Hearing of the Joint Economic Committee - The April 2009 Employment Situation
Hearing Of The Joint Economic Committee - The April 2009 Employment Situation
Chaired By: Senator Amy Klobuchar (D-Mn)
Witnesses: Keith Hall, Commissioner, Bureau Of Labor Statistics Philip Rones, Deputy Commissioner, Bureau Of Labor Statistics; Michael Horrigan, Associate Commissioner, Office Of Prices And Living Conditions, Bureau Of Labor Statistics
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SEN. KLOBUCHAR: All right. The Joint Economic Committee will come to order and I welcome you here to our witnesses, Dr. Horrigan, Commissioner Hall, Mr. Rones, and also Congressman Brady is here with me today. I want to welcome all of you, thank you for being here for this important hearing. I also want to thank Chair Maloney for the opportunity to chair today's April hearing on the employment situation in our country.
Ironically, the last time I presided over a hearing of this exact topic was almost exactly one year ago, Commissioner Hall, and clearly, we've seen some change since then. I was looking back over the questions that you and I had, going back and forth, where we were talking about whether certain statistics were indicators of problems to come, and as it turned out, they were. The Joint Economic Committee has held a series of hearings, as you know, on the economic outlook recently.
We heard from both the chair of the President's Council of Economic Advisors, Christina Romer, and Federal Reserve Chairman Ben Bernanke, that there are reasons for some optimism regarding the state of our economy. They noted that there are green shoots in the form of an increase in consumer demand and indications that the housing market may be bottoming out. On the other hand, as you all know there are some extreme challenges as we see from the announcement of today's unemployment figures.
As you know, the Bureau of Economic Analysis reported recently that consumer spending did rise 2.2 percent on an annualized basis in the last quarter, the most in two years. Dr. Romer recently testified before this committee that because only a small part of the spending and tax relief called for in the Recovery Act has taken place and because much of the economy's response to stimulus occurs with a lag, most of the benefits are yet to come.
But then we have this employment situation that we're here to talk about today. In each of the last six months, private employers have slashed over 600,000 jobs. Total job losses have totaled more than 5.7 million since the start of the last recession -- 5.7 million. And when I think about these statistics, I always try to remind myself that these are not just numbers, that these are real people that we know, that we see in the grocery stores, that we see when we all get home in Congress to our home states.
I just got this letter just, in fact, about a week ago from someone in my state, from one of the smaller towns. She writes, "Amy, we are almost at our wits' end for our daughter and her husband. He is an unemployed plumber who will be out of unemployment help in June. This economy is ruining lives. Our daughter works part time as an LPN in a clinic and can't afford to finish her RN. They have three small children ages 7 and 5-year-old twins.
Right now, my daughter has no health insurance. Both Angie and her husband want to work but there are no jobs. They are in danger of losing their home. We have been helping financially as much as we can, but there's a limit to what we can do. What do we do for our kids?"
The unemployment rate now stands at 8.9 percent, a jump of 4 percentage points since the downturn began 16 months ago, and the broadest measure of unemployment or underemployment that the Bureau of Labor Statistics publishes is now at 15.8 percent. These are real families. These are the families that we are supposed to help and that we are trying very hard to help with some of the new policies of the administration and this Congress.
I think today's unemployment numbers underscore the need for a continuing focus, a continuing bold direction with this economy, that we can't back down, that we can't say things are just going to take care of themselves. So I'm looking forward to diving into these numbers again, Commissioner Hall. I remember we had some good exchanges last time to figure out what all of this really means and what it means for our policies going forward.
As I said, while we see some glimmers of hope, and I think that's very good, and an increase in consumer confidence, we also know that this is a very difficult time period for many Americans. Thank you very much and I will turn it over to Congressman Brady.
REP. KEVIN BRADY (R-TX): Thank you, Chairman Klobuchar. Thank you. Welcome welcome, Commissioner Hall, before the committee as well as the other witnesses. The labor market data reported today reflects continued economic weakness. Payroll employment declined by 539,000 with losses widespread across many industries.
Private sector payroll employment declined by 611,000 while government employment increased by 72,000. The unemployment rate rose to 8.9 percent. These data are not surprising given recent economic trends. Real GDP declined by 6.1 percent in the first quarter of this year with business investment plunging by 38 percent.
There are some preliminary signs in some other data that the rapid rate of economic decline may be slowing, but more evidence is needed before reaching any firm conclusions. The condition of the housing sector and the contraction of the auto industry are among many factors that make the economic outlook especially murky, despite recent economic developments and including the rising unemployment rate. Unfortunately the administration has failed to update its unrealistic economic assumptions in its budget submissions.
For example, again this week, the administration projects an 8.1 percent unemployment rate for this year even though it's clear the rate will unfortunately be much, much higher. The administration projects the economy will decline by only 1.2 percent in 2009 compared to the Blue Chip consensus forecast decline of almost double that -- 2.6 percent. The Economist magazine and other experts call these economic assumptions deeply flawed, and the reason it's important to point this out is that these faulty and rosy scenarios are dangerous because they produce an understatement of the real cost of the administration's expensive new spending proposals.
The result will be huge budget deficits and the doubling of the national debt as a share of GDP by 2017, according to the Congressional Budget Office. In the short term, the steps the Fed has taken including the huge expansion of its balance sheet have helped to stabilize financial markets and will eventually provide a boost to the economy. However, the ongoing need for households and banks to reduce their outstanding debts does suggest when the recovery comes it will probably be weak.
Under administration policies, the excessive levels of deficits, debt, taxes and inflation will undermine long-term economic growth. Unfortunately, increasing the burden of government on an already weak economy is only going to further undermine economic and job growth in the years ahead. The administration's proposed reduction of the incentives for work, saving and investment is not the right way to boost the productivity, innovation and competitiveness of the U.S. economy in the years ahead.
With that, Madame Chairman, I would yield back.
SEN. KLOBUCHAR: Thank you very much, Representative Brady. I'd now like to introduce Commissioner Hall. Commissioner Hall is the commissioner of labor statistics for the U.S. Department of Labor. The -- the BLS is an independent national statistical agency. That's the Bureau of Labor Statistics. I don't like all these initials.
The Bureau of Labor Statistics is an independent national statistical agency that collects, processes, analyzes and disseminates essential statistical data to the American public, the U.S. Congress and federal agencies, state and local governments, businesses and labor.
Dr. Hall also served as the chief economist for the White House Council of Economic Advisers for two years under President George W. Bush. Prior to that, he was chief economist for the U.S. Department of Commerce. Dr. Hall also spent 10 years at the U.S. International Trade Commission. He received his B.A. from the University of Virginia, and his M.F. and Ph.D. degrees in economics from Purdue University. Commissioner Hall?
MR. HALL: Thank you. Madame Chair and members of the committee, thank you for the opportunity to discuss the employment and unemployment data that we released this morning. Nonfarm payroll employment declined by 539,000 in April and the unemployment rate rose from 8.5 (percent) to 8.9 percent. Since the start of the recession in December of 2007, job losses have totaled 5.7 million and the unemployment rate has increased by 4 percentage points.
In April, widespread job losses continued throughout the private sector. Private employment fell by 611,000 compared with an average monthly decline of 700,000 in the prior four months. Over the month, federal government employment rose by 66,000, mainly due to the hiring of 63,000 temporary workers in preparation for the Census 2010. Manufacturing employment fell by 149,000 over the month and job losses continued to be widespread.
Since the recession began, this industry has shed 1.6 million jobs, representing more than a quarter of the total nonfarm job decline during the period. Construction employment decreased by 110,000 in April. Job losses have averaged 120,000 per month in the last six months compared with 46,000 per month from December 2007 to October 2008.
Elsewhere in the goods-producing sector mining employment fell by 10,000 in April. From the start of the recession through September 2008, this industry has continued to add jobs mainly through those -- mainly those related to oil and gas production. Since September, mining employment has declined by 44,000. (Inaudible) -- of employment in professional business services dropped by 122,000. Temporary-help services accounted for about half of the job loss. Since the start of the recession, temporary-help employment has fallen by 825,000, nearly a third of its total.
The health care industry added 17,000 jobs over the month, in line with its average monthly gain since January. In 2008, the average gain was 30,000 jobs per month. In April, average hourly earnings for production and non-supervisory workers in the private sector were essentially unchanged. Over the past 12 months, average hourly earnings have risen by 3.2 percent, and from March 2008 to March 2009 the Consumer Price Index declined by 1 percentage point.
Turning now to measures from a survey of households, the unemployment rate rose to 8.9 percent in April, an increase of 0.4 of a percentage point. The number of unemployed persons increased by 563,000 to 13.7 million. Since the start of the recession in December the number of unemployed has risen by 6.2 million, pushing the jobless rate up by 4 percentage points. Over the month, the number of long- term employed continued to grow, rising by 498,000 to 3.7 million.
The long-term jobless represented 27.2 percent of all unemployed persons in April, the highest proportion on record. The employment- to-population ratio held at 59.9 percent in April. When the recession began in December 2007, it was at 62.7 percent. Among the employed, the number of persons working part time who would prefer full time work was little changed over the month at 8.9 million.
In summary, nonfarm payroll employment fell by 539,000 in April. Private-sector employment dropped by 611,000. Job losses continued to be widespread across major industries. Since the recession began, payroll employment has fallen by 5.7 million. Over the month, the unemployment rate rose by four-tenths of a percentage point to 8.9 percent. My colleagues and I would now be glad to answer your questions.
SEN. KLOBUCHAR: Thank you very much, Dr. Hall. So just to summarize, there were 611,000 jobs lost in the private sector last month. Is that right?
MR. HALL: Yes.
SEN. KLOBUCHAR: And how many jobs have been lost since the -- December 2007?
MR. HALL: Nearly 6 million private-sector jobs.
SEN. KLOBUCHAR: And what would you say, just to summarize, have been the biggest areas of loss for the types of jobs across the country?
MR. HALL: I would say the job loss has been -- has been very widespread. Almost every sector has had job loss with the -- with the exception of health care and education, and even those industries have had a slowing of job growth. The sectors with the biggest job loss would probably be in manufacturing and construction.
SEN. KLOBUCHAR: And how about for parts of the country? What have we seen? I remember when we talked about this a year ago, which was probably a precursor of things to come, when we were trying to figure out what was -- is this just in Michigan, was this a regional problem. And I remember at that point you gave me the states that were having problems, and in fact it wasn't just regional. There was like the -- the highest unemployment states were spread out across the country. And what's the status of that now?
MR. HALL: That's still true. We -- we've seen literally every state has had significant rise in their unemployment rate over the past year.
SEN. KLOBUCHAR: Mm hmm.
MR. HALL: And -- and that continues to be the case. The job loss is widespread. Certain -- certain states have had -- had bigger increases in their unemployment rate, job loss. For example, Oregon and South Carolina, North Carolina and Michigan have been -- have been the largest.
SEN. KLOBUCHAR: Thank you. And I understand Michigan with the auto industry, but what do you point to when you look at Oregon and South Carolina, North Carolina?
MR. HALL: Yeah. You know, it -- it -- it's hard -- it -- it's hard to say because the mix -- the exact mix of industry sort of vary by state. I'd probably have to spend a little time looking at those to -- to get a good answer for you, and I -- we can do that for you but I don't have an obvious answer.
SEN. KLOBUCHAR: Well, sometimes I wonder if you have certain areas which had seen a big increase recently and then suddenly they had gone down. For instance, I know in northern Minnesota the mines had been not doing that well for decades, and suddenly the last few years, because of the international economy, our iron ore mines were on the increase, new people were going to work, and then suddenly with this economic crash worldwide you saw a big decline.
And maybe part of this is areas that aren't just about mining, which, you pointed out, is an issue nationwide, but areas where they were benefiting because of some increase in either manufacturing or those types of jobs.
MR. HALL: Sure, I suspect that there are a number of stories like that. There do seem to be states that, even prior to the recession, were running higher unemployment rates, and those states have tended to have a bigger increase in their unemployment for some reason.
SEN. KLOBUCHAR: And maybe part of that is that they were already seeing some of this. We know this was bigger than just a blip on the radar screen --
MR. HALL: Yes.
SEN. KLOBUCHAR: -- that this was a longer-term recession.
The recession, as we've talked about, seems to be different from previous recessions, given the severe housing slump, the credit crunch, and the global nature of the economic downturn. Based on what you're seeing here, how long do you think this is going to last? I know, when I ask this question, you never answer it, but I thought I'd try. How long do you think this is going to last? And then we can talk about this more in another round of questions, but do you see any glimmers of hope here?
MR. HALL: Well, you're correct. I don't want to speculate on how long this will last. But this was another bad report. There was significant deterioration in the labor market again this month. And I think the story continues to be pretty close to the same story. The job loss is large and it's widespread and it's affecting every industry sector and every demographic group.
If you're looking for a glimmer of hope, I suppose the fact that the private-sector job loss was about 611,000 and it's been averaging around 700,000, that looks like it might be a moderation. But it's only one month and it's not a large change.
SEN. KLOBUCHAR: How about some of the other -- you know, we've seen an increase in consumer confidence, which is pretty marked. We've seen that consumer spending rose in the last quarter. And also, just a little home story, Target, which is based in Minnesota, they just reported that their last four weeks -- they did better in their last four weeks than they did in the four weeks during this exact same time period last year. And so I've heard some of these stories that seem very different than what we were seeing in December- January.
Commissioner?
MR. HALL: That would -- that's probably the most encouraging news that I've seen. Consumer confidence -- at least consumer spending -- consumer spending is 70 percent of GDP. And frankly, if consumer spending picks up, everything else will pick up to match it. So that's the sort of -- that's the best sort of news we could get is a continued pickup in consumer spending.
SEN. KLOBUCHAR: All right, very good.
I'll turn it over to Congressman Brady.
REP. BRADY: Thank you, Chairwoman.
I think we're all anxious for the American economy to recover, the sooner the better, and so I'm always looking for optimistic indications of that.
On the surface, the 539,000 number looks positive compared to past months. But when you drill down in there, it looks like the news is a little more sobering. Tell us a little more about the private- sector payroll employment at 611,000. It's down slightly from last month, but again it's declined. It's a loss of these jobs. So we haven't hit the bottom of the well yet. Can you put that in perspective?
MR. HALL: Sure. I suppose I'd say a job loss of 611,000 is a large job loss. It only looks slightly encouraging because the job loss has been so high the last number of months. But it's still a very large job loss and it's still very widespread, so the pattern of job loss really hasn't changed.
REP. BRADY: Yeah, that's what I sense too.
Deputy Commissioner Rones, government jobs are growing 70-some thousand jobs. Is that attributable to Census hiring?
MR. RONES: The increase in the temporary Census hiring was 63,000, so that really accounts for the vast majority of the increase in government.
REP. BRADY: Trying to again -- I always look at our federal budget, which is running huge deficits, but I worry that we continue to mask the true deficit numbers. Just a couple of months ago, in January, top administration officials claimed that the stimulus plan would keep the unemployment rate at or below 8 percent for this year. Obviously we're at a much higher level already, 8.9 percent. Any projection on what that will be for the entire year, Deputy Commissioner Rones?
MR. RONES: Well, as you know, we don't do projections. Basically we know now that we're at 8.9 percent already in April, so that certainly puts that number in perspective.
REP. BRADY: Yeah. We're fortunate in this committee we do have a lot of experts come before us, some of the best and brightest. The chairman of Economic Advisers, Chairman Romer, very sharp, was before the committee here recently. She cited a 150,000 job creation figure in her testimony before this committee related to the stimulus. Do your numbers substantiate that claim, Commissioner Hall?
MR. HALL: There's no way for us to connect job change with the stimulus. We just don't do that sort of work.
REP. BRADY: What indicators would you be looking for on that? Because obviously we want to see jobs created in this country. No one -- (inaudible) -- touching the bottom of the well. Your numbers -- you can't do it; the numbers don't justify it at this point?
MR. HALL: Right, yeah, and in particular since we're in such a period of such significant job loss. It would be very hard to sort of parse out what would the job loss be if it weren't for something else going on.
I will say, though, you know, for us to see improvement, certainly improvement in the unemployment rate, we're going to have to see not only job loss moderate, but we're going to have to see job loss eventually stop and we'd start to see some job growth before we start to see the unemployment rate start to level off and then eventually decline.
REP. BRADY: I think consumer confidence is an important measure. The uptick in consumer spending was good in the first quarter.
Two questions. It appears like the biggest uptick, Commissioner Rones, Deputy Commissioner Rones, the biggest uptick was in January and February. Some attribute that to IRS tax refund checks getting back into the households and people doing it. The stimulus tax incentives that equate to $1.10 a year -- for a day, excuse me -- went into effect in April.
Is there any evidence yet in this data that that is having an impact, consumer spending? First, what do you attribute the first quarter to? Secondly, do you see any uptick, any measurement, any change because of the Obama tax cuts?
MR. RONES: As Commissioner Hall said, it's really difficult for us to take that one single factor and somehow disentangle that from all the other things going on in the economy. Right now we're still seeing rapid job loss, despite any efforts. You know, we still have 600,000 private-sector job loss. Again, would it have been worse but for the stimulus? We can't really know that.
REP. BRADY: Right. And the uptick in consumer spending in January and February?
MR. RONES: Again, that's one of the few positive signs that we have. Any money that goes into consumers' pockets has to be helpful. And so I'm sure that that's part of what's going on with consumer confidence and a little bumping.
REP. BRADY: I guess my question is, since the stimulus Making Work Pay credit, the $1.10 a day, didn't start until April, what's the reason for January and February?
MR. RONES: Again, it's hard for us to be sure. The surveys seem to indicate that there's some increase in consumer confidence. I'm not exactly sure why that is. I mean, certainly in our employment figures there hasn't been a lot of positive news over that period.
REP. BRADY: Thank you. And before the chairwoman attributes it to the election of a new president -- (laughs) -- let me just say I respectfully disagree.
I yield back, Madame Chair.
SEN. KLOBUCHAR: Maybe it's something to do with the American people.
Okay, Senator Casey.
SEN. BOB CASEY (D-PA): Madame Chair, thank you very much.
And I first want to -- I know I got here late, so I wanted to make sure that I asked unanimous consent to submit a statement for the record.
SEN. KLOBUCHAR: Without objection, it will be included in the record.
SEN. CASEY: Thank you.
I wanted to, first of all, address Commissioner Hall with regard to the question of minority unemployment. I want to make sure I got this right. The numbers for African-American unemployment this month are -- the number is 15 percent. Is that right?
MR. HALL: Yes.
SEN. CASEY: And the number for Hispanics, I have 11.3 (percent). Is that right?
MR. HALL: Yes, that is.
SEN. CASEY: But I guess the month-to-month number for African- Americans went from 13.3 (percent) to 15 (percent). Is that right?
MR. HALL: That's correct.
SEN. CASEY: What do you attribute that to? Because I guess the Hispanic number stayed consistent month to month. Is that correct?
MR. HALL: Yes. It's hard to attribute movement like this, the month-to-month movement, to too much, because there's some volatility in these numbers to begin with. I can't say that the increase in black unemployment was statistically significant, so we would characterize it as an increase. But as far as an explanation, I just don't know for a one-month change.
SEN. CASEY: I know that's difficult, and month-to-month numbers can be -- I guess sometimes they can be significant. You can attribute it to something, and maybe not in other circumstances. But the fact remains, whether we're talking about this month or previous months, that African-American unemployment -- the unemployment rate is almost double what it is for whites. Is that correct?
MR. HALL: That's correct.
SEN. CASEY: That alone is disturbing, because, you know, we keep hearing these commentators talking about the fact that there may be parts of the economy you can point to as improving, and you said glimmers of hope, and other places where there's some degree of positive news.
And we also hear this "lagging indicator" phrase, which, I'll tell you, that's a great candy-coated way of describing a terrible economy, because, of course, if you lost your job or your house or your hopes and your dreams, it's not -- "lagging indicator" doesn't really do it for you. It's not really an accurate assessment of your life if you're going through that.
I did want to ask you also about what you're seeing in kind of state by state. Fortunately for Pennsylvania, in a very relative sense, the numbers are extraordinarily high. But we've gone basically from February to March, 7.0 (percent) to 7.5 (percent), whereas the nation in that time period was going above 8 (percent), I guess, in February or January, but in March going from -- March to April going from, what, 8.5 (percent) to 8.9 (percent). Is that where we are now?
MR. HALL: Yes.
SEN. CASEY: So -- and we've been, in Pennsylvania, losing about -- averaging about 40,000 jobs lost month to month.
When you look at some of the states that are highest in terms of the unemployment rate by percentage, what are the three highest? And what's driving most of that? Is it housing, or is it a combination of factors?
MR. HALL: (Off mike.)
SEN. CASEY: I know that several states are in double figures. I just don't know the listing of them.
MR. RONES: Yeah, we have the data; not at my fingertips.
SEN. CASEY: Okay. California is about -- are they at 12 (percent) already?
MR. RONES: Yeah, I do think they're in double digits.
SEN. CASEY: They're about 11 (percent) to 12 (percent).
MR. HALL: Eleven-point-two.
MR. RONES: Yeah, 11.2 percent.
SEN. CASEY: That's California.
MR. RONES: Yes.
SEN. CASEY: And do you know the next two in the -- I'm just trying to get a sense of what's the --
MR. RONES: Sure. Michigan has an unemployment rate of 12.6 (percent).
SEN. CASEY: Twelve-point-six.
MR. RONES: Oregon has an unemployment rate of 12.1 (percent). Indiana has an unemployment rate of 10 (percent); Nevada, 10.4 (percent); North Carolina, 10.8 (percent); South Carolina, 11.4 (percent); Rhode Island, 10.5 (percent). So there are several states that are now in double digits.
SEN. CASEY: But there's no thread, necessarily, you can identify there. Sometimes -- obviously in Michigan the auto industry contributes to that. So there's no real thread. It's really state- or region-specific, would you say?
MR. RONES: Yes, I would say that. You know, all the states have had a rise in the unemployment rate. That's been consistent with this recession, that it's been very broad across demographic groups, across industries and across states. A number of states started with higher unemployment rates, and those states have tended to have a bigger increase, for whatever reason.
If you're going to look at regions, I suppose the regions that have been hardest-hit have been the West and the Midwest. But all the regions have been hit.
SEN. CASEY: And I know I'm over time. Let me just real quickly -- Chairman Bernanke was here just a couple of days ago, and I asked him about the unemployment data; similar questions that we're examining today. But he commented that the labor market is dynamic and that, even as we shed jobs, people are gaining jobs and the overall picture is dynamic. That's a paraphrase; that's not an exact quotation from Chairman Bernanke, but that idea that there is a dynamic quality to this and there may be areas where there's actual significant growth.
Where do you see -- where is the job growth, if there's any? Is it by -- is there a sector that's growing, or are we just kidding ourselves to say that there's a positive dynamism to it?
MR. RONES: Yeah, I would guess that the dynamism that he's referring to, which I maybe would characterize as job churn, even when we are losing jobs on net, there's a significant amount of people who are switching jobs.
So people are losing jobs and gaining jobs.
But in terms of net gains on a monthly basis, there's very, very few industries that have job growth. Government and education and health care have had some, but to be honest, even education and health care have had a real decline in their job growth in the last few months. They're still growing, but it's been moderating.
SEN. CASEY: Thank you very much.
SEN. KLOBUCHAR: Thank you very much.
I keep wanting to bring up some real examples -- one, because I think we can get so number oriented, we forget who we're talking about; two, I think it's just illustrative of some of the issues.
And I just would start with two people in Minnesota: Matt and Eva Johnson, who got college degrees -- they thought that was the smart thing to do -- and now they are 69,000 (dollars) in debt from their college education. They pay about $800 a month in student loans and they're having difficulty getting work.
They got a house a year ago, before this really hit. They bought a modest, two-bedroom, one bathroom house in Blain, Minnesota -- which is sort of a suburban area -- ex-urban area -- for $172,000. Their house has actually maintained its value, but they can't afford the mortgage payment. So the woman's 22-year-old brother moved into their basement and he pays $400 a month for rent and utilities and groceries. If they didn't have that, they wouldn't be able to make it on their mortgage.
They talk about how they had money a few years ago. They talk about how they decided not to have a child right now. They're going to wait four or five years. They want to, but they don't think they can afford it. They have -- they push off buying groceries. They eat a lot of chicken noodle soup and potatoes and the husband goes on Craigslist daily to try to pick up side jobs, which are getting harder to come by. The wife coaches soccer seven months of the year, which brings in about $1,000. So those are real stories.
And I guess my question there is we've always been told to pursue this American dream, that a college education is a huge piece of this -- I believe that. But what are the differences, first of all, in the unemployment rates -- any of our witnesses can answer this -- for people with college degrees and people without college degrees?
MR. HALL: Sure. They vary significantly by education.
While this recession has been interesting in the sense that it's affected everybody -- it's affected people at all education ranges. The unemployment rates have gone up for people with college degrees and for people with less than a high school education, they didn't start equal and the effect hasn't been equal.
The unemployment rate for people without a high school degree it's 14.8 percent. For people with a college degree it's 4.4 percent -- so a huge difference.
SEN. KLOBUCHAR: Could you go over that for me again?
MR. HALL: Sure. For people without a high school degree the unemployment rate's 14.8 percent.
SEN. KLOBUCHAR: Without a high school?
MR. HALL: Without a high school degree.
With a high school degree it goes to 9.3 percent and then with some college it goes down to 7.4 percent and then with a bachelor degree or the college degree, it's 4.4 percent.
Now, all these numbers have gone up, but they're nowhere near equal.
SEN. KLOBUCHAR: Well, you can see why the president and others are devoted to trying to make sure that people get some college. I think he's talking not everyone has to be the same, but at least a year of post-high school education. And one of these issues is the expense of college and that post education -- graduate.
But as we can see, if we're going to compete in this world economy, it seems like the more we can do to try to get some post-high school degree, and at least finishing high school, makes a major difference in employment. Is that a correct assessment?
MR. HALL: Absolutely. People with higher education have higher labor force participating rates. They have higher wages; they have lower unemployment rates.
SEN. KLOBUCHAR: Another follow-up from the story that I just gave you of the Johnson's in Blain, Minnesota would be something we talked about a year ago, which is what you call the marginally unemployed -- people who would like to work longer hours, but then their hours are reduced. And that is not -- those people are not included in the 8.9 percent unemployment rate that we just announced today. Is that correct?
MR. HALL: That's correct.
SEN. KLOBUCHAR: Okay. So when you include them, where do we go and what are their numbers looking like?
MR. HALL: When you include the marginally attached --
SEN. KLOBUCHAR: And again, those are people -- they're not necessarily moms that want to reduce their hours, because they have kids and they want to reduce it. These are people pushed to reduce hours when they don't want to reduce them.
MR. HALL: Well, yeah. The marginally attached are people who want to work, but for whatever reason they haven't been looking lately. They're discouraged workers.
SEN. KLOBUCHAR: Discouraged workers.
MR. HALL: And then you include part time for economic reasons, which I think is what you're talking about -- people who want to work full time, but they can only find part-time work.
If you include those folks as well, you get a percentage of 15.8 percent.
SEN. KLOBUCHAR: And where is that compared to where we were -- I don't know, a year ago or something or two years ago?
MR. HALL: That's up about 6.6 percentage points over the last 12 months.
SEN. KLOBUCHAR: Okay. And so these people that are discouraged workers that can't quite get the money they need or the hours that they need -- and it's exactly -- I think this kind of situation, maybe they have a job, but it's getting and harder for them to pay for their mortgage and things like that.
MR. HALL: Yes.
SEN. KLOBUCHAR: And has that trend been similar to the regular unemployment rate?
MR. HALL: Yes. All our measures of labor force -- under employment, as well as the unemployment -- have all gone up in a similar fashion. They're all showing a distressed labor market.
SEN. KLOBUCHAR: And again, we've just see these remarkable differences in the unemployment rates depending on people don't finish high school they're at 14.8 percent; with high school, 9.3 percent; with some college, 7.4 percent; college degree, 4.4 percent.
Is that similar to what we saw in some of these last recessions that didn't last as long?
MR. HALL: These are all higher. And the recessions that lasted a shorter time period didn't have such a large increase in the unemployment rate. And all of these numbers are higher than either of the last two recessions.
SEN. KLOBUCHAR: How about the variation between the categories? I know this is what I'm trying to get at here --
MR. HALL: Right, right.
SEN. KLOBUCHAR: In these last recessions, did you see as much of an increase with, say, people without high school degrees?
MR. HALL: I don't know a precise comparison, but I think the pattern's pretty similar.
Generally, like for example, people with at just a high school degree, their unemployment rate starts higher and it goes up more during a recession and that's been true this recession.
SEN. KLOBUCHAR: Okay, very good. Well, that's historically proven as something that if we want to look at long-term improvements to the situation, which would make a difference.
Congressman Brady.
REP. BRADY: Those are fascinating numbers as to the value of a college education and stronger education.
Housing financial sectors, Commissioner, have been especially weak in recent years. Can you describe what's happening in those sectors?
MR. HALL: Sure. The construction employment -- we lost now about 1.4 million jobs in construction. Housing -- industries, you include some other things, it's over 2 million jobs.
REP. BRADY: But in the last month?
MR. HALL: In the last month, construction lost 110,000. So job loss continues to be in the triple digits there in 110,000.
REP. BRADY: They've been averaging about 120,000 losses here in recent months -- so it's fairly -- a little uptick, but fairly?
MR. HALL: Yeah. It's around the same.
REP. BRADY: How about housing financial this past month?
MR. HALL: Credit intermediation and real estate -- those both lost jobs. About 14,000 in credit intermediation and in real estate, rental and leasing lost about 15,000. That's roughly in line, I think, with the last few months.
REP. BRADY: Are there any -- you know, you take -- what is it -- the second week of each month to do the surveys?
MR. HALL: Yes.
REP. BRADY: Any seasonal adjustments related to that, other than people irritated that they have to pay their taxes on April 15th, was there any seasonal adjustment we need to know about?
MR. HALL: Well, our seasonals -- I'm not sure what the seasons were like this month, but we always take the seasonality into account when we quote these numbers.
REP. BRADY: But nothing significant that you would think?
MR. HALL: Nothing to mention. We didn't have any difficulties with the seasonality. There was nothing strongly going on it.
REP. BRADY: Do you measure the real hourly compensation figures -- what payroll, what compensation is?
MR. HALL: Yeah, well, we measure wage -- average hourly earnings.
REP. BRADY: What is going on there?
MR. HALL: In nominal terms, average hourly earnings have been growing maybe 3.2 percent, I believe, over the last 12 months. And they had been growing a little bit faster. They'd gotten up to almost 4 percent prior to the recession. So wages are growing, but not as fast as before.
And then once you deflate them into real terms, we've actually had growth in real average hourly earnings, but that's primarily because of the declining energy prices.
REP. BRADY: I don't see pressure on the Consumer Price Index Number at this point, do you?
MR. HALL: No. Most of the unusual action still on energy and in particular, energy prices have still declined and is therefore, holding down the inflation.
REP. BRADY: That takes a lot of pressure off inflation figures, doesn't it all along -- business, families? It stretches your paycheck a little farther.
MR. HALL: Yes, exactly.
REP. BRADY: Great.
Well, thank you, Madame Chairman, very much. Appreciate it.
SEN. KLOBUCHAR: Thank you very much, Congressman Brady.
One area that we haven't focused on is the veteran unemployment. And I always like to bring this up, because I don't think people think about this as much as they should. And these are people who have served our country and then have come back.
We see some of them leaving before this recession hit. Maybe they're serving for two, three years and then they come back. And their percentage in the total workforce -- all veterans serving after September 2001 is what I'm looking at -- soldiers who have served recently and the percentage of young male veterans serving after 2001 with the unemployment rate.
So what we're seeing now is that -- correct me if I'm wrong -- 13.9 percent of young male veterans serving after September 2001 are now unemployment, which is higher than our national unemployment rate of 8.9 percent. Are those numbers right? What do you have for those?
MR. HALL: Yeah. I have about 10.3 percent as the unemployment rate for Gulf War-era veterans since 2001.
SEN. KLOBUCHAR: So it is higher. And I think the may have had is "male veterans". Maybe that's the difference.
MR. HALL: That might be the difference.
SEN. KLOBUCHAR: So it's 10.3 percent. So as we look at this, you would think these people who have served our country and mostly likely -- I know in Minnesota we don't have any active duty, but we have a huge number of National Guard and Reserve that serve that have left their jobs, that are called up as civilian soldiers. We have the longest serving unit, the Red Bulls in Iraq, out of the Minnesota National Guard.
And so the thought that they're coming back and the job isn't there anymore -- and they've been so disadvantaged, because some people could hold onto their jobs when they were in the workforce and they were gone.
So I'm trying to figure out why we see these higher numbers with these returning veterans. What do you think that the reason is?
MR. HALL: Yeah, I can't say. I'd have to look a little bit more at the data and see if I see a pattern. But it is true that Gulf-era veterans started with a slightly higher unemployment rate and the unemployment rate has increased by more during this recession. For example, it's gone from 5.6 percent to 10.3 percent over the last 12 months.
I don't know of a good explanation for it.
SEN. KLOBUCHAR: Okay. Well, if you could look into that. If you have -- I'm just curious, because it's very depressing to me that these are people that served our country and that they have come back and that their unemployment is even higher than the national average. I think it's very troublesome.
I wanted to shift a little bit to your past job when you were chief economist for the White House Council of Economic Advisers. And if you or your colleagues there could put your professor hats back on for a second and you had to give a lecture about jobs and this recession, how would you explain this moment in our economic history if you look at it more broadly? What factors led us to these unemployment numbers? And having identified the problem, the solutions that you would suggest from an economic standpoint based on the historical data?
So what caused it, what you see to help us get out of it? This is with your overall experience, Commissioner Hall.
MR. HALL: I would say that for the first -- for the first part of this recession, we had job loss, but it wasn't large job loss.
SEN. KLOBUCHAR: And when you're talking about the first part, what time period are you talking about?
MR. HALL: Say from December 2007 to somewhere like September of 2008.
In fact, I would probably say that that was a mild recession -- maybe even may not have been called a recession if things had improved. And my feeling is that was probably related to the housing market -- to people losing value in their homes and that affecting consumer spending.
And we didn't really have really, really strong job loss like we're seeing now until the credit markets really locked up in September. So now we have this period of -- which I think would be an effect of the housing market directly -- and then we have the financial markets locked up, which also affect the global markets. Now, you have all three of these things really impacting the economy and we've had a severe recession now the last six months, I think, as a result.
As far as what would fix it -- that's a little out of my current job. I will say it's hard to see that the labor market's going to improve unless some of these three things -- you know, the housing market, the credit markets and the global economy -- if some of those, at least one or more of those things don't improve, it's hard to see the labor market's going to improve.
SEN. KLOBUCHAR: Yeah. And I was just -- actually, just traveled to Asia with Senator McCain to China and Japan and Vietnam and seeing very similar things -- especially in Japan -- some of the similar policy focus with the recovery plans and trying to make the market move again in that way. And hopefully some worldwide efforts to stem some of the abuses that went on in the financial market, which we know will take awhile to turn that around.
Yesterday, we learned that the number of newly laid off workers applying for benefits dropped to 601,000 last week, which was slightly better than what we thought it was going to be -- I guess that was 635,000.
However, we also learned that the total number of people receiving unemployment benefits climbed to 6.35 million, which is a record for the 14th straight week.
Looking behind these numbers, what does this tell you about our employment situation and how long term this is for these people?
MR. HALL: Sure. Let me mention that the new initial claims for unemployment insurance -- it's a weekly series and it's volatile, so you can't read too much into one data point. But it does seem to have some ability to predict the labor market.
So the fact that the initial claims went down is potentially a good sign.
But this data that we are talking about today was collected about two weeks before that. So if that is -- if that is forecasting an improvement in the labor market, we won't see that until next month. The fact that the claims are at the level is at an all-time high, that's basically consistent with the large number of long term unemployed that we have. And I think the number I quoted in the statement about the percentage of unemployed who are long term unemployed is at a record right now.
REP. MALONEY: Okay. Congressman Brady?
REP. BRADY: Great. Thanks, Chairman. Keep your economic hat on for a moment if you would.
I think most people recognize now, or a growing number in America, that it's not simply enough to buy American; we have to sell American products and services throughout the world, especially with 95 percent of the world's customers living outside the United States. Exports until this year, until the global financial collapse, have been a huge part of our economy. In fact others sitting in your seats at that table said it's really been sort of a lifeline our ability to sell our products around the world has been a lifeline to our economy until demand started to shrink.
What do your numbers -- no, forget the numbers for a minute, from an economic standpoint, how critical is it that we restore, do what we can to restore the demand for and the sales of our American products around the world?
MR. HALL: It's absolutely important. I think exports have been as high as 10 percent of our output have been exports, and I think that is absolutely right. The interconnectedness of markets I think is a real strength for the United States, and the fact that we can sell abroad, and actually the fact that we can buy from abroad, I think both things will help our economy.
REP. BRADY: Now they estimate, experts estimate, that because of our free trade agreements ability for consumers to have more choices is that in America a family, typical family, Texas, Minnesota, can go to the grocery store once a month for free because of the savings and the choices they have whether it's at the supermarket or at the mall or when they are shopping for cars or other things.
I am concerned, because our ability to sell American products is so critical around the world. I am concerned about some new proposals that would actually double tax our companies that sell those products overseas. Some of our companies are able to access those foreign markets from here in the United States; others, because of the product they sell or the market, have to actually be in the region to sell our U.S. products. And our tax code is so -- it's one of the few in the world where we tax worldwide income regardless of where our companies get this income. Most countries tax only within their boundaries themselves. As a result out companies, U.S. companies, have often faced double taxation.
The tax code over a century has tried to be more competitive by -- in two ways, one by saying, look, you can deduct those foreign taxes you pay over in those foreign countries from what you owe us and pay us the difference; and another has been we won't tax that income until you bring it back to the United States -- sort of the same philosophy we have, we don't tax people on their dividends when the company earns it but when they actually distribute it as dividends.
There is a concern that if we remove the ability to deduct foreign taxes, we remove the ability to tax when that income comes back to the United States, that we may well drive our U.S. companies overseas where they have more favorable tax climate. I'm not asking your opinion on some of these tax proposals, but as an economist, do tax regimes of various countries have an impact on economic growth, and on where economic decisions are made within the private sector?
MR. HALL: Yeah, I would say that is almost certainly true, that tax codes do have an effect, differential treatment of -- differential tax codes between countries can have an effect not only with trade but also with investment.
REP. BRADY: I think we've seen the difference. In 2004 Congress worried about the number of jobs being created overseas created a tax code where if companies, manufacturers, produce, invest, create jobs in the U.S., they have a lower tax rate than if you do the same thing overseas; that's the way the tax code is today.
Unfortunately this administration and some in Congress have singled out certain industries like America's energy industry and basically said that no longer applies to you; we're going to tax you when you invest in the United States, just as if you were creating those jobs overseas, exactly the opposite I think of what we need to do.
I think the point you made, the tax -- tax codes do matter in job creation and location of companies. I think it's very important for Congress to consider as a weight into the complicated area of international taxation.
With that I'd yield back.
REP. MALONEY: Thank you very much, Congressman Brady. A few more questions here. I know we discussed last year the health care effect here, and the burdens on workers of the cost of health care in this country which is -- and employers, which is more expensive than it is -- than other countries. And I remember that you suggest that to the extent the employer bears a greater share of the health care cost, this crowds out wage increases to employees, and obviously to the extent that the employees have the higher cost, it makes them more difficult for them to afford things whether it is the goods that we want them to buy out there or to stay in their home.
What does the data show regarding the impact of rising health care costs on wages and in general?
MR. HALL: Yeah, I think in general, and I'm talking back probably prior to the recession because I haven't looked at the data a lot during the recession; that's such a -- sort of not normal times. But there certainly has been evidence that higher -- faster growing health care costs are related with slower growing wages, which is -- as you say, which is evidence that rising health care costs can crowd out wage increases. This is primarily because health care is provided through work in this country.
REP. MALONEY: Okay, and as you know, we are going to be working on health care reform this year. And would you see it if we are able to bring some costs down and make it more affordable and do it in a different way, that that would help people with their wages?
MR. HALL: That is that what the research suggests. Since -- since obviously if health care is crowding out wage growth then reducing health care costs would have the opposite effect.
REP. MALONEY: The -- just to end here with a few questions about indicators which can show some change or some positive shift. We certainly know the unemployment rate has gone up this month, and that there are still way too many people out of jobs. We talked about the consumer spending rose 2.2 percent on an annualized basis in the last quarter, the most in two years. Does that tend to be an indicator that there is some glimmer of hope here?
MR. HALL: Oh, absolutely. I think consumer spending is probably going to be the key to the recovery. If consumer spending -- consumers continue to spend and consumer spending picks up, then I think everything else follows.
REP. MALONEY: The other thing you identified when you looked at your three-legged stool I guess was the consumer spending -- I guess I'll go back to that again with this -- with the target numbers I gave you, which is for the four weeks which ended May 2nd, a net retail sales for target increased 4.5 percent when compared to the same four weeks ending May 3rd, 2008. On the same basis actually April comparable store sales increased .3 percent. So what is the usual correlation between increased sales and employment?
MR. HALL: There are -- there is a positive relationship. If consumers start to spend and you start to get growth, and once you start to get growth I think the job loss would start to moderate over time. If you get enough growth then eventually the job loss will turn into job gain and we will see the labor market stabilize.
REP. MALONEY: But as you have said, the other parts of this three-legged stool are the housing market, and have you seen any changes in that market yet?
MR. HALL: Just -- I think just what everybody else has seen. The -- some small glimmers of hope perhaps in construction. But I don't know that we have a real pattern yet. It's kind of like consumer spending. We've seen consumer spending tick up, but what we really need to see, we need to see both of those things continue to improve.
REP. MALONEY: And then the third part you identified is just the credit market.
MR. HALL: Yes.
REP. MALONEY: And as you know we just recently -- the Treasury Department and the Fed announced the stress test, so we wait to see the effects of that. I think it showed that some of our financial institutions didn't need any more to go out and capitalize and get increased funds. Some of them did, and would this also affect things if we started to get that credit market going again and more stabilized?
MR. HALL: Yeah, absolutely. And I think the -- so the real meltdown in the credit markets has been the biggest single problem I think with this recession. And so that's the thing that probably most needs to turn around.
REP. MALONEY: Very good. And so you will tell our constituents that when they call and are angry that we are helping with the credit market in trying to stabilize, I'm sure you will, Commissioner Hall. I view that also as a major part of this as well.
I just wanted to conclude here summarizing what we've heard today just sort of from a layman's way of looking at this. So this past month we've seen 563,000 more people that are basically unemployed; is that right?
MR. HALL: 539,000.
REP. MALONEY: 539,000. And since the start of the recession how many people are now unemployed?
MR. HALL: The number of unemployed is now 13.7 million.
REP. MALONEY: Thirteen point seven million. I always think these numbers are important, as people have to realize across the country that you know it's not just one person messing up here; that there are a lot of people that have been affected by this recession for no fault of their own. We've seen a rise in the unemployment from last month, it was 8.5 percent and now it's 8.9 percent; is that right?
MR. HALL: Yes.
REP. MALONEY: And then that group that is so hard to -- for people to get their arms around, the group I was talking about like the Johnsons of Blaine, Minnesota, who would like to work more hours, or are discouraged, or what do you call them, marginal workers who are trying to increase those hours and just can't find the job. When you include them we are at 15.9 percent unemployment.
MR. HALL: Fifteen point eight percent.
REP. MALONEY: Fifteen point eight percent unemployment. All right. And then we also talked about the fact that for a certain group of workers, I think Senator Casey talked about those minority workers and we were talking here I know Representative Brady focused on some of the different industries where you see a difference with construction and things like.
But clearly with those that do not have a high school degree, what was that unemployment again?
MR. HALL: Fourteen point eight percent.
REP. MALONEY: Fourteen eight percent. And then you go down to people that have a high school degree, you get at?
MR. HALL: Nine point three percent.
REP. MALONEY: Nine point three percent. People that have at least a year of college but haven't finished it is?
MR. HALL: Seven point four percent.
REP. MALONEY: Seven point four, and people with a college degree, is that?
MR. HALL: Four point four percent.
REP. MALONEY: Four point four percent. We talk about the fact that we have some new policies in place, and that we are -- Sperry is the -- Christina Romer (ph) pointed out this past week while the economic recovery plan has made some difference, that it is going to take awhile to see that in terms of the unemployment; is that fair to say?
MR. HALL: That is, although I must say that the job -- the payroll job gains or losses are concurrent indicators. When the economy starts to improve, we will see the job loss, we should see the job loss start to decline. But it is lagging in the sense that we need more -- we need actually a job gain of a certain amount for the unemployment rate to stabilize. So the unemployment rate is likely to continue to increase once -- even after we start to get job--
REP. MALONEY: And I think that the president and Congress was pretty clear about this that we weren't suddenly going to see this uptick, that a lot of this economic recovery was actually replacing jobs that were lost or have been lost.
The other parts of the policies that we've pursued is putting more money in the hands of taxpayers, with the middle class. Tax cut, do you think that could be contributing some to the consumer confidence, or also the increase, that 2.2 percent increase we've seen in consumer spending? Or do you think it's just a better feeling about, that the economy is stabilized? And I know you are not a psychologist, Commissioner Hall?
MR. HALL: I can't say. I do think the improvement in consumer confidence for whatever reason is certainly related to the pickup in consumer spending. And I think that part is very important.
REP. MALONEY: Okay. And as we go forward here you do not predict any dramatic changes without -- without just holding you to this, say in the next month or two, with the unemployment improving; is that correct?
MR. HALL: I would say I wouldn't predict.
REP. MALONEY: Okay. Oh, thank you, Commissioner Hall. But I think you said that we're in a longer term recession as opposed to something that is just a blip for the month of April?
MR. HALL: Yes, we're having really significant job loss, and that -- although things may improve, the job loss is not likely to end.
REP. MALONEY: And that is what led us to say, in Congress, to extend unemployment benefits, something that we always do in the past when there is a history of this looking like it's going to last longer than just a few months.
MR. HALL: Well, the -- remember I said, the number of long term unemployed is very high, and that number typically continues to rise even after the recession is over. So--
REP. MALONEY: And as we look at these potential hopeful signs we see one, we already talked about the increase in consumer spending; the surveys that show an increase in consumer confidence. We have some industries that haven't been hit as hard as others like, say, health care, and a few others. And we have some evidence in some industries of some increased sales or stability.
The other piece of it was to summarize housing market. We haven't seen much change, but it appears that there are some signs as we heard last week that it may have bottomed out, although we are not certain. And then we also have the financial institutions, again, appearing to be -- appearing to be, we're not certain -- a little more stability than we saw in the fall.
Are those fair assessments?
MR. HALL: Those are fair.
REP. MALONEY: Okay, good. And I wanted to get out on the limb with you, there, Commissioner Hall. So I would just summarize this by saying that these are -- can be viewed as grim, especially by the people experiencing them. You can't tell someone who has lost their job, hey, we've seen some good increases in consumer confidence. That's not going to help them. So I think it's a testament to the continuing involving in making sure that unemployment compensation is available; making sure that we are looking out for people who have lost their jobs; and also seeing this glimmer of hope where we are putting in place policies whether it is a better infrastructure for the future, whether it is broadband, whether it is electricity grid, so that when the economy starts moving again we are better equipped to handle this.
And the last thing I would end up with from my perspective is just the need to put in place some more sensible pragmatic financial regulations that don't go in any way to hurt our economy but to stabilize it because of some of the issues that we saw that caused this credit crunch, whether it's deals that people didn't understand, or too leveraged financial institutions, or people put in place institutions that let the whistleblower that brought the Bernie Madoff case into the SEC, didn't do anything about it, that we need to get our act together here in terms of these financial regulations.
And my last word I would say -- maybe commissioner -- maybe Representative Brady would like to add something here -- is just that as we talk about these numbers we always have to remember the people behind these numbers. One of the most moving letters I got in the last year was a woman who wrote in and said that she and her husband, they put their three kids to bed, and they kiss them goodnight on their forehead, and then they sit at their kitchen table and put their heads in their hands and wonder how are we going to make it. How are we going to make it tomorrow? How are we going to pick up an extra job.
And I know you think about those people everyday, Commissioner Hall, that's your job, and I want to thank you for that. And let us all remember that there are real people behind these statistics. Thank you.
Congressman Brady? All right, thank you everyone. The hearing is adjourned.
END.
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