Senator Reed probed,

some structural changes in the economy.

I know this is not your job, but do you have any observations

about what might be happening in a structural way, that would

give us numbers that are different from those that we have seen

in the old industrial economy, as compared to the new information

economy?

Dr. Utgoff. I don’t have any exact figures, but we do know, for

instance, the manufacturing industry, where there has been the

bulk of the job losses, has become much more capital-intensive, and

is really a different kind of an industry than it was 10 or 20 years

ago, much more capital-intensive, with higher productivity.

Senator Bennett. Can we go back to the chart that I put up in

my opening statement and get a comment from you about the difference between the Household Survey and the Payroll Survey, and

12

any kind of guess on your part or any statistical work that is being

done in your Bureau as to which of those numbers is the more accurate?

Dr. Utgoff. As I said in my statement, when you weren’t here,

we did try to address this in the statement. In general, we believe

the Payroll Survey is a much better measure of trends in the economy, because it is a much bigger sample.

The Household Survey is for 60,000 households. The Payroll Survey is for 400,000 business establishments, and it covers a third of

all workers.

But can I add a few things that will put that graph in perspective?

Senator Bennett. Sure.

Dr. Utgoff. One of the things is that the Household Survey data

shown, are unadjusted for a one-time change in the population that

was given to us by Census and that we include in our numbers,

so you have to adjust that, and it would bring employment figures

from the Household Survey down somewhat.

The two surveys are very different. A big difference in them is

that the Household Survey includes agricultural workers and selfemployed, and the Payroll Survey does not do that.

If someone works two jobs, they would be included twice in the

Payroll Survey and only once in the Household Survey. So what we

try to do regularly is make this an apples-to-apples comparison and

do the adjustments.

For the last year, if you make those adjustments, there’s been

very little difference between the Household and Payroll Surveys.

There was a difference in the previous year, but in the past year,

they’ve tended to move together; they’ve been very close.

Senator Bennett. When you say ‘‘very close,’’ are they very

close on job loss or are they very close on job gain? That’s the big

problem here.

Dr. Utgoff. The difference is about 150,000 job loss.

Senator Bennett. In other words, the Payroll Survey, to take

what you just said, the Payroll Survey is 150,000 jobs better when

you make the adjustment? That is, there are 150,000 more jobs

than there would otherwise be?

Dr. Utgoff. No. The difference between the two surveys is that

one is a slight loss, and the Payroll jobs in the last year were down

560,000.

Senator Bennett. Right.

Dr. Utgoff. When you adjust for all the differences I talked

about and a few additional ones, the Household employment was

down by 425,000, so that the difference is between 100,000 and

200,000.

Senator Bennett. About 140,000 difference?

Dr. Utgoff. Yes.

Senator Bennett. I think it’s important that we pursue trying

to get as accurate as we can. The reason I focus on the Household

Survey is that that’s the survey you use to come up with unemployment figures.

Dr. Utgoff. Right.

Senator Bennett. So there is a bit of a disconnect in the news—

and I talked about that on this morning’s television interview—in

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that the methodology you use to come up with the 6.1 percent figure for unemployment is the Household Survey.

Then in the news reports as to the specific number of jobs lost,

they then switch to the Payroll Survey, so you’re always getting the

two laid side-by-side before an unsuspecting public that thinks

they’re working off the same database, and, in fact, they are two

different databases.

I understand there’s more statistical noise in the Household Survey than there is in the Payroll Survey, and I think the Household

Survey probably is the more erratic of the two. But that then raises

the question, why don’t you use the Payroll Survey for the unemployment number?

Dr. Utgoff. Because it’s only people on the payroll. We count the

number of jobs that are on the payroll of employers. We don’t have

a similar estimate of people who are unemployed, so we don’t have

the ratio. All we know is jobs that are paid for.

Senator Bennett. All right, the bottom line, as I am hearing,

is that the Payroll number, in terms of actual job loss, is probably

more nearly correct than the Household Survey number, but it’s always artificially lower than reality, because there are always people who are self-employed, and there are always people in the agricultural sector, and while you are double-counting those who have

two jobs in the Payroll Survey, the number that would come from

the Household Survey is greater than the duplication. Is that a fair

summary of what you’re telling me?

Dr. Utgoff. That’s correct.

Senator Bennett. I think that’s useful. My time is up.

Ms. Maloney.

Representative Maloney. Thank you, Mr. Chairman. Thank

you for your testimony. By all accounts, Labor Day was not a

happy day for roughly 9 million jobless Americans.

And, sadly, with the news that you’re giving us today, the Labor

Department shows that we are losing even more jobs, 93,000 last

month, the largest job loss since March. My colleague, Representative Saxton, and others, have pointed out that some indicators are

that the economy is improving, yet it’s a jobless recovery.

As my colleague, Mr. Stark, pointed out, since President Bush

took office, the number of unemployed Americans has grown by 3.2

million, and that this is the most dismal record since Herbert Hoover.

We’ve been talking about the different surveys. There is yet another survey out, the one from the Census Bureau, the American

Community Service Survey. That estimates that the unemployment

rate in 2002 was 7.4 percent, which, of course, was much higher

than the standard measure, than the one that we’ve been given

with the Household and Payroll Surveys.

Do you understand what the discrepancy is between the American Community Survey and these other surveys? Why is the

American Community Survey two points higher, roughly?

Dr. Utgoff. They’re very different surveys. The survey that we

use to calculate the unemployment rate is the Current Population

Survey. People actually go to the household. The American Communities Survey is a written response from filling out a form, from

14

the respondent, and there are other statistical differences between

them.

But perhaps the most important is that the American Communities Survey does much less probing about the reasons for being

unemployed than the BLS Household Survey. The ACS has tended

to show higher unemployment rates than the BLS for the last several years.

Representative Maloney. Not going into the reasons for the

survey would not account for why the number is 2 percent higher.

If they ask a person, are you unemployed or not, and the statistic

that they’re handing out is how many people are unemployed,

they’re just saying who’s unemployed. They’re not saying why

they’re unemployed.

I think you need to look further as to why there’s such a huge

difference between the two.

Dr. Utgoff. Well, we are measuring, in the official unemployment rate, the people who are engaged in an active job search.

That means that they have done something actively in the last 4

weeks to seek a job.

In the American Communities Survey, there’s much less probing,

so that you don’t know whether there’s an active job search or

something like just opening the newspaper during the week.

Representative Maloney. But if you’re unemployed and you

want to work, and you’ve been trying to get a job, maybe for a

month you haven’t been looking, you’re so discouraged. The main

point is that that person is unemployed, so I would think that’s giving an accurate assessment of who’s not working.

Dr. Utgoff. Right. That is why we publish a different range of

unemployment rates beside the, quote, official one. We have an unemployment rate that includes discouraged workers; we have an

unemployment rate that includes marginally attached workers,

plus workers who are involuntarily working part-time.

You may want to look at some of those other measures to compare to the ACS.

Representative Maloney. When you include those working

part-time and those working that are marginally attached, as you

said, in other words, those that are under-utilized in the labor

force, what is the number then? I would assume it would be nearer

to the American Communities Survey.

Dr. Utgoff. It’s higher; it’s 10 percent.

Representative Maloney. Ten percent? Well, it’s discouraging,

these unemployment numbers, and they appear to not be improving. I thank you for your testimony.

Do you have any idea why certain economic indicators are improving in our country, yet the unemployment, the jobless rate,

continues to rise rather dramatically to 10 percent when you consider the under-utilized and the marginally attached, part-time

workers?

Dr. Utgoff. I think it’s been pointed out that the unemployment

rate often is a lagging indicator. It tends to improve after other economic signs have improved.

Representative Maloney. Thank you. I hope it improves.

Senator Bennett. Senator Sarbanes.

Senator Sarbanes. Thank you very much, Mr. Chairman.

15

Commissioner, welcome; we’re pleased to have you here this

morning.

I want to focus first on the long-term unemployed, which, I understand, is defined as those who have been unemployed for more

than 26 weeks and continue to look for work. How many individuals are in this category?

Dr. Utgoff. We’ll get that number for you. It’s about 22 percent

of the unemployed.

Senator Sarbanes. Do you know what the percentage of longterm unemployed was a year ago? I understand just over 18 percent. Would that be right?

Dr. Utgoff. A year ago, it was 18.5.

Senator Sarbanes. Now, are the 22 percent, long-term unemployed?

Dr. Utgoff. Yes.

Senator Sarbanes. I gather that it’s been above 21 percent now

for quite a continuous period of time.

Dr. Utgoff. For the last 3 months.

Senator Sarbanes. I had it above 21 percent for 7 months.

Dr. Utgoff. I’m sorry, it’s been since January. I was looking at

the chart wrong.

Senator Sarbanes. It’s been above 21 percent?

Dr. Utgoff. Yes.

Senator Sarbanes. My understanding is that the last time that

the percent of unemployed, long-term unemployed, was this high

for so long, was in the recession in 1983 and 1984; is that correct?

Dr. Utgoff. We will try to get that number for you.

Senator Sarbanes. I’m looking at a table of yours, the U.S. Department of Labor, Bureau of Labor Statistics Percent Unemployed

27 Weeks and Over. That table seems to indicate that the last time

we went through such a sustained period of long-term unemployed

was throughout 1983 and just into 1984.

Dr. Utgoff. Yes, that is right.

Senator Sarbanes. What’s the number of unemployed Americans, as you reported to us this morning?

Dr. Utgoff. 8.9 million.

Senator Sarbanes. How many unemployed Americans were

there in January, 2001?

Dr. Utgoff. Just a moment, we’ll look that number up.

Mr. Galvin. 5,951,000.

Senator Bennett. Five million.

Mr. Galvin. In January of 2001.

Senator Sarbanes. So, in about 21⁄2 years, we’ve seen an increase of 3 million in the number of unemployed Americans; is that

right?

Mr. Galvin. Yes.

Senator Sarbanes. We have also seen the number of long-term

unemployed, those out of work for 26 weeks or more—they still

have to be continuing to look for a job to be included in that category; is that right?

Dr. Utgoff. That’s right.

Senator Sarbanes. So if they’re long-term unemployed but drop

out of looking for a job, we cease to count them for this purpose?

Dr. Utgoff. For unemployment, yes.

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Senator Sarbanes. Is that generally a feature that happens

when you have this long a period of job loss, that people drop out

of the labor market?

Dr. Utgoff. The number of what we call discouraged workers has

increased.

Senator Sarbanes. What are the dimensions of that increase?

Mr. Galvin. The number of discouraged workers has gone up

from January 2001, that you anchored it at earlier, 301,000, up to

503,000 this month, so an increase of about 200,000.

Senator Sarbanes. I wasn’t quite clear in your answer to Congresswoman Maloney’s, I thought, very perceptive question. If we

count everybody into the unemployment rate, in other words, the

people working part-time who want to work full-time, but can’t get

full-time work, and we have people who want to work, but have

dropped out of the job market because they’re so discouraged, are

there other categories of people that have been dissuaded from

being in the labor market or being counted?

Dr. Utgoff. We have two measures: One is marginally attached,

which is anyone who’s looked for a job in the last year but is not

currently looking; then a subset of that is what we’ll call discouraged workers. Those are workers who have stopped working for

economic reason. Other workers stop looking for work because they

have transportation problems or because they have childcare problems or something like that.

So you have discouraged workers and then a larger category of

marginally attached workers.

Senator Sarbanes. Then you have people working part-time

who want to work full-time. Has that figure gone up as well?

Mr. Galvin. I’m sure it has.

Dr. Utgoff. It’s gone up in the last year. We can look at it since

the recession began, but it’s increased in the last year.

Senator Sarbanes. If all of those factors are brought into the

calculation of the unemployment rate, what would the unemployment rate be?

Dr. Utgoff. If you include everyone who is working part-time for

economic reasons and all the marginally attached workers, then

the unemployment rate would be 10 percent.

Senator Sarbanes. Ten percent. Now, it’s my understanding

that we’ve experienced considerable job loss just over the course of

this year; is that correct?

Dr. Utgoff. Yes. I can look that number up for you. I believe it

was in my testimony. It’s 437,000 this year.

Senator Sarbanes. Job loss?

Dr. Utgoff. Yes.

Senator Sarbanes. The Baltimore Sun, in a recent editorial entitled ‘‘Job Loss Recovery,’’ stated about this time, 29 months after

the onset of the last recession, and 21 months after its official end,

employment ought to be expanding. But this recovery remains

uniquely scarred by outright job losses.

Would you regard that as an accurate comment on the situation?

Dr. Utgoff. Yes.

Senator Sarbanes. As I understand it, since January, 2001,

we’ve lost—total employment has fallen by 2.7 million; is that correct?

17

Dr. Utgoff. Since March, the beginning of the recession, we’ve

lost 2.8 million jobs.

Senator Sarbanes. And 3.3 million, I gather, in the private sector, so it’s been a worse experience in that arena.

Dr. Utgoff. That’s correct.

Senator Sarbanes. Mr. Chairman, I know my time is up, and

I’ll just draw this to a close. I simply want to make this observation: The Washington Post reported today that President Bush, ‘‘Acknowledges that despite a number of favorable signs, job growth remains stubbornly sluggish.’’

I just want to say that this does not seem accurate to me. Sluggish job growth would, in fact, be an improvement over what we’ve

been experiencing. We actually have had job loss, not sluggish job

growth.

Thank you.

Senator Bennett. Thank you, Senator.

Back to the point that I was making with the Commissioner,

during this period, we have had unusual and unprecedented increases in productivity, and the rule—apparently iron rule is that

the GDP has to grow faster than productivity in order to create

jobs.

In the second quarter when we had productivity growth of 6.8

percent, in order to have job growth in the second quarter, we

would have had to have had GDP growth of around 7 percent,

which, of course, is virtually impossible.

Senator Sarbanes. That’s a pretty staggering productivity

growth figure, is it not?

Senator Bennett. It is.

Senator Sarbanes. Commissioner, is that out of line?

Dr. Utgoff. It’s on the high end of productivity growth.

Senator Sarbanes. It certainly is; it’s right up there close to the

very top; isn’t it?

Dr. Utgoff. There have been other periods with stronger growth,

including last year at over 9 percent, but that is—you’re right; it’s

at the top.

Senator Bennett. As Senator Reed indicated in his opening

statement and questions, there may very well be something structural going on here in terms of changes as a result of the new economy and the technology boom. As the Commissioner indicated,

we’re getting much more capital-intensive manufacturing than we

ever had before, where we get very high productivity and that

means the whole job situation changes.

Senator Sarbanes. If you’re long-term unemployed and you’re

looking for a job and can’t get a job, have used up all your unemployment, you’re worried about how to support your family. There’s

not much comfort if you say to do, these productivity numbers are

going off the chart.

Senator Bennett. There’s no question about that.

Senator Sarbanes. They are in a tough jam. So we may have

to revise other aspects of the system, including unemployment insurance.

Senator Bennett. That could well be so. And if you were in the

old economy where you tightened the lug nut on the assembly line,

now, all of a sudden, a robot does that and you don’t have the

18

skills. There’s a training problem here, as well as a structural situation.

Let me ask you, Commissioner Utgoff, if you have any statistical

information to share on this: One of the trends that is very strong

in manufacturing is the outsourcing of functions that used to be

taken care of by people on your payroll, for example, janitorial, accounting, and security.

You used to hire your own night watchman, and now you hire

a security company, and statistically, this moves the job from a

manufacturing job to a service job. As we try to get a handle on

the number of manufacturing jobs that have been lost, do you have

any view as to what percentage of those job losses in manufacturing might, in fact, be simply a job transfer from the manufacturing sector to the service sector by virtue of an outsourcing movement?

Dr. Utgoff. It’s certainly a phenomenon that has occurred. I

can’t give you any quantifiable estimate of what that effect has

been.

Senator Sarbanes. Could I interrupt?

Senator Bennett. Sure.

Senator Sarbanes. This is an interesting point, I think. In

other words, if I’m a manufacturing plant and I contract out all of

my jobs—now, I don’t know if that’s possible—but would I have

succeeded in shifting manufacturing jobs in service jobs.

Dr. Utgoff. That’s correct.

Senator Bennett. For example, Senator, if I’m a manufacturing

plant and I say that the one thing I do really well is make engines,

so I’m going to concentrate on making engines, and I’m going to

hire somebody else to do my accounting, a different firm to—as the

House did at one point here, contracted out the food service to Marriott, so there were no more House of Representatives employees

serving food; they were all Marriott employees. So you could say

the House payroll had gone down, but the number of people still

on the property was the same.

So a manufacturing plant could say I’m going to contract my food

service, I’m going to contract my security, I’m going to contract out

my janitorial, and I’m going to contract out my accounting. The

number of manufacturing jobs shrinks dramatically from a statistical point of view, but in terms of the number of people actually

working at the plant, they’re probably the same number of bodies.

Senator Sarbanes. How do you classify a job as being manufacturing?

Dr. Utgoff. By the principal activity of the establishment, so

that janitorial services, that would be part of business services and

maintenance. Then a job in a factory where people are on a production line, and their managers, would be classified as in the manufacturing industry.

Senator Sarbanes. Then if I’m a manufacturer, are my janitors

counted as manufacturers or as service people?

Dr. Utgoff. If they work for the manufacturer and they are on

the manufacturer’s payroll, they count in manufacturing.

Senator Bennett. That’s part of the analysis. I guess, out of this

hearing, what I hope you would take away, is that there is an intense desire to slice the data, perhaps more thoroughly than has

19

been habitually done as we try to get a clearer understanding of

what is really happening in the economy.

Because if what is really happening is, indeed, that there are

structural changes that require policy changes, pointing to a different view of how we approach things here on Capitol Hill, that

is obviously a very valuable thing for us to know.

If, in fact, what is happening in the economy is simply that the

old forces are unchanged, but they’re simply slower now, that’s also

something that we need to know as we make policy decisions about

such things as unemployment insurance, to which Senator Sarbanes has referred.

My own hunch is that we are seeing some fairly significant structural changes in the way the economy works, as we move into the

information age and away from the dominance of the industrial

age. The more we can understand this phenomenon, the better we

in the Congress can react to those new realities.

So, help us with your surveys, with your analysis of who is in

which category and what needs to be done. We thank you for your

service.

Senator Sarbanes. Mr. Chairman, just to get a good read on

where we are right now, it’s my understanding that the initial

claims for unemployment have gone back up. Do you have those

figures?

Dr. Utgoff. The initial claims for unemployment insurance?

Senator Sarbanes. Have gone back up over 400,000; is that correct?

Dr. Utgoff. That’s correct.

Senator Sarbanes. We had gone below the 400,000 figure for a

period, but it’s back up now again; is that correct?

Dr. Utgoff. Yes.

Representative Maloney. Senator, if I could also add to your

very thoughtful comments about structural changes that may be

taking place in our economy, the bottom line, whether you’re working for a service industry or an information industry or manufacturing, the bottom line is the number of unemployed.

That number keeps going up, even though there are some signs

of improved economic indicators. I know that BLS also does a survey on job openings. Is that not correct? I’d like to ask the Commissioner this: In the surveys that you do of new job openings and

labor turnover surveys, is it not correct that the unemployment

problem is lack of jobs? That survey is not showing that the jobs

are there for the unemployed, which then really supports the Senator’s statement that the jobs aren’t there for the people to get, so,

therefore, we should help them with unemployment insurance.

There is an argument that if you give them unemployment insurance, they won’t look for a job, but if your statistics are showing

that the jobs are not there in the first place, then there’s a basic

problem for the people that are looking for a job.

I wish you would comment, please, on the Labor Department’s

results on the Job Openings and Labor Turnover Survey, which I

believe did not show many jobs were available. Is that correct?

Could you give us the data on that?

Dr. Utgoff. Let me get Mr. Galvin to answer this. He’s an expert

on that question.

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Mr. Galvin. Our Job Openings and Labor Turnover Survey

measures job vacancies, hires and separations. In its most recent

report, which is, I believe, for June of this year, it reported a vacancy level of around 3 million jobs, 3 million positions.

Representative Maloney. So then I think it’s correct to conclude that the unemployment problem is lack of jobs. The jobs

aren’t there; is that correct, Mr. Galvin?

Mr. Galvin. That level compares to the unemployment level of

8.9 million.

Representative Maloney. It’s lack of jobs. Thank you.

Senator Bennett. Thank you very much for your service. We

look forward to hearing from you again about all of these concerns.

The hearing stands adjourned.

[Whereupon, at 10:55 a.m., the hearing was adjourned.]

(21)

Submissions for the Record

PREPARED STATEMENT OF SENATOR ROBERT F. BENNETT, CHAIRMAN

Good morning and welcome to today’s hearing on the employment situation.

While many in Washington took the month of August off, the economy managed

to keep operating, even improving. Indeed, many measures suggest that the economy may have finally turned the corner. Economic growth in the second quarter exceeded 3 percent, and many forecasters anticipate further acceleration this quarter.

Worker productivity and wages continue to grow.

These developments have sparked increased optimism about our economy and anticipation that economic growth will soon translate into resumed job growth.

Unfortunately, the Bureau of Labor Statistics—the BLS—reports today that payroll employment continued to decline in August, falling by 93,000 jobs. Manufacturing continued its declines, losing 44,000 jobs. However, the unemployment rate

declined slightly from 6.2 percent to 6.1 percent in August.

It may not be widely known that these figures come from two different surveys.

The BLS surveys households to determine the unemployment rate, while it surveys

employers to determine payroll employment. These surveys have some significant

differences. For example, the household survey picks up the self employed and small

emerging businesses that may be overlooked by the establishment survey.

These surveys appear to tell very different stories about employment since the

end of the recession in November 2001. As illustrated in the chart that I’ve brought,

the household survey indicates that the number of employed people has increased

by 1.4 million since the end of the recession. The payroll survey, in contrast, indicates that roughly 1.1 million jobs have been lost over that period.

The disparity between these two BLS surveys is worth further examination. While

some of the disparity in data may reflect methodological differences between the two

surveys, it may also be that the data illustrate a marked change in the makeup of

the American workforce.

One of our goals at the JEC is to promote accurate and timely data so that policymakers, businesses, and citizens can make better economic decisions; for that reason, I am eager to explore this subject.

In that regard, I think it important to recognize Commissioner Utgoff and the

dedicated staff at the BLS for several enhancements to its data. Since our last hearing, the BLS completed an overhaul of the payroll survey using more up-to-date

definitions of the different sectors in our economy. With the ongoing shift to a service economy—today more than 82 percent of the American workforce is in the service sector—this change helps to bring the new economy into better focus.

Furthermore, I understand that the BLS will soon begin to release a new data

series on ‘‘Job Creation and Destruction.’’ I expect that these new data will shed

much needed light on what’s happening behind the aggregate employment numbers

on which we usually focus. With new data, we can better understand the dynamics

of job creation—in sectors new and old—that drive our economy.

Commissioner Utgoff, we welcome you again to the Committee and look forward

to your insights.

PREPARED STATEMENT OF REPRESENTATIVE JIM SAXTON, VICE CHAIRMAN

Commissioner Utgoff, it is a pleasure to join in welcoming you before the Joint

Economic Committee.

The August employment data reflect the past weakness in the economy. Payroll

employment declined by 93,000, including a drop of 44,000 in the manufacturing

sector. Meanwhile, the unemployment rate slipped to a level of 6.1 percent.

The data show that the consecutive monthly declines in manufacturing employment account for most of the employment losses in recent years. These declines

22

began in the second half of 2000. Measures of manufacturing output and activity

indicate that the manufacturing sector started contracting about the same time.

Other indicators showed that an economic slowdown was underway in 2000.

In the wake of the bursting of the stock market bubble in the first quarter of

2000, business investment and economic growth also fell sharply in the last two

quarters of 2000. As Joseph Stiglitz, President Clinton’s Chairman of Economic Advisers has said, ‘‘the economy was slipping into recession even before Bush took office, and the corporate scandals that are rocking America began much earlier.’’

Although the economy has been expanding since the end of 2001, the pace of economic growth has been disappointing, until recently. The weakness of business investment after the bursting of the stock market bubble has been a major drag on

economic growth.

Fortunately, President Bush and the Congress succeeded in lowering the tax burden on the struggling economy, and providing important incentives for business investment. Data released in the last several months indicate that the long-awaited

rebound in business investment has begun, and second quarter GDP was a stronger

than expected 3.1 percent. Many economists expect that a period of strong economic

growth will emerge over the next several quarters. A sustained period of such economic growth is what is needed to expand payrolls once again, and this must remain the top priority of economic policy.

PREPARED STATEMENT OF REPRESENTATIVE PETE STARK,

RANKING MINORITY MEMBER

Thank you Chairman Bennett for holding this hearing. I would like to welcome

Commissioner Utgoff and thank her for testifying here today.

The Bureau of Labor Statistics today announced that the unemployment rate rose

to 5.8 percent in February and that payrolls plummeted by 308,000—more evidence

that this economy is simply not delivering the jobs it should.

Today, there are 8.5 million unemployed Americans, and about 1.6 million additional workers who want a job but are not counted among the unemployed. And

there are another 5 million people who work part-time because they can’t find fulltime work. Long-term unemployment remains high, with 1.9 million Americans having been unemployed for more than 26 weeks—that’s 22 percent of the unemployed.

Unfortunately, the President is not really helping unemployed workers. The President’s father was far more compassionate. During the last recession, President

George H.W. Bush had a UI program that was much more generous at the start

and then extended it twice because unemployment remained stubbornly high long

after the recession was over.

My question is: Will this Administration support another federal UI extension to

help hard-pressed families? There are a million people out there who have exhausted all federal and state unemployment benefits and are still out of work—

workers who would have received extended benefits during the last recession. While

the current President Bush proposes large tax cuts that will permanently help the

wealthy, he makes no provisions in his budget for extending temporary UI benefits

or restoring assistance to the one million unemployed workers struggling to heat

their homes, feed their families, and find new jobs.

Significantly more workers have exhausted their temporary federal benefits than

over a comparable period in the last downturn. Today, regular state program exhaustions are still rising. Therefore, temporary federal UI benefits will need to be

extended until exhaustion rates come down considerably. The federal UI program

in the last recession lasted for 19 months while regular state program exhaustions

declined back toward non-recession levels.

The President must think that the problem is that people are being too picky

about what job they take, because he proposes to create so-called ‘‘Personal Reemployment Accounts’’ that will provide bonuses for people who get back to work more

quickly. But with 2.5 million fewer private sector jobs today than when the President took office—there are just too many workers chasing too few jobs. PRAs are

no substitute for extending federal UI benefits—and doing so would be like robbing

Peter to pay Paul a bonus.

The Administration’s assaults on assistance to unemployed workers include cuts

in job training totaling $600 million (relative to 2002) for fiscal year 2003 and further cuts for youth employment programs totaling $700 million for fiscal year 2004;

no additional funding for the Workforce Investment Act; and abdicating federal responsibility for the UI system.

Helping unemployed workers should be part of any plan to get the economy moving again. The proposals of House Democratic Leader Pelosi and Senate Democratic

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Leader Daschle would provide immediate stimulus to put people back to work as

quickly as possible. The President should work with Democrats to put these plans

into action immediately.

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