Hearing of the Joint Economic Committee - January Employment Situation

Interview

Hearing of the Joint Economic Committee - January Employment Situation

SEN. SCHUMER: And 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 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 six 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, with the decline in housing prices, lower consumer spending and the 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.

The numbers this morning should be a wake-up call for the administration. Given today's jobs numbers, the administration should abandon its 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, 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 four 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 job report to show that the U.S. economy added 150,000 to 200,000 jobs in one 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 behind 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 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, and that's 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 9.0 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 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 .06 (sic/0.6) percent growth in Gross Domestic Product. All the warning signs indicate 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 six 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 $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. But I must say, the numbers today are a shot across the bow to this administration -- move quickly, take off ideological blinders and do what's best for the economy, which includes both tax cuts and spending stimuli.

Congressman Cummings.

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SEN. SCHUMER: Thank you, Congressman Cummings. Our vice chair, Carolyn Maloney, who attends these -- attends our hearings religiously almost, is unable to attend today because of the caucus. But she asks that her entire statement be submitted for the record, which I'll place in there without objection.

And 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 economic for the White House Council of Economic Advisers for two 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 economic 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.

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SEN. SCHUMER: Thank you, Commissioner Hall.

So in January the actual number went down 17,000 --

MR. HALL: That's correct.

SEN. SCHUMER: -- of the number of jobs? When was the last time we actually had a decline?

MR. HALL: That has been something over 50 months, so it's --

SEN. SCHUMER: All right, it's over four years. This is the first time in four years that we've had an actual decline in the number of jobs?

MR. HALL: Correct.

SEN. SCHUMER: Thank you. Okay, 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?

MR. HALL: Sure. Well, over the past year, in 2007, we averaged about 95,000 jobs a month. And I the fourth quarter of the last -- of last year, the average was about $95,000 -- 95,000 jobs a month. That's -- that's down from about 175,000 in 2006, and about 211,000 in 2005.

Now, with respect to periods of expansion -- let me see, I've got some numbers here; I apologize for shuffling papers here.

SEN. SCHUMER: It's okay. We all do it, Commissioner.

MR. HALL: Okay great.

The job creation during this expansion, since the business cycle trough, has averaged about 97,000 jobs a month. During the previous business cycle, the average was about 200,000 jobs a month.

SEN. SCHUMER: That's a rather large change. And what would jobs have to grow just to keep up with the population growth in the country?

MR. HALL: You know, I don't have that calculation. The number -- the number you mentioned, about 150,000 is about --

SEN. SCHUMER: Right. So actually, this year job growth slower than other expansions, but also fewer jobs created than the number of -- than the number that should keep up if we were keeping consistent with population growth.

MR. HALL: That's correct.

SEN. SCHUMER: Okay.

So far is it fair to say that job creation over the economic recovery that began in 2001 has been weak in historical terms?

MR. HALL: Yeah. With respect to the labor market -- certainly, the labor market took a bit longer to recover than in past business cycles.

SEN. SCHUMER: And when it did, it didn't recover as robustly.

MR. HALL: Yeah, 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.

SEN. SCHUMER: Is that right?

In your opinion, is there any reason to believe this situation will improve?

MR. HALL: Well, I don't want to speculate, since we handle the data.

I will say that the labor market data is important to watch as we go forward and looking to see how we recover. Obviously, 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.

SEN. SCHUMER: Right.

Okay, Commissioner, today's report includes several revisions that show job growth is even slower than previously reported. Is that correct?

MR. HALL: That's correct.

SEN. 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?

MR. HALL: Before the revision, in 2007 we average about 111,000 jobs per month; and after revision we've averaged about 95,000 jobs per month.

SEN. SCHUMER: Right. And so in percentage terms, the growth would be -- was about 1 percent, but now it's .8 percent. Is that fair to say?

MR. HALL: That sounds about right.

SEN. SCHUMER: Mr. Rowans (sp), is that right?

MR. ROWANS (sp): That's right.

SEN. SCHUMER: Mr. Rowans (sp) seems to be your little slide rule over there. Okay.

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?

MR. HALL: Well, it wasn't a really large revision and I hesitate to sort of judge whether -- how much an effect that's had. It's certainly clear that we've had a slowdown in job growth from 2006 to 2007.

SEN. SCHUMER: Right.

MR. HALL: That's certainly pretty clear.

SEN. SCHUMER: And just -- I want to talk a little bit about housing and its affect on job losses. We have known for months that as a result of the subprime crisis, housing-related industries such as 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?

MR. HALL: We have seen job loss fairly widely spread. I can tell you, for example, we've done a tabulation of housing-related jobs -- these are jobs that are directly related to residential construction or things related to construction -- and in 2007, the housing-related jobs declined by 440,000 jobs. So that puts it at a little bit less than half of the deceleration in job growth in 2007 was from housing-related. So that meant about half was from other areas.

SEN. 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 are 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.

Okay, 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 .5 -- half a percent higher than where it was in March 2007. Does the unemployment rate typically rise this fast?

MR. 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 worse signal.

SEN. SCHUMER: Right. And you mentioned about -- 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?

MR. HALL: Yeah, actually, it was that high about two months ago. But it's about two percentage points higher than it was a year ago.

SEN. SCHUMER: Got it, okay. 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.

MR. HALL: (Inaudible.)

SEN. SCHUMER: Yeah. Okay.

If we look at the employment-to-population ratio -- that is, the fraction of working age population with a job -- we see that it also is lower, .5 percent less than it was two years ago. Is that right?

MR. HALL: Yes, I believe that's true.

SEN. SCHUMER: Okay.

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?

MR. HALL: Yes.

SEN. SCHUMER: Okay.

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 two months.

Further, the share of people with a job is lower than it was just a couple of years ago and more people are have 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?

MR. HALL: I would say certainly the job growth has slowed quite a bit. And there have been periods during expansions when there's 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 data point, but yes.

SEN. SCHUMER: Okay.

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?

MR. HALL: I probably shouldn't speculate too much on that.

SEN. SCHUMER: Okay. The first part -- I understand you don't want to mention the "R" word, although it seems clear -- to me at least -- it seems that that's where the data shows we're headed. But what about -- we are entering a labor market downturn. Doesn't that seem pretty clear?

MR. HALL: Well, I'd say it's -- we've had pauses like this before. We don't want this to continue.

SEN. SCHUMER: Well, I think we can all agree with that, Commissioner.

Let me go to just 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?

MR. HALL: Yeah. Actually, as I mention in my statement, the average hourly earnings in 2007 rose about 3.7 percent over the 12 months. And the consumer price index for wage earners increased about 4.4 percent.

SEN. SCHUMER: So actually, it was a loss of .7 percent in earning power.

MR. HALL: Correct.

SEN. SCHUMER: Okay.

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?

MR. HALL: Yes, actually. It's widely recognized that productivity growth is an important condition for growth in real wages.

SEN. 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.

MR. HALL: Yeah. I think -- from 2000 to 2006, productivity grew about 2.7 percent.

SEN. SCHUMER: Mm hmm.

MR. HALL: And during that same time period, real hourly compensation of workers grew about 1.2 percent.

SEN. SCHUMER: Right. Okay.

And finally, on -- I think this is my last series -- on earnings. I believe that the BLS publishes data on the usual weekly earnings of full-time workers, including some information about wage distribution. Is that right?

MR. HALL: Yes, that's correct.

SEN. SCHUMER: Okay. Our staff has done -- at the Joint Economic Committee here -- 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 by .1 percent per year, after inflation. Does that number seem about right to you?

MR. HALL: That's roughly in line with our calculation.

SEN. SCHUMER: Right. 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?

MR. HALL: Yes, it does.

SEN. SCHUMER: Okay. Well, what these numbers bear out is, if you look at average figures, the economy looks a lot better than if you look median figures, because the distribution, the gains that we have made over the last year -- and we can again speculate at the reasons -- but have been disproportionately to the highest income earners. Is that fair to say? By definition.

MR. HALL: Yeah, well --

SEN. SCHUMER: Yes?

MR. HALL: Yeah.

SEN. SCHUMER: Okay. Thank you.

Congressman Cummings.

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SEN. 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. Harg (ph) and Mr. Rones, and my colleague, Congressman Cummings.

The hearing's adjourned. (Strikes gavel.)

MR. HALL: Thank you.

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