Hearing of the Joint Economic Committee - The April 2008 Employment Situation
Interview
Hearing of the Joint Economic Committee - The April 2008 Employment Situation
SEN. KLOBUCHAR: I'm calling the hearing to order, the Joint Economic Committee, on this month's unemployment statistics.
I want to thank our witnesses for being here, Commissioner Hall and Mr. Horrigan and Mr. Galvin. Thank you very much for being here.
I think we all know what's been going on in this country. We have lost 260,000 jobs in just the first four months of this year; 20,000 jobs were lost this past month. We also have the phenomenon that more and more workers are going part-time and reducing their hours. And the other phenomenon we're going to discuss here today and why we're in such trouble right now, or workers are in such trouble, is because, at the same time you see reduced hours, stagnant wages or, in fact, declining wages, you see expenses going up.
And I'm looking forward to discussing in detail what all of these numbers mean. I do think that we would not be fair if we didn't say that we're in tough times. And I say that after visiting with people all over my state and seeing what's going on with them. And some of them may have jobs, but they've seen such stagnant wages. And with the rise of costs in gasoline and the rise in costs of health care and other things, it's getting tougher and tougher for them to get by. And they look for a second job and they can't find them because, of course, we're having less jobs in this country.
What's been going on is that the wealthiest 1 percent of United States families is garnering the largest share of income since 1929, while most of America is just struggling to hang on. Middle-class income has fallen over $2,000 since this administration has taken office, a phenomenon that we haven't seen in 50 years.
Meanwhile, the cost of virtually everything has skyrocketed, from heating bills to groceries to gas to health care and college tuition. For many families, even some basic necessities seem out of reach. Just yesterday we had a hearing in this very room of the Joint Economic Committee about the price of food. We had food banks testify about how they're stretched thin. We had a baker testify about how difficult it is for bakers to pay for wheat.
And, in fact, there's been some interesting work done on this that I'll be asking our witnesses about later by a woman at Harvard, a professor there, who has shown this lost income of wages. And she actually tracked it from 2000 to 2007, and she showed the total lost income and increased expenses for your average American family comes to $5,739. And I'll be passing out copies of this in 10 minutes or so.
She showed that the lost income was $1,175 for the average American family between 2000 and 2007. And then she was able to show how the expenses have increased; higher mortgage payments -- again, this does not include 2008 -- higher mortgage payments, $1,729; higher gas bills, $2,081 a year; higher food costs, $237 a year -- again, not including even what's been going on in '08; higher phone bills, land line, $112; higher appliance costs, $42; higher health insurance costs, $363.
And when you have families with children, there has been even a greater change, with increased day care, increased after school, and increased state college costs. So you see this net, basically, of $5,739 per year that the average American family has lost.
And I bring this up in the context of the unemployment rate and the reduction in hours and real wages for Americans, because that's what so many middle-class families are experiencing. That's why they've been putting more of their debt on credit cards, because they literally are not keeping up.
Americans are facing the largest loss of wealth since the Great Depression. And here you have a chart showing that, that the stock market lost $2.7 trillion in value since May of 2007. The crisis has wiped out $2.7 trillion in home values. And the dollar has lost a third of its value. And the federal debt has nearly doubled in the last eight years.
And for too many families across the country, the dream of owning a home is turning into a nightmare. Every day, 8,000 more families lose their homes to foreclosure. Between January and March of this year, one out of every 194 households received notice of default, auction sale or bank repossession. What started as a foreclosure crisis has now had more than ripple effects. It's turning into a tsunami across the entire country.
For many people in my state who are paying their mortgage, like I have, they say, "Well, why does this matter to me? I pay my mortgage." But what they've finally begun to realize is that it is affecting home values across this country. In my state, we've seen a 10 percent decrease in home values.
When Chairman Bernanke testified before our Joint Economic Committee a few weeks ago, he agreed that what started as a foreclosure crisis is now, in fact, the root of the economic crisis.
As of this month, there are 7.6 million Americans unemployed. But with the continuous loss of jobs, they are now vying for 3.9 million available jobs. The number of unemployed workers is almost double the amount of jobs that they can find. More and more jobs are disappearing each month.
In January through March, as I mentioned, we lost a total of 240,000 jobs. And for some industries, the losses are particularly felt. And that's something I think we should discuss in this hearing. There's a difference between industries. In construction this month, we saw a loss of 51,000 jobs. In manufacturing, we saw a loss of 46,000 jobs. In retail, we saw a loss of 27,000 jobs.
What today's numbers also show is that while some companies have not been cutting jobs, they have been cutting back on hours. Across the board, manufacturing hours were down, as was factory overtime. Remember, we were talking about families that have seen this $4,500-a- year increase in expenses. When they lose some of their overtime, this is what puts them over the edge in terms of their family expenses.
While this might sound insignificant for many of us that they lost a little overtime or they got their hours cut back, for them these lost hours can literally make the difference of paying their mortgage or not paying their mortgage.
Unemployment rates in the month of April remain high. What we have also seen is that those that have not been able to find a job are exhausting their unemployment benefits. In Minnesota, 52,000 people are expected to lose their unemployment benefits without having found work. That is 5,000 more than last year. And as you see here on this chart, which is unemployment exhaustion chart, nationally long-term unemployment and exhaustion rates have continued to rise.
While they were unemployed, these people paid into the unemployment compensation fund, a fund that currently has a surplus of $35 billion. They paid into this insurance, and now they are running out of resources. In every other economic downturn, when we've seen this kind of exhaustion of unemployment benefits, the administration has extended unemployment. Time and time again, people in this situation have appropriately been given relief through an extension of unemployment benefits by 13 to 26 weeks. But we have not seen this kind of relief yet from this administration.
These unemployment numbers are hitting our veterans as well, members who bravely have served overseas and now are standing in unemployment lines back home. I figure when these when these men and women signed up for war, there wasn't a waiting line. We would hope that when they come home after serving our country, there shouldn't be a waiting line to get a job.
And this shows how recent veterans are having a hard time finding work, their percentage in the total workforce, all veterans serving after September 2001, and the percentage of young male veterans serving after September 2001 with the unemployment rate. So 11.2 percent of young male veterans serving after September 2001 are now unemployed, which is a higher rate than, of course, the national average.
It's unbelievable that we can't do more to help the men and women that protect this country to find a way to provide for themselves or their families upon returning.
As layoff rates are expected to increase to 68 percent for U.S. companies, and prices for everything from college tuition to health care to food continue to rise, it looks like we will likely have to brace ourselves for continued increases in unemployment.
I look forward to hearing from Commissioner Hall and what the numbers for April can tell us about the economic outlook; and working with my colleagues in the Senate to bring much needed relief to American families feeling the pressure of this economic downturn.
And with that, I am pleased that Senator Casey has joined us from Pennsylvania and I'll give him an opportunity for an opening statement.
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SEN. KLOBUCHAR: Thank you very much, Commissioner Hall.
According to today's report, the economy lost 20,000 jobs in April and we know, as I mentioned, that the economy lost an average of 80,000 jobs per month in the first three months of 2008.
When was the last time that we saw four months of consecutive job losses?
MR. HALL: The last time we had four consecutive months of job loss was in 2003, when the U.S. labor market was still recovering from the effects of the 2001 recession.
SEN. KLOBUCHAR: And then how long -- how many more months did we go with job losses in 2003?
MR. HALL: I think jobs finally ticked up in August of 2003. So we had fairly consistent job loss from about March of 2001 to August 2003. So it was quite a long time.
SEN. KLOBUCHAR: Do you think the circumstances are different this year?
MR. HALL: Well, certainly we've now had four months of job loss. We haven't seen nearly quite the numbers of loss that we had, obviously, during the recession. But again, we do have four in the row of job loss.
SEN. KLOBUCHAR: We discussed the fact that some industries, such as construction and manufacturing, have seen job losses for the first time for some time.
And during the first four months of this year, construction lost 190,000 jobs. In fact, in my state we've seen the largest over-the- year increase in mass layoffs from construction; however, employment losses are now spread across a wide array of industries.
Can you tell us where job losses began and what industries are now seeing unemployment?
MR. HALL: Sure.
The job loss really began in residential construction, which has been experiencing job losses since early 2006. More broadly, industries related to the housing market have been shedding job for about two years now, declining nearly 850,000 over that period. This actually wipes away about 90 percent of the jobs gained in those industries between April 2004 and April 2006. Otherwise, I'd say there's sort of broad weakening in job growth fairly much across the board, with the big exception being health care and educational services. Even those industries that haven't been experiencing job loss lately, they've had a slowing in job growth.
SEN. KLOBUCHAR: How many jobs have been lost in the temporary help industry? And I ask this because I've heard that this is a precursor to sign that things are in trouble.
MR. HALL: Temporary help industry peaked in December 2006, most recently, and it shed 155,000 jobs since then.
SEN. KLOBUCHAR: Ed, do you consider the temporary help industry a leading indicator of employers' willingness to hire?
MR. HALL: Temporary health industry is considered by many to be a leading indicator. The logic is that firms may let go of temporary workers first when the economy begins to weaken. I don't know how well it functions right now as a leading indicator, but I will say that, prior to the 2001 recession, temporary help began to decline in May of 2000 -- about 10 months prior to the recession.
SEN. KLOBUCHAR: And when was the last time this temporary -- that the temporary help industry saw this level of job loss?
MR. HALL: 2001.
SEN. KLOBUCHAR: Okay. Nationwide, manufacturing saw job losses from 2001 to 2004 and, after a slight respite, manufacturing has been shedding jobs since mid-2006. Is that correct?
MR. HALL: That's correct.
SEN. KLOBUCHAR: I just had a number of builders visiting me, so I know firsthand what they've been experiencing. Which subsector of manufacturing have been the hardest hit by recent job losses?
MR. HALL: Looking out over the past six months, the biggest job losses were in motor vehicle and parts, which lost about 55,000 jobs; fabricated metal products, furniture, wood products all lost around 20,000 jobs; and then, non-metallic mineral products, plastics and rubber product, apparel and textile industries all lost jobs.
SEN. KLOBUCHAR: It's my understanding that some parts of the country are experiencing higher joblessness than others. Could you tell me what regions are seeing the highest job loss?
MR. HALL: Sure. Actually we've had states in every region of the country experience job loss. The largest job loss over the past 12 months have been in Michigan and Florida by far, and then California, Rhode Island, Ohio, Arizona and Wisconsin also lost jobs.
SEN. KLOBUCHAR: Could you go through that again?
MR. HALL: Sure. Michigan and Florida, California, Rhode Island, Ohio, Arizona and Wisconsin -- those are in order of job loss.
SEN. KLOBUCHAR: Okay. So it's not necessarily regional as much as in -- what do you think defines a job loss in a state? It seems some of them are manufacturing states, I would say.
MR. HALL: Yeah, that's certainly true for some of them. Michigan, I think, in particular, has probably been hit with quite a lot of manufacturing job loss.
SEN. KLOBUCHAR: What parts of the country are being impacted by fall-offs in the housing and credit related industries? I think we talked about what states you think are hit by manufacturing decline.
MR. HALL: Sure. Thirty-three states have seen construction declines over the past year. And again, it's not concentrated in regions, it's pretty spread out. By far, California and Florida have seen the biggest declines, but there were also significant declines in Arizona, Michigan and Nevada. With respect to financial activities, again, California and Florida were the two biggest losers, but New Jersey and Arizona also lost jobs.
SEN. KLOBUCHAR: You know, if almost would almost be simpler if you said this was regional. The concern for me, when I hear this, is it seems like this is truly a national economic downturn and it's not just one region or area of the country. Is that right?
MR. HALL: Yeah, it seems to be -- yes, it seems consistent with that. Certainly, it's fairly broad with respect to industries and regions.
SEN. KLOBUCHAR: Are there other industries that are driving the decline of unemployment in some areas besides the ones that we've talked about, the construction and the financial and the manufacturing?
MR. HALL: Yeah, that's a -- it's a question -- it's impossible to give sort of a simple answer to that question because every area has its own unique industry mix. I would say the labor market performance really depends a lot on the industries. You know, for example, the Texas job market might've been helped recently by rising oil prices, but other areas would be hurt, for example. So there's not a really simple answer to that.
SEN. KLOBUCHAR: In our state, the employment-to-population ratio, which is the fraction of working-age population with a job keeps falling, and the information you reported on today shows the percentage of the U.S. population with jobs is also quite low. Is that correct?
MR. HALL: Yes.
SEN. KLOBUCHAR: And when was the last time the national employment-to- population rate was as low as it has been recently?
MR. HALL: That's a good question.
SEN. KLOBUCHAR: You've done so well so far.
MR. HALL: (Chuckles.) Yeah, I'm going to have to dig a little for that one. When has it been? Well, I'll tell you what I know, we'll see if they can dig up a specific answer.
SEN. KLOBUCHAR: Okay, that's fine.
MR. HALL: The employment-to-population ratio is at about 52.7 percent this month, and that's edged down a little bit from about 53 percent a year ago.
SEN. KLOBUCHAR: Okay. When you put this all together, and then I'm going to turn it over to Senator Casey and then come back with some additional questions, would you agree that the employment situation is looking rather grim?
MR. HALL: Well, I try -- I want to try to stay away from sort of looking forward, just because --
SEN. KLOBUCHAR: Okay, that -- it looked grim the past four months if you want to look at it that --
MR. HALL: We've certainly seen a significant slowing in the labor market, and it's broad.
SEN. KLOBUCHAR: Okay. Thank you very much.
Senator Casey.
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SEN. KLOBUCHAR: Thank you very much, Senator Casey.
Commissioner Hall, I just want to follow up a little bit on Senator Casey's questions about the part-time workers, because it's been my impression -- and I guess it's hard for you to get to the bottom of these statistics -- but that some people would like to work full-time but they're working part-time. It's not by choice. Do you have any statistics on that?
MR. HALL: Well, yeah, actually, I think the number that I quoted before is people who are working part-time for economic reasons as opposed to other reasons. So they'd be involuntary --
SEN. KLOBUCHAR: Okay. And so that 306,000 you gave to Senator Casey, those are not people that -- you know, they have a child, so they want to work from noon to 4:00 or something like that. This is people that are pushed by economic reasons to work part-time.
MR. HALL: Correct.
SEN. KLOBUCHAR: And do you know how high the unemployment rate would be if it included those who work part-time for economic reasons as well as those who didn't have any job at all?
MR. HALL: Well, the broadest measure -- we have several measures of unemployment. The broadest measure we've got includes not only the unemployed but those working part-time for economic reasons and those who are marginally attached.
SEN. KLOBUCHAR: Okay.
MR. HALL: That's our broadest measure. And that number is at 9.2 percent right now.
SEN. KLOBUCHAR: Because to me, when I'm -- when I'm giving you those statistics early on, and we'll talk about them a little more, about how people are just hanging on and their expenses are going up -- when they're pushed to work, go half-time, and they've got some credit card debt or a mortgage debt, it seems to me that, for them -- maybe it's losing half a job, but it's losing enough that they might not be able to make it.
And that 9.2 percent figure feels a little bit like what you hear when you're out there than the other unemployment rate. And do you know how that has changed over time?
MR. HALL: That's been -- that's had similar changes as the regular unemployment rate. It's actually increased from 8.2 to 9.2 over the past year.
SEN. KLOBUCHAR: So it's gone up, say -- roughly, with my math, like almost 10 percent, or something like that?
MR. HALL: Well, yeah, but -- yeah. So it's -- it's up about 1 percentage point. The regular unemployment rate is up about a half a percentage point -- (inaudible) --
SEN. KLOBUCHAR: But, compared to what it was? If it was 8.2 percent, and then it's gone up to 9.2 percent, it hasn't gone up 10 percent but it's percentage-wise, it's gone up rather dramatically.
And would you agree with me that if the expenses are going up and it's -- and they have just, just a little bit of a change can make a difference to them, that that is -- when you're in that situation with rising expenses, that those kinds of loss of first time to part-time jobs is more meaningful in the economy to individual families?
MR. HALL: Absolutely.
SEN. KLOBUCHAR: Okay.
The thing I also wanted to focus on here is that -- how well the labor market is doing is not just about employment, but it's also about wages. And how have wages done for the past, say, year -- April to April, or something like that?
MR. HALL: Over the past -- well, data's not available for inflation in April at the moment, but over the 12 months ending in March, hourly earnings grew by 3.7 percent, and that did not keep up with inflation. Inflation grew about 4.3 percent over that time.
SEN. KLOBUCHAR: So, that's my argument with the expenses.
MR. HALL: Yeah.
SEN. KLOBUCHAR: So the inflation -- whatever they made got eaten up by their health care or other things like that.
And how about those numbers -- say, going back to 2000, for the wages, the average wages?
MR. HALL: We'll have -- we'll have to look that up.
SEN. KLOBUCHAR: I stumped you again, Commissioner.
MR. HALL: You did, actually. (Laughs.)
And then I probably will then ask about controlling it for inflation too. And if it's easier to -- take your time. Senator Casey and I are happy. We're not using the clock.
MR. HALL: This might be a question where we'd a calculator. So, I'm not sure if we're going to be -- (off mike consultation.)
SEN. KLOBUCHAR: Senator Casey is threatening to put on the Jeopardy music, but I have told him we will not do that.
MR. HALL: This might be something where we'd be better off --
SEN. KLOBUCHAR: Okay. That's just fine --
MR. HALL: -- following up later -- (inaudible) --
SEN. KLOBUCHAR: -- and what I'm just trying to do is find a longer-term trend, in general, with the wages, and then wages adjusted for inflation. Because I have these numbers from a well-known professor, and I just wanted to see where you were coming from. I think she probably used your statistics, so.
MR. HALL: All right -- yeah.
SEN. KLOBUCHAR: All right.
How much have real wages been falling? So the, so the actual -- when you adjust it for inflation, it's gone down, what, 1 percent or something?
MR. HALL: Yeah, over the past 12 months it's been about .6 of a percent.
SEN. KLOBUCHAR: It's been about what?
MR. HALL: Six-tenths of 1 percent.
SEN. KLOBUCHAR: Six-tenths of 1 percent.
An employer's labor costs include not only wages and salaries, but also benefits. When labor costs rise due to increases in health insurance, how does that affect your measure of employee compensation?
MR. HALL: Well, we do have measures of employee compensation that include health care costs. So, for employer-provided health care, it does raise compensation.
SEN. KLOBUCHAR: Okay.
And as employers shift more burden -- there's a lot of discussion right now about, you know, health care reform, and my prediction -- I will try to make predictions, would be that we would be taking this on not this year but next year, and there's discussions about placing more burden -- by some people, onto employees.
And as employers shift more burden -- and they have been doing that, of rising health care costs to their workers, doesn't that reduce the purchasing power of their take-home pay even more?
MR. HALL: Yes. And when health care costs rise, in fact, I think you see two things -- to the degree that the burden is shifted onto workers: Their purchasing power is reduced. Also what can happen, though, is employer-provided health insurance can crowd out wage increases. You can actually get slower wage growth as a result of higher health care (benefits ?).
SEN. KLOBUCHAR: Oh, because they're -- the money they're paying out to their workers, more is going out to pay for health care instead of for the wages?
MR. HALL: Yeah.
SEN. KLOBUCHAR: So either way you do it, they're, they're kind of messed up, because the worker either is taking more of the health care costs, and then maybe the employer gives a little higher wage; or the employer pays for more of the health care costs, but you're saying the statistics show when that happens then they -- that's not reflected in this higher wages?
MR. HALL: Yes.
SEN. KLOBUCHAR: Okay.
Yesterday this committee, as I mentioned, held a hearing on the rising costs of food. And government forecasters predict that, for 2008, we will see a 4 to 5 percent increase in the Consumer Product Index for food consumed at home. So, that's just another example.
Does this concern you about the health of our economy, in general?
MR. HALL: Yeah. Certainly higher food prices would put extra strain on consumers. And, obviously, consumers are a major part of the economy, and that would be -- would add to their difficulties.
SEN. KLOBUCHAR: And then I just wanted to go through these numbers.
Do we have -- do they have -- (off mike consultation). Okay, this is these numbers that I got from this -- the professor. And if you want to look first on the first page, and I thought this was just a nice way of laying this out.
And it shows that for the average American -- and this is from 2000 to 2007, and what I find somewhat scary about this, for the average American family, is that this doesn't even include the food increases that we're talking about in 2008, or the enormous gas increases we've just seen in this past year.
But when you look at this, the lost income, at $1,175. And then you look at these increases: Higher mortgage payments at $1,729 -- each year this is extra money that our people are paying. Higher gas bills, $2,081 per year -- this if from 2000 to 2007. Again, not including the increases that we've seen.
Higher food costs, $237 -- again, not including that 4 to 5 percent increase that's being projected. Higher phone bills -- these are land line bills, $112 more. I personally know this from seeing my bill. Higher appliance (cost us?), $42. Higher health insurance costs -- which you and I have been talking about some, increased $363 per year.
And so when you add this up, the increases, and then you add in the wage losses, you're at $5,739 that the average American family is paying out that they didn't before. And so I bring this up -- and then when you have families with children, increased day care expenses have gone up.
And this is what they've gone up, not what they are: $1,321 per year. Increased after-school costs -- that's the area I'm in now, I'm in, I'm in a little dip of child growth: $511. And then increased state college costs -- this is state college, $1,021 per year. So, depending on where a family is with their kids, this is additional money that they're paying out per year.
So when you -- when you add all this up, it can be even more than $5,739. And you can see the bar graph shows the same thing -- the decline in income; and then you add in this increased expenses. You look at it for working parents with one small child; you look at it with families with one child in college.
And these -- it says here that these are based on U.S. Census Bureau population reports changes. Expenses are calculated from the Bureau of Labor Statistics. And also they use the Consumer Price Increase (sic).
And then the last chart I included -- just because I thought it was interesting, was the total consumer debt increase from 2000 to 2007. Now, do you project that any of this will change in the next year, or are they still going to be facing these higher expenses, Commissioner Hall?
MR. HALL: I wouldn't project. I'd just --
SEN. KLOBUCHAR: Okay, that's right! I forgot.
Does this trouble you, what's happened in the past?
MR. HALL: You know, I haven't seen the study, but sure. It would trouble me.
SEN. KLOBUCHAR: I noticed the higher mortgage payments again -- as we're seeing more and more problems with that. The higher gas bills, again, go up. And I just think that's at the root of what we're looking at.
These unemployment numbers -- and the reason that Senator Casey and I -- I'll speak for myself -- but we're concerned about those part-time employment rates is that these are people that are just on the cusp and they're trying to keep those full-time jobs with their rising expenses.
And we're also concerned as policymakers, because they're putting these -- a lot of families are putting this on their credit cards -- these increases -- 5,000 (dollars) a year. And it's very similar to what you're seeing for the average Americans putting on their credit card.
So what we're trying to find here is some glimmer of hope with the job market. I personally think, from a policy standpoint, that we need to look at more direction for this economy with green jobs and other things.
I also think that when you look at that -- do you want to put that wealth chart up again that we had from the beginning -- where we had showed that for the top 1 percent, they're doing the best they ever have since 1929. They have the largest share of income they've ever had since 1929, and I'm hoping this will lead us to make some changes with tax policy with regard to the top 1 percent.
But does this trouble you, what we're seeing with the loss of income and then the outsized portion going to the top 1 percent?
MR. HALL: Sure.
SEN. KLOBUCHAR: Okay.
I have another area of questions about consumer spending, but I think I'll let Senator Casey go and then I'll come back.
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SEN. KLOBUCHAR: Thank you very much, Senator Casey.
I wanted to just go back at the unemployment rate for a little bit, before talking about the consumer statistics.
So basically, the unemployment rate's at 5 percent. Is that correct?
MR. HALL: That's correct.
SEN. KLOBUCHAR: And how many people entered unemployment last month?
MR. HALL: Well, the unemployment ticked down a little bit. It was little changed over the month. But I would say that the month-to- month numbers are -- they vary a bit. I prefer to look at maybe quarterly averages.
SEN. KLOBUCHAR: That would make sense.
MR. HALL: So for example, if you start with the second quarter of last year, you start with an average of 4.5 percent. Then the next quarter 4.7, 4.8 and then 4.9. So we've seen a steady rise in the unemployment rate up through the first quarter of this year. So I think that gives you the best picture of unemployment.
SEN. KLOBUCHAR: And as you and I discussed, a similar rate for that -- was it 9.2 percent when you add in the economically -- the part-time workers that didn't want to go there but are there? And whether the other group you call marginally --
MR. HALL: Marginally attached.
SEN. KLOBUCHAR: What does that mean?
MR. HALL: Those are folks who want to work and say they want to work and they've looked for a job some time in the past, but they aren't looking now.
SEN. KLOBUCHAR: Okay.
And this idea that jobs are difficult to find is something that I've heard a lot from people across the country. And just yesterday, the Department of Labor reported that last week, applications for unemployment benefits rose to 380,000, up from 345,000 the previous week. And so we seem to be getting close to the 400,000 mark, which is significant, because I'm told that many economists consider that to be an indication that the labor market is actually in recession. Do you agree with that?
MR. HALL: To be honest, I'm not sure I do, because I think the relationship between the unemployment -- initial U.I. claims and the job the growth is not quite what it used to be.
SEN. KLOBUCHAR: Why is that?
MR. HALL: The relationship seems to have changed in the last year or two for -- to be honest with you, I really don't know.
But what you are saying is -- it was the old rule of thumb about the U.I. claims being consistent with a certain level of job loss or job growth.
SEN. KLOBUCHAR: So then what do you consider to be the best indicators for whether or not we're in a recession?
MR. HALL: Payroll, job growth and the unemployment rate.
SEN. KLOBUCHAR: Okay. And do you think we're there?
MR. HALL: I wouldn't want to offer an opinion. And really, it's because of the role of the Bureau of Labor Statistics.
SEN. KLOBUCHAR: Mm-hmm. (In agreement.) No, I understand.
MR. HALL: Because it's important for us. We produce the data and we want to be clear that people have trust that we're not -- that we're not offering our opinions. We're offering the facts and we do what we can to let the data speak for itself.
SEN. KLOBUCHAR: And as we talked about earlier, people enter unemployment for a number of reasons. What's the most common reason to be unemployed in April?
MR. HALL: The most common reason is job loss. In April, about 52 percent of the unemployed were unemployed because of job loss.
SEN. KLOBUCHAR: And what's the next reason?
MR. HALL: Second would be re-entrants and new entrants. And about 36 percent of the unemployed are either re-entering the labor market or are new entrants.
SEN. KLOBUCHAR: So is that possible that some of our returning veterans that we talked about, that come back and so they're new entrants because they'd lost their jobs when they served overseas -- I'm just trying to -- it would make sense to me. I'm trying to figure out why we've seen those high numbers with our returning veterans, those that have served since 2001.
And if it's harder -- if you don't have a job or you had to give up a job either because you decided to stay home with kids or you went to fight in Iraq or whatever, it seems like it would be -- this is my own common sense -- harder to get back in the market. And so that's what I'm trying to get at with that question.
MR. HALL: Yeah, I think that's right. I think the returning veterans would count as re-entrants and new entrants in the job market.
SEN. KLOBUCHAR: Okay. Just one more question about the long- term unemployed people. Isn't it the case that the share of the unemployed who are long-term unemployed is higher today than it was in the early '90s and the early 2000s? Is that true?
MR. HALL: That's true.
SEN. KLOBUCHAR: And back then Congress extended the unemployment insurance benefits, didn't they?
MR. HALL: I believe so.
SEN. KLOBUCHAR: Do you think this is a good measure about whether or not we should extend benefits, unemployment insurance benefits to the long-term unemployed?
MR. HALL: I'll beg off on that as a policy question.
SEN. KLOBUCHAR: Okay, but just to keep you with the facts, back in the early '90s and early 2000s -- and this was -- when we discussed this, it must be like the 2003 issue we were discussing early on -- when we saw long-term unemployment, that was when Congress extended the unemployment insurance benefits. And now it's worse now.
MR. HALL: I believe so.
SEN. KLOBUCHAR: All right. The consumer spending issue; the Commerce Department reported that consumer spending, which represents about two-thirds of economic activity, increased by only .1 percent in March after remaining stagnant in February. In your view, what does this trend portend for the labor market in the months to come?
MR. HALL: Well --
SEN. KLOBUCHAR: This is based historically on (what you've seen ?).
MR. HALL: Okay, yeah. Well, without forecasting, I'll say the weakening in the consumer spending has been consistent with the weakening in the labor market. And I think this is something that works both directions. Weaker consumer spending weakens the labor market, and a weaker labor market means lower income growth, which can lower consumer spending. So you sort of have things working both ways.
SEN. KLOBUCHAR: So getting at my issue that I've been focusing on today with how you have more expenses -- these expenses are going up no matter if wages are going -- whatever happens, we know these expenses are going up -- so when expenses are going up and wages are pretty much stagnant, then -- and have gone down maybe over time -- then you see less consumer spending. Is that right? Is that a trend that happens?
MR. HALL: Yes.
SEN. KLOBUCHAR: And so what you just said is when you see less consumer spending, that can also lead to a weaker job market. Is that right?
MR. HALL: It can, yes.
SEN. KLOBUCHAR: So it's almost the chicken and the egg. It just keeps -- so how does that work, that less consumer spending leads to a lesser job market?
MR. HALL: Well, the idea is if consumers are spending less, then you have businesses cutting back on production. And that leads to the weaker job growth, and then it can eventually lead to job loss.
SEN. KLOBUCHAR: Okay. So when Minnesotans aren't going to buy, like, a new fishing rod because gas is too expensive and they're not going to go up to their cabin as much, then the people that work making the fishing rods see less jobs.
MR. HALL: Yes.
SEN. KLOBUCHAR: Okay. So this expense issue that I brought up is not just some wild-eyed thing. It's actually related to the loss in jobs.
MR. HALL: Yes.
SEN. KLOBUCHAR: Typically in a recession, how long does it take for employment to recover to its pre-recession peak?
MR. HALL: Since 1980, the average time for employment to recover to its pre-recession level is about 20 months. I will point out that the most recent recession, it took 39 months for employment to recover.
SEN. KLOBUCHAR: Thirty-nine months. And that was back in early 2000?
MR. HALL: Yes.
SEN. KLOBUCHAR: Okay. How long do wages and compensation take to recover?
MR. HALL: It depends if you're talking about the levels of the growth. Wages and compensation don't typically decline for very long, the levels don't, during a recession. But the growth -- in fact, the last two recessions, the growth in wages has never recovered. We had a permanent -- what seems to be so far has been a permanent decline in the growth of wages.
SEN. KLOBUCHAR: So that's been continuing since the '90s, basically.
MR. HALL: Yes.
SEN. KLOBUCHAR: And recessions before that, it did recover.
MR. HALL: That's a good question. I don't know beyond the last couple of recessions.
SEN. KLOBUCHAR: When you had those recessions before in the '90s, in the early 2000s, did you see this kind of escalating expenses like we're seeing with food and gas prices?
MR. HALL: I don't know. My memory is not that good to --
SEN. KLOBUCHAR: We can check that out. I'm just thinking -- the reason I'm going there is that you have this -- some of how you got out of these recessions in the past was that people were able to increase their spending. And part of how they did that is that they had the money to do it. And now, when these expenses are escalating, they're going to have less money to do it, and so we may have -- it may take longer and have more of a gloomy picture in terms of getting out of it.
MR. HALL: Right, right. Yeah, I don't -- I'm just going to do this from memory a little bit. I don't recall that both declining economic growth and high inflation -- I don't think we've had both of those two things together since the early 1980s.
SEN. KLOBUCHAR: So based on your analysis of today's report, and mostly, which I've appreciated, the trends going over the last years, does it appear that we are going to continue to be in a difficult period for the labor market in the months to come?
MR. HALL: Well, I'm going to beg off on that.
SEN. KLOBUCHAR: It's based on the historical data.
MR. HALL: Well, the reason is that we produce -- we're going to be producing the data over the next few months. And if we're going to be producing it, I don't want to forecast what I think it's going to show. I want to let the data come out and speak for itself.
SEN. KLOBUCHAR: Okay, very good.
Senator Casey.
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SEN. KLOBUCHAR: Commissioner, is there anything you wanted to say here at the end to clarify anything or summarize anything?
MR. HALL: No, thank you.
SEN. KLOBUCHAR: Okay. Well, I really appreciate you giving us these statistics. And I just thought I would summarize what I learned from this hearing today, as Senator Casey and I have just been here a year and a half and have appreciated being at this hearing and getting this information. And correct me if any of the things I say are wrong. I wrote this down from what we got at the hearing.
So this month we've seen 20,000 or more people that basically are unemployed. They've lost their jobs in this country. And so that means we've had 260,000 people who have basically lost their jobs, are unemployed, in the first four months of this year.
We are seeing an increased trend in the unemployment rate from the same time last year. And you kindly gave me those numbers of just 4.8, 4.9, up to the point of 5.2 percent. Is that right, or 5 percent, where we are now?
MR. HALL: Five percent, yes.
SEN. KLOBUCHAR: Five percent. And then the statistic that I think people need to continue to concentrate on is the people that do have jobs, but their hours have been reduced. And in hard economic times, it's more difficult for them to find work. And I think the people, not that they chose to go part-time, but they have been pushed part-time economically, was 306,000 more people in April, coming to 5.2 million people in -- was it the last year?
MR. HALL: (Inaudible) -- I think this month.
SEN. KLOBUCHAR: In the quarter. In the quarter. So it's 306,000 people going from full-time work or maybe --
MR. HALL: Right.
SEN. KLOBUCHAR: Does it have to be full-time work but just have their hours reduced, 306,000 people?
MR. HALL: Yeah, the number of part-time for economic reasons increased by that much.
SEN. KLOBUCHAR: Okay. So 300,000 people this month, a total of 5.2 million people nationally. Then, at the same time, you also have, I thought, another statistic that was interesting was that we have had people -- the major reason that people are unemployed is because they've lost their jobs.
MR. HALL: Yes.
SEN. KLOBUCHAR: But the second reason is people who are returning to the workforce are having trouble finding a job. They can't get a job. And while you didn't give me the statistic, we have the statistic on the -- did that come from your work, the returning veterans -- do we want to put that one up again? -- which includes the people who are returning veterans? So young male veterans serving after September 2001, 11.2 percent of them are unemployed. So that's helped me to understand this when we look at those statistics.
And then the last thing that you and I have talked about, and you verified pretty much with your own statistics, is just that we're seeing these increasing expenses for the average American family. And the statistics that I use that came from the Consumer Price Index and Consumer Product Index and from Labor Bureau statistics is a trend from 2000 to 2007 -- and again, you have not verified this number; this is a statistic that I got from a study, and I'll give you the study -- where the average American family has lost $1,175 a year. And then their expenses have increased over $4,000 a year. And would you say that that doesn't surprise you at all?
MR. HALL: No, I would say it doesn't.
SEN. KLOBUCHAR: Okay. And so that -- maybe, you know, we're off a few hundred here or there, but that it's $5,739 for total lost income and increased expenses. And when you add in people who have kids, that's even more. And one of the things I learned from our hearing today was that, you know, that's bad on its own, but it also, because of the decreased spending, leads to more job loss, basically. So you have this chicken-and-an-egg situation.
And while you can't forecast for the future, for me as a new senator here, I am proud that we've been trying to push for these things that help people, extending the unemployment benefits, which we discussed happened in the last few recessions, which we've been blocked by a filibuster from doing, also the long-term economic plans of trying to reduce expenses, which I think is trickier, but something that Washington has not been doing, and that's looking at a real oil policy with more reliance on alternative energy and doing more to promote research into hybrid and electric cars and alternative fuels beyond corn-based ethanol, the cellulosic ethanol.
And you look at some of these other countries like Brazil that have been able to do this with sugar cane because of a government policy that pushed it, and now they don't have to pay for all this expensive oil. They're not dependent on these foreign countries.
And so I want to thank you for this information, because it's really helped me as I go forward, to go back with even a stronger commitment to looking at this long-term economic policy, as well as the statistics that show how hard it's getting for the middle class to get by.
And what really concerns me is when you look at those numbers for the top 1 percent and you think of these tax cuts that have helped that wealthiest group and where it's gotten us. It's gotten us to the point where we are much worse off as a country. And now it's starting to hurt the entire economy.
So I think these are things that we will take from this hearing as we go forward to make policy. And I know that you are a numbers person, as you are, Mr. Horrigan, and you are, Mr. Galvin, but I thank you for getting us these numbers on a timely basis so we can move forward.
Thank you very much.
MR. HALL: Thank you.
SEN. KLOBUCHAR: The hearing is adjourned.
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