S. HRG. 106-679

THE STRATEGICPETROLEUM RESERVE

HEARING

before the

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

September 27, 2000

Printed for the use of the Joint Economic Committee

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON: 2000

cc 66-908

For sale by the U.S. Government Printing OfficeSuperintendent of Documents, Congressional Sales Ofice, Washington, D.C. 20402

JOINT ECONOMIC COMMITTEE

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

SENATE

CONNIE MACK, Florida, ChairmanWILLIAM V. ROTH, JR., DelawareROBERT F. BENNETT, UtahROD GRAMS, MinnesotaSAM BROWNBACK, KansasJEFF SESSIONS, AlabamaCHARLES S. ROBB, VirginiaPAUL S. SARBANES, MarylandEDWARD M. KENNEDY, MassachusettsJEFF BINGAMAN, New Mexico

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, Vice ChairmanMARK SANFORD, South CarolinaJOHN DOOLITTLE, CaliforniaTOM CAMPBELL, CaliforniaJOSEPH R. PITTS, PennsylvaniaPAUL RYAN, WisconsinPETE STARK, CaliforniaCAROLYN B. MALONEY, New YorkDAVID MINGE, MinnesotaMELVIN L. WATT, North Carolina

SHELLEY S. HYMES, Executive DirectorJAMES D. GWARTNEY, ChiefEconomist

HOWARD ROSEN, Minority StaffDirector

CONTENTS

OPENING STATEMENTS OF MEMBERS

Representative Jim Saxton, Vice Chairman ................... 1Senator Edward M. Kennedy ............................. 3Senator Robert F. Bennett ............................... 6Representative Carolyn B. Maloney ........................ 7

WITNESSES

Statement of the Honorable Robert S. Kripowicz, Acting AssistantSecretary for Fossil Energy; Accompanied by Richard Furiga, TheDeputy Assistant Secretary for Petroleum Reserves ......... 11

SUBMISSIONS FOR THE RECORD

Prepared Statement of Representative Jim Saxton, Vice Chairman . 35Prepared Statement of Senator Edward M. Kennedy ............ 37Chart submitted for the record by Senator Kennedy entitled, "Distillate

Stocks are Low - Especially on the East Coast," . ........... 39Chart submitted for the record by Senator Kennedy entitled, "Regional

Residential Heating Oil Prices," ...................... 40Chart submitted for the record by Senator Kennedy entitled, "Winter

Demand Impacted by Weather," ...................... 41Chart submitted for the record by Senator Kennedy entitled, "Strategic

Petroleum Reserve Releases ......................... 42Chart submitted for the record by Representative Maloney entitled, "Oil

Company Profits Exploded Over the Past Year" .. ........ 43Letters submitted for the record by Representative Maloney ...... 44Letter from Chairman Rainer submitted for the record by Congress-

woman Maloney ................................. 45Letter to Secretary Babbitt submitted for the record by Congresswoman

Maloney ....................................... 47Prepared Statement of Robert S. Kripowicz, Acting Assistant Secretary

for Fossil Energy and attachment ..................... 49

THE STRATEGIC PETROLEUM RESERVEWednesday, September 27, 2000

CONGRESS OF THE UNITED STATES,JOINT EcONOMIC COMMITTEE,

WASHINGTON, D.C.

The Committee met, pursuant to notice, at 10:00 a.m., in Room 311,Cannon House Office Building, the Honorable Jim Saxton, ViceChairman of the Committee; presiding.

Present: Representatives Saxton, Sanford, Pitts, Maloney, andWatt; Senators Bennett and Kennedy.

Staff Present: Chris Frenze, Robert Keleher, Darryl Evans, JasonFichtner, Colleen J. Healy, Joe Pasetti, Howard Rosen, Daphne Clones,Michael Kapsa, and Russell Comeau.

OPENING STATEMENT OF

REPRESENTATIVE JIM SAXTON, VICE CHAIRMANRepresentative Saxton. Good morning. I am pleased to welcome

our witness, Assistant Secretary Robert Kripowicz, before the JointEconomic Committee (JEC) this morning. Although it was not plannedthis way, this hearing on the Strategic Petroleum Reserve (SPR) appearsto be especially timely. We had scheduled this hearing before this issuebecame front and center, but in light of the fact that it was scheduled andin light of the fact that this is a topic that is of interest to many Membersof Congress, as well as the public, it is a timely hearing.

The purpose of the hearing today is to examine the SPR in thecontext.of U.S. energy policy. In recent days, there has been tremendousinterest in the SPR, but a lot of important questions remain unanswered.One such important question relates to the various possible methods oftapping the SPR and whether they would prove effective in the short-runas well as in the long-run. The hearing today is not intended to promoteany particular point of view, but merely to examine the underlying facts.These include the amounts of oil in the SPR and home heating oilreserve; the quality of this oil; the mechanics of release through swapsand other effects on prices and supplies; and the physical removal of theoil from the SPR.

Since last winter, I have been on record favoring a release of oilfrom the SPR to deal with the shortages, especially in home heating oil.Senator Kennedy and I were just talking about the effect of this situationon the Northeast. Obviously, last winter, consumers were faced with a

very, very difficult situation. Everyone knows that, but there was anothergroup of people who were very much affected as well, and those are thepeople with the fleets of trucks that go to deliver the oil.

What happened was the price spiked from about $1.00 to $2.00, soconsumers were unable to make timely payments. However, the deliverypeople couldn't get product unless they paid for it, and so they were thepeople who were put in the middle; a difficult situation for all of themand an impossible situation for some.

If market forces were determining oil prices, then an SPR releasewould be somewhat problematic, but is less so when state-owned firmsfrom the OPEC countries are exercising their monopoly power. An SPRrelease would counteract OPEC's anti-market policies, at least in theshort-run when inventories are low. In addition, the use of the oil weaponby some countries makes counter-action appropriate in the short-run.OPEC's restraint on oil supplies reflects the influence of the hard-lineprice hawks within the cartel. Moreover, Iraq also exports a significantamount of oil to the U.S., a factor that could threaten the U.S. yet again.

However, an SPR release is only a temporary measure and is not apanacea. The U.S. must do everything in its power to undermine theOPEC cartel and its monopoly power over supply and pnces. The healthof the national and international economy is very positive, but it has ledto higher demand for oil, and OPEC has moved to fully exploit thisdevelopment. U.S. consumers and taxpayers are paying a heavy price forthe OPEC exploitation.

Even as they put the squeeze on U.S. consumers, several of the hard-line OPEC price hawks and other OPEC members and allies are currentlyreceiving U.S. taxpayer subsidies through the International MonetaryFund (IMF). Ihave introduced legislation mandating the U.S. ExecutiveDirector of the IMF to oppose new loans to OPEC members and allieswho exercise their monopoly power to the detriment of the U.S.economy, but much more pressure on OPEC is needed. Currently,Venezuela, Indonesia and Algeria are all receiving IMF subsidies at theexpense of the U.S. taxpayers, and so U.S. taxpayers are being gougedtwice, once by IMF subsidies and the contributions we make to it, andsecond by paying high prices at the pump.

Fortunately, new exploration and extraction technologies are leadingto the discovery of vast new oil deposits that can be tapped in moreefficient ways. As the former Saudi oil minister has acknowledged, theOPEC's days are numbered. However, today we are focusing on the

short-run problem and whether it can be effectively addressed through theSPR.

I would like to thank Mr. Kripowicz for being here this morning,and we look forward to your.testimony, but before that, we are going tohear from our good friend from the Northeast, Senator Kennedy.[The prepared statement of Representative Saxton appears in theSubmissions for the Record on page 35.]

OPENING STATEMENT OFSENATOR EDWARD M. KENNEDY

Senator Kennedy. Thank you very much, Mr. Chairman, and thankyou for renewing your continued support of the release of oil in the SPRand for calling this hearing to get the facts. I think this is enormouslyimportant at any time and particularly important now.

As you know, Mr. Chairman, first of all, the judgment that has beenmade by the President and the Secretary has had broad support in theCongress and not just limited to our side of the aisle. It has been broadlysupported by the Chairman of our Finance Committee, Senator Roth,Senator Specter, by Senator Collins, Senator Snowe, Senator Jeffords, allRepublicans, Congressman Gilman, Chairman of the House ForeignRelations Committee, as well as yourself.

So this has had a broad range of support because this is the onlymeans available to make an impact in terms of home heating oil in theNortheast, and other parts of the country. This is against a background,as this chart on my left would indicate, that portrays the normal range ofreserves that are held in the East. and that is, the purple line goes throughthere we see the normal range.[The chart entitled, "Distillate Stocks are Low - Especially on the EastCoast," appears in the Submissions for the Record on page 39.]

If you look at December of last year, we were just below the normalrange and yet - and we also, as the next chart we will see, but I want tohold this one, there was a relatively iMild winter. At that time we wentfrom 80 cents a barrel up to $2 a barrel. This had an enormouslydevastating impact, particularly on elderly families, particularly on fixedincome families. If you look now back at the chart, you will see that thereserves that will be held this year, this time, are still well below,generally throughout the Northeast, 40 percent of what they were lastyear in New England, specifically 60 percent. So it is a very ominoussituation.

[The chart entitled, "Regional Residential Heating Oil Prices," appearsin the Submissions for the Record on page 40.]

. The next chart will show even last - well, this next chart showswhat has happened in the different parts of the country where homeheating oil, residual heating oil, has been used. You have New England,the Mid-Atlantic, the South-Atlantic and Midwest, all on that chart goingback for several years. What you see from this chart here is the dramaticspike that took place in New England, for a number of different reasons,we don't have the extensive kinds of areas for reserves, although in theprevious chart it showed you in that other line that we are way below,even the reserves that we could hold. And last year with the fact that wedidn't even keep the reserves where they should have been and could havebeen kept, the dramatic spike, this shows it is particularly sensitive inNew England.

The next chart shows like last year, where the temperature was, theblack line indicates what the normal temperature would be; the red, theactual temperature. So you have really a warmer than normal winter withthe price going right up through the roof You have now the reserves inthe Northeast generally, and particularly in New England, well downfrom last year, which is rather ominous.

[The chart entitled, "Winter Demand Impacted by Weather," appears inthe Submissions for the Record on-page 41.]

This final chart, Mr. Chairman, would show the past where there hasbeen the release of the strategic reserves. I take note, particularly the1996 release where it was 28 million barrels of oil sold to raise revenuesas directed by the Congress as part of the balanced budget regime, I daresay providing relief for hard-pressed families that are involved in life anddeath situations clearly should have a priority even over that particularproposal.

[The chart entitled, "Strategic Petroleum Reserve Releases," appears inthe Submissions for the Record on page 42.]

In the most recent times, we have seen in July of this year the swapthat was made in order to provide some relief to two major oil companies.So the fact remains that there has been the release in the past, and I thinkthere has been sufficient authority to do it.

I want to just conclude, Mr. Chairman, that we have seen now thecommitment of the release of 30 million barrels. Translated, that is aboutthree to five million barrels in our region of the country. It is having apositive impact generally on the heating oil prices, a reduction in theoverall costs of a barrel of oil, about 15 percent reduction. That will have

a very positive impact. It will be good for the next 30 days. We mayvery well be in a situation - we only get, as it works out with the refinery,with the 30 million barrels, three to five million barrels for home heatingoil in our region because others refined in ways for gasoline and otherdifferent gas products. So we may very well have, at the period of time,30 days from now, a requirement to release additional funds.

This is always against the fact that the administration can sell higherthan they buy the futures market, which is now about $24 a barrel. So itis a good savings, a good investment for our country and, of course, wehaven't always taken advantage of the lower price. We missed theopportunity to provide another 200 million barrels just recently in the lastfew years because the Congress made a determination not to have thatinvestment. There is sufficient protection for our national security, mostimportantly, the authority is there to release it.

We take note that nowthat the Spanish Government is consideringreleasing some of their comparable SPR for their own economy, theyhave been supportive of the administration's position, and I also draw theattention of the Committee to the fact that the G-7 has also, this lastMonday, supported this position. So we are grateful to your leadership,Mr. Chairman, as someone who understands this issue. We thank you forhaving these hearings. We look forward to hearing from our witnesses.but it is important to put this into some kind of perspective. Our fellowNew Englanders, Republican and Democrat alike, are appreciative of theaction that has been taken. If this action wasn't taken, there would be noother action that could be taken, in the short-term. The devastatingimpact on families would be realized. That is not going to happen and weare glad that the action has been taken. I thank the Chair.[The prepared statement of Senator Kennedy appears in the Submissionsfor the Record on page 37.]

Mr. Saxton. Thank you very much, Senator Kennedy.Senator Bennett has requested an opportunity to make an opening

statement. What I would like to do is to permit him to make his openingstatement and perhaps have one more from your side. Will that work outfor everybody? Okay. Fine. We will have Senator Bennett for fiveminutes and then we will move on to another Member from the Minority.

Senator Bennett.

OPENING STATEMENT OF

SENATOR ROBERT F. BENNETTSenator Bennett. Thank you, Mr. Chairman. There has not been

unanimous joy at the suggestion that the oil reserves be tapped. SecretarySummers took the unusual step of writing the President a memo in whichhe strongly opposed tapping the oil reserve and quoted Alan Greenspanas supporting that. This is an unusual move. The Chairman of theFederal Reserve usually does not allow himself to be quoted on mattersof this kind, but he and the administration's chief economic advisor, theSecretary of the Treasury, both said this was a serious mistake. It alsohas given rise to an interesting editorial or op-ed piece in The New YorkTimes that appeared yesterday. Thomas Friedman, who normally is notknown as a supporter of Republican causes, was very, very negative inhis reaction to it. If I may quote from some of the Friedman column, hesays we either have to start to consume less oil by shrinking our SUVs,raising gasoline taxes or, again, taking conservation seriously, or findmore nonOPEC oil, which means figuring out how to tap more ofAlaska's huge natural gas reserves without spoiling Alaska's pristineenvironment or else we pay the price.

I should note that the Congress twice has tried to move in thatdirection. Twice, the President has vetoed the Congress' initiative andnow we pay the price.

Mr. Friedman goes on, Mr. Gore knows this but instead of laying iton the line, he opted for an Olympic quality, full body pander, offeringa quick fix to garner votes and pain-free solutions for the future; primethe pumps, prime the polls and pay later. He says this is dangerous.Another name for the Gore strategy would be the Saddam HusseinRehabilitation Act of 2000, because tapping into the Strategic Reservewithout conservation or exploration only guarantees OPEC's dominance.

He goes on, and I will not quote the rest of his column because,frankly, it gets quite political and talks about the election. It makes asuggestion as to how people might vote m the election as a result of this.But I think we should recognize that Secretary Richardson, in hisannouncement, said the release was to increase supply and not to lowerprices. The people in New England who think that this release will infact lower prices are, I believe, deluding themselves. Right now therefineries are at 96 percent of capacity.

They are at full capacity and an addition of crude oil that isunrefined simply means that there is more supply available for therefineries when they get around to shifting from refining gasoline to

refining crude oil into home heating oil. But my expectation is that thehigh prices for home heating oil that we had last year are going to berealized again this year. The charts that the Senator from Massachusettshas given us do not demonstrate to me that we are going to get any lowerprices for home heating oil. If anything, the prices for home heating oilare going to be higher.

And the key comment from the Senator from Massachusetts was,gee, this is the best we can do in the short-term. The column byFriedman indicates that our problem is a long-term problem and it is notgoing to be taken care Qf by short-term solutions. There may be a littlebit of benefit that would come out of this release, but the long-termexclusions lie in the directions that Thomas Friedman talks about and thePresident is going to have to put away his veto pen or the next presidentis going to have to put away his veto pen and allow the Congress to goahead with the initiatives we have already been pushing, which wouldincrease the supply of American crude in the long-term.

We are now seeing that the policies of this administration to holddown the supply of energy across the board, be it natural gas or crude oil,are beginning to come home to roost now in dramatically higher pricesand dramatically greater dependence upon foreign oil. We have noshort-term solution for that. That long-term problem is with us and willremain with us until the administration decides to listen to the Congressand allow increased supply of domestic energy sources, be it natural gasor oil or preferably both, together with increased supply of hydroelectricpower, which this administration has also opposed, or we are going to seeenergy prices continue to skyrocket for the years ahead.

Representative Saxton. Senator Bennett, thank you very muchWe have one additional statement from the Minority.

Mrs. Maloney.

OPENING STATEMENT OFREPRESENTATIVE CAROLYN B. MALONEY

Representative Maloney. Thank you very much, Mr. Saxton, forcalling this hearing today. Winter energy prices deserve our fullattention, and I am pleased that we are here to talk about one solution thathas been put forward to the problem, swapping oil from the StrategicPetroleum Reserve. Senator Kennedy pointed out that this has widebipartisan support, national support and international support from theG-7 and others. While Governor Bush has criticized the decision to swapoil from the Reserve, I am convinced that it is a timely and sensible way

to really help the suffering of consumers, especially in the Mid-West andNortheast and especially with home heating costs.

One thing that troubles me is that he is very critical, or certainpeople are very critical. Yet they don't have any other alternative. Andoil companies have really tripled their profits over this last year. Wecan't expect American families to believe that current prices are entirelydue to OPEC decisions alone. Oil companies' profits have exploded.When we compare their profit margins between June of 2000 and 1999as reported in Standard & Poors, here are the increase in profits.

I would like to put this in the record. I mean, these are huge profitmargins, again, that comes from Standard & Poors, Unocal Corporation,872 percent; Phillips, 274 percent; Chevron, 140 percent; Marathon, 203percent. The New York Times recently reported and I quote, "that the 14major oil companies during the first 8 months of this year earned a totalof $15.5 billion, nearly triple the profits during the same period in 1999when oil prices were depressed," according to the energy informationadministration.

[The chart entitled, "Oil Company Profits Exploded Over the Past Year,"appears in the Submissions for the Record on page 43.1

Yesterday Secretary Richardson testified that the refineries are ableto handle this, and we have already seen that prices have gone down.

I would like to put in the record two letters that I think arcimportant, and I think that they are related to the energy debate that wehave. While OPEC is meeting today in Venezuela and oil companies aremaking huge profits, oil lobbyists are working behind the scenes, as wespeak, in this Congress, with the Majority, to increase their company'sbottom lines at the expense of the public and the taxpayers. And I wouldlike to bring up two issues that are moving through this Congress rightnow. One is the Commodity Futures Modernization Act of 2000, whichhas passed the House Banking Commerce and Agricultural Committees.This would have the effect of allowing trading in energy futures to moveoff of public exchanges and on to private electronic exchanges out ofsight where the public will have no ability to monitor changes in energyprices.

[One letter appears in the Submissions for the Record on page 44; theother was not received.]

For example, currently the market participants on open exchangeswith more than 200 contracts, the equivalent of 200,000 barrels of oil,must report their positions to the Commodity Futures TradingCommission (CFTC) and the exchange and the CFTC makes the

information available to the public. Trades often exchanged will not havethe audit trail available to reconstruct fraud. A situation could occurwhere consumer energy prices spike based on trades and energyderivatives, products conducted on private multilateral exchanges that theenergy companies themselves even own.

And I would like.to put into the record a letter from ChairmanRainer from the CFTC in which he basically says that he cannot audit ormonitor the energy exchanges if this exemption for energy, that allowsthem for their future tradings, to go off of the public trading. I think thatis an important point that would have a long-term effect on pricing andour ability to monitor what is taking place.[The letter from Chairman Rainer appears in the Submissions for theRecord on page 45.]

I would also like to point out yet another giveaway to the oilindustry. In 1996, along with Chairman Horn, we held a series ofhearings where we documented efforts by the oil industry to cheattaxpayers out of millions of dollars owed in royalties for oil taken out ofFederal lands. These hearings and subsequent investigations by the GAOled the subcommittee to conclude that major oil companies were payingroyalties to the Federal Government based on prices that were far lowerthan the market value of the oil they were buying and selling. To date,lawsuits against the oil industry have resulted in more than $300 millionbeing returned to the U.S. treasury. Overall, the oil industry has beenforced to pay over $5 billion to the Federal Government, states and Indiantribes. The revised oil valuation regulations which have emerged fromthese lawsuits will restore an additional $66 million each year to the U.S.Treasury.

With that money, we could put dollars into the LIHEAP (LowIncome Home Energy Assistance Program) program, which has been apriority of Senator Kennedy. We could do a lot with that money. Nowwe find out the Senate Energy and Natural Resources Committee plansto attach a provision designed to thwart the new valuation rule to theEnergy Policy and Conservation Act that authorizes the StrategicPetroleum Reserve, and finally authorizes the desperately neededNortheast Home Heating Oil Reserve.

I am truly disturbed and astonished that we would consider attachinga giveaway to.the oil industry in the midst of a bill designed to helpconsumers deal with rising oil prices. I have written Secretary BruceBabbitt urging him to strongly oppose this provision, and I would like

also to put that in the record. I am hopeful that the Senate will pass itwithout this particular rider.

[The letter to Secretary Babbitt appears in the Submissions for the Recordon page 47.]

Representative Saxton. The gentlelady is well past her time. Canyou finish up?

Representative Maloney. Just in conclusion, oil companies aremaking record profits. This step is a reasonable one. It will - it is a swapthat will - the oil will come back into the Reserve, and at the same time,there are two giveaways moving their way through Congress right nowthat will have an impact on consumer prices from the oil industry.

Representative Saxton. I don't want to interfere, but you are waypast your time. Thank you very much for concuding.

Representative Watt. Mr. Chairman.

Representative Saxton. We are going to move now to ourwitnesses. We had an agreement, Mr. Watt, that we were going to haveoriginally one statement on each side and then in fairness, I expanded totwo statements on each side and so we are going to move to ourwitnesses.

Representative Watt. Well, I did not realize, Mr. Chairman, thatI was going to have to flip a coin with one of my colleagues about whowas going to make an opening statement. Is there some reason that weare in a hurry? Are these gentlemen who are testifying in a hurry to gosomewhere else? Are we in a hurry?

Representative Saxton. We are all anxious to move forward withthe hearing and hear from the experts on the issue.

Mr. Kripowicz.

Representative Watt. Is there some reason that we have waivedopening statements for one person and not the other people?

Representative Saxton. As I stated, Mr. Watt, when we came intothe room it was my intention to have one opening statement on each side.That was the agreement, and in fairness to both sides we expanded it toan additional opening statement on each side.

Mr. Kripowicz.

OPENING STATEMENT OF ROBERT S. KRIPOWICZ,ACTING ASSISTANT SECRETARY FOR FOSSIL ENERGY;

ACCOMPANIED BYIRICHARD FURIGA, THE DEPUTY ASSISTANTSECRETARY FOR PETROLEUM RESERVES

Mr. Kripowicz. Mr. Chairman, Members of the Committee, I ampleased to be here to discuss the Strategic Petroleum Reserve.

Representative Watt. Can we ask the speaker to at least pull hismicrophone forward and let us hear him?

Mr. Kripowicz. Mr. Chairman, Members of the Committee, I ampleased to be here to discuss the Strategic Petroleum Reserve. Iunderstand that when this hearing was first scheduled, the Committeewas interested in a general description of the Reserve and the way wemaintain its readiness. Given the President's direction to the Departmentlast Friday, we also have a specific circumstance to discuss. So I will bepleased to answer both general questions about the Reserve and anyspecific questions members have regarding the way we are responding tothe President's direction.

Ihave with me at the table Mr. Richard Furiga, the Deputy AssistantSecretary for petroleum reserves, who oversces the day-to-day operationsof the Strategic Petroleum Reserve, and who is charged withimplementing the exchange initiative.

The Strategic Petroleum Reserve is the world's largest emergencystockpile otcrude oil. It was authorized in 1975 when President Fordsigned into law the Energy Policy and Conservation Act. We beganadding the first crude oil in July of 1977.

Today the Reserve holds 571 million barrels of crude oil. Contraryto what a lot of people envision, the Reserve is not a typical tank farm.In fact, very little of the Reserve's crude oil is contained in above groundtanks. Virtually all of the inventory is stoted in deep underground saltcaverns. These caverns were created by using water to dissolve massivecavities in the salt domes that are prevalent along the Gulf of Mexicocoast.

The top of a typical storage cavern may be as deep as 2,000 feetunderground and extend another 2,000 feet to its bottom. It is largeenough to hold one of the towers of the World Trade Center. We have62 of these caverns at four sites i. Texas and Louisiana. These cavernshave the capacity to hold 700 million barrels of crude oil, although, as Isaid, they currently hold 571 million barrels.

Why do we use salt caverns? One reason is cost. When we built theReserve, we could store crude oil in the caverns for one-tenth of the costof above ground. It is the most economical way to store large quantitiesof crude oil. A second reason is environmental safety. At the depths ofthese caverns, the natural geologic pressure will seal any cracks thatmight develop in the salt formation.

This provides a very secure way to store oil and avoids problems ofabove ground tank spillage and other environmental concerns.

The salt domes also permitted us to site the Reserve's storagelocations near our major refining centers. Each site is connected tocommercial pipelines and shipping terminals that also provide readyaccess to refineries and distribution points throughout the country.

We can move oil into the market, if necessary, at rates up to 4.1million barrels per day, and we can sustain that rate for three months. Atone million barrels per day, we can deliver oil to the market for nearly ayear and a half.

The Reserve has been used once before by pcesidential order toavert a possible supply shortage. That was during Operations DesertShield and Desert Storm. During Desert Shield, in September of 1990,President Bush directed that we conduct a test sale to ensure the readinessof the Reserve.

When the Persian Gulf conflict escalated in January 1991 andDesert Shield became Desert Storm, the President ordered a fullprecautionary drawdown of the Reserve.

Together, the two actions released 21 million barrels of oil into themarket, four million in the test sale and 17 million in the full drawdown.

We have also used the Reserve on a more limited basis in the past.This summer, for example, we exchanged 1 million barrels of crude oilto refineries in Louisiana that were threatened with supply shortagesbecause of a shipping channel blockage.

In 1996, we carried out a similar exchange because of a commercialpipeline blockage.

In 1998, we exchanged a lower grade of crude oil for a higher gradethat was more compatible with our drawdown and delivery system.

And in 1996 and 1997, we carried out three budget-related sales inaccordance with Congressional appropriations.

This past Friday, President Clinton directed the Department toconduct the largest exchange to date, as a way of boosting domestic oilsupplies. We are especially concerned about the critically low

inventories of heating oil that many families will need this winter. Webelieve that a temporary infusion of 30 million barrels of oil into themarket over a 30-day period will likely add an additional three to fivemillion barrels of heating oil this winter, if refineries are able to matchhigher runs and yields seen in the past. This will be extremely importantnationwide, where distillate inventories are 19 percent lower than theywere a year ago, and it will be especially important on the East Coast,where distillate inventories are 40 percent lower and in New Englandwhere inventories are 65 percent lower than -last year.

This past Monday, my office issued the solicitation for theexchanges. We are asking companies to submit bids by this Friday. Inthe bids, companies will specify how much additional oil they will returnbetween August and November ofnext year. We will choose the winningbids and award contracts by the following Friday.

This is an important point, Mr. Chairman. The President ordered anexchange of crude oil, not a sale. That means we will get the oil back,plus a bonus percentage. Bids will be awarded on the basis of whichcompany offers to return the largest amount of additional oil ofcomparable or higher quality. in other words, we are not depleting theReserve, rather we will be adding to.it.

Our solicitation specifies November as the month for delivering thecrude oil. However, the three Reserve sites we are using will be ready toaccommodate earlier deliveries if the companies can make suitabletransportation arrangements. We could be seeing the first oil move intothe market perhaps as early as mid-October.

I would point out, Mr..Chairman, that the President's decision lastFriday is one of a series of actions we are taking to prepare for thiswinter. Another is the creation of a two million barrel heating oil reservein the Northeast. We are exchanging a small portion of the crude oilfrom the Reserve, about 2.8 million barrels, for two million barrels ofheating oil stocks and the storage capacity to hold them this winter.

All of our contracts are in place for the heating oil reserve, and weare beginning to fill it. In fact, over half the oil is already in place. Andwe expect the Reserve to be fully stocked in the next few weeks, wellbefore the original end of October target date.

With that, Mr. Chairman, let me conclude my opening statement andalong with Mr. Furiga, answer any questions that you and the othermembers may have.

[The prepared statement of Acting Assistant Secretary Kripowicz appearsin the Submissions for the Record on page 49.]

66-908 2001 - 2

Representative Saxton. Thank you very much, sir.Mr. Furiga, do you have an opening statement, sir?

Mr. Furiga. No. I don't.

Representative Saxton. Would you just say for the record who youare and what your position is? You will have to pull the microphonecloser.

Mr. Furiga. My name is Richard Furiga. I am the DeputyAssistant Secretary for the Strategic Petroleum Reserve, and as such, Ioversee the operations of the office here in Washington, D.C. and ourproject office which is located in New Orleans.

Representative Saxton. Thank you very much. Are you going toanswer questions also or do we direct our questions all to Mr. Kripowicz?

Mr. Kripowicz. If you would direct them to me, Mr. Chairman, ifI can't answer them, I will have Mr. Furiga help me.

Representative Saxton. As you know, I have thought that it wouldbe a good idea to use some of the Strategic Petroleum Reserve forpurposes of increasing supply. As I said in my opening statement, lastwinter was lartizularly difficult in the Northeast, where there is such ahigh reliance on home heating oil for purposes of homeowners heatingtheir homes.

As a result of the situation that I described in my opening statement,in February, I wrote a letter to Secretary Richardson and asked him toconsider doing something similar to this, and at that time he was opposedto it and told me so. Then I wrote another letter in March because thesituation had not improved and, again, the administration was opposed tothe policy that is today the administration's policy.

Then on September 15th of this year, I wrote another letter knowingthings were not better. So the record of my position on this issue is quiteclear.

Having said that, I think it would be a cruel hoax on the Americanpeople to put in place this policy only to see prices spike again. So Iwould like to try to have you help us put into the correct perspectiveexactly what it is that we can expect. So I have some questions that mayhelp us to get there.

I am aware that in the recent past the OPEC countries have agreedto increased production by, I believe, 800,000 barrels per day; is thatcorrect?

Mr. Kripowicz. That is correct, yes, sir.

Representative Saxton. I believe it is also true that the OPECcountries have had three such announcements of approximately the samemagnitude; is that correct?

Mr. Kripowicz. Yes, sir. Our calculation is that between theOPEC countries and the other oil-producing countries of the world, thatsince these first announcements that were made, approximately three anda half to four million new barrels per day of oil are now available for themarket, or will be once OPEC starts producing this last 800,000.

Representative Saxton. Now that would be the internationalmarket, wouldn't it?

Mr. Kripowicz. Yes, sir.

Representative Saxton. -How does that relate to additional importsinto the United States?

Mr. Kripowicz. Our level of imports, as I recall, has risen slightlyover the past year. I think it has to do with overall supply in the world,not necessarily directed at the United States. A lot of those imports couldhave been coming from other stocks.

Representative Saxton. Now, is this increased production whichresults in increa.;ed imports into the United States, how does that relateto 30 million barrels per month? In othei* words, the release of petroleumproduct from the SPR, 30 million barrels sounds like a lot, but on theother hand, if you look at it in a different way, I read this morning that itis about a day and a half s supply for the American consumer. How doesthe OPEC increase in production relate to that kind of increase that weexpect from the release from the SPR?

Mr. Kripowicz. The overall world production is approximately 75million to 76 million barrels a day, and our use is approximately 25percent of that or 19 million barrels a day, so our increase of 1 millionbarrels a day is approximately a 5 percent increase in the amount of oilthat would be available on U.S. markets. I would point out that as littleas a two million barrel swing in the amount of oil in the world marketshas been responsible largely for the large increases in oil prices over thepast year and a half.

Representative Saxton. The OPEC countries withholdingproduction, you are saying?

Mr. Kripowicz. It is a combination of reduced production and thenlater increased demand. So, you know, a small amount of oil in theneighborhood of a few million barrels, even though there are 75 millionbarrels a day produced in the world, has a large impact on price.

Representative Saxton. Do you expect the 800,000-barrel-per-dayincrease - announced increase, we hope it takes place, and otherincreases that have occurred to make a significant impact on oil supplyin this country?

Mr. Kripowicz. The indications from our Energy InformationAdministration are that the combination of the increases by both OPECand other world producers will allow for the beginning of the resumptionof inventory building that needs to take place in order for prices tostabilize.

Representative Saxton. And then if we are beginning to increasesupply, does that mean that it should increase enough to hold prices downthis winter?

Mr. Kripowicz. Again, our Energy Information Administrationbelieves that over the next few months the prices should remain relativelystable, but then will start decreasing after the winter months.

Representative Saxton. So you expect stable prices this winter?

Mr. Kripowicz. According to our projections, yes, sir.

Representative Saxton. Let me move on to another subject that hasbeen of interest to me: There seems to be conflicting reports aboutexisting spare refining capacity, as Senator Bennett pointed out in hisopening statement. I too have heard that we are at 96 or 97 percent ofrefining capacity. Several. analysts have reported that rcefineries arecurrently producing at near capacity, and Secretary Richardson saidFriday that U.S. refineries have spare capacity. What is the situation withrespect to refining capacity at this time, in your opinion?

Mr. Kripowicz. My understanding is that the average utilization isapproximately 94 to 95 percent right now, but we are going into a periodwhere refinery capacity is usually somewhat less utilized so that if therefineries produce at higher rates, we will be able to get, as I said in mytestimony, some three to five million barrels more heating oil for stocksout of the 30 million barrels we intend to release. Generally speaking, atthis time of the year there is a lot of maintenance done in the refineriesand their utilization drops considerably. I believe Secretary Richardsonis going to meet with the refiners later this week to talk to them aboutdeferring some of that maintenance and keeping their high levels ofutilization in order to produce more heating oil.

Representative Saxton. Common sense tells me that this time ofthe year, beginning in October, would seem to me to be the time of the

year when refinery capacity would be more fully utilized, getting readywith product for November and December. Is that not true?

Mr. Kripowicz. Typically, to my knowledge, is that in Septemberand October is when the refineries usually do maintenance turnaround sotheir capacity utilization is somewhat lower. Capacity utilization in therefinery industry is always very high. It is usually at least 90 percent orhigher even during turnaround tinie. So we are not talking about goingfrom very low to very high utilization.

Representative Saxton. Tell me about the inventory situation.How are our inventories of oil at this time?

Mr. Kripowicz. Senator Kennedy had some charts up there thatcame from our Energy Information Administration. There is no questionthat crude oil stocks are below normal levels this year. They are at 289million barrels, which is at least 25 million barrels below what would bethe normal lower limit. For crude inventories, I have some updatedinformation from this morning that shows that nationally we have 115million barrels of distillate product, which is 21 percent lower than lastyear; and for the eastern region of the country we have 40 million barrels,which is 42 percent below last year's levels. For New England heatingoil, which is the concern that we have and why we are releasing thereserves, there are 4.3 million barrels of stocks in place, which is 70percent below last year's levels. So we are indeed in a very tightinventory situation.

Representative Saxton. Is there a relationship between theinventory levels and subsequent price levels?

Mr. Kripowicz. Price levels are detennined by demand, basicallyby supply and demand. If you have a lot of demand and low inventories,the natural result is higher prices.

Representative Saxton. So in summary, since my five minuteshave expired, you believe - or are at least hopeful - that the increasedproduction by OPEC countries, with the release from the SPR, coupledwith the needed excess refining capacity, would produce enough extraproduct on the market to stabilize prices this winter? Is that what yousaid, essentially?

Mr. Kripowicz. Stabilize them at higher prices than they were lastyear but stabilize them, yes, sir. Now if there are unusual weathercircumstances, there could be some significant volatility in prices, andthat is always the case.

Representative Saxton. Now let me clarify again to be sure. Didyou just say at higher levels than last year?

Mr. Kripowicz. Yes, sir.

Representative Saxton. So you believe again this winter, in spiteof the current administration policy, which I am not fighting with, that wecould see prices spike above where they were last year?

Mr. Kripowicz. I am talking about nominal prices, not necessarilyspikes in price. I don't know - I am not predicting any spikes in price butI am saying if, for instance, the price of heating oil in New England couldaverage around $1.32, which is--

Representative Saxton. It went to $2.00 last year.

Mr. Kripowicz. But not aii average. On average, it was muchlower than that.

Representative Saxton. Do you expect there to be a spike of up to$2.00 or above this year?

Mr. Kripowicz. We are not predicting any spikes, sir. Those arevery hard to predict. If you have normal weather and the production thatwe project, then there wouldn't be any price spikes.

Representative Saxton. So it sounds like you are hopeful therewon't be price spikes?

Mr. Kripowicz., Yes., sir.

Representative Saxton. But you don't.know that'?

Mr. Kripowicz. Yes, sir, we can't predict that.

Representative Saxton. It is very important that we don't leave theimpression with the American people that we have provided an ironcladfix to this problem and then have a price spike occur or prices rse, let usnot even call it a spike, prices rise to last year's levels oc above and findout that their government has put in place policies that they said wouldwork and it didn't work.

I think that is crucially important, and at the same time, if there isgoing to be a bad situation with heating oil this winter in spite of the factthat I have advocated certain programs that you have subsequently put inplace, I don't want them to hear you or :ne or Senator Kennedy oranybody else say this is going to fix the problem if we don't think it is.That is why I am so persistent about this point.

Mr. Kripowicz. If things remain normal, there should be no pricespikes. There is no way that we can guarantee that that won't happen.We can't guarantee that there won't be bad weather and disruptions inshipping because of freezes or other things of that nature.

Representative Saxton. Senator Bennett points out that this year'saverage price is still higher than last year's; is that correct?

Mr. Kripowicz. Yes, sir.

Representative Saxton. Do we expect the current policy that hasbeen proposed to lower average prices?

. Mr. Kripowicz. A 30-day release of oil from the StrategicPetroleum Reserve will only have a temporary effect on prices. Overall,because of the increases in production from OPEC and other countries,our Energy Information Administration projects that the prices of oil willgradually decrease over the next six to nine months.

Representative Saxton. Senator Kennedy.

Senator Kennedy. Thank you, Mr. Chairman.Let me just come back to this issue about what we might be able to

anticipate through the winter. I think you have made the point that therelease of several million barrels of oil does have an impact, a rippleeffect, within the worldwide industry that is not insignificant and that theswing of two or three million barrels even a day in a world that isconsuming 77 million, has at least, as you related, a positive impact oflowering the costs for consumers. Let us get back to the home heating oilnow.

We have, as you have pointed out, with the announcement of thePresident, threc to five million barrels that will be available in theNortheast and now you have also indicated that there is an expectationthat there will be some increase in terms of production. I want to knowwhat is going to happen after 30 days. Are we going to be able to rely ona continuation of some release if we are not going to get this increasedproduction, if we are going to see a drawdown in terms of these reserves,if we are going to have an increase or a lowering of the temperatures upthere in New England? What will be your recommendations - if thatcircumstance develops? Because we are glad, as we look down the roadnow, and we are reassured by what you are saying, but we understandthat you are going to have to make a decision reasonably quickly.

We were mindful last year when this whole issue developed and theadministration didn't release or swap, the answer that we received fromthem, if they let the oil go out then, take the time to refine it, and by thattime the weather would get warmer and that is why there was a good dealof resistance to doing it. A big point is being made about a changedposition by some people because they were against it at a time when itwouldn't make any difference versus making a decision and supporting

now where it will make a difference, and that point hasn't evidently sunkin. I keep hearing it made on the television.

My question to you is, what is going to happen now, after these next30 days or so, if we don't get an increase in production? Are we going tohave to depend upon another increase? Should we? Should we anticipatethat now so we are not going to see these kinds of swings that are goingto perhaps protect the heating oil user now, but later in February orMarch send the price up through the roof?

Mr. Kripowicz. Sir, we are continually reassessing the situation.As a matter of fact, we have instituted daily meetings to discuss the oilsupply situation and the heating oil supply situation. At the end of 30days or sooner, if there is any indication that such action is necessary, wewill reevaluate our position. We need to look at the stocks of heating oiland distillates and what the refiners are doing and what OPEC and othersuppliers are doing and factor all of those things together to keep afterthis constantly.

Senator Kennedy. But you are not going to leave us high and dry,hopefully'?

Mr. Kripowicz. No, sir. That is our pledge.

Senator Kennedy. Let me just ask you - and that is reassuring -with the release of 30 million barrels from the Strategic PetroleumReserve over 30 days, the Reserve currently holds 570 million barrels,what risks, if any, are there of allowing the Reserve to temporarily fall to540 million barrels in terms of our national security? How much of a riskis that?

Mr. Kripowicz. Senator, we think that the risk is minimal. We stillhave the capability to release the Reserve at over four million barrels aday, even with the - for 90 days, even with the release of the 30 millionbarrels. So we think it has very little effect, particularly since we will bereturning the oil to the Reserve beginning early next fall.

Senator Kennedy. Yes. How long will it take to build the Reserveback up to 570 million?

Mr. Kripowicz. We are expecting to have the oil come back frombetween August and November of next year.

Senator Kennedy. Of next year?

Mr. Kripowicz. Yes, sir.

Senator Kennedy. Didn't the administration recommend toCongress that we buy 200 million more barrels when oil prices were low?Do you know?

Mr. Kripowicz. There was never a budget request for that item,Senator, although we did institute a royalty-in-kind program, taking someof the oil that would have been sold for $10 a barrel and putting in theReserve, and we are in the process of putting 28 million barrels ofroyalty-in-kind oil into the Reserve.

Senator Kennedy. Finally, why has the Congress failed toreauthorize the Strategic Petroleum Reserve? Do you know?

Mr. Kripowicz. I wish I did, Senator. The House has--Senator Kennedy. Well, we are hearing so much about this issue

now by members, particularly - I don't want to say on the other side ofthe aisle, because we have had bipartisan support for this particularproposal, but at least some Senators are excited about this. But thereseemingly hasn't been the sense of urgency in terms of the orderlylegislative process in terms of reauthorizing. I hope we get about thebusiness of doing that.

I want to thank you very much for your responses. It was veryhelpful. I want to thank the Chairman for having these hearings as well.

Representative Saxton. Senator Kennedy, thank you very much.I would like now to turn to Senator Bennett.Senator Bennett. Thank you, Mr. Chairman.I am finding myself grateful that I lIve in a part of the country that

doesn't use home heating oil, although the price of natural gas has morethan doubled and my constituents are going to be payring twice as muchthis winter.

A few quick comments. I is my undurstariding that one of thereasons why refineries don't have the demand in September and Octoberis that the summer driving season is over and they can switch fromrefining gasoline to refining home heating oil. Currently with gasolineover $2.00 a gallon in some parts of the country, the demand for gasolinestays high and that is one of the reasons why the refineries are operatingat 96 percent of capacity, which means if they switched to home heatingoil, they are going to have to stop making as much gasoline. So wouldthat indicate that in an attempt to deal with the home heating oilchallenge, which you have outlined, which strikes me as stark, that thereis going to be no relief out of this release from the Strategic PetroleumReserve with respect to gasoline for people in those States? Is that acorrect assumption?

Mr. Kripowicz. No, sir. We are releasing 30 million barrels of oiland that will go for multiplicity of products, including gasoline and dieselfuel.

Senator Bennett. But if the refineries can't do it - I am not talkingabout the amount of crude oil stacked up outside of the refinery. If therefinery is operating at virtually full capacity, which at 96 percent it is,and it says, okay, we have to increase the amount we are making forhome heating oil, that is a sum zero game for the refinery; for the refineryto increase the amount going into home heating oil, it has to decrease theamount going into gasoline. The amount standing on the dock coming inmakes no difference in terms of the refinery capacity, isn't that true?

Mr. Kripowicz. If, in .fact, the refineries are using all of theircapacity, and as I had stated earlier, the refineries at this time of the yeargenerally reduce their capacity utilization-

Senator Bennett. I understand that, but they are reducing thecapacity because the demand for gasoline goes down so that they can say,all right, we now don't have to produce as much. The demand forgasoline is not going down. The demand for gasoline atypically rightnow is very high by virtue of the high prices, the demand to say give usmore gas to drive the prices down. So I think there is a bottleneck herein the refinery that we have to recognize is going to impact here.

Let me switch to another comment that you made, because frankly,these numbers disturb me, the numbers you are giving. You say we are70 percen t lower than we were last year at this point with respect to homeheating oil in New England?

Mr. Kripowicz. Yes, sir.

Senator Bennett. That is a huge gap that has to be made up, at atime when the demand on the refineries for other prod icts remains high.So when you say you are going to end up with an average price higherthan last year, that strikes me as an understatement. I think theeconomies and the physical capacity of this industry that you are talkingabout absolutely guarantees that you are going to be higher than you werelast year. I accept your statement that you can't predict spikes, but peopledon't live on spikes. They live on the average price that they pay, and ifthey are going to be paying an average that is higher than last year, whichyou said they would, and I think that is absolutely dictated by the fact thatyou are only - you are 70 percent lower than last year. I say "you." Idon't mean "you" in the Strategic Petroleum. I should say "we."

Last year when the prices were so high that people were stunned bythem, Secretary Richardson said we were caught napping. Itjust boggles

my mind that if he was caught napping last year and the prices were sohigh that it was an issue, that he could come into this year 70 percentlower than he was last year. I don't think the executives of the oilcompanies had anything to do with that. Did they? Did the executivesof the oil companies dictate that we would be 70 percent less in NewEngland this year than we were last year?

Mr. Kripowicz. No, sir, and the administration is taking steps; thisrelease of oil from the Strategic Petroleum Reserve being one to build upthose heating oil supplies. The second is to establish the NortheastHeating Oil Reserve, which will, before the end of October, add 50percent to the supplies that exist in the New England area.

Senator Bennett. But didn't they see this coming, with 70 percentbelow last year, and last year was a crisis? It would seem to me, if I amdoing any long-range planning, last year is a crisis and I admit publiclythat I was caught napping by that crisis, I would want to be above lastyear, not 70 percent below when we are coming into this. I agree withSenator Kennedy that the concern is not what is going to happen over thenext 30 days. What is going to happen as you get into this wholesituation and you are going into it 70 percent farther away than you wereat this point last year, and last year was a disaster?

Now that is not technically the subject of this hearing. The subjectof.this hearing has to do with understanding about the release of this oiland, as I say, I simply look at what Secretary Summers and ChainnanGreenspan and others have said that this was a mistake, but maybe we arein such a disaster situation that we have to do it and that it is anemergency that has to be done. But the question that arises clearly in mymind is how did the administration get us in such an emergency wherethey are at the point where there is 70 percent, I just have to keep comingback to this, 70 percent below where we were in a year that everybody uphere remembers as a disaster year? What got us to that 70 percent figure?

Again, it clearly wasn't the oil companies. They love to sell oil. Sosomebody, if we were asleep at the switch or we were caught napping lastyear, somebody clearly did it again, it seems to me.

Mr. Kripowicz. Senator, if I may respond, the administrationmoved rather quickly to try to establish a regional home heating oilreserve because we knew that there were low heating oil inventories inthe Northeast, and when inventories did not start to increase, as theynormally do around this time, we moved to try to establish enough crudeoil supply to get another three to five million barrels of heating oil before

the bulk of the heating season starts. The idea is to get us back up to atleast the levels that we were last year.

Low inventories are an endemic problem, not just in heating oil butin crude oil and gasoline and all other products, caused by circumstancesthat began as long as two years ago, whenever oil prices were $10 abarrel and production was originally cut back by OPEC. We lostproduction in our own country, and over that period of time, ourinventories were reduced drastically. I wouldn't accuse the oil companiesof reducing them on purpose. Nor would I accuse the government ofdoing anything to make them be reduced, either.

Senator Bennett. I don't think the government did anythingdeliberately shortsighted. I don't accuse anybody of that. But I do think,given the numbers you have given us here, not any numbers I broughtfrom staff, numbers you have given us here, we have to say that theiractions were, in fact, shortsighted. They may have been well intentioned.They undoubtedly were. As I say, I will not impute evil motives toanybody here.

Mr. Kripowicz. Yes, sir.

Senator Bennett. But clearly, the numbers speak for themselves.We are facing a situation where the people in New England, by your owntestimony, are going to-be paying a substantially higher level on averagefor home heating oil this year than they did last year, and that is ifeverything works as you hope it works. If there are some glitches, whichyoui appropriately say you can not predict, it will be even worse than that.

So we are facing a situation where a best case, people in NewEn-gland are going to be paying higher prices on the average tdhis yearthan they were last year, even if everything works out.

Mr. Kripowicz. Yes, sir.

Senator Bennett. Okay.

Mr. Kripowicz. If I may add one- other thing. It is that theadministration has worked very hard over the past year to have OPEC andnon-OPEC producers increase their production, and that has resulted inan additional four million barrels a day that are now available for use.

Senator Bennett. That gets back to the comment in my openingstatement. They may have worked to try to get OPEC nations to increaseproduction, but at the same time, for eight years, they have been doingeverything they can to make American producers produce less, not onlywith respect to oil but every other form of energy. But that is a debate foranother time.

Representative Saxton. Senator Bennett, thank you very much.Mrs. Maloney.Representative Maloney. Thank you. Thank you very much. As

we were discussing, one of the contributing factors to the high price of oilis the depletion of inventories, and as you testified we are 70 percentbelow or lower in the inventories of the private sector. So my questionis, why have U.S. refineries allowed inventories to fall so low?

Mr. Kripowicz. This is, Congresswoman Maloney, this is part ofthe answer that I was giving to Senator Bennett, it is a long process thatstarted with oil prices being $10 a barrel in 1998 when we had excessinventories, and OPEC cut back production. We lost production in theUnited States because it became uneconomic and we began to utilize thelarge inventories, both in the United States and across the world, becausethere was not enough production to meet demand. In addition, demandincreased tremendously, both because of economic activity in the UnitedStates but also Asia has recovered from.the period of recession they werein whenever oil prices were $10 a barrel. So all of those inventories wereused up partly by decreased production and partly by increased demand.

A second thing that is occurring in the tiarket is that with existinghigh prices, with low fiture prices, there is no incentive for anybody tostore oil in inventory because they would be selling it to a market whereprices are going to be lower. So there is no incentive. If prices stabilizewith increased production and they become closer to what future pricesare, then there will be some more incentive for refiners to store product.

Representative Maloney. I guess the main question is how do weuse this opportunity to make sure that this doesn't happen in the future?The line of questioning seemed to indicate that the government was doingsomething that interfered with the private sector maintaining inventories,but is there some way we can work to make sure that - or work wherethis does not happen in the future? You testified that this was ashort-term approach to the high cost. Is there some way that we canencourage refineries to replenish their inventories and use thisopportunity for future economic stability, oil stability?

Mr. Kripowicz. I think it is a long-term question, although it maynot be in terms of many years but it is certainly in terms of many months.We need to increase production to meet demand and to somewhat exceeddemand so that we can have enough oil to start restoring inventories.Once they are restored to normal levels, then we shouldn't have theproblem of high prices because of short inventories.

Representative Maloney. How much oil is the royalties-in-kindprogram expected to bring into the Reserve over the next year?

Mr. Kripowicz. We have already processed 10 million barrels intothe Reserve, and we have another 18 million barrels which will bedelivered in the next year.

Representative Maloney. Could you clarify for us how the swapswork from the Reserve, and what happens if oil continues to rise in price;will oil companies be obligated to repay the oil even though it might bemore expensive than it is today'?

Mr. Kripowicz. Yes, ma'am. Our solicitation asks for bids forreturning the oil between August and November of next year, at least ona one-for-one basis but, you know, we expect the offers to beconsiderably more than one-for-one, and once based on the anticipatedmarket conditions, the bidders propose a certain amount of oil to bereturned to the Reserve; even if market conditions change, if prices arenot actually lower but higher next summer, they would still have to returnthe same amount of cil. So there is not aprice adjustment. The contractsare on strictly a quantity-for-quantity basis.

Representative Maloney. Oh, I see. And how long does it take for

oil, once released fro-m the Reserve, to get to people's homes in the formof heating oil?

Mr. Kripowicz. That is sort of a variable number. Within days ofrelease, or of signing the contracts, the oil can actually be released torefineries and we can get it there within a week. Once it is refined, itwould take, in some cases, a minimum of a couple of weeks to deliverthat refined product to, say, the Northeast. So we are talking aboutanywhere from a month to two months, but generally speaking, webelieve that if the oil is delivered on our schedules, that the refinedproduct will probably be available by the end of the calendar year.

Representative Maloney. Vice Presidential Candidate RichardCheney has called for more oil exploration and drilling in the Alaskanwilderness. Would you comment on thatproposaI?

Mr. Kripowicz. The administration does not support drilling, as the

Congresswoman is aware of. The administration has actively opened upthe National Petroleum Reserve in Alaska for oil drilling and continuesto pursue aggressive oil sales in other areas of the country such as thedeep offshore Gulf Coast where we have had large increases inproduction and in other areas in Alaska.

Representative Maloney. I guess more broadly, how much oil isavailable in the currently known oil fields around the world? And basedon current consumption patterns. do we have any idea how long this oilwill last?

Mr. Kripowicz. I don't have those numbers available at myfingertips, Congresswoman, but I can get that information for the record.Our projections are, for example, that through 2020 the projections of ourEnergy Information Administration are that there is enough oil forproduction at prices nominally less than what they are today.

Representative Maloney. What would have happened to oil priceshad the President not authorized a release from the strategic oil reserve?We are seeing them drop, what, $7.00 so far? But what would havehappened?

Mr. Kripowicz. I am not sure I know the answer to that question.It is clear that when you add more supply to the market that the oil priceswill go down, and they have, although this is the short-term effect. In thelong-term, we expect that the oil prices, even absent the release from theReserve, would have moderated based on 2riticipated production anddemand and they would have gone down eventually.

Representative Maloney. Say if after 30 days the price of oil stillremains high. above $30 a barrel, what additional steps might the EnergyDepartment be prepared to take?

Mr. Kripowicz. We still have all of the options available for therelease of the Strategic Petroleum Reserve, or for an additional exchange.We would look at all of those options and will continue to fbllow all ofthose options. as I said to Senator Kennedy, because of the seriousnessof the situation.

Representative Maloney. Could you just shale with us whatprograms are available now to hclp people cope with the rising price ofoil? Are these programs limited by region, income, or some othercriteria?

Mr. Kripowicz. The programs that are available are the LIHEAPprograms, and they do have formulas for both income and distribution tothe various states. I think the President just released an additional 400million in low income energy assistance last Saturday.

Representative Maloney. I would like to give you a letter thatCommissioner Rainer sent to me expressing concern about the movementin Congress to move off the exchange, the futures trading and oil. Theway I know what oil prices are is that I see it on the exchange. I open up

the paper. It is on the exchange. Their argument is if we move it off theexchange, they will not be able to audit or monitor what the futureexchange rates are for oil. Could you comment on this? Is this - I see itas a problem because that is how I understand what is going on, and I cansee if it is not on the exchange that it would be hard for me and otherconsumers, and really policy.people who are concerned about the priceof oil, and unlike financial instruments that are infinite, it is a commodity,oil is a commodity, it is a very finite product and it seems to me it shouldbe on the exchanges as is corn and other commodities.

Mr. Kripowicz. Ma'am, that is not my area of expertise. I wouldbe happy to take a look at the letter and we will provide some comments,but I don't have the expertise to be able to say, other than the fact that itmakes sense, to be able to know what those prices are.

Representative Maloney. It seems like common sense. We havebipartisan support on keeping the exchange transparent so that consumersand everyone else knows what is going on.

Thank you very much for your testimony and for being here today.Representative Saxton. Thank you, Mrs. Maloney.

Before I recognize Mr. Pitts, I would just like to comment on Mrs.Maloney's question relative to inventories. You indicated that there is noincentive. I want to make sure I understand. Let me just say this. andthen you tell me if what I interpret is correct. I have information from theDepartment of Energy that there may be some expectation that oil priceswill begin to decrease at some point in the future.

You say here the growth of non-OPEC oil has played a significaintrole in the erosion of OPEC's marketshare over the past two decades, andthen you go on to discuss this issue, and you conclude that prices maybegin to come down because of the looser grip that OPEC will have onsupply. Therefore, is what you are saying about inventory that becauseprices are high today and it would cost refiners a significant amount moreto put in place inventories today than they might expect it to costsometime down the road, is that what is causing the lack of incentive?

Mr. Kripowicz. It is a question of what you expect to be able tosell something for, and the original cost. So that if you are buying veryexpensive oil now, you want to be able to sell it now while the prices arestill high. There is no incentive to hold the inventory if you expect pricesto drop. If the futures prices were somewhat higher, or near term priceslower then there would be incentive to store and wait for the higherprices. That is the effect of a very large difference, which there is nowof $5 or $6 between current prices and future prices. It pays a refiner to

ship the product immediately, and it pays whoever is storing that productto get rid of that product as quickly as they can while prices are still high.

Representative Saxton. Thank you very much.Mr. Pitts.

Representative Pitts. Thank you, Mr. Chairman.Mr. Kripowicz. there seems to be a good deal of confusion as to the

criteria or the mandate for using the Strategic Petroleum Reserve. Whatconstitutes a crisis? What objective criteria exists for using the Reserve'smandate?

Mr. Kripowicz. Mr. Pitts, the Energy Policy and Conservation Actspells out criteria that the President needs to use in order to draw downthe Strategic Petroleum Reserve, and I will talk about that in a second.But in this case, what we are doing is an exchange and not a sale, not anactual drawdown. Since we are exchanging oil are going to get it back.So the President did not have to strictly adhere to these particularguidelines, although he still used the overall basis for the program thatthe supply of heating oil would be very short and that was the reason forthe exchange. The criteria for an actual sale from the Reserve are a littlemore stringeat. What they require is a national energy supply shortageof significant scope and duration, which will cause a major adverseimpact on the national cconomy, which would result - which is likely toresult from either an interruption of supply of imported products ordomestic products, or some act of God, and those things are spelled outin the law and are reviewed very carefully before the President wouldactually decide whether or not to nake a release from the Reserve, to sellthe oil rather than to do somnething like an exchange.

Representative Pitts. What are the actual criteria for using anexchange versus a drawdown or sale?

Mr. Kripowicz. There are no established criteria for an exchange,although the President clearly made his decision based on the fact that wecould provide additional supplies of heating oil, which were in shortsupply in the Northeast.

In addition, one of the requirements of an exchange that we haveused for all of our other exchanges that we are using here is that we willactually acquire more oil for the Reserve through the exchange.

Representative Pitts. The New York Times reported that other G-7countries are considering releasing oil from their own oil reservestockpiles. Is this a policy that may be adopted by other countries and is

there a role for international coordination of such policies? Whatprovisions have been made for such a strategy?

Mr. Kripowicz. There is an international coordination rolewhenever you have sales from the Reserve. There is not the necessity forinternational coordination if you have an exchange, although I know thatwe -- that the Department talked to several governments before weactually made the exchange solicitation.

Representative Pitts. You mentioned that refining capacity is atapproximately 94 percent, and that this is a time of the year the refinersusually decrease refining to focus on maintenance. If refiners are at nearfull capacity, will the release from the Reserve and the increase inrefining capacity increase the cost of refining?

Mr. Kripowicz. We don't believe so, or if it does, it would only bea marginal increase. The refining industry has been able to produce at 98or 99 percent capacity with very little increase in cost.

Representative Pitts. If the refiners have to delay maintenance,what exactly does that mean for refiners, their ability to maintainproduction, the impact on the eiivironment?

Mr. Kripowicz. Probably experts in that don't sit at this table, butI would say that for short periods of time delay of maintenance would notbe a problem. If you were talking about delaying maintenance forsignificant periods of time, then you might begin to run into operationalproblems.

Representative Pitts. What about the impact oi the environment?

Mr. Kripowicz. The refiners are required to meet the environ-mental standards and guidelines that they operate under, and we are notasking that those guidelines le waived.

Representative Pitts. Finally, according to the plan--

Representative Saxton. Mr. Pitts, if I may, something is wrong -that red light should not be on. You have almost four minutes remaining.

Representative Pitts. Thank you, Mr. Chairnian. According to theplan, oil refineries will replace oil in the Reserve. If demand or prices donot fall to an equitable level, what effect will this have on the refineries'ability to replenish the Reserve?

Mr. Kripowicz. It will be more expensive for them to do so, but thegovernment will still get its oil. The risk falls on the purchasers of - orthe exchangers of the oil. When they take the oil, they take the risk in thefuture markets and if, in fact, prices stay up and don't go down, then itwill be more expensive for them.

1 31

Representative. Pitts. It will cause an increase in prices, is thatcorrect?

Mr. Kripowicz. What I would suspect would happen is that theexchangers would come back to us and ask us to further delay theexchange and create even additional oil for the Reserve while they bet onthe futures market again.

Representative Pitts. Thank you, Mr. Chairman.Representative Saxton. Thank you very much, Mr. Pitts.Mr. Watt.

Representative Watt. Thank you, Mr. Chairman. I appreciate theChairman having the hearing and I appreciate the Chairman beingbalanced in his approach and comments on this issue.

I do have some concerni that some of the other people on the otherside who have asked questions and made comments may not be quite asbalanced about this and may be impliedly suggesting that thisadministration has more blame than 1 believe it has, and that perhapsthere is a revisionist view oi their part of the history of the RepublicanParty's invoivement in this and a number of Republicans' involvement inthis. So I would like to spend a minute or two, since I didn't get a chanceto have an opening statement, kind of setting the record straight here foreverybody that wants to have the record set straight.

My research indicates that when President Bush sold oil from theStrategic Reserve during the Gulf War, prices were actually lower thanthey are now and that President Bush stated that the release of oil was notfor national security reasons but to, quote, "calm the markets," closedquote, is what he said at that time.

In 1996, Republicans twice passed laws requiring the sale of oilfrom the Reserve, a total of over 28 million barrels, to help pay forbudget priorities. That is 1996. In 1999, Republican leaders DickArmey, Tom DeLay, Roy Blunt and 35 others introduced a bill thatwould have eliminated the Department of Energy and abolished theStrategic Reserve, and since the Republicans have been in control,. theyhave let the President's authority to fully use the Reserve lapse threetimes, totaling 18 months, and in 1999, they blocked the proposal to buy10 million barrels of oil for the Reserve when crude prices were $10 abarrel, not anywhere close to the 30-some dollars a barrel they are today.

So I think we need to set the record straight here before we startimplying that there is some blame here that should be on our side on thisissue.

Additionally, since I have been here, my Republican colleagues havespent the last five years cutting conservation and renewable energyprograms, and for those of you who are trying to blame this on us, weunderstand that supply and demand operate in this equation, not justsupply. So despite the fact that the Republican presidential candidate hascalled for more spending on energy conservation, Republicans haveunderfunded solar, renewable and conservation programs by $1.3 billionbelow. the President's funding request since 1995, $1.3 billion less.

In 1995, Republicans cut energy efficiency programs by 26 percent,dropping funding from $1.117 billion in 1995 to $840 million in 1996.If they had not cut the Weatherization Assistance Program by 50 percentin 1995, over 250,000 more households could have helped decrease thedemand for heating oil this year. So, again, supply and demand both playinto this.

They have also failed to support domestic producers by passingproposals for tax credits to keep marginal wells in production and buyingdomestic crude during times of low prices.

So I think we ought to understand that this is a very complex issue,and this is not the time to be poinxting fingers across the aisle at each otherand pretending that in this election year, the Democratic presidentialcandidates, or a Democratic Congrcss, has real responsibility for that.

Even in this Congress, when heating bills will be over 30 percenthigher this winter, this Republican Congress has yet to pass a bill to fullyauthorize the President to create a Northeast Heating Oil Reserve.

On June 15, Republicans voted down a Democratic proposal to buy$10 million in fuel for a home heating oil reserve, and the AmericanPetroleum Institute reported last week that heating oil inventories are 20percent lower than last winter and, of course, the witnesses have attestedto that.

In 1995, my Republican colleagues voted to eliminate the LowIncome Home Energy Assistance Program, and in 1996 they proposedcounting LIHEAP assistance against the income limits for food stampsand tried to force disadvantaged families to choose between food andheating their homes.

So this is an issue that has been going on awhile, and I think theChairman of our Committee has been very balanced in his approach, butI want to be clear that since I may have next to the last word on this, Iknow the Chairman is going to have the last word on it, that those of uswho are casting st3nes and aspersions about this issue should not bedoing so. This is a complex issue. I personally support what the

President has done to deal with this, what we hope - what we all hope,I hope on a bipartisan basis, is a short-term shortage, but we have got tocontinue to do whatever we can to increase supplies, alternative sourcesof fuels and to reduce demand; and all of those things have to play intothe equation if we are going to have any kind of security in this area inthe future.

I appreciate the Chairman giving me some time, and I will be happyto yield back whatever time I have.

Representative Saxton. Thank you very much, Mr. Watt.

For a minute there I had my eyes closed and I dreamt I was at theDCCC listening to a conversation, but anyway, I would like to yield fora final thought to my friend, Senator Bennett.

Senator Bennett. Well, thank you, Mr. Chairman. I listened toCongressman Watt and I accept his rebuke for partisanship. I hope it isa bipartisan rebuke because we started off with the demonization of oilcompanies and an attack on oil companies, and the rhetoric that has beenin the presidential campaign. I do agree absolutely with CongressmanWatt that this is a very complicated issue. It is a long-term issue, andwhile I would maybe have a different interpretation, Mr. Watt, than youdo with respect to some of the congressional actions you have described,I do sustain my belief that this administra ion has, in fact, pursued anoverall policy that has discouraged energy creation in the United States.I have seen it in my own state.

I have seen it throughout the West where a very large percentage ofour natural resources for energy exists. We have seen it in the bills theCongress has passed that would increase American production of energysources, which the President has vetoed, and in my opening statement,the reference by Thomas Friedman, who is not a Republican, indeed ifyou read his column regularly, you know he is not a Republican, I do notexpect that he will vote for Mr. Bush, but he is scathing in hisdenunciation of the long-term neglect of energy sources in the UnitedStates. And I add the additional comment about refineries because nomatter how much energy you have, it all has to go, in terms of homeheating oil and gasoline, through a refinery, and I have seen, again,firsthand in my own state, the environment&l policies of thisadministration discourage and ultimately in some cases - discourage thebuilding of refineries, in some cases force the closing of refineries, sothat our refinery capacity becomes the bottleneck through which all ofthis is going.

Representative. Watt. Will the gentleman be kind enough to yieldbriefly?

Senator Bennett. Sure, I will be happy to.

Representative. Watt. I just want to make the point that I think

there is enough blame to go around for both sides. I am not trying to saythat this is you-all's fault or our fault. I think there is enough blame to go

around in the public sector, in the private sector, you know,compensation, failure to conserve. None of us is exempt from the blamehere. and I don't think we do ourselves much of a service to get into the

blame game here. We need to try to roll up our sleeves and come up with

a sounder policy in the future that keeps us out of these kinds of

situations.

So I think I generally agree that there is plenty of blame zo go

around.

Senator Bennett. On the last final comment from me, I have just

purchased a vehicle that gets 70 miles to the gallon, so I am doingwhatever little bit I can to deal with the conservation issue. The fact that

my six children have now left home has a great deal to do with it because

it has only two seats, and for most of my married life, I couldn't handle

that.Thank you, Mr. Chairman.

Representative Saxton. Well, thank you. I would Ike to thank all

the Members of the Joint Economic Committee for having been here

today, and Mr. Kripowicz and Mr. Furiga, thank you for being here. Thc

purpose of today's hearing was to get the facts out on the table. I think

for the last hour and 40 minutes or so we have been able to do that. So

I would like to thank everyone for their participation and I hope that we

have taken a small step in moving the process forward to solving what is

obviously a very, very serious situation in our country., particularly in the

northeastern part of our country. Thank you very much, and the hearing

is adjourned.[Whereupon, at 11:4 a.m., the hearing was adjourned.]

SUBMISSIONS FOR THE RECORD

PREPARED STATEMENT OFREPRESENTATIVE JIM SAXTON, VICE CHAIRMAN

I am pleased to welcome our witness, Assistant Secretary RobertKripowicz, before the Joint Economic Committee (JEC) today. Althoughit was not planned this way, this hearing on the Strategic PetroleumReserve (SPR) appears to be especially timely. The purpose of thehearing today is to examine the SPR in the context of U.S. energy policy.In recent days there has been tremendous interest in the SPR, but a lot ofimportant questions remain unanswered. One such important questionrelates to the various possible methods of tapping the SPR and whetherthey would prove effective in the short run and in the long run.

The hearing today is not intended to promote any particular point ofview, but merely to examine the underlying facts. These include theamounts of oil in the SPR and home heating oil reserve, the quality of thisoil, the mechanics of releases through swaps and their effects on pricesand supplies, and the physical removal of the oil from the SPR.

Since last winter I have been on record favoring a release of oil fi-omthe SPR to deal with short-rnm shortages, especially for home heating oil.If market forces were. determining oil prices, an SPR release would beproblematic, but is less so when the state owned firms of the OPECcountries are exercising their monopoly power. An SPR release wouldcounteract OPEC's anti-market policies -- at least in the short-ruin -- wheninventories are low.

In addition, the use of the oil weapon by some countries makes acounter-action appropriate in the short run. OPEC's restraint of oilsupplies reflects the influence of the hard line price hawks within thecartel. Moreover, Iraq also exports a significant amount of oil to the U.S.,a factor that could threaten the U.S. yet again.

However, an SPR release is only a temporary measure and is not apanacea. The U.S. must do everything in its power to undermine theOPEC cartel and its monopoly power over supply and prices. The healthof the national and international economy is very positive, but it has ledto higher dernand for oil, and OPEC has moved to fully exploit thisdevelopment. U.S consumers and taxpayers are paying a heavy price forthis OPEC exploitation.

Even as they put the squeeze on U.S. consumers, several of thehard-line OPEC price hawks and other OPEC members and allies arecurrently receiving U.S. taxpayer subsidies through the International

36

Monetary Fund (IMF). I have introduced legislation mandating the U.S.executive director of the IMF to oppose new loans to OPEC members andallies who exercise their monopoly power to the detriment of the U.S.economy, but much more pressure on OPEC is also needed. Currently,Venezuela, Indonesia, and Algeria are all receiving IMF subsidies at theexpense of U.S. taxpayers.

Fortunately, new exploration and extraction technologies are leadingto the discovery of vast new oil deposits that can be tapped in moreefficient ways. As the former Saudi oil minister has acknowledged, theOPEC's days are numbered. However, today we are focusing on the shortrun problem and whether it can be effectively addressed through the SPR.I would like to thank Mr. Kripowicz for his appearance before theCommittee. today.

.Snator 8dward M4. kuyldy

FOR IMMEDIATE RELEASE CONTACT: Will KeyserSeptember 27, 2000 (202) 224-2633

STATEMENT BY SENATOR EDWARD M. KENNEDY AT THEJOINT ECONOMIC COMMITTEE HEARING ON

THE STRATEGIC PETROLEUM RESERVE

The Strategic Petroleum Reserve is an important resource for the nation's security, and Icommend Chairman Saxton for calling this hearing on its capabilities. This is a timely subject ofurgent importance to millions of Americans.

Families in the Northeast cannot keep war just on the plans and promises that havebeen circulating as the winter approaches. While many discuss long term solutions to thenation's energy problems, short term inventories of home heating oil have become ominouslylow in our region. Today, inventories are 40% lower than last year in the Northeast, and 65%lower than last year in New England.

Last year was an unusually warm winter--but because inventories were low, familiesthroughout the Northeast were hit with $2 a gallon heating oil costs, while families in otherregions paid almost $1 less. Had last winter been colder than normal in New England, theshortages and emergencies could have been much more severe.

Clearly, something had to be done about the low current inventories. Last week,President Clinton took decisive and timely action by tapping the Strategic Petroleum Reserve for30 million barrels of crude oil over 30 days. This SPR release was the only realistic way toincrease inventories of heating oil in the Northeast. The Energy Department projects that theincrease will be 3 to 5 million barrels by November, or 10% above existing inventories. Thealternative to the SPR release was to do nothing, which would have been unacceptable in theface of the serious potential risks.

It's disappointing, therefore, that some have criticized last week's SPR release aspolitical. The SPR release has already proved to be a useful option, and it was probably the onlyoption. No one has proposed another practical solution to our region's short-term heating oilneeds. Those needs are immediate and overwhelming, and numerous Republicans had joinedDemocrats in asking the Administration to release SPR oil, including Senators Roth, Specter,Jeffords, Chafee, Collins, and Snowe, along with our distinguished Chairman, CongressmanSaxton, and Congressman Ben Gilman, the Chairman of the House International RelationsCommittee, and a number of other House Republicans.

-more-

2'

Releasing oil from the Strategic Petroleum Reserve was sound policy. In addition to

bipartisan support in Congress, the G-7 Finance Ministers and Central Bank Governors called the

decision good for the world economy, and issued a statement in support of it. Certainly,

American truckers and consumer groups were pleased with the decision to increase distillate

stocks. The market itself has shown its approval. The price of November crude oil has dropped

over $6-or 15/between the day we had urged Secretary Richardson to release SPR oil, and

this morning.

We are also interested in ways that Congress can strengthen the Strategic Petroleum

Reserve. It currently can store 700 million barrels of crude oil, but Congress has only provided

funds for 571 million barrels. Because Congress did not allocate the resources needed to fill

SPR when oil was $10 a barrel, we now face costs of over $30 a barrel.

In 1996, Congress directed the sale of 28 million barrels to raise money for the

government. Yet now, some complain that the Administration's decision to release 30 million

barrels of oil will jeopardize national security. Clearly, these positions are inconsistent, and I

look forward to our witness's assessment of the relative security risks that various releases of

SPR pose to the nation, as well as what can be done to strengthen the reserve.

The nation looks to both Congress and the Administration for leadership on energy

policy. When it comes to heating homes in the Northeast, the issue is a matter of life and death

for millions of families. Cold doesn't discriminate between Republicans and Democrats. The

Strategic Petroleum Reserve is a major part of the solution this winter, and so is increased

funding for the Low Income Home Energy Assistance Program. LIHEAP helps protect 106,000

families in Massachusetts, and over 3 million nationwide, from having to choose between

heating and eating. We need to deal with all aspects of these energy challenges, and produce

both the short-term and long-term energy solutions that the nation needs.

I look forward to today's hearing, and to working with my colleagues to achieve a

bipartisan energy policy worthy of this nation.

-30-

East Co st

Regional Residential Heating OilPrices

225

200

175

2 150

O 1251 0 0 - - -**

O~100.

C 75 - New England

50- -Mid Atlantic

-x-S. Atlantic

25 +Midwest0 1 1 1

IV O O m CI) 1*- 0 '1 1

C) 00C' Va

ii

1999-20(

STRATEGIC PETROLEUM RESERVE RELEASES

July 2000 Exchange I million bappels fop 1.03 million bappels when Pefin-epy ship access blocked.

Appil 1998 Begin exchanging 28 million bappels fop 28 million bappels plustpaspoptation and quality imppovements.

Decembep Exchanged 11 million bappels of low gpade cpude oil fop 8.5 mil-1998 lion happels of sweet cpude that is mope valuable and easiep to

Pefine.

1998 Exchange 900,000 bappels plus 82 million to meet Apco's emep-gency pipeline filling needs,.

logo 28 million bappels of oil sold to Paise Pevenue as dipected byCongpess.

lool lpaq wap, 17.5 million bappels; Peleased duping Desept Stopm.

1890 Test sale of 3.5 million happels duping Desept Shield.

1986 Test sale of I million happels dipeCted by Congpess.

Oil Company Profits Exploded Over the Past Year

(profit margin increases between June 2000 and June 1999)

Unocal CorporationPhillips PetroleumMarathon GroupChevron CorporationTexaco IncorporatedExxon Mobil

872%274%203%140%125%123%

CAROLYN B. MALONEY s141, DIScT. New You O Des

KANKING AND FINANCIAL 0 l-ItAsa .O .

Conglres of the thiteb A'tates 1^1 0IO

GOVERNMENT REFORM - o

JOINT ECONOMIC COMMITTEE Jouse of RepreftttaltibeUnollasington, ZBC 20515-3214

September 7, 2000

William J. RainetChairmanCommodity Futures Trading CommissionThree Lafayette Center1155 21' Street, NWWashington, DC 20581

Dear Chairman Rainer:

On July 27, 2000, the House Banking Committee reported H.R 4541, the CommodityFutures Modernization Act. The intent ofthis legislation is to increase legal certainty in financialderivatives markets and to enhance overall market stability.

While I am supportive of the goals of the legislation relating to financial products, I amconcerned with language that may have the effect of moving substantial trading in energyproducts off of public exchanges. Unlike unique financial derivatives products of infinite supply,many questions remain about the susceptibility of energy products to market manipulation.Investigations of the energy markets are currently ongoing and energy prices are near all-time

highs. Under current circumstances, I do not believe it is the appropriate time to further.undermine consumer confidence in energy prices by moving trading in energy products off ofpublic exchanges where they are closely monitored by your agency and where market information

is available to the public.

As this legislation may shortly move to the House floor, I respectfully request that your

agency forward me an analysis of the language relating to exemptions for nonfinancial products in

H.R. 4541 and the other commodity market modernization bills pending before the House.

Thank you for your timely response to this request.

Sincerely,

Member of Congress

U.S. COMMODITY FUTURES TRADING COMMISSIONThree Lafayette Centre. 1155 21st Street. NW, Washington. 0C 20581

Willian J.Rainer (202) 418-5030aairmn September 19, 2000 (202) 418-5520 Facsimile

The Honorable Carolyn B. MaloneyMember of CongressU.S. House of Representatives2430 Rayburn House Office BuildingWashington, D.C. 20515-3214

Dear Representative Maloney:

I am pleased to write you on behalf of the Commodity Futures Trading Commission inresponse to your recent letter asking for the Commission's position with respect to language inH.R. 4541 that would exempt energy and metals products from regulation under the CommodityExchange Act.

Before addressing the specifics of the energy and metals exemptions, I would like toemphasize the Commission's support for swift Congressional action on legislation establishinglegal certainty for over-the-counter financial derivatives consistent with the unanimousrecommendations of the President's Working Group on Financial Markets.

However, all versions of H.R. 4541 also contain provisions that effectively exempt mostforms of trading in energy products from the Commodity Exchange Act, contrary to therecommendations of the PWG. As stated previously in testimony in both the House and Senate,the Commission is deeply concerned that these exemptions are not based upon sufficientevidence to warrant their inclusion in the legislation. One of the principal factors cited by thePWO in recommending an exclusion for OTC financial derivatives was that nearly every dealerin those products is either subject to, or affiliated with, an entity subject to federal financialregulation. This cannot be said with respect to most participants in trading energy products.

The Commission also notes that the views of other agencies with responsibilities forregulating various aspects of the cash markets in energy products have not been solicited. Therecommendations of the President's Working Group on Financial Markets for treatment of OTCfinancial transactions was preceded by nearly a year of deliberation and study by the fourprincipal agencies of the Working Group, resulting in a consensus on treatment of thoseproducts. No such process has been undertaken by the agencies with responsibilities for variousaspects of trading in energy products, and we are therefore concerned that the potentialconsequences of this part of the legislation have not been thoroughly considered.

The Honorable Carolyn B. MaloneyPage 2

While the exemption in energy products is common to all three versions of the legislation- those of the Committees on Agriculture, Banking & Financial Services and Commerce,respectively - the Commerce Committee version extends the exemption to apply to metalsproducts, as well.

With respect to the exemption for metal commodities, the Commission has serious

reservations about the extent to which H.R. 4541 would exempt these products from the CEA.In the Commission's experience, metal commodities have an unambiguous history ofsusceptibility to manipulation and we believe that futures and options transactions in thesecommodities require full regulatory oversight by the CFTC to protect the markets and theirparticipants from unlawful practices. For example, in 1998 the Commission settled a majorcopper manipulation case, in which one company acquired a dominant and controlling cash andfutures market position during 1995 and 1996 that caused copper prices worldwide to rise toartificially high levels. That case resulted in the offending company's paying the largest civil

monetary penalty in U.S. history to that time. In fact, the President's Working Group Reportexplicitly stated that these markets have been susceptible to manipulation and to supply andpricing distortions and therefore recommended that they not be excluded from the CEA.

The Commission recognizes that the legislation attempts to address some of theseconcerns by providing the agency with anti-fraud and anti-manipulation authority. Charging theCommission with the responsibility to police for fraud and manipulation, however, withoutconferring commensurate authority to promulgate regulations, where necessary, leaves the

CFTC inadequately equipped to fulfill those responsibilities.

While there are many important provisions of H.R. 4541 that warrant enactment, theCommission cannot recommend that the Congress move forward on those provisions unless thebasic issues outlined here are addressed. The Commission is pleased to continue working with

you and other interested parties to reach a satisfactory solution to these important issues.

Sin ly,

William J. ner

CAROLYN B. MALONEY

BANINIANDFINANCIAL 0 anls...Congres of the Widteb A'tates "'-

GOVERINMENT REFORM C

Jw ECONM COMMBTTEE NOt of Iwtr titatibtlabillingttn, 1i 20515-3214

Sqteember 13, 2000

The Honorable Bruce BabbittSecretary of the Interior1849 C Street, NWWashington, DC 20240

Dear Secretary Babbitt:

It has recently come to my attention that Senator Murkowski. without any committeeconsideration, will offer an amendment to drastically expand the Royalty-in-Kind program. As aMember who has worked for years to make sure that taxpayers receive the fair amount of oilroyalty payments, I am extremely concerned that this proposed amendment could seriously affectthe ability of the Federal government to collect the appropriate amount of royalties from oil takenfrom Federal lands.

Specifically, I am concerned that this amendment would replace the existing standard for"fair market value" of oil sold from Federal lands with one that is vaguely worded and potentiallydesigned to benefit the oil industry's legal challenges to the recently enacted oil valuation rule.Earlier this year, after years of industry resistance, your Department was finally able to implementa new oil and gas valuation rule to ensure that the Federal government is properly reimbursed foroil taken from Federal lands. The new rule requires oil companies to value oil based on market-based spot pricing (i.e., fair market value) instead ofso-called "posted prices" which companiesdetermine on their own. As a result ofthese changes, the Federal government will finally end anindustry scam that was costing taxpayers more than $66 million each year. Language tofundamentally redefine the "fair market value" of oil in statute could effectively undermine thenew valuation regulations. This is completely unacceptable. This issue is too important to berushed through Congress in the waning hours of this session.

In addition, I am extremely concerned that Congress is on the verge of fully authorizing aprogram which has never been considered in committee and which the General AccountingOffice(GAO) expressed concern about as recently as August 1998. The GAO is currentlyreexamining the Royalty-in-Kind program to see if any progress has been made. I strongly urgeyou to oppose this legislation until we have the opportunity to hear from the GAO and theappropriate committees on this critically important issue.

Instead of this unnecessary amendment, I ask that you urge the Senate to recede to theHouse on the FY 2001 Interior Appropriations bill and allow the Royalty-In-Kind pilot program

48

to deduct transportation and processing costs for one year. In that way, we can learn more aboutthe viability of the concept and also allow Congress the time to more carefully and collegiallyconsider this proposal.

I look forward to hearing your views on this legislation and hope you will join me inpublicly opposing it. Thanks in advance for your consideration

Sincerely,

Carolyn I. MaloneyMember of Congress

cc: Senator Barbara BoxerSenator Richard DurbinDirector Walt Rosenbusch

Statement of Robert S. KripowiczActing Assistant Secretary

For Fossil EnergyU. S. Department of Energy

Before the Joint Economic Committeeon

September 27, 2000

Mr. Chairman and Members of the Committee, I am pleased to be here to discuss the StrategicPetroleum Reserve and the actions taken this past week by President Clinton to use the Reserveto help avert possible fuel shortages this winter.

The Reserve was authorized in 1975 in the aftermath of the first Arab oil embargo. The EnergyPolicy and Conservation Act, signed into law by President Gerald Ford on December 22, 1975,provides that the Reserve may consist of up to one billion barrels of petroleum products. Thecurrent plan for the Reserve, however, provides for 750 million barrels of crude oil and 2 millionbarrels of heating oil.

The Strategic Petroleum Reserve consists of four oil storage sites - two in Louisiana and two inTexas - with capacity to store 700 million barrels. The first oil for the Reserve was delivered onJuly 21, 1977, and today the Reserve holds 571 million barrels of crude oil. The most commonmeasure of the relative size of the Strategic Petroleum Reserve is to compare its inventory to thenet daily volume of petroleum imported into the United States. The Reserve inventory nowequates to between 50 and 60 days of import protection.

We also are establishing a regional reserve of heating oil in the Northeast as a component of theStrategic Petroleum Reserve. One million barrels of heating oil are to be located in the NewJersey portion of New York harbor and another one million barrels in New Haven, Connecticut.A portion of the heating oil stocks is already in place, and the entire 2 million barrels will be inplace early in October.

The Gulf Coast Reserve crude oil is stored in caverns that have been hollowed from massive saltdomes. These domes are common through the Gulf region, and provide the most advanced,lowest cost, and environmentally friendly method of long term petroleum storage. Our facilitiesare located near major refinery centers and connected to commercial pipelines and shippingterminals, which allow the rapid release of oil to the marketplace.

The President's Decision to Use the Strategic Petroleum Reserve

On September 22, 2000, President Clinton directed the Department of Energy to use the StrategicPetroleum Reserve to help bolster domestic oil supplies, especially the critically low inventoriesof heating oil that many families will need this winter.

50

2

The Department of Energy will exchange crude oil from the Reserve. Companies that obtain oilwill be required to return comparable or higher quality crude oil to the Reserve in the fall of2001. Because oil prices are expected to be lower then, the companies will return the amountthey obtained plus additional quantities as a bonus percentage that will be specified in the offers.This ultimately will increase the amount of oil in the Reserve and enhance the nation's"insurance" against future energy supply disruptions.

The President made the decision to carry out the oil exchange because of concerns that laggingpetroleum product inventories could create potentially severe hardships for many Americanfamilies this winter. Today, distillate inventories across the country, which include heating oil,are 19 percent lower than they were a year ago. On the East Coast, where 36 percent of familiesuse heating oil to stay warm, distillate inventories are lower still: 40 percent less than last year'slevels. In New England, heating oil inventories are closer to 65 percent lower than last year.

While global oil production has been increased in recent months due in part to theAdministration's diplomatic efforts - production increases have added three-and-a-half millionbarrels of oil per day to the world market - demand continues to siphon off the extra barrelsbefore they move into inventories. Thus, U.S. crude stocks remain very low, and stocks ofheating oil and other distillate fuels are at critically low levels.

The President's action will add the equivalent of a million barrels per day to the U.S. market overa period of 30 days, a temporary infusion of oil that could begin quickly to restore a betterbalance between supply and demand. The action will likely add an additional 3-to-5 millionbarrels of heating oil this winter, if refineries could match higher runs and yields seen in the past.

This past Monday, September 25, the Energy Department issued the exchange solicitation fromits New Orleans office. Offers will be due this Friday, September 29. The Energy Departmentwill evaluate the bids and negotiate "best and final" offers next week, and contracts are expectedto be awarded on Friday, October 6. Companies offering to return the most crude oil of acomparable or higher grade next August through November will be awarded contracts.

The solicitation calls for moving the crude oil to successful offerors during November, althoughthe Energy Department will be able to accommodate earlier deliveries if an offeror can make thenecessary transportation arrangements.

Statutory Authorities for Exchanging Reserve Oil

The exchange initiative is authorized by Section 106 of the Energy Policy and Conservation Act.This section authorizes the Secretary, for purposes of implementing the Strategic PetroleumReserve Plan, to place in storage, transport, or exchange:

3

1) crude oil produced from Federal lands, including crude oil produced from theNaval Petroleum Reserves to the extent that such production is authorized by law;

2) crude oil which the United States is entitled to receive in kind as royalties fromproduction on Federal lands; and

3) petroleum products acquired by purchase, exchange, or otherwise. (emphasisadded)

Emergency Oil Sales from the Reserve

As I've noted, the President's action this past week has been to offer an exchange of crude oil asa way to supplementing supplies on the market over the next two months while replenishing -and adding to - the Strategic Reserve's inventory next year. The Committee has also expressedan interest in the process for an emergency sale and drawdown of Strategic Reserve oil.

The authority to draw down the Reserve is dependent on a Presidential finding of severe energysupply interruption or that a drawdown is necessary to comply with our international obligations.I have attached to this statement the relevant language from the Energy Policy and ConservationAct that defines the conditions under which the Reserve can be used in this manner.

In the event of an emergency oil sale, refiners and trading companies would be the bidders forReserve oil under standard sales provisions which we have distributed to prospective bidders andhave posted on our web site. Knowing in advance the procedures for a competitive sale permitscompanies to respond to a solicitation and the government to carry out its bid evaluation andaward process in a rapid and efficient manner.

To ensure that our operation and potential use of the Strategic Petroleum Reserve remainsconsistent with the practices of private industry, we routinely meet with companies that couldpotentially be involved in the use of the Reserve. Recently, for example, we have had customerservice teams visit 30 companies this year that account for 96 percent of the Nation's refiningcapacity.

This close coordination with industry is one of the primary reasons why the Department can issuea solicitation for an emergency oil sale within 24 hours of a Presidential finding and complete thebid process and be ready to deliver oil to successful offerors within 15 days.

If called upon to counter a major disruption, the Reserve can supply oil to commercial buyers at arate of more than 4.1 million barrels per day for 90 days. During this time, the Reserve would bethe equivalent of the fifth largest oil producing country in the world.

4

After the 90-day maximum drawdown period, the rate of oil release would decrease as storagecaverns are emptied. At one million barrels per day, the Strategic Reserve could supply a steadyflow of crude oil to the market for approximately a year-and-a-half.

The large volumes of oil and the rapidity with which it can be moved into the marketplace makesthe Strategic Petroleum Reserve a formidable deterrent to countries that might consider using theflow of oil into world markets for political leverage.

Since the creation of the Reserve the only time a President has made such a finding was duringthe Gulf War in 1991, at which time the Energy Department offered nearly 34 million barrels andsold about 17 million barrels of Reserve oil.

The Need for Reauthorizing EPCA

As Members are aware, the Energy Policy and Conservation Act (EPCA) expired on March 31,2000. Our General Counsel staff and senior legal staff at the Department of Justice, however,have concluded that the authorities of EPCA to manage the Strategic Petroleum Reserve havebeen effectively extended by Congressional enactment of current year (FY2000) appropriationsfor the Reserve.

It is important, however, that there be no ambiguity about the President's ability to use theStrategic Petroleum Reserve in the future. EPCA provides the only direct and full authority tooperate the Reserve and is the strongest underpinning for our emergency oil response capability.That is why the President and Secretary Richardson have continued to call on Congress to renewthe authorities of EPCA. The House of Representatives has acted twice in the past severalmonths to reauthorize the legislation, and hopefully, the Senate will take action in the near future.

EPCA reauthorization is also important because the Act provides limited antitrust protection forU. S. oil companies assisting us and the International Energy Agency to plan for and respond toan oil emergency in a coordinated manner.

Meeting Our International Obligations

The U.S. Strategic Petroleum Reserve is the world's largest emergency stockpile of crude oil. Assuch, it helps the United States satisfy its international obligations to other member nations of theInternational Energy Agency. Under the Agreement on an International Energy Program, theUnited States and other member countries of the International Energy Agency (IEA) have agreedto store the equivalent of 90 days of net petroleum imports against the possibility of supplyinterruptions, and to jointly respond to such interruptions. The U.S. meets its obligations by acombination of Government-owned stocks and private sector inventories. In total the membercountries of the IEA account for approximately 1.2 billion barrels of petroleum reserves.

53

5

The Desert Storm drawdown of 1991 was conducted in coordination with the lEA and otherOECD nations. This concerted effort was one of the primary reasons why oil markets stabilizedand prices moderated during the Persian Gulf conflict.

Mr. Chairman, this concludes my opening statement and I will be pleased to answer anyquestions that you and the Members of the Committee may have.

Attachment

The Energy Policy and Conservation ActStatutory Provisions for an SPR Drawdown

DEFINITIONSSEC. 3. As used in this Act:(8) The term "severe energy supply interruption" means a national energy supply shortage which thePresident determines -

(A) is, or is likely to be, of significant scope and duration, and of an emergency nature;

(B) may cause major adverse impact on national safety or the national economy; and

(C) results, or is likely to result, from (i) an interruption in the supply of imported petroleumproducts, (ii) an interruption in the supply of domestic petroleum products, or (iii)sabotage or an act of God.

DRAWDOWN AND DISTRIBUTION OF THE RESERVESEC. 161.(2) For purposes of this section, in addition to the circumstances set forth in section 3(8), a severe energysupply interruption shall be deemed to exist if the President determines that -

(D) an emergency situation exists and there is a significant reduction in supply which is ofsignificant scope and duration;

(B) a severe increase in the price of petroleum products has resulted from such emergencysituation; and

(C) such price increase is likely to cause a major adverse impact on the national economy.

(g)(1) The Secretary shall conduct a continuing evaluation of the Distribution Plan. In the conduct ofsuch evaluation, the Secretary is authorized to carry out test drawdown and distribution of crude oil fromthe Reserve. If any such test drawdown includes the sale or exchange of crude oil, then the aggregatequantity of crude oil withdrawn from the Reserve may not exceed 5,000,000 barrels during any such testdrawdown or distribution.

(h)(1) If the President finds that -

(A) a circumstance, other than those described [above] exists that constitutes, or is likely tobecome, a domestic or international energy supply shortages of significant scope orduration; and

(B) action taken....would assist directly and significantly in preventing or reducing theadverse impact of such shortage,

then the Secretary may...draw down and distribute the Strategic Petroleum Reserve.

55

(2) In no case may the Reserve be drawn down under this subsection -

(A) in excess of an aggregate of 30,000,000 barrels with respect to each such shortage;

(B) for more than 60 days with respect to each such shortage;

(C) if there are fewer than 500,000,000 barrels of petroleum product stored in the Reserve; or

(D) below the level of an aggregate of 500,000,000 barrels of petroleum product stored in theReserve.

0

r2--1S. HRG. 107-50

THE EMPLOYMENT SITUATION:

FEBRUARY 2001

HEARING

befor-ethe

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

March 9, 2001

Printed for the use of the Joint Economic Committee

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON: 2001cc 72-432

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, D.C. 20402

JOINT ECONOMIC COMMITTEE

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

HOUSE OF REPRESENTATIVESJIM SAXTON, New Jersey, ChairmanPAUL RYAN WisconsinLAMAR SMITH, FloridaJENNIFER DUNN, WashingtonPHIL ENGLISH, PennsylvaniaADAM H. PUTNAM, FloridaPETE STARK, CaliforniaCAROLYN B. MALONEY, New YorkMELVIN L. WATT, North Carolina

SENATEROBERT F. BENNETT, UTAH, Vice ChairmanSAM BROWNBACK, KansasJEFF SESSIONS, AlabamaMIKE CRAPO, Idaho

LINCOLN CHAFEE, Rhode IslandJACK REED, Rhode IslandEDWARD M. KENNEDY, MassachusettsPAUL S. SARBANES, MarylandJEFF BINGAMAN, New MexicoJON CORZINE, New Jersey

CHRISTOPHER FRENZE, Executive DirectorROBERT KELEHER, ChiefMacroeconomist

PATRICIA RUGGLES, Minority Staff Director

CONTENTS

OPENING STATEMENT OF MEMBER

Representative Jim Saxton, Chairman ....................... I

WITNESSES

Statement of Katharine G. Abraham, Commissioner, Bureau of LaborStatistics: Accompanied by Kenneth V. Dalton, AssociateCommissioner, Office of Prices and Living Conditions; and Philip L.Rones, Assistant Commissioner of Current EmploymentAnalysis .............................. .......... 3

SUBMISSIONS FOR THE RECORD

Prepared Statement of Representative Jim Saxton, Chairman ..... .16Prepared Statement of Senator Jack Reed, Ranking Minority .

Member ........................................ 17Prepared Statement of Senator Jon Corzine .................. 19Prepared Statement of Commissioner Katharine G. Abraham, together

with Press Release No. 01-57, entitled, "The Employment Situation:February 2001," Bureau of Labor Statistics, Department of Labor,March 2001; selected charts, and "Unemployment Rates by Countyin New Jersey," .... .............................. 20

THE EMPLOYMENT SITUATION:FEBRUARY 2001Friday, March 9, 2001

CONGRESS OF THE UNITED STATES,JOINT ECONOMIC COMMITTEE,

WASHINGTON, D.C.

The Committee met, pursuant to notice, at 9:33 a.m., in Room 1334,Longworth House Office Building, the Honorable Jim Saxton, Chairmanof the Committee, presiding.

Present: Representatives Saxton and English. Senator Corzine.Staff Present: Chris Frenze, Bob Keleher, Darryl Evans, Colleen

J. Healy, Daphne Clones-Federing, Corine Bradshaw, Amber Williamsand Russell Comeau.

OPENING STATEMENT OFREPRESENTATIVE JIM SAXTON, CHAIRMAN

Representative Saxton. Good morning. It is a pleasure to welcomeCommissioner Abraham before the Committee once again to report onthe release of new employment and unemployment data for February.

Recent current economic conditions indicate that the economy hasslowed from the remarkable pace present through the middle of last year.The array of economic data shows that the economy has been in aslowdown for the last two quarters. For example, the rate of GDP growthhas fallen two quarters in a row. The consumer spending and investmentgrowth have also slipped. However, there are some signs of a residualeconomic strength in certain sectors, such as construction and the service-producing industries. In addition, overall employment growth has slowedbut has generally been positive.

The employment-population ratio remains high, and labor marketconditions for the most part remain fairly tight as reflected by therelatively low unemployment rate. The slowdown does make theeconomy more vulnerable to shocks and disruptions, but the economyremains in positive territory.

The Federal Reserve is aware of the softness of the economy, and itsrecent survey indicates that that is a continuing problem.

The employment data released today seemed to be influenced by theslowing pace of the economy. Payroll job growth for February was135,000, considerably lower than the 225 to 250,000 range typical duringthe healthy economic expansion. The unemployment rate remainedunchanged at 4.2 percent. Given the weakening of the economy since themiddle of last year, the case for change in economic policy is quitestrong.

The tightness of Federal Reserve monetary policy should be relaxed,and the Fed has taken steps in this direction earlier this year, although

more remains to be done. Further rate cuts by the Fed are needed. As amatter of fact, for quite some time I have been questioning Fed policy.As far back as November, 1999,1 began to question Fed tightening policyand did so again in March of 2000 and finally again earlier this year.

Congress can also do its part by reducing the fiscal drag on theeconomy from the excessive tax burden imposed on our tax system. TheHouse took a step in that direction yesterday, and the Senate will work itswill later as time goes by. The tax system is counterproductive, and nowis a good time to reduce its negative effects. This will not make theeconomy turn on a dime, but it will improve the prospects for continualeconomic growth now and in the future. The current economic outlookposes challenges that should not be taken lightly. Changes inmacroeconomic policy are needed to get the economy back on track.

Commissioner Abraham, let me again welcome you to today'shearing. We are certainly anxious to hear your report in the veryarticulate way that you have been accustomed to delivering it to us.Before I do that, I would like to welcome my colleague from New Jerseyfor the first time, Senator Jon Corzine, who is no stranger, to say theleast, to the world of economics and economic growth and investment,having been extremely successful in his real life adventure; and now heis here with us in Congress. As he just walked into the room for his firsttime, I don't know whether he may have an opening statement, but wecertainly want you to feel welcome here and to make an openingstatement if you would like to.[The prepared statement of Representative Saxton appears in theSubmissions for the Record on page .16.]

Senator Corzine. Mr. Chairman, thank you for the welcome. I havea formal statement I will submit for the record, but it is a great pleasureto be here with you and working on issues that I think will make adifference with regard to our economic picture in the long run.

I am anxious to hear about unemployment statistics, which I used towatch very closely on a day-to-day and a second-to-second minute; andI think we all have grave concerns about the state of the economy. So Ivery much look forward to this morning's discussion.

But mostly, I want to say thank you for your welcoming remarks andI look forward to working very closely with you over the years.[The prepared statement of Senator Corzine appears in the Submissionsfor the Record on page 19.]

Representative Saxton. I thank my colleague. CommissionerAbraham, you may begin. The floor is yours.

OPENING STATEMENT OF KATHARINE G. ABRAHAM,COMMISSIONER, BUREAU OF LABOR STATISTICS:

ACCOMPANIED BY KENNETH V. DALTON, ASSOCIATECOMMISSIONER, OFFICE OF PRICES AND LIVING CONDITIONS;

AND PHILIP L. RONES, ASSISTANT COMMISSIONER OFCURRENT EMPLOYMENT ANALYSIS

Ms. Abraham. Thank you, Mr. Chairman. It is a pleasure to beseeing you again in this new year; and, good morning, Senator Corzine.

As always, we are happy to have the opportunity to comment on thelabor market data that we released. The unemployment rate, as younoticed, was unchanged in February at 4.2 percent, and payrollemployment rose by 135,000. Since early last fall, the growth in payrollemployment has slackened. In the five months since September, theaverage monthly increase in. payroll employment has been 103,000. Incontrast, during the first nine months of last year, payroll employmenthad grown by 187,000 a month, on average.

You should have in front of you a small package with some charts.The first chart relates to what has been happening with payroll

employment. The data shown there are only for the private sector, for thereason that the buildup and drawdown in Federal employment related tothe census otherwise would have distorted the figures. I think you cansee looking at those data the slowdown in the rate of growth of payrollemployment in recent months.[The chart package appears in the Submissions for the Record on page45.]

Focusing on what happened in February, the key features of theFebruary data in my view are, first, the continued reduction inmanufacturing employment and hours; second, the more than offsettingjob gains in services and some other industries; and, thirdly, the over-the-month rise in average hourly earnings.

Let me talk first about manufacturing employment. Manufacturingemployment fell by 94,000 in February following a decline of about thesame magnitude in January. Those declines bring total factory job lossessince last June to 371,000.

The second chart in the small package that I gave you shows what hasbeen happening to manufacturing employment. There has been a periodof time you will recall back in the spring of 1998 when, around the Asianeconomic crisis, we started to see declines in manufacturing employment;and then for a period of time things seemed to have leveled out. Sincelast summer, however, we have again been seeing rather substantialdeclines in manufacturing employment. I think the thing that isnoteworthy about what we are seeing in February is how widespreadthose declines in manufacturing employment are. That is shown in thenext little chart. Even the electronic components industry has a small jobloss over the month. That was an industry within manufacturing that hadbeen on an upward trend for a couple years. The only manufacturingindustry with a sizable over-the-month increase was motor vehicles, but

that gain of 13,000 was just a fraction of the loss that had occurred inJanuary. So even that has to be put in some context. On net, autoindustry employment has fallen by nearly 80,000 since June.

Manufacturing hours and overtime hours also continued on theirdownward trend in February. That is shown in the fourth chart in thispackage. Since June, the average factory workweek has declined by afull hour, and overtime has fallen by 8/10ths of an hour. The factoryworkweek is now at its lowest level since the spring of 1991, outside oftwo months when winter storms caused sharp temporary reductions inhours back in December; and then in January of 1996 you can see sharpdeclines related to weather. Weakness in manufacturing may haveaffected some other industries. For example, wholesale trade, whichserves as an intermediary between manufacturers and customers, has lost22,000 jobs since November. This is the largest such decline in thatindustry since early 1993.

Employment in help supply services, which is mainly temporary helpfirms that provide workers to manufacturing as well as to other industries,was little changed in February but has fallen by 200,000 since April of2000. Help supply had been a big job gainer during most of theeconomic expansion that began in the spring of 1991. So these recentlosses do represent a real change.

Employment in the services industry as a whole rose by 95,000 inFebruary. Health services had the largestjob increase among the servicesindustries, as employment in hospitals continued to benefit from recentexchanges in Medicare payment schedules. Employment also rose insocial services, computer services, and private education. Publiceducation accounted for a large share of the rise in governmentjobs overthe month.

Maybe I could digress forjust a moment from my prepared statementat this point. I commented at the beginning of my remarks about theslowdown in overall employment growth that we have seen over the lastfive months or so. Manufacturing has been hard hit. We have seen a realturnaround in help supply. If you look at the rest of the economy, youdon't see any evidence of that slowdown. The slowdown in employmentgrowth has really been very concentrated in just a couple of areas. In theservices sector in particular, things have held up pretty well; and in anumber of services industries we have actually seen somewhat fastergrowth over the last five months than previously.

Following a very large gain in January, construction employmentadded 16,000 jobs in February. That is another industry where we havenot seen any slowdown. Since October, employment in construction hasbeen increased by 37,000 a month on average. In the 12 months prior toOctober, the average monthly increase had been only 23,000.

From our survey of employers, average hourly earnings were upseven cents in February. The over-the-year increase was 4.1 percent.This was the fourth month in a row that the over-the-year increase inaverage hourly earnings was 4 percent or higher. Throughout most of

1999 and 2000 those over-the-year gains had remained in the 3.5 to 3.8percent range.

As I mentioned at the beginning of my statement, the unemploymentrate was unchanged in February at 4.2 percent. There is a chart thatshows the average hourly earnings figures. The unemployment rate wasunchanged in February at 4.2 percent. In February, the number of newlyunemployed, those unemployed less than 5 weeks, and also the numberof unemployed job losers who were not on temporary layoff, both rosefor the second month in a row.

Other cyclical indicators from our survey of households, such as thenumber of people working part-time for economic reasons, that is,working part time despite the preference for full-time work, and also thenumber of people outside the labor force who have stopped looking forwork, have shown no clear signs of an upward trend.

In summary, the sharp downturn in manufacturing employment andhours continued in February. Still, overall payroll employment continuedto rise, and the unemployment rate remained relatively low. Finally,earnings gains appear to have picked up in recent months.

So that is the basic picture as we see it, looking at these data. Wewould, of course, be happy to answer any questions that you might have.

[The prepared statement of Commissioner Abraham and theaccompanying Press Release No. 01-57 appear in the Submissions for theRecord on page 20.]

Representative Saxton. Commissioner, thank you. It would appearthat the initial reaction among the members of the economic communitywas somewhat of a surprise earlier this morning when these employmentnumbers were released. There was an expectation that, among those whowere awaiting these numbers, that they would be somewhat weaker thanthey were. Do you have any explanation for, while these are not strongnumbers, they are stronger than the expectations would have indicated?Do you have any explanation that we might consider as to why thishappened?

Ms. Abraham. I am almost thinking this might be a better questionto address to your colleague. You are quite correct that the expectationswere for somewhat lower payroll employment growth than we in factreported, though the expectations for unemployment were about in linewith what we reported.

It may be that people were expecting construction to be weaker thismonth than it actually turned out to be. In January, we had an enormousincrease in construction employment. Part of that was probably ananomaly related to very bad weather in November and December, sopeople having been let go earlier in the year than they usually are and notgetting layoffs in January that we would have expected. But it wasstronger than you could have explained just on that basis.

And people may have expected, as often occurs, that, given that verystrong January number, that we would see declines in February. Wedidn't get that. Construction employment actually rose.

I don't know, with respect to other things, exactly where thediscrepancy may have come.

Representative Saxton. Commissioner, you indicated that theweakness in job growth was particularly evident in manufacturing.

Ms. Abraham. Correct.Representative Saxton. Matter of fact, what was the number,

94,000 job loss in February and about the same in January?Ms. Abraham. Correct.Representative Saxton. This tracks in terms of manufacturing jobs

with a long-term trend, does it not?Ms. Abraham. Well, the long-term trend in manufacturing for many

years has been downward. The declines in recent months have reallyaccelerated. I think they are sharper than you can explain just on thebasis of a long-run trend.

Representative Saxton. When I say many years. actually thedeclines in manufacturing began in the 1997-1998 time-frame, did theynot?

Ms. Abraham. There were declines through the early '90s and thensome pickup and then some declines, interrupted by increases and thenfurther declines.

If you take a much longer time perspective. the tendency clearly hasbeen towards declines in manufacturing. It is really not just the last fewyears.

Phil has got numbers here that go back further. If you go back to themid '70s, for example, when our overall economy was much smaller,manufacturing employment for the late '70s was in excess of 20 million.And despite growth in the economy since then, manufacturing has fallento 18.5 million, that kind of range.

Representative Saxton. I only have limited data before me - I cansee where we are at 18.9, 18.8, 18.9 in 1998.

Ms. Abraham. Right. I mean, we have come down about threequarters of a million since then. That is true.

Representative Saxton. So there has been a trend downward overthe long-term, and there has been a specific trend down over the shorter-term since 1998, and it became an especially steep decline beginningabout January 2000, is that-

Ms. Abraham. I might date it in the summer, rather than in January,but, yes, declines have accelerated.

Representative Saxton. And, at the same time, the civilianunemployment rate during those years - in spite of the fact thatmanufacturing employment has declined - the unemployment rate hasdeclined along with it, meaning that other sectors of the economy havepicked up jobs.

Ms. Abraham. Right. That is right.

Representative Saxton. But then we see, in terms of theunemployment rate, beginning in the second quarter of 2000unemployment started to increase again, did it not?

Ms. Abraham. Well, I guess I would characterize the un-employment rate slightly differently. I would say that for a long periodof time, I think it was 15 months, the unemployment rate hovered in avery narrow range. From October of 1999 through December of 2000,it never got outside of the range from 3.9 to 4.1 percent. So I wouldcharacterize it as having been quite stable at a very low level over thatperiod. It has been a little higher over the last two months.

Representative Saxton. 4.2 percent.Ms. Abraham. Right.Representative Saxton. Okay. So there is obvious reason for

concern about the loss of manufacturing jobs, and there is reason for usto examine why the unemployment rate has continued to go down.Obviously, that is because of increases in job growth in other sectors.But now we see that while we continue to lose jobs in the manufacturingsector, job growth in the other sectors is not as robust, and that startedduring the last half of 2000, is that right?

Ms. Abraham. Let me try to state what my sense of this is: we haveseen slowdowns in overall payroll employment growth, but those havebeen very concentrated. They have been concentrated in the last fewmonths, as compared to earlier in 2000. They have been concentrated inmanufacturing and in temporary help. Employment in the rest of theeconomy really has not slowed at least over that time frame. Theserecent declines have been quite concentrated. The recent slowdown hasbeen quite concentrated.

Representative Saxton. When you say recent slowdown, you aretalking about the last half of 2000?

Ms. Abraham. Yes.Representative Saxton. There have also been widespread reports

of layoffs in the private sector, but they are hard to evaluate in the contextbecause some job growth has been going on, as we have been saying.What do your figures show about the layoff situation and its impact onemployment and unemployment?

Ms. Abraham. Let me just describe the information that we have onlayoffs. We have information on mass layoffs that show up throughpeople registering for unemployment insurance. If there is a companythat lays people off and 50 or more of their people register forunemployment insurance, we pick that up and are able to track that.

At the end of last year, November, December, we saw a substantialpickup in the volume of layoff activity. January's number wasn't out ofline with what we had seen a year earlier. I guess it remains to be seenwhat the numbers for February, March and so on are going to show.

The November and December numbers certainly do show a higherincident of layoff activity than we had seen in this data series before.These data only go back five years, six years, so we don't have a long

time series. But the numbers for the end of 2000 were certainly quitehigh by historical standards, standards of the recent past.

Representative Saxton. Let me just go to general impression. Iknow that some of the information I have here is not data that youdeveloped. It is obviously very closely related. Slowdown inemployment growth over the last seven or eight months tracks with theslowdown in GDP as well, is that correct?

Ms. Abraham. Generally speaking, I think all of that economic datathat we have seen recently are telling a fairly consistent story.

Representative Saxton. And the slowdown started-Ms. Abraham. At the end of last year.Representative Saxton. Third quarter of last year.Ms. Abraham. Unfortunately, I don't have the GDP figures in front

of me. I take your word for it on that one.Representative Saxton. The GDP growth in the second quarter of

last year was 5.6 percent. According to the figures I have in front of me,the third quarter was 2.2 percent; and in the fourth quarter it was 1.1Dercent. That sounds about right.

Ms. Abraham. That sounds like a slowdown.Representative Saxton. And personal consumption follows the

same downward trend, or appears to. In the third quarter of '99, t wasvery robust; and during 2000 consumption began to decrease fairlyrapidly. And that tracks with the figures that you are seeing, I assume.

And retail sales, the same thing occurred in January of 2000.Actually, in May of 1999 consumption started to fall. Retail sales startedto fall and have continued to fall.

I am not sure whether you have evaluated those numbers or not, butis it your general agreement that that has-occurred?

Ms. Abraham. General agreement that the picture seems to bepretty consistent.

Representative Saxton. I am not going to go through all thesefigures, but my staff has provided measure after measure that shows thedecline in the economy started six months ago, according to some figures,a year ago according to other measures. Would you generally agree withthat, that is the case?

Ms. Abraham. The figures that we focus on, of course, are theemployment figures. Employment growth in 2000 was belowemployment growth in '99, but sort of within that, as we look at thosedata, the last several months, five months, is where the slowdown hasbeen particularly pronounced.

Representative Saxton. It is consistent with the slowdown, correct?Ms. Abraham. [Witness nodded.]Representative Saxton. Thank you very much.Senator Corzine, do you have any questions at this point?

Senator Corzine. Thank you, Mr. Chairman.Commissioner Abraham, I guess my question would be,

acknowledging the pattern of other economic measurements that theChairman cited, have you done any work on the historical perspective ofhow we enter into a recession and what - if we were, in previous periods,how long the lag is and what kinds of early warning signals within thedetail of the employment statistics would red flag that? Are there anysigns along those lines? The temporary hiring patterns, corporations haveoften been cited as one of those places where you might look first.

Ms. Abraham. That is not something that we devote resources to.That really gets away from the production of the data into the analysis ofthe data.

I know there are things that people do look at. Some people, as Ithink we were suggesting, look at employment in help supply, mainly thetemporary help firms. Some people look at the number of peopleunemployed for fewer than five years, the newly unemployed, as kind ofan indicatcr. Sometimes people look at the other labor market indicatorslike people working part-time when they would rather have a full-timejob or people giving up on job search. But, no, we have not attempted toanalyze past cycles and pull out of the data what we should be looking atto diagnose what is happening now.

Senator Corzine. With regard to your comments on electroniccomponents, does that tie to some of the slowdown that we have seen inthe dot-com phenomenon and slowdown or is that really a differentpicture into the economy?

Ms. Abraham. What the electronic components really are aresemiconductors, communications equipment, that sort of thing. So it maybe related, I suppose, to what is going on with some of these dot coms.To the extent that the dot-coms are in retail activity, they would becategorized elsewhere.

Senator Corzine. Then, finally, I would ask a question about yourcomment that health services held strong in this period and tied to recentchanges in Medicare payment schedules. I don't know whether you wantto comment on whether you think this is a temporary phenomenon or onethat you believe might be sustainable ih employment growth.

Ms. Abraham. It is very clear in the data that we have seen a pickupin employment growth in health services over the period beginning inabout October. For the five months October, November, December,January, February, health services as a whole was growing by about22,000 a month, compared with just 14,000 over the earlier part of 2000.Health services is an area where our long-term employment projectionssuggest we can expect continued robust employment growth, justreflecting the demographics of the society, if nothing else. So healthservices is an area where I would expect strong employment growth overthe long term to continue.

How much of any pickup we have gotten as a result of theseMedicare changes might be persistent versus temporary, I don't reallyknow.

Senator Corzine. Mr. Chairman, I think that is good for me. Thankyou very much.

Representative Saxton. Thank you very much, Senator. Very goodquestions.

I would like to introduce to you, Commissioner Abraham,Congressman Phil English, who is at this hearing for the first time andappeared yesterday at a JEC hearing for the first time. Phil has been withus since 1994 in Congress. He is a member of the Ways and MeansCommittee, and we lobbied hard to get him on this Committee becauseof his interest in economics.

Phil, welcome, and the floor is yours.Representative English. Thank you, Mr. Chairman.Commissioner Abraham, it is a privilege to take your testimony.I was wondering if I could get to you elaborate further on some of thetrends you see in the manufacturing sector, manufacturing beingobviously a critical sector but being a category that is so broad that italmost conceals more than it reveals. I am wondering if you could giveus a sense, for example, of what the job patterns have been within the

steel industry within the last month.Ms. Abraham. Maybe I could put some of this in a bit of a longer-

term perspective as well.Representative English. Certainly.Ms. Abraham. There are a number of parts of manufacturing thathave really been on a long-term, secularly declining employment path.

The two that jump to mind are apparel and also other textile products,which have just over long periods of time been shedding jobs at a fairlyrapid pace.

You asked specifically about what has been happening in steel. Steelis the biggest part of what we call primary metals. Over the month,primary metals fell by 5,000. It fell by 6,000 in the month before that.It was down by a couple thousand a month over the prior 12 months. Sothe last couple months have been substantially worse than the average forthe recent past.

Parts of manufacturing had actually been doing fairly well up throughthe middle of 1998. Manufacturing as a whole had been doing wellthrough the middle of 1998. We had seen employment growth in aircraft,we had seen employment growth in industrial machinery, electroniccomponents had been doing well. Then manufacturing got hit by theAsian economic crisis, and in a lot of those industries you started seeingemployment declines.

Things had leveled off in many of them for a period of time, but allof these industries have been experiencing employment declines in recentmonths.

Representative English. Do you have the data broken out to helpus identify some other sectors? What I am trolling for here is there arecertain sectors that are obviously import sensitive. There are others thatare very sensitive to changes in export conditions. And I wonder, forexample, do you have a break-out for machine tooling or do you go downto that far in - do you identify sectors that narrowly?

Ms. Abraham. In the data that we put out for the current month, wedon't have data that go down to that level of detail. When we put out datalater on, we do have data that are more detailed and would include thingslike that.

Representative English. What was the trend-Ms. Abraham. We do have a data series that we put together -

maybe we could ask Phil Rones to talk about this - that is designed totrack employment in industries that are export sensitive. We don't havea corresponding one for industries that are import sensitive. But maybeyou could-

Representative English. Mr..Rones, would you comment?Mr. Rones. We have several series that track industry employment

related to defense, exports, construction. So we try to look beyond justthe specific employment growth in those industries. in what we call theexport sensitive industries, overall the over-the-month change was minus24,000. So we lost 24,000 jobs in what we call the export sensitiveindustries. And what we are looking at there are industries that have atleast 20 percent of their gross revenues in exports. Over the year, wehave lost 66,000 jobs in those industries.

Representative English. May I ask, under the category of fabricatedmetal products of which we have a significant component in WesternPennsylvania, I see there is a significant projected fall-off for this month.I realize month-to-month it is very difficult to predict what is going on,but there has been, since November and December, looks from thesestatistics seasonally adjusted to be a fairly significant drop. Can youcomment on that?

Ms. Abraham. We need to verify that, in fact, that is what we areseeing. It was both this month and last month that industry lost 13,000jobs, and it lost jobs as well in December. Up through November it hadactually been holding its own.and even adding a bit. So it is really thelast several months where we have seen declines, in the last two monthsrather sharp declines have occurred in employment in that industry.

Representative English. And under industrial machinery andequipment I see there is also a significant drop-off just over the lastcouple of months seasonally-adjusted.

Ms. Abraham. Correct. We had seen some declines earlier forindustrial machinery, but it was down and up, down and up. Lastthree months have all been declines, with a rather sharp decline thismonth.

Representative English. Thank you. That is extremely helpful; and,Mr. Chairman, I appreciate the opportunity to participate.

Representative Saxton. Thank you very much, Mr. English.Commissioner Abraham, if I may just ask you about New Jersey fora minute, the New Jersey economic situation. And understanding that

these figures are from January, what do the recent trends in employmentand unemployment suggest about the State's economy and in whatindustries does employment growth seem strongest and in New Jerseywhich sectors seem to be the weakest?

Ms. Abraham. Let's see, Phil Rones I know has brought a packagewith some information for the State of New Jersey. I have also got here,if I could pull this out, some information on the employment.[The chart package concerning the state of New Jersey appears in theSubmissions for the Record on page 51.]

Maybe you could comment on the unemployment picture, Phil; andI will comment on the employment.Mr. Rones. What we prepared for you is a map that hasunemployment rates in New Jersey by county, and we will give this toyou. What we see here is that the New Jersey unemployment rate is 3.8percent, and that was an average for the year 2000 which is just slightlybelow the unemployment rate for the Nation as a whole, which averaged

4 percent.One thing you will see from this, there.is a very dramatic range inunemployment. There are parts of New Jersey where the unemployment

rte is between I and 2 percent and has been for a sustained period oftime, and there are counties in southern New Jersey where theunemployment rate is higher than 10 percent. So there is a substantialspread in the economic conditions in different parts of New Jersey.Ms. Abraham. You also asked about what was happening withemployment in New Jersey. Employment in the State of New Jersey wasup by 1.7 percent over the year ending in January of 2001. In terms ofthe pattern of that employment growth, it looks not unlike that of theNation as a whole. Construction employment growth has been verystrong in New Jersey over the year, up 3.8 percent. Manufacturing

employment was down over the year by 1.7 percent. We saw stronggrowth in services.So I would provide for you as well the figures that break out the mixof employment growth, which sectors have been growing and which havenot. But the broad picture is certainly consistent with what we are seeingfor the Nation as a whole.Representative Saxton. Senator.Senator Corzine. We have a little interest in this chart here on thisside of the table, regardless of our political affiliations. I appreciate theinformation. I think the dispersion is really quite striking. I suppose thatis the case if we looked at almost every state in the country.Ms. Abraham. That is true. There tend to be pockets, often in morerural or more isolated parts of the geography, where the unemploymentis higher.

Senator Corzine. I hope that we will be able to take advantage ofthis New Jersey connection on a consistent basis, the Joint EconomicCommittee. Thank you very much, Commissioner.

Representative Saxton. Has your analysis of the unemployment oremployment situation in New Jersey taken into account industry byregion or job opportunities by region, or are you able to offer anyexplanation generally why it appears that perhaps our most ruratNewJersey counties - and we do have rural New Jersey counties - are doingsignificantly less well than counties that might be considered suburbangrowing counties or urban New Jersey counties?

Ms. Abraham. We would be happy to take a closer look at the datato see whether there is any light beyond what you see in the figures thatwe can shed on that.

Representative Saxton. Well, thank you very much.Let me ask one final question and then see if either of my colleagues

have a final question.Commissioner, you have indicated to us in the past on a consistent.

basis, as has your predecessor, that in effect you warned against readingtoo much into one month's data; and I have delivered the same messageto us fairly consistently. Are the data reported today any exception tothat rule?

Ms. Abraham. Oh, no. I think there are some things in the data forthis month that seem at this point to represent a trend that has continuedover several months. But we are by no means willing to make predictionsabout what might happen next month.

Representative Saxton. And can you just articulate what that orthose trends may be?

Ms. Abraham. Well, it is the things that we have already discussed.I think clearly there has been slowing employment growth overall thatseems to. be *concentrated in manufacturing and help supply. In terms ofchanges, there seems to have been a pickup in recent months in the rateof growth of average hourly earnings. Having said that, unemploymenthas remained low and we have not seen any slowdown in employmentgrowth outside of, broadly speaking, the sectors that I already identified.

Representative Saxton. But back to the thrust of my originalquestion, I guess - and I don't mean that you didn't answer my originalquestion because I asked you about trends and you told me what theywere - but back to - let.me just backtrack to my original question, andthat is that the data reported today are no exception to the rule in termsof reading too much into whether or not we are seeing any kind of achange in job growth or job loss.

Ms. Abraham. The more data you accumulate, the clearer thepicture.

Representative Saxton. Thank you very much.Senator or Congressman, do you have - Senator Corzine.

72-432 2001 - 2

Senator Corzine. Commissioner Abraham, the unemployment ratefor African-Americans jumped up from 7.6 to 8.4 December to January,and then I think it fell back to 7.5 percent. These numbers, these arepretty volatile changes. I presume that has something to do withsampling size.

Ms. Abraham. That is a good example of the point CongressmanSaxton was making.

Senator Corzine. I wonder what we could do, given a desire to havegreater tracking? What do we have to do to make sure that we get a moresteady read statistically over time?

Ms. Abraham. If we were to get a more steady read month-to-month, the only real option would be to substantially increase the size ofour monthly household survey. The monthly household survey is roughly50,000 households that are interviewed every month. Different groupsare represented, roughly in proportion to their share of the population.So African-Americans represent, very roughly, 10 percent of that sample.So naturally any statistics for that group are going to have, as you said,much higher sampling variability. The only real way to address thatwould be to substantially increase the size of the sample for that group,which would add to the expense of doing the survey.

Senator Corzine. Do you have any sense of taking the 50,000 andmaking it 75,000, or is there - and then with obviously commensuratepickup in the various distributional aspects, how much that runs, just agauge?

Ms. Abraham. The current budget for the monthly householdsurvey - you would know that, Phil. That is your responsibility.

Mr. Rones. The BLS share, which covers most of these monthlvdata that we are talking about, is around $38 million a year for themonthly survey. If we increase the sample by 50 percent to 75,000, youare probably talking about close to a $15 to $20 million increase in thebudget.

I wouldn't try to talk you out of increasing the size of the CPS, butyou would still end up with fairly volatile estimates for these smallgroups, even at an increase of 50 or even a 100 percent. The overallnational unemployment rate is accurate to within about 2/10ths of apercentage point each month. For some of these smaller groups we aretalking about month-to-month variability that could be a full percentagepoint or even more. That would be reduced, but it would not provideestimates that would be comparable to the large groups we are talkingabout.

Senator Corzine. Over time hopefully I can form an opinion aboutbeing able to question the cost-benefit element as we watch variousgroups where you, have these high concentrations of unemployment.

Ms. Abraham. I might add, if there were particular interest inparticular groups, it could also be possible to target sample increases onthose groups, which might make it somewhat less expensive rather thanjust expanding the whole survey.

15

Senator Corzine. Sure. That is one of those things that, as we gothrough this process of reviewing this data, the more precise in myquestion - I am concerned about you can draw pretty extremeconclusions off of very volatile data if you are not careful - not you butthose of us who use the data.

Ms. Abraham. I might note for some of these subgroups within thepopulation, taking data averages over several months, for example,obviously gives you a more precise fix. You just don't have it soprecisely for the current month.

Senator Corzine. Thank you, Commissioner.Representative Saxton. Mr. English.Representative English. No questions.Representative Saxton. Commissioner, thank you again for your

usual fine presentation. We appreciate it very much, and we lookforward to seeing you very soon in the future.

Ms. Abraham. Thank you.(Whereupon, at 10:23 a.m., the hearing was adjourned.]

SUBMISSIONS FOR THE RECORD

PREPARED STATEMENT OFREPRESENTATIVE JIM SAXTON, CHAIRMAN

It is a pleasure to welcome Commissioner Abraham before theCommittee once again to report on the release of new employment andunemployment data for February.

A review of current economic conditions indicates that the economyhas slowed from the remarkable pace present through the middle of lastyear. An array of economic data shows that the economy has been in aslowdown for the last two quarters. For example, the rate of GDP growthhas fallen two quarters in a row, and consumer spending and investmentgrowth have also slipped.

However, there are some signs of residual economic strength incertain sectors such as construction and some service-producingindustries. In addition, overall employment growth has slowed but hasgenerally been positive.

The employment-population ratio remains high, and labor marketconditions, for the most part, remain fairly tight, as reflected in therelatively low unemployment rate. The slowdown does make theeconomy more vulnerable to shocks and disruptions, but the economyremains in positive territory. The Federal Reserve is aware of thesoftness in the economy and its recent survey indicates that this is acontinuing problem.

The employment data released today seem to be influenced by theslowing pace of the economy. Payroll job growth for Febtiary was135,000, considerably lower than the 225,000-250,000 range typicalduring the healthy economic expansion. The unemployment rateremained unchanged at 4.2 percent.

Given the weakening of the economy since the middle of last yearthe case for change in economic policy is strong. The tightness ofFederal Reserve monetary policy should be relaxed, and the Fed hastaken steps in this direction earlier this year, although more remains to bedone. Further rate cuts by the Fed are needed.

Congress can also do its part by reducing the fiscal drag on theeconomy from the excessive tax burden imposed by our tax system. Thetax system is counterproductive, and now is a good time to reduce itsnegative effects. This will not make the economy turn on a dime, but itwill improve the prospects of continued economic growth now and intothe future.

The current economic outlook poses challenges that should not betaken lightly. Changes in macroeconomic policy are needed to get theeconomy back on track.

SEN. JACE REED (1) 107TH IoRiESS

SDM gresa of &e United Sates -SE.. PUL S. ABAsM (MD) WAm.a, DC205164602

SENJWICOR(N JOINrT ECONOMIC COMMITrEE - MINORITY FAX22.224-5562RUF EYfETES (CA)RV. CDnotYN B. MAU PMY(NY) PARAURE" MELVNL WATT(NC) STFDC

Opening Statement

Senator Jack ReedRanking Member

March 9, 2001

I want to welcome Commissioner Abraham to the Committee this morning. Ialso want to thank Chairman Saxton for holding this hearing. These hearingsare an important tradition at the Joint Economic Committee.

No matter how you look at it, over the last ten years, we have experienced thestrongest economy in over a generation. Unemployment has decreased tohistoric lows, the gap between the richest and poorest has finally started toshrink, and poverty has dropped markedly.

However, in recent months, we have seen signs of a pause in the economy.We are at a crossroads and we must remain vigilant if we are to continue tobuild on our past successes.

Last week, the Bush administration proposed a tax cut that could be as much$2.2 trillion. If enacted, a tax cut of such magnitude could reverse the pastdecade of economic progress and could undermine the prosperity thatAmericans have worked so a hard to achieve.

I fear this $2.2 trillion tax cut could return us to the days of budget deficits andstagnant wages.

I bring up the tax cut because I believe the data we receive from thecommissioner is very relevant. Numbers like productivity are especiallyimportant to the tax debate. On Tuesday, the BLS reported that productivitygrowth during the last quarter of 2000 was 2.2 percent. For all of 2000,productivity surged 4.3 percent, the best showing since 1983. Healthyproductivity growth is necessary to sustain high levels of economic growth and

-2-

maintain improvements in wages and salaries, without igniting inflation. Wemust do all we can to insure that productivity growth remains high;we must do all we can to prevent the recent dip in the last quarter fromcontinuing.

Private investment in plant and equipment, education and training andresearch and development are key to raising productivity growth. Some of mycolleagues like to argue that cutting taxes alone promotes more investment.But if we learned anything from the last 20 years, it is that investors are muchsmarter than that. They know that the real cost of capital - based on interestrates and inflation - is more important than tax cuts.

If we want to sustain the prosperity of the last few years, we must be vigilantagainst the prospect of returning to budget deficits, which would push upinterest rates and stifle private investment once again. I hope we will notreturn to these failed policies but commit ourselves, instead, to paying downthe debt.

Recent statistical releases have raised some fears over the prospect ofrenewed inflation. The core CPI inflation rate jumped to 2.6% year-over-yearin January 2001, compared to 2.0 percent at the beginning of 2000. It isimportant to remember not to read too much into one month's or quarter'sdata. Second, I return to what I said before: modest increases in wages andprices do not need to be inflationary, as long as productivity growth is strong.Again, I want to especially welcome Commissioner Abraham before theCommittee this morning and I look forward to hearing from you and yourcolleagues about the current economy and its impact on American workersand their families.

19

PREPARED STATEMENT OFSENATOR JON CORZINE

Thank you, Mr. Chairman. As this is my first hearing of the JointEconomic Committee, let me say that I am very happy to be here, and tobe a member of the Committee. Given my background in the privatesector, I am hopeful that I will be able to make a contribution. And I amglad to have an opportunity to serve with such a distinguished colleaguefrom my own home State.

Mr. Chairman, I am looking forward to hearing from CommissionerAbraham and learning more about the most recent employment data. Ihave been following these and other economic indicators closely, as I didin my previous career, and, frankly, I have grown quite concerned. Itseems to me that we are in a period of great economic uncertainty, andreal down side risk.

For that reason, I have been working on a proposal with my colleaguefrom Florida, Senator Graham, to provide a middle class tax cut thatwould provide a real boost to the economy. Our proposal would establisha new ten percent rate bracket for.couples with combined incomes up to$19,000, meaning that most families would get a tax cut of $950. The taxcut would be retroactive, so that it would have an immediate stimulativeimpact. And, of course, the faster we put money in peoples' pockets, thegreater the likelihood that we can avoid a recession and return to a pathoF strong economic growth.

In any case, Mr. Chairman, while I do have concerns about the stateof our economy, I hope we will hear some good news today. And I lookforward to hearing from Commissioner Abraham.

FOR DELIVERY: 9:30 A.M., E.S.T.FRIDAY, MARCH 9, 2001

Advance copies of this statement are made available to thepress under lock-up conditions with the explicitunderstanding that the data are embargoed until 8:30 a.m.Eastern Standard Time.

Statement of

Katharine G. AbrahamCommissioner

Bureau of Labor Statistics

before the

Joint Economic Committee

UNITED STATES CONGRESS

Friday, March 9, 2001

Mr. Chairmai and Members of the Committee:

I appreciate this opportunity to comment on the labor

market data we released this morning.

The unemployment rate was unchanged at 4.2 percent in

February, and payroll employment rose by 135,000. Since

early last fall, the growth in payroll employment has

slackened. In the 5 months since September, the average

monthly increase in payroll employment has been 103,000. In

contrast, during the first 9 months of last year, payroll

employment had grown by 187,000 a month, on average. The

key features of the February data, in my view, are the

21

2

continued reduction in manufacturing employment and hours,

the more-than-offsetting job gains in services and some

other industries, and the over-the-month rise in average

hourly earnings.

Manufacturing employment fell by 94,000 in February.

This follows a decline of about the same amount in January

and brings total factory job losses since last June to

371,000. The decline in February was widespread throughout

manufacturing. Even the electronic components industry had

a small job loss over the month; employment in this industry

has been on an upward trend since the spring of 1999. The

only manufacturing industry with a sizable over-the-month

increase was motor vehicles, but that gain (13,000) was only

a fraction of the loss that occurred in January (48,000).

On net, auto industry employment has fallen by 77,000 since

June.

Both manufacturing hours and overtime also continued on

downward trends in February. Since June, the average

factory workweek has declined by a full hour, and overtime

has fallen by 0.8 hour. The factory workweek is now at its

lowest level since the spring of 1991, except for 2 months

when winter storms caused sharp, temporary reductions in

hours.

22

3

Weakness in manufacturing.may have affected some other

industries. For example, wholesale trade--an intermediary

between manufacturers and customers--has lost 22,000 jobs

since November. This is the largest such decline in the

industry since early 1993. Employment in help supply

services, which is dominated by temporary help firms that

provide workers to manufacturing as well as other

industries, was little changed in February but has fallen by

200,000 since April. Help supply had experienced dramatic

job growth during most of the economic expansion that began

in the spring of 1991.

Employment in the services industry as a whole rose by

95,000 in February. Health services had the largest job

increase among the services industries, as employment in

hospitals continued to benefit from recent changes in

Medicare payment schedules. Employment also rose in social

services, computer services, and private education. Public

education accounted for a large share of the rise in

government jobs over the month.

Retail trade employment rose by 37,000 in February,

after seasonal adjustment, following 2 months of very small

gains. Mortgage banking continued to add jobs due to high

levels of refinancing activity. Following a very large gain

in January, construction added 16,000 jobs in February.

23

4

Since October, employment in the industry has increased by

37,000 a month, on average. In the 12 months prior to

October, the average monthly increase was only 23,000.

Average hourly earnings were up 7 cents in February;

the over-the-year increase was 4.1 percent. This was the

fourth month in a row that the over-the-year increase was 4

percent or above. Throughout most of 1999 and 2000, the

over-the-year gains had remained in the 3.5- to 3.8-percent

range.

As I mentioned at the beginning of my statement, the

unemployment rate was unchanged in February at 4.2 percent.

The jobless rate for blacks, which had risen in January,

returned to its fourth-quarter level of 7.5 percent. In

February, the number of newly unemployed (those unemployed

less than 5 weeks) and the number of unemployed job losers

who were not on temporary layoff both rose for the second

month in a row. Other cyclical indicators from our survey

of households, such as the number of people working part

time despite their preference for full-time work and the

number of people outside the labor force who have stopped

looking for work, have shown no clear sign of an upward

trend.

In summary, the sharp downturn in manufacturing

employment and hours continued in February. Still, overall

2

.5

payroll employment continued to rise, and the unemployment

rate remained relatively low. Finally, earnings gains

appear to have picked up in recent months.

My colleagues and I would be glad to answer your

questions.

25

NwUnited SaeDepartmen

Newsof LaborBureau of Labor Statistics Washington, D.C. 20212

Internet address: hap://stats.bis.govinewsrels.htmLTechnical information: USDLO0-57

Household data: (202) 691-6378

Transmission of material in this release is

Establishmentdata. 691-6555 embargoed until 8:30 A.M. (EST),

Media contact: 691-5902 Friday, March 9,2001.

THE EMPLOYMENT SITUATION: FEBRUARY 2001

The unemployment rate held at 4.2 percent in February, and total nonfarm employment rose by

135,000, the Bureau of Labor Statistics of the U:S. Department of Labor reported today. Large job

losses continued in manufacturing, where employment declined by 94,000. Employment gains in several

other industries, including services, accounted for the net increase in payroll employment Average

hourly earnings rose by 7 cents over the month.

Chad 1. Urtrpms a. Chadrta*att 0w12: NWotam pmeI.mOprWt W MA d OId-a

Mah 1998 - Febury 2001 ea Mad 1998 -Fuay 2001

.08

Unmpoyet (Hoiusehold Survey Data)

Both the number of unemployed persons (5.9 million) and the unemployment rate (4.2 percent)

were essentially unchanged in February. The jobless rates for most of the major worker groups-adult

men (3.5 percent), adult women (3.7 percent), teenagers (13.6 percent), whites (3.7 percent), and

Hispanics (6.3 percent)-were little changed from January. The unemployment rate for blacks declined

to 7.5 percent, the same level as in the last quarter of 2000. (See tables A-I and A-2.)

In February, both the number of newly unemployed (those unemployed less than 5 weeks) and the

number of unemployed job losers who did not expect to be recalled rose for the second consecutive

month. (See tables A-6 and A-7.)

Total Fmnninvmnt and the Labor Forc (Household Surver Data)

Total employment was essentially unchanged at 135.8 million, seasonally adjusted, in February. The

civilian labor force, at 141.8 million persons, also was little changed over the month. The labor force

Table A. Major Indicators of labor market activity, seasonally adjusted( N u m b e r s in t h o u s a n d s ) _ _ _ _ _ _av e r a g e sda t a

Qureryaverae othly data ,,,,,J Jan.-Category 20 2000 2001 Feb.

V Dec. IJan. IlFeb.I changeHOUSEHOLD DATA

Civilian labor force........................Employment...........................Unemployment.......................

Not in labor force.........................

All workers..................................Adult men..............................Adult women.........................Teenagers........................W hite.....................................Black.....................................

Hispanic origin......................

ESTABLISHMENT DATA

Nonfarm employment.........Goods-producing' .........

Construction...........Manufacturing.............

Service-producing,............Retail trade...................Services........................Government................

Total private.............................Manufacturing...................

Overtime..........................

Total private................................

Average hourly earings,total private...................................

Average weekly earnings,total private..................................

Labor force status

140,7 141,208 141,48 141.955 141,751 -204135.049 135,593 t35.836 135.999 135,815 -184

5,657 5,616 5,653 5,956 5,936 -2069,235 69,358 69,254 68,934 69,27 341

Unemployment rates

4.0 4.0 4.0 4.2 4.2 .03.3 3.4 3.4 3.6 3.5 -0.13.6 3.4 3.4 3.6 3.7 .1

13.5 12.9 13.1 13.8 13.6 -.23.5 3.5 3.5 3.6 3.7 .17.6 7.5 7.6 8.4 7.5 -.95.6 5.6 5.7 6.0 6.3 .3

Employment

131,619 131,836 131,878 p132,102 p132,237 p13525,680 25,623 25,569 p25,639 p25,564 p-75

6,688 6,732 6,717 p6.875 p6,891 p1618,453 18,350 18,312 p18,216 p18,122 p-94

105,940 106,213 106,309 p]06,463 p106,673 p21023.189 23,225 23,245 p23,250 p23,287 p3740,553 40.752 40.797 p40,884 p40.979 p9520,536 20,435 20,435 p20,502 p

20,539 p37

Hours of work

. 34.4 34.3 34.1 p34.3 p34.2 p-0.141.51 41.0 40.4 p40.9 p40.6 p-.34.51 4.21 3.91 p4.1 p3.81 p-.3

Indexes of aggregate weekly hours (1982=100)2

151.2 151.2 150.6 p151.8 1l51.0 p-0.8

Eamings

$13.79 $13.95 $14.02 p$14.03 p$14.10 p$007

474.03 478.13 478.08 p481.23 p482.22IIncludes other industries, not shown separately. ,2Data relate to private production or nonsupervisory workersprefliminary.

participation raze-the proportion of the population age 16 and older who are either working orlooking for work-edged down by 0.1 percentage point to 67.2 percent, still relatively high byhistorical standards. (See table A-1.)

About 7.6 million persons (not seasonally adjusted) held more than one job in February. Thesemultiple jobbolders represented 5.6 percent of total employment, compared with 5.8 percent a yearearlier. (See table A-10.)

Persons Not in the Labor Force (Household Survey Datal

About 1.3 million persons (not seasonally adjusted) were marginally attached to the labor force in

February, the same as a year earlier. These people wanted and were available to work and had looked for

a job sometime in the prior 12 months. They were not counted as unemployed, however, because theyhad not actively searched for work in the 4 weeks preceding the survey. The number of discouragedworkers was 289,000 in February, about the same as a year earlier. Discouraged workers, a subset of the

marginally attached, were not currently looking for work specifically because they believed no jobs wereavailable for them. (See table A-10.)

Indusbtarll Emplmnt (saishment Survey Data)

Nonfarm payroll employment increased by 135,000, seasonally adjusted, in February. Since last

September, the average monthly growth in payroll employment has been 103,000, compared with anaverage gain of 187,000 during the first 9 months of last year. In February, major job losses continuedin manufacturing. These losses, however, were more than offset by gains in services and most other

major industry divisions. (See table B-I.)

In the goods-producing sector, manufacturing employment fell by 94,000 in February, following asimilar loss (as revised) in January. Together, these losses exceeded the total employment decline in this

industry for all of 2000. With the exception of motor vehicles, where some workers returned from

temporary layoffs, employment declines in manufacturing were widespread in February. Job lossescontinued in fabricated metals (13,000) and in industrial machinery (11,000). Electrical equipment and

apparel also lost 11,000 jobs each. Smaller employment declines occurred in a number of otherindustries, including furniture, primary metals, textiles, printing and publishing, paper, and rubber andplastics.

Elsewhere in the goods-producing sector, construction employment rose by 16,000, seasonallyadjusted, in February, following an unusually large increase in January. Mining employment rose by3,000 in February, after having increased by 8,000 in January. Employment in oil and gas extractioncontinued to grow; this industry has gained 25,000 jobs over the last year.

In the service-producing sector, services employment increased by 95,000 in February, about in line

with its average monthly increase during 2000. In February, health services employment rose by 28,000,as hospitals added I1,000 jobs. Business services gained 24,000 jobs, after 4 consecutive months of joblosses. Within business services, employment rose by 15,000 in computer services, following weakgrowthin January. Help supply employment was little changed over the month; in the prior 4 months,job declines totaled 181,000. Social services added 15,000 jobs in February, and private educationemployment grew by 20,000.

Employment in finance, insurance, and real estate rose by 16,000 in February, continuing the growthtrend that began last August Strong demand for mortgage refinancing boosted employment in mortgagebanks, which grew by 5,000 over the month. Employment increased by 5,000 in insurance carriers,

4

Employment in transportation and public utilities grew by 28,000, following a decline in January. Jobgrowth in February was nearly double the industry's average monthly gain for 2000. Air transportation,which had accounted for most of the loss in January, added 15,000 jobs in February.

Employment in retail trade increased by 37,000 in February, following 2 months of little change.Gains were widespread. Employment in department stores, however, was little changed; this industryhas lost 60,000 jobs over the year. Wholesale trade employment declined for the third consecutivemonth.

Government employment increased by 37,000 in February. Employment in local government grewby 26,000, including an increase of 16,000 jobs in local education. There was little change in federalgovernment employment.

Weekly Hours (Establishment Survey Data)

The average workweek for production or nonsupervisory workers on private nonfarm payrolls edgeddown by 0.1 hour in February to 34.2 hours, seasonally adjusted. The manufacturing workweek fell by0.3 hour to 40.6 hours; since June, the factory workweek has fallen by 1.0 hour. Manufacturing over-time declined by 0.3 hour in February to 3.8 hours, the lowest level since 1992. (See table B-2.)

The index of aggregate weekly hours of production or nonsupervisory workers on private nonfarmpayrolls declined by 0.5 percent to 151.0 (1982-100), seasonally adjusted. The manufacturing index fellby 1.4 percent to 101.1. (See table B-5.)

Hourly and Weekly Earnings (Establishment Survey Data)

Average hourly earnings of production or nonsupervisory workers on private nonfarm payrolls in-creased by 7 cents in February to $14.10, seasonally adjusted. Over the month, average weekly earningsincreased by 0.2 percent to $482.22. Over the year, average hourly earnings rose by 4.1 percent andaverage weekly earnings grew by 2.9 percent. (See table B-3.)

The Employment Situation for March 2001 is scheduled to be released on Friday, April 6, at8:30 A.M. (EDT).

March 2000 National BenchmarksIn accordance with standard practice, BLS will release nonfarm payroll employment

benchmark revisions with the May data on June 1, 2001. The March 2000 benchmarklevel has been finalized and will result in an upward revision of 469,000 to total nonfarmemployment for the March 2000 reference month, an adjustment of 0.4 percent.

Also concurrent with the release of the March 2000 benchmark revisions on June 1,BLS will continue the implementation of a new probability-based sample design for thepayroll survey that began last year with the wholesale trade industry. Estimates for themining, construction, and manufacturing industries will incorporate the new sampledesign with this release. Further information is available on the Internet(http://stats.bls.gov/ceshome.htm) or by calling (202) 691-6555.

Explanatory Note

This news release pesents statistics from two major suarveys. theCurrem Population Survey (househsold survey) and the CmrrentEmployment Statisticssurvey (establishmen survey). The honseholdsurvey provides the information on the labor force, employmnt andunemployment that appears in the A tables, marked HOUSEHOLDDATA. It is a sample survey of about 50,000 huneholds coaductedby the U.S. Census Burean for the Bureau of Labor Statistics (BLS).

The establishment survey provides the information on theemploymet, bours, and earnings of workes on nonfarm payrolls that

appears in the B rables, marked ESTABUSHMENT DATA. Thisinformation is collected from payroll records by BLS in cooperationwith State Agencies. In Jime 2000, the sample included about 3W.000establishments employing about 48 million people

For both surveys, the data for a give month relate to a particularweek or pay period. In the household survey. the reference week isgenerally the calendar week that contain the 12th day of the meonth.In the estahlishment survey. the reference peiod is the pay periodincluding the 12th, which may or may not correspond directly to thecalendar week.

Coverage, definitions, and differencesbetween surveys

Household survey. The sample is selected to reflect the entirecivilian nomnstitutional population. Based on responses to a series ofquestions on work and job search activities, each person 16 years andover in a sample household is classified as employed, unemployed, ornot in the labor fource

People are classified as employedif they did any work at all an paidemployees during the reference week; worked in their own business,profession, or on their own farm; or worked without pay at least 15bours in a family business or farm. People are also counted asemployed if they were temporarily absent from their jobs because ofillnestsbadweather, vacation, labor-management disputes. orperonalreasons.

Peopleareclatifiedasuremiployediftheymectallofthefollowingcriteria they bad no employmenti during the reference week; theywere available for work at that time and they made specific efforts tofind employment sometime during the 4-week period ending with thereference week. Persons laid off from ajob and expecting recall rednot be looking for work to be counted as unemployed. Theunemployment data derived from the household survey in no waydepend upon the eligibility for or receipt of unemployment insurancebenefits.

The civilian laborforce is the sum of employed and unemployedpersons. Those not classified as employed or unemployed are not unthe laborforce. The m emnployment rte is the number unemployed asa percent of the labor force. The laborfoe participation rate is thelabor force as a percent of the population, and th employmtent.

poplaftios ado is the employed as a percent of the population.Establishment survey. The sample establishments are drawn

ftom private nonfarm businesses such as factories. offices. and stor.as well as Federal, State. and local government entities. Employees on

noqfarmin payrolls are thee who received pay for any pass of thereferace pay period, including persons on paid leave. Persons arecounted in each job they hold. Hous andearningsdaia are for privatebusinesses and relate only to production workers in the goods-prducing sector and onsupervisory worken intheservioe-producingsector.

Differencesilnesmploymenttesimates. Thea umerous conceptaland methodological differences between the household andestablishmentsurveystesultinmporttdistinctionsiotheeemploymentestimates derived from the surveys. Among these arte:

*Tehouscholdsstay icdm agricultural workers.theselfoyed.unpaid fanily workers,adprivatehouseholdworkersamong the employed.These groups are excluded from the establishment survey.

* The household survey includes people on unpaid lease among theemployed. The establishment survey does not.

* Thehouseholdsurveyislimitedto warkers t6yearsofageandolder.The establishment survey is not limited by age.

* Tie household survey has no duplication of individuals, becaneindividuals arecouted only once, even ifthey hold more than onejob. Inthe estahtishmnt survey. employees working at more than one job andthus appearing on more than one payroll would be counted separately foreach appearance.

Other differces between the two snoeys ate described in"Comparing Employment Estimates from Household and PayrollSurveys." which may be obtained from BLS upon request.

Seasonal adjustmentOver the course of a year, the size of the nation's labor force and

the levels of employment and unemployment undergo sharpfluctlations due to such seasonal events as changes in weather.reduced or expanded production, harvests, major holidays. and theopening and closing of schools. The effect of such seasonal variationcan be very large; seasonal fluctuations may acciit foi as much as95 percent of the month-to-month changes in unemployment.

Because these seasonal events follow a more or less regularpatrneachyearbtheirinfluenceonstisticltrendscabeclimnatedby adjusting the statistics from month to month. These adjustmentsmake nonseasonal developments, such as declines in economicactivity or increases in the participation of women in the labor force.easier to spot. For example, the large number of youth entering thelabor force each June is likely to obscure any other changes that havetaken place relative to May. making it difficult to determine if thelevel of cnomic activity has risen or declined. However. becausethe effect of students finishing school in previous years is known, thestatistics for the current yearcan be adjusted to allow for a comparablechange. Insofar an the seasonal adjustment is made correctly. theadjusted figure provides a more useful tool with which to analymchanges in economic activity.

In both the household and establishment surveys, most seasonallyadjusted series are independently adjusted. However, the adjustedseries for many major estimates, such as total payroll employment,employment in most major industry divisions, total employment, and

unemployment are computed by aggregating independently adjustedcomponent series. For example, total unemployment is derived bysumming the adjusted series for four major age-am components; thisdiffers from the unemployment estimate that would be obtained bydirectly adjusting the total or by combining the duration, reasons, ormare detailed age categories.

The numeical factors used to make the seasonal adjustments arrecalculated twice a year. For the household survey, the factors amcalculatedfortheJanuary-JuneperiodandagainfortheJuly-Decenierperiod. For the establishment survey, updated factors for seasonaladjustment are calculated for the May-October period and introducedalong with new benchmarks, and again fortbe November-April period.In both surveys, revisions to historical data are made once a year.

Reliabity of the estimatesStatistics based on the household and establishment surveys are

subjecttoboth sampling and nonsamplingerror. Whenasampleratherthan the entire population is surveyed, there is a chance that the sampleestimates may differ from the "true" population values they represent.The exact difference, or sampling error, varies depending on theparticular sample selected, and this variability is measured by thestandard err of the estimate. Ther is about a 90-percent chance, orlevel of confidence, that an estimate based on a sample will differ byno more than 1.6 standard errs from the "tre" population valuebecause of sampling mor. BLS analyses am generally conducted atthe 90-percent level of confidences.

Forexampletheconfidenceintervalforthemonthlycangeintotalemploymentfromthe household survey isontheorderofplusorminus376,000. Suppose the estimate of total employment increases by100,000 from one month to the next. The 90-percent confidenceinterval on the montldy change would range from -276,000 to 476,000(100,000 +/- 376,000). These figures do not mean that the sampleresults are off by these magmtudes, but rather that there is about a 90-percent chance that the "true" over-the-monith change lies within thisinterval. Since this range includes values of less than esro, we couldnot say with confidence that employment had, in fact, increased. If,however, the reported employment rise was half a million, then all ofthe values within the 90-peront confidence interval would be greaterthan zero. In this case, it is likely (at least a 90-percnt chance) thatan employment rise had. in fact, occurred. The 90-percent confidenceinterval for the monthly change in unemployment is +/- 258,000, andfor the monthly change in the unemploymetsnt rate it is +/- .21percentage paint.

In general, estimates involving many individuals or establishmentshave lower standard errors (relative to the size of the estimate) thanestimates which am based on a small number of observations. Theprecision of estimates is also improved when the datana cumulatedover time such as for quaterly and anmal averages. The seasonaladjustment process can also improve the stability of the mourblyestimates.

The household and establishment surveys are also affected bynonsanpling error. Nonsampling errors can occur for many reasons.including the failure to sample a segment of the population, inabilityto obtain information for all respondents in the sample, inability orunwillingness of respondents to provide correct information on atimely basis, mistakes made by respondents, and errors made in thecollection or processing of the data.

For example, in the establishment survey, estimates for the mostrecent 2 months are based on substantially incomplete returns; for thisreason, these estimates are labeled preliminary in the tables. It is onlyafter swo sumccssive revisions to a monthly estimate, whes nearly allsample reports bave been received, dan the estimate i considered final.

Another major source of nonsampling eror in the establishmentsurvey is the inability to capture, on a timely basis, employmentgenerated by new firms. To correct for this systematic underestimationof employment growth (and other sources of crror), a process knownas bias adjustment is included in the survey's estimating procedures,whercby a specified number of jobs is added to the monthly sample-based change. The sine of tle monthly bias adjustment is based largelyon past relationships between the sample-based estimatesof employment and the total counts of employment described below.

The sample-based estimates from the establishment survey areadjusted once a year (on a lagged basis) to universe counts of payrollemploymentabrainedfromadministrativerecords ofthenesmploymentinsurance program. The differeace between the March sample-basedemployment estimates and the March universe counts is known as abenchmark revision, and serves as a mugh proxy fortotal survey error.The new benchmarks also iscorporate changes in the classification ofindustries. Over the past decade, the benchmark revision for totalnonfarm employment has averaged 0 3 percent, ranging from zero to0.7 percent.

Additional statistics and other InformationMore comprehensive statistics are contained in Emsployment and

Earnngs, published each month byBLS. Itisavailablefor$26.00perissue or $50.00 per year from the U.S. Government Printing Office,Washington. DC 20402. All orders must be prepaid by sending acheck or money order payable to the Superintendent of Documents, anby charging to Mastercard or Visa.

Employmenat and Earnings also provides measures ofsampling error for the household survey data published in thisrelease For unemployment and other labor force categories, thesemeasures appearin tables I-B through I-H ofits "Explanatory Notes."Measures of the reliability of the data drawn from theestablisment survey and the actual amounts of revision due to bench-mark adjustments ae provided in tables 2-B through 2-1 of thatpublication.

Information in this release will be made available to sensoryimpaired individuals upon request. Voice phone 202-691-5200TDD message referral phone: 1-804877-8339.

HOUSEHOLD DATA HOUSEOLD DATA

T"K A.I. E84*oyu866 stat of0 d~ 96946pop. 9b60m6end.p

"St O.a846619 =*.d SO86.6y4164so

Effpbryw 6Ks^ a.. wed ag

TOTAL

0.6.. o.*6Kw 6K.66 OB7 M10.SS vim$6 637 2107 210.577 710.76 2M0SS 211*

C~.ft6 140.105 14Imv 12306 146.6K 141.60 1.1.135 MASS46 141PS 141.75,P K67.1 61.9 a". 67.4 67.0 670 67.1 67.3 472

E4sd137.A54 1364= 134.74 135.12D 13654M 135.478 135"6 1356900 136.61

w86 .~61 ~ 6. 63.5 1." 64.7 64.4 643 6435 643 64.A

46*1237M 2,411 2.764 3-W7 3241 &176 3.274 3.179 X.135

kldu.U -4.6 136.46 131.051 131JOD 131.753 13* 3Z=6 136.54 132.61 137

LIw79"d 62731 6.567 5.464 5.740 5376 SAW 5.K 446 *

Aft"YC-t IdO 4.4 4.7 4A 4.1 3.2 4.0 4.0 42 42

to h i.656 46L723 4641 6.786 46L047 46om6 69.441 691*4 6.A64 00275

pfo . -MwY-O.0 - 4.43 4.474 4=6 4376 4.377 4,201 4236 4.417 4.456

Neil lB yams WW over

C0.6.,l46wkdxw p161 136* 161,357 101*6O 101.6 1607m 101.175 1012M 161.37 161.426

C~ _______________ 74AN 75.149 72.118 75.366 72.3 752496 75=6 75.415 75,547pW I IS 740 74.1 74.1 75. 74.6 7435 74A 740 7435

_______________ ".M____ 71l 71.405 71.430 I=6 M27 7Z.354 73."s 712.140 75254EO91051846.9866g461. 71.1 70.4 70.4 731 71. 7.5 71. 71S 71.3

I% .7651 0 5497 3,7"4 3.087 3.61 2.944 S*6 3.04 3*4 3.187

A ivy ads - -16 4.7 50 4. 4.0 3S4 4.0 4.0 4.3 42

Mess 20 year mWl am5

Ohdl80*wS0w60 am 61.K 6.4 63.227 61.mK 02.469 gum61 MM11 61.14 Saw37

aI.m.~ 75.b754I 71.161 71.136 70.367 71,154 71.136 71*6 71.46 71*6

_________ _ 75.4 76.4 3 770 7&S 75.4 750 7S.7 76MVAS SLIM SLIM0 46.11 6677 66774 46.6K 6848 aw.61 MI.76

71 7.1 73.1 743 740 r7. 740 73.4

MIS*4 2.16 127 1*6 2= 2.219 Z22 22v Z26 2.15.No~5*65610419 _______________ 621 60.194 O=.6 66L24 6.55 6261 MAO1 66.76 46.6

L%8716. . 2.61 3.061 3AM6 2.375 2A,6 2.45 2."41 2.575 2.57,y.8166 4.0 42 42 3.3 353 U. &4 36 35

W081611 18 years end over

chg. 6K11 nkwk 4481 P. 14637 14Z3 MASS6 108.517 100=6 109.402 106,481 104S32 14634

01.161to. ft12SS77 6*69 Mi.73 61.A62 6*,02 6675D 46257 6140 6204P~ 6.2 66.2 S6. a". 610 461 M2 46.4 46.4

GZAC4 6144 3.6 03.344 mm75 613X7 63.12. 01.= amim1 61.41

E8965sm..61.S6K 57.7 67 57. 0 670 67.7 57.7 57 0 7 67.9 57-9

Ik.8bved L.734 242 2.717 2.705 Z592 2,56 ZAN 2.730 2.74L.5611.14 - -42 43 42 4.1 3.8 40O 4.0 4.1 42

Womn,l 20 year and over

Ckfto n 16K&d 461 1Pop4 16104IM3 MASS6 louse6 101,443 16123 101,012 101063 101*60646(116137m 61.104 62335 61.488 a,=6 61*6 61018 6.126 6*=

__________ 612 612 6123 61.1 610 GO.? a" 61.1 612

E~w6,K664

8 40 460 46.0 460 46s S0 460 46. 54.

_____________ 00___ 44 7T7 754 04 740 76 6 S52 636

_____________ 2.245 2.494 2 2.6 3.161 MIS1 2.111 2*4 2320

151965466 30 A 3.7 3.8 3.4 3.4 3.4 3a 3.

CW 4 *m6k0860 t~ IS-No4 16S6 16.113 16.140 3.4 15 361 16.41 S 6*6u 16.113

MOS. to. f- 7,05 7,734 7.305 6.6K ".37 8.371 661 6.337 0"4

_____________ 458 44.I 45.2 53.5 O61 SM. 613 610 512

P64454466 6.764 SAM6 GAM6 7*6 7*6 L280 72N 7.181 7.122

E5t*6ll41L0 41.1 41.3 440 4610 450 w 4W. 442

ISI*6 5 126 94 3D8 64 257 236 205 143

SAW6*44665 .1 4.475 21 6.561 7=3 7*6 SAWK am6

1J641.151 1.13 1.110 1.162 'An I=4 I.1m 1.140 1,121

L96 K __________ 14A 143 14.3 13A 128 In 13.1 Me. 134

I rw - - - - - - - - - - - - - --- wMamn rsmw k=Ov k* mplf-" d s~~da- -

HOI26EHOL DATA OSHLAT

Not 14 M1.0bS69-00DYDATA1*8. lo A-2. 6 nicesO a. M4 o. OWfu osfm ysc. .- udIp soii

(1I8& 1181W001.-*)b

-*nkftwp 122&18 1753 170.83 173888 174269 175A74 175&M 17%24 17&.30CMWI0b40. 117.154 117A22 117.88 117,051 117.83 117,140 117345 11.276 118.37P7A 67.1 67 67.7 6712 872 671 672 673E~I112,516 112.78 113.8= 113AM0 13M24 113.509 113.11 114015 113888E0,o1p*8,1GO~. 6. 642 642 8.5 84. 84.8 a". 851 68U1llO4-4.573 4A64 4205 4.10D 4.019 4.151 4.134 4261 4.305&D8 3 . 4.1 .. 1 33 3.4 & 3.5 34 V.

Pin~o 77.1 78.7 76.7 77A 72 70e 760 77L2 702057 6727 073975 8523 60.5"7 56,470 8.281 0825n 588Eli0on~ l.a. - 744 71 73.7 75.2 74.7 7425 74.8 74.5 74.24bs40o .115 Z= 2.3160 1.732 1.723 1288 1.78 1283 1

&S74~888 3 33 2D 2 2 2 12 22

Iso.~ Ma t"5.418 60.08 51.019 Sam6 00.26 00.35 GO=. 60.794 50.844B.d 8340 49.171 40=6 48,702 45.777 48.825 40.0= 40250 48.155Ml~,8w l. ~ 08. 52 08. 08.2 Sal8.2 082 6 54 0.7 08212570 177 1.710 1,561 1204 12510 12054 1234 lAMMS~ U____ I 3 3.4 &1 3.0 32 VI 32 U

Botome Is*uo 1830783Ck. ft. 6am5 6.AN 6. 7.113 7.036 7M3 7.06 0260 4.0as01 51.3 514 083 60.4 882 50.7 60.1 042"m560408 5.87 L752 0264 G26 606 8267 0.174 0.16S46.opI os .45A ".7 45.3 40.1 402 4029 40.3 48.7 48.7U3881pm.d ING0 8 770 867? 786 019 812 854 78wva-"1&2 1"2 11.2 122 11.2 11.7 112 1.7 10"--- -- -3 132 541U. 132 552 12.4 12.2 W1 52. . . .10.7 02 04 10.4 10.5 1±9 1067 88 92

0276 .3 0420.0750 5I 5 25.,309 2527 MAN.4 31 2018 A.12O~s0b.._______ _ 18,52 I8.87 16.211 18.721 18267 18.732 16.742 J8.773 16251a"~ GL3 80 8 45.0 6SL7 602 S83 85.9 68 65.7&~40414 12.170 15.192 15.418 15.401 1544 15,470 1527 6,440EffOWS.WAMVOP268c MNO 882 88. 08 0125 88 6120 a" 882 a"0hxe5. IA 123 1.8 .31 173 1226 1.247 172 1.401 1261L~~~lss0.3 8.2 02 738 7A 725 7A 04 7HUw. 20 yoous 881 am,

aISml~1. 7.308 712 7217 7.414 7=3 710 7.45 7.43D 7X7473.3 724 71.0 7Me 72 7me 72 71 72A8rli .7 G.8M 8.770 8.8N G.SS 6.838 8267 018 G=8E6~p~n 72 88. 88.4 887 P7. GY3 67A 882 873060 an1 547 02 15 89 040 053 48710o0psI72 72 7.2 7.1 720 02 7.3 0 02W068881.,0620 ymad o8w

0.~~~t s 8.1 8.36 821 8.22 8.8 02213 02m 8.3888 88.OL 2 88.1 80.2 O0 88. 88A 884 602E 0 "d 7.719 7.716 7.70 7.717 7.788 TA 7261 7.731 725881 882-Pw-an§ 8I a 1.1 81.3 61.3 01.3 81.7 ODA 612919 80 US w4 m7 017 472 am 4881ii p838 02 7 I 8. S 02 ± 2 5.7 72 02

p3023 W8 3061 83. 39. 412 302 402 38*FI. 672 04 023 748 747 76 712 223 M3-ftsw8~p18 27.2 88* 2523 32 30.4 32. AS3 88am .Il2IS 2 3 23 m4 235 21 83 2D 83101I.08 01. 58) 30 28.3 02O 21.3 M,7 273 531*O 03 30.3 250 87 12 2 8 3.20.3 2". mO 25 32A1 3. 83 2.

HO0UEHOL DATA HOUSEHOLDW DATA

TW " Ecilarm 85666 Go6 thil d~ by MM wit. Wk il Flpmth WW~i u - 4drte

9k66168I

EMcIiia sm-85 mil SIX o0nd

l m wil WIN will l l mm

15.w ISS1 ISA

14=14 $4,05 8 1 4,2 Ul 85.7 UP 5. 6) 8 IEOW-F9ill. ft 64.8 a") 64.0 641 a"0 647 4- ~ ~ ~ ~ ~ t soW 144 411W3.713.5 4

"'s~5S4 8a" S1 1016 IT3 785.3- -6 . 6) 37 &.0 t.o 5.

III 116 st fq5S -y m68 *.No Iti w646 -Uk V..b bi .l b-6 6~ S 5151641 b1~4-6864

nwa ppm ft domlid.~ ol 585,M, t 46ftmrt4b~pouft 6.mV

WM3100 b,~ ft4 - - mid hi 6 'Ii l ill18 6 Il

TAW .A-& engyalor66 gtok ofU Va d~ popsdflon 25p Vom 00 by 9*061I 6646464

vittiow 1. .

mw l m l molm am mm

Leas & 610 1 admilc f685

Ckokiii41P.46M 27016 7185 17.1111 27.57 27.83 27.851 27W via5 27.16

D~M6o4 i141 Iiisl Kill lime6 12.11 11.856 11W 12A=1 12W04

423W~ 15.6 82 85&1 43&G 43.7 85 1142 43U 4.

64I44 10 = 1.1 10.796 11W 11.451 11.171 A11 11.193 11.1403U6I50~ 85.6 356 A. 41.1 46. 40.1 400 464 4110

7o44 41 1W 735 706 707 745 6116 636

Lv__________clot 7.0 112 o.7 &1 6A GA 6)s Go 7.7

57.471 56)65 57*17 5y.47 57.85 57.38 57.41 66.85 57817

______________ 27= 37511 WAS1 37X6 MINES 37.121 37.157 37.413 37W31P~66 851 66. 66. 85.3 64. a6" 6. 66A 64)

Ito65l1 _5 425 61)9 61s 850 612 an) 62) 619 as.

1454561.7 141 Ism6 I AM6 I.31 'All, 1m 1.A25 14&07585n3 4.4 43 113 its 3) 3.6 3 31

44*6 44A"1 85M34.6 4.7 44710 MA.N 44.31 4541

________________ SUN__ W566 173 3,414 85.68 15.41 Wil 1385 11 33016

Plplimb 74& 73 13. 1r.6 735 13) 7X 74.7 7MI

____________________ "All 31.106 35.41 31.715 15.143 31)67 32;141 15.151 15.167E5l8961171.7 71.3 71) 7102 ".7 71) 72.1 72.5 71.1

IAN__ __ _ IoW 1 on 85 W7 7u 56 904 g pg

ILI814 3. 123 34 z 7.4 2.7 V. 30 L.7

__________d~e 45.56 45.766 40.157 45.267 4.7116 43.708 4&=5 45.7110 411.157

kw"-66 853 L 5475 Am4 Will 35WZ WIN5 31.4w 36.416 361002pm~~ 5 57 7113 76) 73.7 7113 764 7M. 75

5764335 867 8360 8541 85.81 35074 85.856 356 25W_____________ 76.6 7113 761.3 76 77.6 76.1 75.3 761.6 76.5

S5W 4 1 p 51 pg 5so so 8 Fill

L643171.7 1 1. ) 1. 8 s I Is Is is

-116 = d6 iotmeal.08W -

HOUSEHOLD DATA

TWAA4 Siuds6 1o5om hlcltorsHOIUEOLD DATA

= m8. mml am wal am1 5

T.05u ISCM 36.3 74 Into i3M6 13416 la1 uma 13

OCC WATION

W.40.745 41.23 41.101 6.0= 40.745 41AM 41AM1 41.420 41.72T.4-90 110"4 16*16 16k-6 16.5 SU.M1 W1 16.58 4158 31M

11*11-6m W . w & 17.5= 1161 mu58 16.58 Is.47 M6550 16.116 Sun11.As S11 24.746 I26 1Am K4748 1""1 "Am K4*727.5 2.5 17 .58 VN A16 14m5 Also 1117 28.58 11AmF .dsw"4 SA SAN Ma 2Am 3"1 M MAP 31 &35

8 4 u1.110 1010 117 17 I. I'm6 158 1. 1.111 MISS

Ia so5 285 so a 101 SO 145 14 12 111

121AmI 121.5 16*16 116.71 164.3 164.4 1064M 11.5 14M0AN 116Am 121*7 121.73 140"m 121A om 1 to$= I0KM 065

u.blv Ma14 126m . 4 .716 6.m6 Lm5 1"8 6.6 147

PERSONSAT58UKPARTI

Mait" am6 166 me4 &321 1 a a 3.

10Am 146 1008 185 116 1A 1m 186 111P66~~~~b6~m INNS 11*1 .6 26 a 1 837 5

Smc1to*.I74 Ma 6.11 1.7 SAW m Ma 1A Sin .60016.58wSIM 11581 5 16 15 67 158 160 15

16711 Pot ft12. 8ne66 41 404 1b 86 .61 1mm

HOUSEHOL8D DATA HOUSEHO12L DATA

CHATMC

8m V .740 S.AN 5.12 .1 3. 4A0 4.0) 4. 4.2

z 9 1--.1 2-V5 4.m2 2=2 13 3.3 1A 3U 3A 3*

12l 2) V-L .3 L 22W 3A M 14 u4 3A 3.7

SM 16019 8 1.I1 1.140 1.121 as8 I". 110 W 13A 114

kfw~ 0-8 ow law .=7 La 1 22z 22 U2.ON MW 12 2 A LS 2 2A 23 2A

Vk- 1 1 54I 5m8 S41 82 &A4 L2 &I 0.M .

-dk. W 4AW4 .M8 4.738 &9 1M 3.9 :4.1 42o. wwr- ,8.14 1 .122 1.178 4A 4.5 4.3 4.0 4. "A

.OCC8JPATIO8P

= P0Wmt12 1740 1753 IA 8.7 1.3 1.7 Is 1isA____ .6 A40 A347 3.0 So 3. 3.1 3A 14

ft P85I. 2WP- 5n1si 572 3.8 14 3.7 W. 3.7 W1.111 1~ 1.40 1 0.0 L. GA 7.1 72

F~b W .~Wl 212 234 25? 5.8 0.7 7.1 0.3 52 72

Pd 0071088~kM 4.548 OWM 4.81 42 4101 4 4.0 42 A.5I0.~0000 1.2 1 .410 IAN8 4 47 42 4.0 4* 8a

8848 1 2 30 7.1 1. 3.5 0& 2.2 4.0581 88o 54 ms 72 5. sa * 0 7.0

_______ 700 888 on &A 42 38 14 02 4*18gal37 Sol 121 &I &G U4 1 42 02

___________ 313 80 102 02 .3 4S2t 4.3 LoLM8 &M27 325 4.1 14 &D N* 4

T 88W~k 22D 218 408 .2 22 to 32 1a 288588. 5 W1.02 I.= 1.012 U 4.* 4.7 4A8 8o M.

___________ 21 198 210 Z.7 2.3 1.9 01 L3 is

___________ 418 1011 288 2.I2 222 L2 1.w_______ 4 118 IN8 "* I . 8 .4 1 * 8U 1 00

Tdb A-& bDulad III~ m

F., i & F8. O. Do. 0 1100 wl 2m mw l 80,Iml

NUME OF UNMLOYE

L68888~217 &M02 &M71 &M2 "to 2=3 2.40 2"1 4.2505484 823 2W9 2.115 ism8 8.1 11"8 -So 8.27 1*8l5m8 1.01 1W 1*17 1212 8.211 1.31 1.12 ". I

Is~lS 713 1M7 81 a"7 12 713 128 73 JIMv ____________ mW 714 118 on 004 51 8so 88

122 114 81 2 14 14 1* 2 2Ls &1 5* 8. .1 8.8 MI 0*

PRCNTOSTIOTO

___________________ vu 100. 100A I10A 1122 810 812 12* 1L40888 40.0 40. 40 403 452 a0* 04A 03. 47208s% .f 1~ WA* W8. 12 31.8 31* 30.0 32 noIs.."05 M'S 2* 2M2 2.7 no 2&* as* 220 noIsm8 =14 w0. 14 12 22 12 1" 121 22)

13.1- ol I Ila I8 85*6 IQ* W 1 . 10.7 11.72II

HOUSEHOLD DATA

T" 6A-7. R-.o 6ftSlI~l661

oft-b.s4b 60046.51

HOUSEHOLD DATA

-as-An 66111ys1 Seaonsy -o

200D ENSI 2 001 S 2DE00 2- 0-1 20

NUMER OF~ UNEMPLOYED

56.6. i-1I~ 140S. P-- -* U2EN 3.4W 3.=N 2.814 Z.446 250 U154 2.742 2AM0On .56.07.35 - 1.134 IAV6 low6 033 825 677 07 '= 6.5m016I0 - 5.60 m 1'An 2= 1.701 SM)1 5S4 1.7 I.751 1"0

P014jb.1 1*1 12 1.451 () ()() I I

-777 6 ENo 767 615 70 746 82DEIh.EW _ _ 2AV lEN Z.1 MW 151 .01 5.50 1.0 AV346E -57 37 w0 400 50 420 401 w4 377

PERCENT DIBUTION

Tolsqs6 - ____ 101.A 100,5 500,.0 10m0 100.0 100.0 5010 501,0 101.0A34. b- oo.401l6..01qw..bJEN 46.6 51.7 512 45.3 44.3 444 4.7 45. 47aon1po651

15 - k 15.2 2&3 1", 54A2 54.6 Me 16. 172 1546

1001450b W .4 1.5 12. 35.3 M0 4.50 1.3 214.0 508 .7,31...0 02 3D.1 3539 34.5 33. 34A2 3&85 37 32.3N-6..66 V. L7 3.1 63 72 7?A 63 7A &2

UNEMPLOYED AS A PERCENT OF THdECIVUAM LAO FORCE

~3~7S046E06.616017.6 2.2 3. 2.3 1.9 1.7 1.8 5,5 11 2-0J. - .6 A5 A5 A .5 .5 A2 A

A..l.. '. A 'A IA 1.3 1'A 1'3 IA 'A5i0 .2 .32 .3 , 2 .3 .2 2

l01w3

ToW A.6. Rasp *f mIS..sali .,a u of b4wsd~j~

IMo 82010y76dgl011d S..snxW 0ftd

1.041~ , 1.2 1.5 .9 .0 a2 .2 1.0 1.1

(..) 4 4.7 4.6 4.1 3,54V 4, 42

"JTd Swdmmvl4wo34~w065 56.66.16bbi.- &.s Pd6 W- 4A 4.9 4.4 ('5 41 () (1) ('5 (1)

L6" 3 U, LS3 (1) (1) (1) (1) (1) 41)

am1 6.63 ft 91 -650d54 o- .O4-MId f, W--f

101.Wy - .0. tavm o .5 := 34ft . O. -4 166 34s- h 0 6 W466..W.O .kW.ps~~~s0'B' 65 hN . .*1 54.04 3fl ON 4.1.1 .66.E .035p . l toP14016. ~ ~ ~ ~ ~ ~ ~ Ok 045NM b- d*0 =15--53 . ~616

. 060w 60 s0.60006oL6.6 o a 6

HOUSEHOLD DATA

Tab A-4L I5285I6 Par140 by m0 and QP, willy .445

HOUSHOL DATA

AQ6. I- Fb Fla. 0a 0 J. F

TwL 6 1 an 5,740 5.1105 5936 4.2 9 4 4.0 4.2 4.I924asym 2= 220 23597 111 9291 62 9. 9

16.15p Mal8 2.540 I.221 I&& IM. 1110 1 3.8 23.6

,:0 175.2 S16 40 555 15.l I22 5. 50 7. 22

2929s, 83 = . 250 '2. 222 2.4 22 115 2.

2004245.2 I=0 1'A6 A.46 7.4 6.8 . 7A 72 7225 p- ad9 3.510 3.767 r3.765 30 &05. &D 32 2

250454P 3=6 5. 2.v 32M2 3.0 &0 3.0 32. 2a,.m09 age 529 Its 2* 2 2.5 2.7 26

M92e5i m and 5.5 32M 3,187 40 3.5 4A 410 4.3 '42

lat2e292 2*15 2*74 I=8 0.1 9.4 U 9.7 21 2

293475 25 33 30 26* ?7A 17.5 214 25.5 222

,84582 1a 56 5 3.3 12 20.7 12.-3 121.7 111 1IM

auto6534 50 564 an 7.3 7.3 7.3 72 7A 22

255.m927 4215 226 225 Z4 2.9 1,0 10 &. 1.0

25.464

2 125 AM 2 ,619 2*t III 11 29 Z9 M. 10

552m-. 7409 -- 274 30 251 2.7 2.8 2. 2.8 10 L9

Wo IY-W 285.40 2.705 2.730 2.745 4.2 3.9 4.0 4.0 4. 42203425.92 1*5 971 45 .4 844 X* 16.7 U Si

s,422.2 - 416 440 12.* 22 2.3 12. 2.4 I2.

163:17r-29.... m5 22 220 243 22 t2. 212 1 15.7

, I4s"-.. 279 274 20 11.3 IA. 22.5 21* 122 L7

20 W 2455 y- .......... 523 472 42. 7.8 L253 9.7 L.7 9.2

22.9894242 2 .75 2*75 &.2 M0 5. .0 32 3.4

'All,55 I*5 228 I*4 5.1 2. 2 &1 5*4 258.24m432 200 5 5 51 2. 2.7 2.4 Ls 2.7

Table A-IL Persons ima In the Imbor force an rmuffip1501049 by smx. n1ot swescraily adjusted

Category_Fe _ b Fla Fb FW Fwl

NOT IN THE LABOR FORCE

Tom -4 129"*W.67f - 4M723 611.7811 25.0 25*0 43.5 CA.75P.2156.mr,mvi54O... 4.43 4.54 2.743 1271 2.40 2,629

S. 47,*4 92 492* 214 42434 4425.Sm' I.X3 22M 577 922 407 77

24.noo'22n44l41072510 20 150 140 283 183

88.9. ~6944 Ilay, 22224 ill 1.5 428 427 54 02

MULWDLE JOBH9OLDERS

T,34 222pI6 j402oI4 7.735 7.512 4*27 3.5 3406 2,5

Pe2l"Ifibl5ldn. , 2Jow.231 425 4,258 2.44 Z.40 1.2 1.7P2F47 ., 2 4I Zal5 31 42 1.17 47 454 1.2231 1 .240

F a me, = =4047

ja652559222405 066 l2i 220 140 54

2404Smplixo4c5 nd7 920M7....... 7 .5 ON 722 838 240

MeWP th Wde .vn.dlgV d 1-493520.422369474225*42-ft5my ons end0556552 p2490 intel 22f2592t

5 ,ft In95Oft.6Job5during2584089*. pan sum4 -92026 924 way 2*4d0ty2de2-42*7. v tid real an ov eu5-. co nat Any wo,1 laf -- ag ~ 664~S414392219442272569S 4

525oug5,od.mo ~462*2954223 typo4 05545425 c..m*7ja634n 240259249255*.640240d-4M402010,9lock nolI In26927594 mda;29252x

38

EFSTOU4HM026 DATA ElrrABL1240267 DATA

T~4 .WW.6.605. I6 "648 5w by hedosay

Notl 80.0001a*,)odrml

WO DO =IP OSOIP 20W 2W 200 20 01P 201P

Ttl.............................. 12&M07 130.77 I29.01 130,047 130.482 131,789 131.842 131.07 130.102 13237Todpiat . ..................... 29.3 II1.04 108,555 109.00 110.088 Ill.=0 111.427 111.443 l 111.8 8l.

Good.produchrg ......................... 25.=2 25.48 25.028 24.947 25.024 25.808 25.020 25.0 2,29 25.084

MLb ............................. ... 521 541t 537 538 533 S42 541 540 548 881M 8 6 h 8 8*r ............................ 44.3 43.3 42. 41. 3 45 44 43 44 43 42cw0ir8...... ... ............ ....... 80.4 70. 78.8 788 81 it 0 78 78 79 7001 and gas 0~ extra283.n 314.2 315.2 317.4 258 300 311 311 310 321Noastlic m .. .. 103.2 104.2 100.0 100.8 111 108 08 07 180 10

Constricion ...... 8 .................. .1m5 .6m1 6374 6a,= 688 8.745 0.734 8.717 0.87 8.08Gorma 800 ontacors....... . 1.417,4 1.502 1,478.4 1,472.5 1.481 1.517 1.52 1.57 1.54 1.54H.*00 8o~~o108g 758. 8M71 771.2 774.2 M0 W0 80W7 8an 911

.... 1S0s.8d .. . . ...... &.364.M64 4,1211.5 4,121.4 424 4= 4.30 4=8 4,43D 4.42

"MULW-t ..... .. ...... ......... .... .88 MAN~ 1&.117 18,040 18,473 18.7 18.80= 18.312 18.21 18112I'mcluct2. olis Z3 2.03 12.381 12.298 15.0 2.832 2.584 12.015 15.442 12.28

Do08ogoods - . -------- 11.050 11.3461 107W 10.1170 1128 lilti 11.50 11.2 18.840 10.00P 46628n 1.s .. 7.04A7 7=53 7.410 7.3814 7.04 7.042 7.84 7=53 7.454 7,411L-.er ard wd .02 818.2 OW012 787.6 7810.2 M 812 07 802 780 780Fu fm nd80 urS................... 500.7 582.1 540. 540.0 500 56 584 502 047 541ROM0u d8Y. last &= 00 . --------- 5484 507. 04U 844.4 587 584 500 041 567 5M

P&M8Y eaedkd bi ...... * ...... 650L6 604.2 877. 673. 80 60 8OW 08n 677 672Mard kerv98OCNad88basic 1 OW 308.,4 22D0 218 217.8 (I) (I) (1) (I) (I) (1)Fj.404840 801,ortpdu............. ... 1.524.8 1,530 1.518 0 U0. 1.525 1.53 1.030 1.530 1,617 1.504

.086f~~.4~. . Z 5134-7 Z.121L6 4.11112 Z102 Z.131 Z2.14 Z2.17 Z124 5.118 Z107...p . .... .. 8 360. 383.6 302.3 3112 308 381 381 302 383 283Eletr8 itid4 harlO. I l0 lioi845 .. 1602.3 1.731.0 1,725.0 1,712.8 1,48 1.719 1.724 1,726 1.724 1.713

m08o o sser - ame01..4.. 844.7 OK6. 86.11, 680. 645 687 804 656 696 60...................... . .0580M& 1,81&.6 1,75&.2 1,767.1 1.88 1.812 1.814 1.813 1,757 1.766

&bo ader, and .19184808 10271 ....... 0WI 1.5 8362 900.3 IAN 801 go ON 040 653Atlsa 88redp. Paris. 452.0 457.8 454.0 454.9 453 456 455 456 452 4531811.84094.08 844.1 801.0 6012 606. 844 847 880 801 653 85Ik46ooc n .o- o89 ....... .... 304.3 302.5 3807 386.1 398 388 384 20 91 38

semoust.i080 . god .... .. 7,33 79 7,210 7.170 7=8 7.= 7= 7275 7.W6 7,219Plsi0 .. A..8 assi.. 5.60 5,000 4,042 4.01 5.105 5,041 25118 4.888 4.86811 4.801DFod asWKMP 1,840.8..... AM 1,460. 36.0 1.031.5 IM87 1.673 4867 1.68 1.66 1.66Tobo6p.odu.08- - - --......... 3.6 382 292 30.7 37 37 37 37 38 35TO.111, "pbroducts - 54We 525.0 51&.1 510.8 540 836 530 025 M2 513

ACWW 04.Pod Pser ede .......... 680.7 0242 816. 611.6 860 630 am 020 026 615priparri88dtpeordis .............. 6812 656.0 6516 640. 683 680 87 606 653 6461.81 684M1*g - 15413,7 1,501 1,552. 1,544.8 1.550 1.588 1.07 1.554 1,50 1.1546- . 1,0-8-- ----- W I = 1 .018.4 1,010.7 I =I 1 .023 284 1 m I A 12119. ..... ..4........ 127.8 1201.4 123.9 124.0 130 131 130 129 129 125R480.0and 080. plasti910000.........1.010.6 Og.5 84.1 676.0 1.010 1.001 096 801 9 6779Lahad lealtuapeadcut ............ 7.3 71A 69.7 60.6 76 73 72 71 70 Go.56188484905819ft. ... ................. . 10%W83 107.= 104.983 10700 104.M4 I124 16=3 10OL38 100.483 106.67

TT: =p600 01 00 A86I ............. 7U 7,147 7.019 7.088 6"87 7,046 7.01111 7.088 7=07 7.105- ...-- 4.424 4.041 4.518 4.524 4,479 4-W4 4,50 4.5111 4A"7 4,58

trardSspo58lon ... ... _ . ... 2 210.0 213A4 212.2 225 2198 2 217 218 216Loa real o0. Inau 8a ! rom_. 505.2 05W. 508.4 1514. .C 466 S0W 8 5 60 S 502T- - oi .rmt 1,7607 1.9W2 1.814.0 1M7 1.83 1,45 1.853MIAWate nwpoaOon ............... __ IO0. 180. 19,014.8 86619 296 256 206 25 208

= bqo8l4y1 ai 1.- - 24761 1.6741.3 1 = 286 280 147 1.310 18 = 1.312 1287c4ol.oWg~8,I - ... - 2.4 12-0 12.4 12.3 12 12 13 12 2 12T8668.588i..04c~n.. . - ......... 4027 477.6 472.0 474.3 460 474 475 478 476 477Cmo.&RWMo and P.M.i Z16.-.. 5440 5.06 2.101 2,504 Z.458 5.40 5.40 2.=0 2.00 2.512

C..0 68a808 - - 1,582 1,626 1,448. 1,42. 1566 1.041 1.A6 1.653 IASI 169Electric 68 gam 58 mind, 0 682 852, 602. 6012 860 80651 83 802 858 8565681408594 tl..................... . GM 6.6 7287 7=1 7-1 7.01 .1 7.08 728 720! 7,5074 7A8710.0*3888 gods-.-------.------ 4.1591 42=6 4.175 4,175 4.17? 4.57 4= 4.201 4.183 4.184

Prosspolo goods . .......- .0 2 .80 2.867 2.1147 5.02 2.08 2.88 204 &W88 2X07

8.. bwou am Was Of tw564

39

MSAEIJ50WD( DATA MSA8I.36S4T DATA

T*1. 8-I. 6l 08l0 ; nodso 1I byk6400r-C 4*nm

p6m* asse 23.U 23.01 ==57 22.73 MM07 M10 M323 23.2M M323 23=3&aDonsawtesw ' ul.n..- 0681 1=7 W&4 00. I= I= IM) 1.019 1-018 1.013

Coic. .h.ft sias 2.0433.S037 2.738 2=7 2.75 2740 .77 2.742 2.04 2.00Depasinard SI50 2=350 260 2377.1 2X804 Z.417 2=~ 2419 2.411 2,W84 2387

F004 M- 3,471.03,507. 34." -,505 3=~ 3.510 3,516 3=52 3,W3 3.544AU.00l044 d.WM04 setIa . Mg- - 2388. 2.41V. 2.308 ZMA 1 2.4 2.431 2.430 28 2.425 2

N l d used w domilem I 1,24.3 1,1 17.0 1.11&,1 1.11&90 1.100 1.12D 1.120 1.121 1 .121 1.123

A144*l640 . . 1.145.0 1.= 1,22A 1,184.8 114 1=5 1.21 1.217 I

F1ll4.*I.l101~0.4.... 1077 .00?_123 12. 1.1" 1.128 1.13D 1.137 1.136 1'138 0 11Q icli 4*1418100 .. ____ 7.735,2 A 0655 7.791.0 7.8743 7=05 S=07 S=0 8.1i1 8.125 &.140

road. 1.004 4~41l1.0 - 2053. A.. 3,150. 3A58.4 3.021 3.075 3M84 3.0(M 3.095 3.100

Fvwce. khstessum. must oad1etate4 7.564 7242 7.618 7=23 7524 738 7.647 701 7.07 7AR5FO.0 .... ________ V ,07 3,748 V.42 3,754 3.717 :X737 3.739 3.747 3,71 3,7M

D hpod..y .645. . -....... 2.001.2398.3 2A=3 2Z03 ' 2.007 2.034 2n 2.03 2=02 2=0C4114111.1 banks ........... ..- 1.484.5 1448.5 I,442.2 1.440.3 1.460 1.440 1.445 1.445 1.443 1.443

04*10 k*5'a ..... a .... m... 244.4 23&7 23.4 231 245 23 237 237 237 25N6d1Oy bW~ff- SU 807 900.3 0003 06 000 05 8GM 000 6w0 700

I44ttgap *bureaus 64" Woksa.s 236,2 =51 323.2 324 30 324 3 321 32 3Samily 011140 arid ............ 719.2 772.1 771.7 7742 723 766 700 773 776 7701401 d41 .0. 800101l41 .0k.4 2381.4 240.4 247.8 2502 23 240 24 250 250 240

.*.0 ........ .. 36 2=36 3 200 2=36 227 225 225 2=5 2.3W6 2=7

k -. 4004 ...... I-IO 1,6 . M 1.05 1 .0 IAN 1.581 1.507 1,0 '% ,50 1,504

8*0680.01*404144 . 1700.39 778. 774'a 772. 767 774 7 -5 M7 77 M7ROWestt....... .... 1,491 1,531 1.616 1,510 1.534 U.546 1,548 1,5 = ,0 1.50I0

51604 ........ ... .... 39.400 40.06 3006 40.448 38.014 40.005 40.7856 40.707 40.04 40,070A005A"4 UMM1. =A-67. 7492 607.9 0073 706 006 010 610 825 823

H." 414*0 o 4- pt-. I. . 1.716 1.902, 1.0344 130 1.060I 85 13804 1380 1048 1 A48 1.00668.44404041..s ".... 137 127 .23 M 1 =7 138 AS 38 I 38 = I I82 I38 = 33

s~V~ ...... ............ ..... 0.3006 0A.000 0,50.0 0.52- 0.215 D.M 9=~ 0.751 0.742 0.766Se.*4lmtb~dk&16 008... .......... O2 1=3 008.0 OD 1.00 1.00 1.000 1.'004 1 .000 1,2014 1,2017

P0014148744. ...... 3,530 3.030 35234 3,5110 a .773 3.061 3.845 3.744 3.06 3,005H* pply wor1 o . ........ .. 12 3,403.2 &,111.1 3,101.7 3,=0 3,432 3,413 3.338 3,= 3255

C.18.P L184* pdal,oo4 4.40.4.. 1368.2 1.06 1380.0 2.018.3 1~ 1386 1.0 1388 2.00 2,215A4 4.. mmA ad1.191.4 1.2112 1.215.4 1=0 1.195 2w8 IB 1.215 1,227 122

~01001k.,1-* . . 370.7 38.4 378.7 3702 384 388 388 383 304 383.. 0.8400 ................... . =4 6412 531 .4 63406 50 630 531 630 640 636

and rec01.*1.06l*44 ... ie I1L5172 1382.4 I,1 1S388.0M 1 .723 1 .701 1.70 1 .707 1387 I.006

H..00.44'64408 .. .. . ... .......... 1000.9 10245A 10.23&9 10038 10.070 .101 10.208 10229 10,258 10.9

044*dWk461n164*40614l --.. 1A.907 1M.07 13843 1388. 1'914 1,000 1,953 L38 1387 1=97Nu6abV and pormna1l06 54 -I . 1.783U 1,700.6 1708.1 1.0003 1.7M0 1.70 1.70 1.708 13.801 1 I

'40801W -.- ..... - 3,060. 4,208. 4=D 4386. 4= 4= 4A40 4.003 4381 4,27

Ham hoM664. cguo~ ____...... 635.0 66 63730 6362 530 645 644 842 644 642L~i..0. ~ ...... A. .S3 1.017.3 .115 M05.5 1.0 1,216 1,214 1.015 .18 1=8

------0.1.4 .. - *...."-- Z443.3 251086 2.3272 Z2.2 2.300 2207 2.30 2.300 2.301 2.41104*1141. .. . ...... . ........ . .. 29112 3 3082 3,043.8 -.. 2.0 Z12 3,010 3.032 38 3.05 3,077

Chid cly cao4l srie-...... ....... 754.3 0070 0001 018.8 740 704 707 70 708 80P44.ds1 ..........4 ....... W&7 8446 843. 847.7 007 030 840 845 040 851

074*1. 9.- ... - - 12 1012 04.9 9084 100 103 104 104 104 105Z804*0041. .2417A 4Z243732.413. 43"3 2430 2440 2.400 2.450 2.450 2.450

6o ndO1 4*vi -1 .11014*0.-- 3.30023,4712 3 467.4 a.S1.4 3M34 3,463 3.471 3.40 3.498 3.505M41..56 *.C4144l16 W -. 0713 1,017A 1,15.5 1388.7 904 1,215 1,215 13821 I~ = I

and l1*4p0001*4h..ticm -. 1.1M.8 1.13012 1.129S 1,133.7 I,27 1.128 1.137 1.139 1.144 1.143.. 41. . ........... .... ..... 0 3.3 52,7 52.4 13,2 (1) (1) (1) (1) (1) (1)

0041.1llt .... . ... - 2 - 3837 20819l 20.438 38.945 20,504 2D.464 28.405 2435 280 3820

Federal 2. 2.01 2.398 2.0= V,76 Z25 2.815 2.56 2.014 2.6108.444* .40054.0 I.. .37 1.737 1.737.7 1.745.7 1.3 .5 .0 .753 1.75 ,0

4* - t- '. 4=~ 4,M5 4.07 4.082 4.728 4.718 4,748 4.789 4,752 4.771E.G 2388. 2.108, 1.4 2150.2 1,361 I38N 1.97 1386 135 1.9

ova,5444.016 State. Z7..... 2L. Z.751A 2.m3I 2.7511. 2.747 2.707 2.771 2.770 2.70 2.Z4.4*c. .. 13,177 13=~ 13.162 13381 12.0 13384 13.'042 13.100 13.125 13,152

601001 ........................... .... 7,03 7.7402 7.571.3 7.77311 7.30 7381 7.37 7.30 7.400 7.418Othas 64*1 g.-4440 -. ..........-- 5.410 5.6184 0380.4 5=8.4 531 1 5.003 5300 5.713 5.726 5.738

I Thass, . Mi.4 0 74441 244.10 Wsad4 WW1. 01.WI n0 6.4406801.0 _ pM,,j0.

b p9m~l804 M110141 b .. Md WM Og 1.744*1I

40

ESTABUmENT DATAESTABUSHMET DATA

2W M 2W1 38018 2DD 200D 2DD 20 P 280DP

TaIOM . ~ 342 342 359 339 34.6 34.4 34.3 34.1 34.3 3420olbV~4g . ..........408 403 40.0 39.5 413 409 405 308 40.4 202

un - 441 442 448 4.o 44.7 452 44.9 44s 43 40.3Consiac o 37 37.7 7.7 372 39.7 30.3 32 372 32 X02

415 412 407 403 418 41A 412 44 40.9 40.......... 4.4 4.4 32 3- 4.7 45 4,3 39 41 32

good s ............. 4.7 4 12 & 2 9 4 4230 41 41.7 40.7 41.1 40.9U4 44 39 32 42 42 4.4 S9 4.0 3.

3 2 4 4 0 0 3 9 3 9 3 4 2 4 7 4 0 2 3 9 2 3 9 .7 4 0W .l.al a d.... - - - . .- - 3 98 2 4 0 2 3 2 3 0 4 4 0 3 3 9 .7 3 .4 3 B 2 3 9.0 3 9 .1

.... ... 4.4 4129 41.0 402 4326 431 42.7 41.7 42.2 4128R td . ................ 2 A 43.3 43. 42.1 442. 2 2 2 2 2

d lsa e 4 3 43 427 432.4 43L4 44.2 44.1 432 4 7 42. 4 -- - - - 3. 2 41.7 41 .3 41.0 42.4 42.1 41.7 4026 41.4 413= 4Z4 43.2 4129 41. 4.3 42.1 430 41 b 41 41 3BTda,*a,o a dw4 ob *a 41.5 4125 40.7 40.1 412 412 40. 40.4 40.7 40.3.lwvt *kW 432 42.2 41.5 41.0 44.0 43.1 43.0 4028 41;. 41.1W gtd....... 45.0 4128 402 40.4 4&.0 44.0 43.2 40.1 412 40.3-. 41.3 41.3 402 41.0 411 412 41.0 40.4 40 .6 4028.... .nw4a . ... 31 3925 362O 39.0 392 391 39.1 392 29.2 391

9b0-&Mi oo4 402 4. 02 0 1 402 40.4 40.0 4015 40.1&. 1 39 M2 4.5 41 4.1 320 4.1 &9

FO~ W Wnre om.0 ........ 1 402 412 4029 3929 41.8 41.4 411 40.7 41.2 0.T pw .... .. ..... 3912 392 3728 37.4 40.6 39482 32.85 79.41 &1240 39., 1. 0 4025 402 40.4 3928

A~M olaiI POA06. 378 82 38 3.1 37.7 38.9 X08 30.3 38. 38.1p~pm .dpa0,odub......-- 43.0 422 4Z7 42 432 425 42 4120 43.6 42.4Pl9gsrkab 4~ .W... MW 39Xt------- 252 391 377 37A 383 381 38.0 37.7 39.1 37PN 422 M01 3.7 42.5 42.7 43.0 42.5 42.4 42 42.7

- 34 44 02 85 (2) (2) (2) (2) (2) (2)L.w 41. 41- 40.7 401.... 412.... 41.1 4120 40.1 40.9 40.4

.... d~6V37.7 3725 37.3 382 301I 37.4 39.1 37.1 3no 37.15'e2,,kg..... . . 322 32.7 324 32.4 3228 32.7 32A2 32.7 3228 322

raq~~i, 40 bs . 391 3&2 39.1 38.2 38.3 382 385 39. 392 285W1296 a d -04 --..-. - - .. --- 39.-------- 1 39.4 MO. 38.1 385 38.5 39. 36.4 26. 38.4R~d U. .. . . ....................... 2&.5 28O2382 20.4 38.1 32U 20.9 2&.7 29.1 32

Fb-~~ ~ ~ 36- 0- -".. .... 1 20. 35.2 382 30. 36.1 X1 X2 36.1 38L2

-WD 30.8 32 32 3. - . 32 -i 32 322U 3228

DAU Wll 1. Pmuc works in ff& NW mw0W4A .- OIL-,~~lwI-~ ,,9131 -~ - ~ , mm ww I. N.0 pu uiy .Md Wg,. 41.., ~ .I M-* MWta A OMM Thm1. 11... hich ft4 =,, .M&. 9 .g 1, 961ddo0.00.4pb~~P0.lbI8t br.U1,s 100 .9 P a bl. l.M,

41

ESTAB.IIff CATA ESTABLJS8MNTWTA

T.b B.S.1$veag AhaW el no

anes r F11 De Fe k Der I J.r, Fel8200 2000 200P 2 2000 202019 2 201

T7081 g40 813.5 3142 814AD 8I115 $48444 84712 $47722 847850Total 1354 14 2 40 410 6848 478.8 481.3 45.

__________ _ 15.07 187 15.81 15.84 8146 631.50 624.40 617.7

laft 1720 17.17 17.22 17.13 75.52 70.93 771.46 7M

Consnido _ 17.42 1821 tL20 1822 674.15 68.52 6814 67778

Maradmisin 14.19 146 1461 14.6 58. 804.2 5843 50.40

0TA 084. 14.73 1526 MIS 15.18 GM13 4 62115 81&71

Lwb0 011.31 13.5 1-.84 11788 408.5 47140 4414 475Tapotgn arpubliculilli es .51 '2.01 1.5 12868 4010 M340 46326 463.72

sals ral -. -- 13488 1455 14 14.51 i1.0 5807. 50 I 18.1i..y ". ........ 8 18654 1.AI 9.8 126.8 2 72 7 220 87.1

F t.ne dc r Mtt. ..... * 193 1922 1954 1564 870.22 53087 8500 8128

Se.ie . *.... .=.... - 1877 14.12 1436 141 078.7 560 4 46.83 47.5bd4588l..d i w, -d ow - - 15.48 18.84 I5sm 15.84 802.8 878.8 88.8 688M

80 .. 08 ,80 '408- 172 14AS 14M2 14.10 588.38 58008 071202 18041___________ 18.5 19.70 18.28 18.42 810.88 831.38 O.12 758.82

11180.1 2w - 19.03 2208 18.75 10.8M 858. 801.00 807.78 MAE808,W0. rdft 9205880 14.41 1550 14.50 14.87 588103 501.88 81023 813.77

18~8 l.,i18f 11.53 11.91 11.90 11.81 45&.13 47.4 488 444

WrA.82 90048 MW 5 13.80 M379 1.52 542.42 581M 004.38 100.38

Food .1 hk4.4 p202 i~. 22 12.88 12.84 1 2.50 5OD21 52038 518.8 S0274Tb po '7A00 IS M74. 85 18.38 18.77 8852 738.75 88722 '505

T.4%__ 108 112 AI 2 11.4 1 1.84 448.11 42122 4482 438.3

A-"1 .rd40- 0 .... 822 8.21 8.24 8922 338.53 M3385 334.48 333M2Pww.2 8102 m 5A000 IS A50 8 18.45 185 887.57 707.8 72242 t-712

p&"8880 and , .... . 14.13 14.5 14.55 14.%8 538.4 008.41 048.54 04.50084881. 820 aj poa.8~cts . 1 70f7 18.3 M824 18.48 700.88 751.88 775.05 75.05

9880820088co pmo ..... 22.03 21.88 21.84 22.10 808.10 958.28 980.77 1507.8

P~A.202 ad . 028818 ~ Pm5...... 12.57 10.0 13.5 13223 52.40 03422 S31.14 00.11

2.8888268.8862000 ...... o.... 88 102 1.8 10.21 370.45 38325 303.44 378.75

01180-p208481 Mi.1 13.04 13.84 M137 42728 442.7 441.84 44890

T108902808 .02 P48k 850 .. 18.0 18.5 18.58 18.8 811.51 838.8 502.8 838.8

50458581a 04...... ......... 14.91 Is 15.8 1.54 1558 588.87 098.8 8882 550.0

R68. b."8 __.35_.~ 82 5 8M OM8 388.48 218.8 272.88 274.81

p.MC@ h,008wd W8 MW __ 1493 152 1&48 15.84 538.O 553.08 5001 088.17

0.880. I&___ 137 1420 1428 14.83 44850 I454.43 I48383 488.85

p1 Seelbomb atmtuS2

ESTABuSHMENT DATA ESTABUNSMNT DATA

T hoB-uAdg. - 6y of producilan r perlaryworers en priva nnlar pao by

Feb. Oc No D

2MFe 2001W

Tolal pdlvalec.."w.. ....... $ 1.413.5$31 14.M8 $14.18 $14.10 0.5

Goofthgrl:Ing 5... 20 15.57 1016 1.83 1070 1575 .3Mking . . ....... 1714 17.0 1713 17.06 17.01 17.0 1

Consii . 17AO 180$ 12D 11.14 18.2 1832 .0.l 1421 14.2 1463 154.5 14. 14.47 6

Esie 1345 158 13527 133 13.8 14.5 .

S n13.51 1306 141 13.20 1322 143.1 .7Chang Gw pcem tra D 6e0008 81 18.84 1 .7W~h0d............... 14M ism3 10.48 M6.7 10.4 50.67 .6

bade ~ ~ W 9M .... . ... .4 80 .8 8.6 9.81 8.M A

on". ... 47 01 51 03 15,64 10.M .90u.. -. .. W ...... 38 4M8 14.12 14.20 4.22 14.31 .6

2 Thu CaaW ftl. kdo Ill, LMM. Wage Eue Dkdb 0abgOu ~eI~u-(doat OuIwukus (CPIW - b dom Uds du~4d

let8 .

MA . no6tWi8Q~e urn -4 from On Dge.4u 510 P. - prdftwyl

43

ESTABUSHMENT DATA ESTABISHMT DATA

Table 04. Im o a ho o0 prodcila ny pri-al noritrm ty Im r

.3asw seas &*lMws easny qa

F.& Dc J Feb Fal Oc 0o. Dec. J2 20 200P 2 P 200 200 2000 2000 201P 200

TOpo 144 151.8 1465 1470 1506 151.6 151.5 150.6 1518 151,0

Goo ducnO g 112.5 111 109.7 109. 117.5 11. 114.7 1122 114.6 1125

MLing -- 491 51.1 50.3 50.3 51.0 i2.2 51.1 50.6 521 510

Constrton 1632 173.7 160 1612 189.0 1094 181.4 1761 18.6 1832

Maraactdra 1058 1042 101.5 92 107.0 105.0 1043 1012 102.5 101.1

Durablegoods 1112 1094 1051 104.6 1121 110.2 109.7 1007 107.0 105.7Lorandsoop.octs 140 1302 133.0 1312 1476 14Z3 141. 1376 130.4 137.7Fur0enau0rs - 137.7 1373 1312 12U 1394 137.0 1352 13 137 1312

Stoedayandg 10 109.7 104.0 1024 1157 1146 112.8 1097 111.2 109Pnrey taliclusri.. 92.1 0A. 057 32 92.3 90.0 09.4 a&2 85.4 52

BLasturcSnbasictW poduct 716 67.3 651 44 72.1 690 62L 067 652 642F OWaPou 120.1 119.4 116.7 114.4 120.7 120.8 110.6 116.0 1169 1154h y ndeWmet 1050 1053 104 1522 105.4 104.6 104.4 102.6 1040 1019

Eetrrianoterlectrica lmen 107.1 1103 100 1042 1 109.2 109.0 107.1 107.1 1051Tnoao ppn. 12&8 1180 111.7 1113 1270 1209 120.4 1117 1126 1116

Mlot vddesandesdAnar 170 1519 140.7 1402 170 1610 157.0 144.4 1413 1402Instre rsrdtated p 74A 745 736 743 743 71.6 73 7.9 71.6 741

Mcouaradatrn . 100.5 99.1 9 96 1022 995 990 07.9 98.4 974

Nn 0los9L3 972 50 93 10 0979 9070 954 95 942Fodendbiep _oducts 1126 1159 1127 1092 1170 1166 115.6 1142 11&1 1144Tabcpo.- i38 53.1 490 463 523 402 47.6 47.8 452 442

TenglIM pndcts ........ 702 755 733 750 80.2 772 75.4 74.7 71.7 714Appl7 51.5 521 512 50. 54 . 0 i2 517 51ePqI pandalled prct 105.1 1092 1030 100 10L7 1036 103.4 101 1028 101.7

PNlOngandplisdng. 12DL8 123.2 1192 1185 122.0 1228 121S 1202 1215 1200a aard ald p..m 102 101.4 995 92 102.6 1010 1003 09.4 100.1 093

P63. 57 9 09.1 605 6L3 60 612 562 25 64.5S t plaica prosts= 1472 1426 1402 131L3 142 144.5 1438 1393 1410 13L2

Lealhara ndiallpoCci- 312 3D2 22 2 32 30 31 209 29 209.1

Serk oucig .. 1616 1690 162.9 1642 1655 167.6 160 1879 164 t03

Tranprialloanpdic ..... lille . 1320 1414 13S6 1374 134.7 1302 1392 1404 1400 139.7

Wholsalat . 1296 1332 13D.1 13D4 132.1 133 1340 133.2 1333 137

tatltr adU... 13L4 140.9 1304 13B2 1442 1442 1454 144.4 1462 1452

Fkancekwmurnce.ndreal stat - 1375 1303 138 1302 1368 1395 1398 1403 1403 1412

Seri -- -12032 209 204 2092 1207 2105 2109 2110 2110 2113

P . prelranay.1 See loolot 1. table B12.

ESTABLISHMENT DATA

Table B-6. Difluion0idexe 0f employment change, seasonaM y l0e4-bd

ESTABLISHMENT DATA

Private noniarm payols, 356 induala

1997..............1998 ..............1999 .2000.2001 .

Omer 3-on spa19971998199920002001

Over &north apan

1998199.5000.2001.

00er 12bonth4 span.1997

199.

2000 ......

2001 .

Owe 1-month spar

1 997.

1999.

2000.2001 .

O0e senarilh spr1997...

199.199920002001 .

1909

199..............

2000.2001.

Ome 12-mnh span1987 .... .. .....

1998 .. .

1999 .2000 .2001 .

Maradacurin parle 139 industes

1 Hased on asoaDy a data or 1-, 3-. and 64nonih pe NOTE Fipses are the pemen of ndustri h eploymWnand unadjstd dea for the 12-mnih sa. Data aen within icasing pu on 0of. the in dustries wilh unchnd eployment,

t .,where7 . 50 Ird cs aequal balac betwn in wPla peiiayinsi and deraI emplyment

Charts to accompany statement of

Katharine G. AbrahamCommissioner

Bureau of Labor Statistics

Friday, March 9, 2001

Employment in total private nonagricultural establishmentsOver-the-month change, 1999 - 2001

Seasonally adjusted, In thousands500

400

300

200

100

0

-100

-200

Source: Bureau of Labor Statistics, March 9, 2001

4, 4,4,

E

*

I

Employment in manufacturingOver-the-month change, 1999 - 2001

Seasonally adjusted, in thousands100

50-

0

-50

-100

-150

4o :

Source: Bureau of Labor Statistics, March 9, 2001

9 9

Employment in manufacturing industriesOver-the-month change, February 2001

Seasonally adjusted, In thousands

'0 'e O.P *-,,, "C' a, "' q s 'oe'40 e 4 4e 0 "' / 'qeN

vy Oly "Pa 0 0' < 10 btCA o;

"I

Source: Bureau of Labor Statistics, March 9, 2001

Average weekly hours in manufacturing, 1988-2001

Seasonally adjusted42.5

42.0

41.5

41.0

40.5

40.0

Jan-88 Jan-90 Jan-92 Jan-94 Jan-96

Note: Shaded area denotes recession.

Source: Bureau of Labor Statistics, March 9, 2001

Feb 2001 40. hor

AaMA9 T IVO

3an-98 3an*00

Over-the-year percent change in average hourlyearnings, 1990-2001

Seasonally adjusted

Jan-90 Jan-92 Jan-94 Jan-96

Note: Shaded area denotes recession.

Source: Bureau of Labor Statistics, March 9, 2001

Jan-98 Jan-002.0

V Over-the-year change

AA A fJ\for Feb. 2001 = 4.1 percent

Unemployment rates by county in New Jersey

Provisional 12-month averages for 2000

(New Jersey = 3.8 percent; U.S.= 4.0 percent)

9DU1RC:EB..ofaltborSb~u~Local Am tomoym Sbi41k%M-. 2001

-1oI.M.dy M.y 2.2201.

I l01oocrova7.0% to 9.9%

*6.0'.-69%5.011/o- 5.9%I4.0/0-4 49/O

F 3 o-3.9%

H2. /O - 19%1 .91/o or below

52

NEW JERSEYLabor Force Data by County, Provisional 12-month Averages for 2000

* High unemployment rate counties are found in the Southern part of the state. wheretourism and agriculture are important industries.

* Two Northern counties that have experienced losses in manufacturing jobs and havehigh concentrations ofminorities also ehibit higher than average unemployment

* Low unemployment rate counties are predominantly in the Western and Central partsofthe state.

Labor Fore Employment UnenploymentLeel Rate

126.550 119.206 7.344 5.8446.705 432,867 13.838 3.1227,646 221,004 6.642 2.9262.498 252.208 10.298 3.945.435 41.474 3,961 8.763.864 59.160 4.704 7.4

372.925 355.194 17,731 4.8132,478 127.455 5.023 3.8283.193 266.736 16.457 5.869.914 68.692 1,2 1.7

168,641 163.182 5,459 3.2410.640 397.610 13.030 3.2310.478 300.141 10,337 3.3265.053 258,852 6,201 2.3213.607 205,096 8.511 4.0233,538 221,865 11.673 5.032.530 31,110 1.420 4.4

170.339 166.614 3,725 2.276.842 74,584 2.258 2.9

269,101 2568.341 10,760 4.051.534 49.885 1.649 3.2

U.S. Departnudt LaborBureau of Labor Stainfcs

Local Aeea Unmployment StalssMatch 2001

Couy

Atlantic County. NJBergen County. NJBurlington County. NJCamden County, NJCape May County. NJCumberland County, NJEssex County. NJGioucenter County, NJHudson County. NJHunterdon County, NJMecer County. NJMiddlesex County, NJMonmouth County. NJMort County. NJOcean County. NJPassaic County, NJSalem County. NJSomeset County. NJSusse County. NJUnion County. NJWarren County. NJ

53

NEW JERSEYSeasonally Adjusted Statewide

Labor Force Statistics

Month Labo Force Employment Unemployment

Level Rate

1998

.an 4,165.138 3,967.222 197.916 4.8

Feb 4.152.652 3.959.195 193.657 4.7

Mar 4.144.944 3.950.400 194.544 4.7

Apr 4.146.341 3.947.264 199.077 4.8

May 4,141.002 3.950.321 190.681 4.6

Jun 4.133.638 3.945.029 188.659 4.6

Jul 4.128.871 3.940.596 18.275 4.6

Aug 4,125.663 3.940.142 185.521 4.5

Sep 4.136.146 3.948.654 187,492 4.5

Oct 4.143.365 3.956.857 186.508 4.5

Nov 4.148.087 3.959.057 189.030 4.6

Dec 4,163.423 3,973.049 190.374 4.6

1999

Jan 4.179.224 3.987.209 192,015 4.6

Feb 4.189.882 4.001.057 188.825 4.5

Mar 4.205.447 4.006.111 199.336 4.7

Apr 4.213.970 4.014.756 199,214 4.7

May 4.216.722 4.013.185 203.537 4.8

Jun 4,218.690 4.015.577 203,113 4.8

Jul 4.223,781 4.022,508 201,273 4.8

Aug 4.218.454 4.021.093 197.361 4.7

Sep 4,207.290 4.015.470 191.820 4.6

Oct 4.203.570 4.017.039 - 136.531 4.4

Nov 4.195.747 4.016.015 - -7,732 4.3 -

Dec 4.190,871 4.017.403 173.468 4.1

2000

Jan 4.171.225 4.014.086 157.139 3.8

Feb 4.167.808 4.007.463 160.345 3.8

Mar 4.162.672 4.011.896 150.776 3.6

Apr 4,166.187 4,012.688 153.499 3.7

May 4.168,471 4.013.251 155.220 3.7

Jan 4.169.074 4.014.697 154,377 3.7

Jul 4.166.934 4.013,575 153.359 3.7

Aug 4.182.682 4,023.868 158.814 3.8

Sep 4.197.873 4.037.564 160,309 3.8

Oct 4.214.409 4.053.940 160.469 3.8

Nov 4.234,038 4,071,388 162,650 3.8

Dec 4.252.271 4.091.633 160.638 3.8

2001

Jan p 4,250.978 4,098,429 152,549 3.6

U.S. Department of Labo

Opreliminary Bureau of Labor StaistcsLocal Area Unernploymnt Slatisics

March 2001