S. Hrg. 107-725

THE EMPLOYMENT SITUATION:SEPTEMBER 2002

HEARING

before the

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

October 4, 2002

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JOINT ECONOMIC COMMITTEE

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

HOUSE OF REPRESENTATIVES

JIM SAXTON, New Jersey, ChairmanPAUL RYAN, WisconsinLAMAR SMITH, TexasJENNIFER DUNN, WashingtonPHIL ENGLISH, PennsylvaniaADAM H. PUTNAM, FloridaPETE STARK, CaliforniaCAROLYN B. MALONEY, New YorkMELVIN L. WATT, North CarolinaBARON P. HILL, Indiana

SENATEJACK REED, Rhode Island, Vice ChairmanEDWARD M. KENNEDY, MassachusettsPAUL S. SARBANES, MarylandJEFF BINGAMAN, New MexicoJON S. CORZINE, New JerseyROBERT G. TORRICELLI, New JerseyROBERT F. BENNETT, UTAHSAM BROWNBACK, KANSASJEFF SESSIONS, ALABAMAMIKE CRAPO, IdahoLINCOLN CHAFEE, Rhode Island

CHRISTOPHER FRENZE, Executive DirectorROBERT KELEHER, ChiefMacroeconomist

PATRICIA RUGGLES, Minority StaffDirector

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CONTENTS

OPENING STATEMENT OF MEMBERS

Representative Jim Saxton, Chairman ........ ................. ISenator Jack Reed, Vice Chairman ......... .................. 3

WITNESS

Statement of Kathleen P. Utgoff, Commissioner, Bureau of LaborStatistics; Accompanied by Kenneth V. Dalton, AssociateCommissioner, Office of Prices and Living Conditions; and Philip L.Rones, Assistant Commissioner of Current Employment Analysis 4

SUBMISSIONS FOR THE RECORD

Prepared Statement of Representative Jim Saxton, Chairman, togetherwith chart package .................................... 20

Prepared Statement of Senator Jack Reed, Vice Chairman ..... ... 26Prepared Statement of Kathleen P. Utgoff, together with Press Release

No. 02-570, entitled, "The Employment Situation: September 2002,"Bureau of Labor Statistics, Department of Labor ........ I ... 27

Information provided to Senator Sarbanes from CommissionerUtgoff ........................................... 53

Information provided to Representative Watt from CommissionerUtgoff . ........................................ 55

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THE EMPLOYMENT SITUATION:SEPTEMBER 2002Friday, October 4, 2002

CONGRESS OF THE UNITED STATES,JOINT ECONOMIC COMMITFEE,

WASHINGTON, D.C

The Committee met, pursuant to notice, at 9:35 a.m., in Room 1334,Longworth House Office Building, the Honorable Jim Saxton, Chairmanof the Committee, presiding.

Present: Representatives Saxton and Watt; Senators Reed andSarbanes.

Staff Present: Chris Frenze, Robert Keleher, Colleen J. Healy, BrianHigginbotham, Dianne Preece, Patricia Ruggles, Chad Stone, MattSalomon, Nan Gibson, Donald Marron, and Jeff Wrase.

OPENING STATEMENT OFREPRESENTATIVE JIM SAXTON, CHAIRMAN

Representative Saxton. Good morning. I am very pleased towelcome BLS (Bureau of Labor Statistics) Commissioner Kathleen P.Utgoff to her first appearance before the Joint Economic Committee(JEC). We look forward to these monthly hearings and always hope forgood news. We don't always get it, but most of the time we seem to. Asyou know, this Committee has a longstanding relationship with BLS, andwe look forward to working with you in the years to come,Commissioner.

Dr. Utgoff. Thank you.Representative Saxton. The employment data released today are

consistent with other data showing moderate expansion of the U.S.economy. The unemployment rate in September was 5.6 percent, whilehousehold survey employment increased by 711,000. The payrollmeasure of employment was essentially unchanged in September,although it was revised upward to 107,000 jobs in August. Recentpayroll data, employment data, reflect the economic slowdown evidentin a host of data since the early months of the year 2000.[The chart entitled, "Employees on Nonfarm Payrolls" appears in theSubmissions for the Record on page 22.]

For example, the percentage of the population employed peaked inApril of 2000, and the number of unemployment started increasing in thefall of 2000. The deterioration in manufacturing employment began evenearlier. Manufacturing employment peaked at 18.9 million in April 1998,and has been trending downward ever since that time. Since April of1998, 2.2 million factory jobs have been lost.

One major factor behind the economic slowdown that began in 2000is the stock market decline. The hardest hit sectors have includedtechnology and internet-related companies, resulting in investment losses

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for many employees, retirees, and other investors. Many will recall thatthe NASDAQ peaked in March of 2000, but the extent and speed of itsdecline is not so widely recognized.

If I may just at this point pause for a moment and point to the charton the side here, we can see that peak that occurred and the rapid declinethat occurred that I just mentioned during the year 2000. It is quiteremarkable, I believe, as many who had invested in high-tech will knowfirsthand. After the peak in March the extent and the speed of the declineduring the year of 2000 is really quite remarkable.[The chart entitled, "Stock Price Index: NASDAQ Composite"appears inthe Submissions for the Record on page 23.]

Between March of 2000 and January of 2001, the technology richNASDAQ index actually fell from 4,800, a little bit above 4,800 actually,to about 2,657, a decline of 45 percent in just that very short period oftime. Nearly $3 trillion of wealth was wiped out in this period, whichended in January of 2001. Contrary to some recent attempts at historicalrevisionism, clearly a huge investment meltdown was well under waybefore any changes in administration personnel and politics in 2001.

Let me also make the point that economic growth as measured bytotal output of goods and services; that is, GDP, fell dramatically in themiddle of 2000 as well. In the second quarter of 2000, real GDP growthwas at 4.8 percent. But in the second half of the year, growth had slowedto an annual rate of about one-fifth of that rate.

This chart that we have up also makes this point. And if we lookcarefully'at it, we can see that at the beginning in the middle of 2000 wesaw this unmistakable trend begin.[The chart entitled, "Gross Domestic Product" appears in theSubmissions for the Record on page 24.]

Industrial production, one of four major indicators used to determinethe timing of recessions and expansions, peaked in June of 2000, thentrended downward as well, as the chart that we are looking at clearlydemonstrates. And so downward trends generally begin in the middle of2000, which of course is something that is important to recognize.[The chart entitled, "Industrial Production Index" appears in theSubmissions for the Record on page 25.]

The economic and financial deterioration has caused the budget toswing into deficit. On its own, the 2002 impact of the Bush tax cut,scored at $38 billion, would have left a huge budget surplus amountingto over $250 billion. However, this economic and financial marketdeterioration since 2000 accounted for well over $300 billion in lostrevenues and added spending, erasing the surplus and pushing the budgetinto deficit.

The economic slowdown so evident in 2000 turned into a recessionin the first quarter of 2001. In the current issue at the Atlantic Magazine,Clinton administration chief economist, Dr. Joseph Stiglitz, stated: "Theeconomy was slipping into recession even before Bush took office."

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This is a Clinton administration chief economist speaking: "Theeconomy was slipping into recession even before Bush took office, andthe corporate scandals that are rocking America began much earlier."

That is his exact quote. And while I don't agree with his entirearticle, Dr. Stiglitz is right on the critical factual point regarding theorigins of this recession.

The current economy has strengths and weaknesses, and there arevalid reasons to favor policies to promote stronger economic growth.However, the factual record refutes attempts to link the economicslowdown with changes in tax policy. The steps taken in 2001 to relaxmonetary policy and reduce the tax burden softened the damage inflictedby the recession.

Given the potential of deflationary forces to undermine the currenteconomic expansion, additional policy changes may be necessary. Inparticular, I would urge the Federal Reserve to consider an additionaleasing of monetary policy to prevent the possible danger of deflation toprice stability. The Federal Reserve's draft actions in the recent past havedemonstrated their ability to prevent potentially deflationary forces fromdamaging the U.S. as well as the international economy.

Thank you again, Commissioner. And at this point we will turn toSenator Reed.[The prepared statement of Chairman Saxton appears in the Submissionsfor the Record on page 20.]

OPENING STATEMENT OFSENATOR JACK REED, VICE CHAIRMAN

Senator Reed. Thank you very much, Mr. Chairman. Thank you forconvening this hearing. I also want to welcome the new Commissionerof the Bureau of Labor Statistics, Dr. Kathleen Utgoff. Welcome,Commissioner. I look forward to working with you, and thank you foryour testimony here today.

Today, there are more than 8 million unemployed Americans, andmore than 1.5 million additional workers who want a job but are notcounted among the unemployed. Payroll employment fell by 43,000 jobsin September. Long-term unemployment rose significantly in September,up by 11 1,000. Today, 1.6 million Americans have been unemployed formore than 26 weeks, twice as many as at the beginning of 2001.

Although the economy is clearly still in a slump, some might arguethat the recession is over because GDP has shown some growth; but tobring the unemployment rate down significantly, we would need anannual growth rate of more than 3 percent and we are not getting that.Certainly, the job market recession is not over. The economy has lostover 2 million private payroll jobs since January 2001. We have yet tosee the kind of strong job growth that signifies a real recovery. If this isan economic recovery, it looks just like the kind of jobless recovery wehad in the early 1990s.

This is sobering and distressing news, which should be a call toaction. The unemployed face a tough job -market. Unemployment

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benefits provide some necessary relief for hard-pressed workers whohave been unable to find a job during this downturn. It is estimated thatover the next 5 months alone, 3 million jobless workers will be harmedif Congress fails to pass an extension of unemployment benefits. TheFederal Unemployment Insurance Trust Fund currently has a $24 billionsurplus, which is more than sufficient to provide additional weeks ofbenefits to workers who have or will soon exhaust their benefits.

We have already begun to see the human toll of unraveling economicprogress as family incomes are falling for the first time in nearly adecade. Poverty is on the rise and families of all income levels are losingtheir health insurance.

The task before us as policyrnakers is to put the economy back on apath of strong and sustainable growth. Extending unemploymentbenefitsto workers before the current program expires would not only helpmillions of families weather these difficult economic times, but it willalso provide a boost to the economy without undermining our long-termfiscal discipline.

Mr. Chair-man, I look forward to the testimony of CommissionerUtgoff on the state of our labor markets today. And also, I believe thePresident must step up to the issue and address the economy aseffectively and as aggressively as he is addressing some of the issues ofinternational security. Without presidential leadership, this situation willcontinue to deteriorate.

Thank you.[The prepared statement of Senator Reed appears in the Submissions forthe Record on page 26.]

Representative Saxton. Commissioner, once again, welcome. Andwe are very pleased that you are here and we are ready to hear yourtestimony.

OPENING STATEMENT OF KATHLEEN P. UTGOFF,

COMMISSIONER, BUREAU OF LABOR STATISTICS;ACCOMPANIED BY KENNETH V. DALTON, ASSOCIATE

COMMISSIONER, OFFICE OF PRICES AND LIVING CONDITIONS;AND PHILIP L. RONES, ASSISTANT COMMISSIONER OF

CURRENT EMPLOYMENT ANALYSISDr. Utgoff. Thank you very much for your welcome. I am very

pleased and honored.Representative Saxton. Commissioner, if you will pull the mike up.

Dr. Utgoff. Thank you very much. I am very pleased and honoredto. be the new Commissioner, and I am sure we will both try to worktogether for the future.

I have a prepared statement which I would like to submit for therecord because it has many increases and decreases in it, and for the mostpart we really have not had much change over the last few months. So letme summarize the major changes in September, and we can discuss otherchanges later on in the questioning period.

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In September of 2002, both the unemployment rate at 5.6 percent andthe payroll employment were essentially unchanged. Payroll employmentwas essentially unchanged in September minus 43,000. In the prior 4months, employment had increased by a total of2l17,000, including a gainof 107,000 from the revised figures in August. In September, job lossesin manufacturing and transportation offset gains in finance and healthservices as they have in previous months. None of the other majorindustry divisions, such as construction and retail trade, had statisticallysignificant changes in employment in September. Manufacturingemployment, which, as you have shown, has had declines throughout thisdownturn, the manufacturing employment decreased by 35,000 inSeptember. Job losses have accelerated over the last 2 months followinga moderation in declines from April to July.

This trend is evident in electronic equipment and industrialmachinery, which lost 11,000 and 9,000 jobs in September, respectively.The manufacturing workweek was unchanged over the month, andfactory overtime edged down by a tenth of an hour to 4.1 hours.Transportation employment fell by 26,000 in September. Trucking hadan unusually large employmentdecline, and airtransportation lost 12,000jobs. Employment in air transportation has shown no clear trends so farthis year following losses totaling 132,000 in the last 4 months of 2001.

Total employment as measured by the household survey as opposedto the payroll survey increased by over 700,000 after seasonaladjustment. Teenagers accounted for nearly half of the gain as the largeseasonal decline in their employment that typically occurs in Septemberwas less than normal.

Thank you, Mr. Chairman. I would be delighted to, with mycolleagues, answer any questions that you might have.[The prepared statement of Commissioner Utgoff appears in theSubmissions for the Record on page 27.]

Representative Saxton. Commissioner, thank you very much. Letme try to clarify, if I may, for the purpose of the record at least. Theunemployment rate in August was 5.7 percent. Is that correct?

Dr. Utgoff. That is correct.Representative Saxton. And the rounded number for September fell

by a tenth of a percentage point to 5.6 percent.Dr. Utgoff. That is correct.Representative Saxton. Then we have some mixed news on our two

surveys. We have the household survey, which showed job increases of711,000 jobs, and we saw on the payroll survey a different story, a slightreduction in the number of jobs created of, what, 43,000?

Dr. Utgoff. Yes.Representative Saxton. How do we - explain if you can how you

think the difference occurred between the household survey and thepayroll survey.

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Dr. Utgoff. As you said, they come from two different surveyinstruments. The payroll survey comes from a fairly widespread surveyof firms. Over 300,000 firms are surveyed in the payroll survey, and thenthe household survey comes from a survey of 60,000 households. Sothey can differ. And when they do differ, we tend to put more emphasison the payroll survey since it is a much larger sample.

Representative Saxton. The response of people who are watchingthe economy this morning was quite surprising to me, particularly withregard to the market futures. When these numbers were released, peoplewho are involved in trading, etcetera, took them as fairly optimistic. AndI wonder if you can explain why that might be.

Dr. Utgoff. Well, the projections had been for a two-tenths increasein the unemployment rate. Compared to what the projections were, theactual situation was somewhat better.

Representative Saxton. So it was perceived as being positivebecause the anticipated unemployment rate was anticipated to go to 5.9percent?

Dr. Utgoff. I can't be sure, but I think that is a reasonableexplanation.

Representative Saxton. But instead it fell to 5.6 percent, which wasinterpreted as positive news?

Dr. Utgoff. That is correct.Representative Saxton. I see. How much has the household

measure of unemployment increased in the last two months?Dr. Utgoff. I will have Mr. Rones answer that.Representative Saxton. I think I may have said unemployment. I

meant employment. I am sorry.Mr. Rones. It has gone up about 1.1 million.Representative Saxton. 1.1 million. And how would you

characterize that?Mr. Rones. Well, the increases are statistically significant. The next

thing we would ask ourselves: Are they economically meaningful? Andone thing that we have seen in looking at these data over the many yearsis it is not unusual to pick up substantial gains or losses in employmentfrom the household survey in a short period of time. You can have aperiod, as we had this year, a long period with no growth and thensuddenly pick up a lot of growth.

I would want to point out, though, that in both August andSeptember, what we expect to happen based on past history is a largenumber of people leave the labor force, particularly teenagers. And whatwe had this month is there weren't as many employed both because as atrend towards less summer work among teenagers and because of theeconomy. So there were fewer people employed than normal, so nowthere are fewer to leave those jobs. We expected a large number to leave.We didn't get it. And that shows up as a seasonally adjusted employmentincrease. You might even call it a quirk in seasonal adjustment. I

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wouldn't put a lot of analytical weight into those two gains inemployment.

Representative Saxton. I see. Let me back up a month, if I may.In the original data that we got from the August payroll employment data,the original number was significantly less than the revised number. Therevised number came out sometime in late August, I believe. Can you tellus what the original employment - payroll employment - data lookedlike? And tell us what the revised number is. And tell us why you thinkthat occurred.

Dr. Utgoff. The original number that we announced in August was39,000. The revised number that we released today is 107,000. Eachmonth we revise the past two months because additional data comes infrom our payroll survey. And so every month we announce new data forthat month and revisions of the prior two months.

Representative Saxton. Would you then expect that there may besome revision to the September numbers as well?

Dr. Utgoff. Yes. I do expect a revision.Representative Saxton. Do you feel like it will be on the optimistic

side or perhaps the pessimistic side?Dr. Utgoff. If I said either of those, it would mean very bad things

for our survey techniques.Representative Saxton. I see. Thank you. Is the payroll - is the

overall payroll employment level in September different in a statisticallymeaningful way than that of August?

Dr. Utgoff. No, it is not.Representative Saxton. So we continue to see some moderate

growth in the economy?Dr. Utgoff. Yes.Representative Saxton. Is that a fair statement? And how does the

level of the index of aggregate weekly hours in September differ fromthat of the previous month?

Dr. Utgoff. I know that they have increased by a small amount. Letme see if I can get that exact number for you. Mr. Rones is looking it up.

Representative Saxton. While Mr. Rones is looking, it has been myobservation that the length of the workweek has been increasing. And Iwonder - and that is the reason I ask this question.

Dr. Utgoff. I'm sorry, I don't have glasses to read those very smallnumbers.

Mr. Rones. The index-Representative Saxton. We are going to have to get them blown up

for you.Dr. Utgoff. Yes.Mr. Rones. The index of aggregate weekly hours went up from

August to September from 148.0 to 148.6. So it is up .6.

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Representative Saxton. That is six-tenths of an hour? Is thatcorrect?

Mr. Rones. Well, it is an index figure pegged to the 1982 level. Soany aggregate hours above what we had in 1982 represent increases in theindex above 100.

Representative Saxton. Let me ask - Commnissioner, let me ask youthis. Would it be a fair statement to say that if the length of theworkweek is increasing, that it would be an indicator that there is somegrowth in the economy? As a matter of fact, I think it has been up for thelast two months.

Dr. Utgoff. Yes.Representative Saxton. And I believe-Dr. Utgoff. Yes. It has been going up moderately in the last two

months. But previous to that it had been falling.Representative Saxton. rm sorry?Dr. Utgoff. Previous to that it had been falling.Representative Saxton. Right. And my information is that this is

a leading economic indicator. In other words, as the economy begins toexpand, an employer has a number of choices to make. Obviously, ifthere is more need for labor he could hire more people. Or, as a first step,he can have the existing workforce work longer. And so this hashistoricallybeen a leading indicator of perhaps things to come. So if onewanted to be optimistic, one could say the workweek is beginning toexpand, and therefore optimistically we could expect positive things tohappen in the future.

Dr. Utgoff. I think many economists do believe that hours,particularly hours of manufacturing, are a leading economic indicator.

Representative Saxton. Commissioner, thank you. And at thispoint we will ask Senator Reed if he has some questions.

Senator Reed. Let me yield to Chairman Sarbanes.Senator Sarbanes. Thank you Senator Reed. I have a nomination

hearing that I have to hold somewhat later this morning. I appreciate thisopportunity to go ahead.

First of all, I want to say to Chairman Saxton, this may be the lastmeeting of this Committee in this Congress perhaps, although if we wereto come back, we might have another one. And I know that thechairmanship of the Joint Economic Committee in the next Congress willshift to the Senate side.

Representative Saxton. That is correct.Senator Sarbanes. I want to thank Chairman Saxton for the way in

which he has conducted the Committee hearings in the course of histenure. I think he has been very fair to all of us, and I very muchappreciate that.

Representative Saxton. Well, thank you, Senator, and I appreciatethose comments. That is very kind of you.

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Senator Sarbanes. And Commissioner Utgoff, I want to welcomeyou. I think this is your first appearance before the Joint EconomicCommittee.

Dr. Utgoff. Thank you, Senator.Senator Sarbanes. We wish you well in your position as the

Commissioner of Labor Statistics.You have had some very distinguished predecessors, Katharine

Abraham, your immediate predecessor. And of course, before her, thelegendary Janet Norwood, who was considered really one of thepreeminent career civil servants in the government and a woman of greatforce, and we enjoyed her tenure as Commissioner.

In fact, I was listening to some of these questions as they were beingput to you, and I know there will be many others that will come. And Icommend to you going back perhaps and reading the transcript of someof Janet Norwood's appearances here. It will give you a good handle onhow to handle questions coming from the Members of the Congress. Shewas a master at that, I have to say.

I noticed you worked for the Council of Economic Advisers; and asan alumnus of that staff, I am obviously impressed by that. And I knowyou have held a number of other significant positions, and actually cometo us from being the Director of the Center for Naval Analysis.

I just want to make one comment. This Committee historically hasworked very closely with the Commissioner to sustain theprofessionalism of the Bureau. There have been occasions - fortunately,not too frequently, but there have been occasions in the past. And I havebeen on this Committee now a long, long time, so I have had a chance towatch it when there has been an effort to politicize the Bureau and thework of the commission - and of some Commissioners. TheCommissioners have always resisted that, and I laud them for that. Andthis Committee has always tried to sustain the professionalism of youroffice, and I think there is a very fine tradition there. I know you arecertainly committed to upholding it. And I for one as a Member of thisCommittee want to indicate to you that we certainly would support youin every way if by some chance the professionalism of the office shouldbe menaced in any way. And Ijust wanted to put that on the record. AndI wish you well in your new position.

Dr. Utgoff. Thank you. I have discussed this with Secretary Chao,and she feels exactly the same way you do.

Senator Sarbanes. Good. Now, I am interested in the long-termunemployed, because I am interested, as Senator Reed mentioned, in theunemployment insurance issue, specifically the extension of theunemployment insurance benefits. We have extended benefits in everyprevious recession, often almost always more than once. I mean, weextended them more than once in each particular recession. This time wehave extended benefits once, by 13 weeks, but that extension expires atthe end of this calendar year. For many people, the use of the extensionhas already expired. They have run the string and they are no longer

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eligible to draw benefits. But even those eligible, when they get to theend of the year, even if they are in only the first, second, or third week oftheir extension, the 13 -week period, they fall off the cliff, as I understandit, at the end of this year and could no longer draw unemploymentbenefits. So you have the people who have used them up, the people whoare about to use them up, and the people who would have some left butcome to a termination at the end of the year regardless of what they haveleft, and I think this is a very serious problem.

Now, let me just explore this with you a little bit. My understandingis that the number of long-term unemployed - and here I am using thestandard of more than 26 weeks. I think you also use a more than15-week standard, if I am not mistaken. But as measured by the standardof more than 26 weeks, which is of course the standard unemploymentinsurance benefit period, unemployment has more than doubled since thebeginning of last year. My figures would show it has gone from 648,000to almost 1,600,000. Is that correct?

Dr. Utgoff. That is correct.Senator Sarbanes. Now, I also understand that just in the course of

a year; namely, from last September to this September, it is just shy ofhaving doubled, going from about 800,000 to just under 1.6 million.

Dr. Utgoff. Correct.Senator Sarbanes. So we have got 1.6 million people there who

have been unemployed for more than 26 weeks. Is that correct?Dr. Utgoff. That is correct.Senator Sarbanes. Now, you also use a more than 15-week

standard, is that correct?Dr. Utgoff. Yes.Senator Sarbanes. And what does that show us over - let us say

over a year's period?Dr. Utgoff. From September to September, or from September, it

has gone from almost two million to almost three million.Senator Sarbanes. So that is a pretty rapid run-up as well. I am told

that the workers unemployed for more than 26 weeks now make upalmost 20 percent of the unemployed. Is that correct?

Dr. Utgoff. We can get that number for you in just a minute. Mr.Rones is looking for it.

Yes. That is correct. It was 19.5 percent.Senator Sarbanes. Pardon?Dr. Utgoff. Yes, you were correct. It was 19.5 percent.Senator Sarbanes. Right. So the number of unemployed workers

in this instance, 26 weeks or more, is now at 19.5 percent of the total ofthe unemployed?

Dr. Utgoff. Yes.Senator Sarbanes. Now, my information is that that is the highest

percentage since 1994; in other words, eight years ago?

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Dr. Utgoff. Just a moment. I am not sure we have with us the datathat is back that far.

Senator Sarbanes. Yes.Dr. Utgoff. I am sorry, we don't have that, but I will be glad to send

the number to you.[information provided to Senator Sarbanes from Commissioner

Utgoff appears in the Submissions for the Record on page 53.]Senator Sarbanes. Well, I would be happy to receive that. But let

me assert it, and then you can send us further information, particularly ifmy assertion is not correct.

My understanding is that at 19.5 percent for workers 26 weeks ormore as a percent of the total unemployed, it is the highest percentagesince the end of 1994. 1 understand the average number of weeksunemployed has risen by 1.6 weeks to 17.8, and that the median has risenfrom 1.1 weeks - has risen by 1.1 weeks to 9.5 weeks. Does that jibewith your figures?

Dr. Utgoff. My recollection is that it does. The duration declinedfrom the measures that you used in the previous two months, and it hasagain moved up in the last month.

Senator Sarbanes. Is it fair to conclude, looking at these figures,that the problem of long-term unemployed and all its manifestations isone that is increasing as we look at the figures?

Dr. Utgoff. I would say it has been more stable, the duration ofunemployment and the mean duration of unemployment, for the last 3months since I have been Commissioner. But in general, in a slowdownthe average duration of unemployment does increase. But the patternover the last few months has been just as the other statistics that wetalked about.

Senator Sarbanes. Well, what do your figures show onunemployment claims? Unemployment insurance claims?

Dr. Utgoff. I know that the average - the moving average issomething like - for the initial claims is a little over 400,000. But we canget that number for you.

The initial claims for the last week were 417,000, the preliminaryfigures.

Senator Sarbanes. Well, let me just run them for a month. Whatwere they for the beginning of August of this year? I mean, just a couplemonths ago.

Dr. Utgoff. 382,000.Senator Sarbanes. 382,000. And they are now at what?Dr. Utgoff. 416, the preliminary figures.Senator Sarbanes. So that is a 10 percent increase just over a

couple of months, is that correct?Dr. Utgoff. Yes, about nine percent, actually.

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Senator Sarbanes. Mr. Chairman, I just want to close with thisobservation from this line of questioning. It seems to me very clear thatwe have an increasing problem with respect to long-term unemployed.And of course, the theory of the unemployment insurance system is thatthese are working people. You can't get unemployment insurance if youhaven't been working. So you have to have a work record in order toqualify for it. I want to be very emphatic about that.

The theory is that you sustain people for a while, the economy picksback up, job openings become available, and they are able to go back towork. But that is not happening in the current situation, and so we havethis growing problem with respect to the unemployed. And what we havedone in previous recessions in order to deal with that is we have extendedthe unemployment insurance period. And there is a major effort nowunder way, certainly in the Senate - I don't know what is happening in theHouse - to do such an extension, certainly before we leave here;otherwise, we are going to have people who are just going to beconfronted with this, are going to come right up against this situation ofin effect falling off the edge of the cliff.

Now, Senator Reed and I and others have joined in an effort to dothis extension. We did it five times in the early 1990s when we wereconfronting that recession. And all of the figures that we have here, tomy view, strongly support doing so again. I mean, there is doubling andmore than doubling of the long-term unemployed people more than 26weeks. This fairly sharp rise in the new unemployment insurance claimsindicates a worsening in the labor market, and we are pushing hard on theSenate side to get unemployment insurance benefits extended, and I hopewe will be able to do the same thing on the House side.

Representative Saxton. Well, thank you very much, Senator, andthank you for your kind remarks at the beginning of your questions. Ireally appreciate that. I have tried to run this Committee in a bipartisanand fair way, because I think it. is important that the American peoplehave the benefit of good information from these public hearings. I wouldlike to make one point.

Senator Sarbanes. Go ahead.Representative Saxton. Go ahead.Senator Sarbanes. I will hear you, and then I just want to make one

point.Representative Saxton. Okay. Fine. I just wanted to make sure

that you understand, Senator, that I fully sympathize with people who arelong-term unemployed. That is very important. But the real answer tothe long-term unemployed - while the temporary answer is, you arecorrect, is to extend unemployment benefits. I have no quarrel with thatwhatsoever - the long-term answer is obviously to get people back towork, and we have made some strides in that direction.

I just wanted to share with you the data that is reflected on this charton employees on non-farm payrolls. It is fairly obvious that back in themiddle of 2000 a trend began which manifested itself into a recession in

13

the first quarter of 2001, where we were seeing very productive jobgrowth during the years prior to 2000, but in 2000 the trend began whichshowed that we were producing less growth in the j ob market. And as thearrows on the chart clearly demonstrate, that trend has been reversed.And we are beginning now to - we began, actually, in the middle of2001, to see job growth return to the economy. And, as a matter of fact,during the last several months we have been in the positive, on thepositive side.

So we are pleased that we have got this continuing growth in jobs.And of course this month we saw a flattening of the growth rate, and thatis unfortunate. But the basic trend over the last year and a half or so hasbeen to push us back on to the positive side.

Senator Reed, would you like to-Senator Reed. I am going to - Senator Sarbanes, did you have a

comment?Senator Sarbanes. Mr. Chairman, for the sake of sort of the

completeness of the record, you quoted Joseph Stiglitz earlier, and Iwould like to expand the quote a bit so we have it in full context.

Representative Saxton. You can expand it as your quote. I said thatI didn't agree with everything that Mr. Stiglitz said in his statement. Butif you want to quote him, that is fine.

Senator Sarbanes. What I am going to quote he said directly beforewhat you quoted. So I will give the full quote:

"It would be nice for us veterans of the Clinton administration if wecould simply blame mismanagement by President George Bush'seconomic team for this seemingly sudden turnaround in the economy,which coincided so closely with his taking charge. But although therehas been mismanagement and it has made matters worse" - that came justbefore your quote - "the economy was slipping into recession evenbefore Bush took office."

Representative Saxton. That is right.Senator Sarbanes. "And the corporate scandals that are rocking

America began much earlier."Of course, we are trying to deal with those corporate scandals.Representative Saxton. We both are, Members of both parties, that

is correct.Senator Sarbanes. But I just wanted to get that into the record.

Thank you very much.Representative Saxton. Senator Reed.Senator Reed. I wonder if Mr. Watt might-Representative Watt. Sure. I appreciate the gentleman allowing me

to go, because I do have to catch a plane at some point today, too.But I want to try to establish a couple of benchmarks here so we can

kind of get this in context. Three benchmarks timewise I think areimportant. January of 2001, which is the time, coincidentally, that therewas a change of administration. August of 2001, which I presume would

82-291 D-2

14

reflect the numbers before the events of September 11, rather than usingthe September of 2001, which I presume would reflect some of theimpact of the events of September 11. And then August of 2002, whichwould be a year following the events of September 11. And so I havekind of set up a chart here, and I ask you to help me do the continuity onthose three dates, but with the left side of my chart reflecting the totalwhite unemployment, the total black unemployment, the blackunemployment composites for persons between 16 and 19, and the blackmen statistics for the age 16 to 19. I believe you have all of those figures.I presume you would.

Dr. Utgoff. Yes. It may take us a moment to find them.Representative Watt. Can you just walk me through one by one

here so we get a real perspective of what impact whatever forces arehaving on unemployment and perhaps get a picture of the disparateimpact between white employees and black employees? Can we startwith January of 2001? Would you give me the composite whiteunemployment figures?

Dr. Utgoff. Just a moment.Representative Watt. Percentage. I amjust looking for percentages

now; I am not looking for gross numbers.Dr. Utgoff. 3.6.Representative Watt. 3.6 would be the composite men and women

white?Dr. Utgoff. Yes.Representative Watt. And in August of 200 1, what was that figure?Dr. Utgoff. August of 2001, it was 4.3 percent.Representative Watt. And in August of 2002?Dr. Utgoff. It was 5.1 percent.Representative Watt. Okay. Now, could you give me the same

numbers composite black men and women overall, January 2001?Dr. Utgoff. January 2001, it was 8.2 percent.Representative Watt. And August of 2001?Dr. Utgoff. Nine percent.Representative Watt. And August of 2002?Dr. Utgoff. 9.6.Representative Watt. And then black composite men and women

16 to 19, January 2001 ?Dr. Utgoff. January 2001, it was 27.5 percent.Representative Watt. August of 2001?Dr. Utgoff. 30.1 percent.Representative Watt. And August of 2002?Dr. Utgoff. 30.5 percent.Representative Watt. And for black men only, ages 16 to 19,

January 2001 ?

15

Dr. Utgoff. I am told that we don't have the historical record for thatgroup because we don't seasonally adjust it.

Representative Watt. Well, I am looking at something that givesme back to September of 2001 here, seasonally adjusted household data.Is that - this is not your information?

Dr. Utgoff. I am sorry, Representative Watt. I misspoke. We justdo not have it with us right now.

Representative Watt. Okay. Let me - I don't have January of 2001,but I do have August of - let us see. Well, I have September of 2001,which would be for black men 28 point-

Representative Saxton. If I may just interrupt, and remind myfriend Mr. Watt that we have one unlimited statement - a time limit oneach side. The Senator used the unlimited time. So if you could - infairness, I will not cut you off, but would you get to your point?

Representative Watt. I am about to get to the point.Representative Saxton. Thank you.Representative Watt. I think in August of 2002, according to my

information, is 30.5 again, for black men. I am sorry. I believe that isright, but I could be wrong.

The point I am trying to make is I presume these figures show asubstantially more adverse impact, a greater adverse impact of whateverthe conditions are on African Americans as opposed to the rest of thepopulations.

Dr. Utgoff. Mr. Rones has the figures on that.Representative Watt. Okay.Mr. Rones. I just took the figures that you had asked for from the

beginning of 2001 until the current figure, and you look at the increasein the unemployment rate. The absolute increase is about the same foreach, about a point and a half on their rates. But because the black rateis considerably higher, really double the white rate, so you actually endup having the white rate increasing at a much faster rate, 42 percent overthat period as compared to half that, about 17 percent.

Representative Watt. Okay. Well, that is fair. You are saying thatthe actual increase is less dramatic?

Mr. Rones. That is right. The key point of course is that the blackrate is twice as high as the white rate. And that is the case - or that hasbeen the case historically regardless of the business cycle. But theincrease - the rate of increase has been a bit more for whites than forblacks.

Representative Watt. I am not sure I understand that. But 27.5 to30.5 in my calculation is 3 percent. And 8.2 to 9.6 - I am sorry. 3.6 to5.1 is 1.5 percent. I don't - maybe your math is different than my math.

Mr. Rones. I was-Representative Watt. But the picture is the same. The point is-

16

Representative Saxton. Mr. Watts, if you could sum up at thispoint, we would appreciate it.

Representative Watt. I am trying to sum up.Representative Saxton. Thank you.Representative Watt. If you will let me sum up. Black

unemployment is substantially higher in this picture than whiteunemployment?

Mr. Rones. That is correct.Representative Watt. Okay.

[Information provided to Representative Watt from Commissioner Utgoffappears in the Submissions for the Record on page 55.]

Representative Saxton. Thank you very much, Representative Watt.Good point.

Senator Reed.Senator Reed. Thank you very much, Mr. Chairman. And let me

begin by associating myself with Chairman Sarbanes' remarks, as youwind up your tenure. It has been a pleasure working with you andcooperating with you, and thank you again for your even-handeddischarge of your responsibilities.

Representative Watt. And if the gentleman would yield, I shouldhave said that, also. That has been my experience.

Representative Saxton. I appreciate all your kind remarks. Thankyou.

Representative Watt. Except for the time that you dispense out;aside from that.

Senator Reed. Well, let me just jump right in now, and comment,if I may, on the chart. I will readily acknowledge that I am a graduate ofplebe mathematics at West Point. But it looks to me like that for the lastmonths on that chart the slope is negative, and that this could be theclassic unfolding of a double dip recession, where you have employmentincreases and then the numbers begin to turn around and start going downagain. It just - let me refer it to the experts.

The last few months there suggest a negative slope on the curve andthat employment is falling?

Representative Saxton. If I may just point out to the gentleman thatthe revisions aren't in that chart. They just came out today, and youwouldn't see that dip if the revisions were in the chart.

Senator Reed. All right. Well, that is why I wanted to clarify thecharts, because unrevised the chart suggests that the curve rose, and theline - the positive slope, increasing employment of the negative slope.So we will look for the revisions.

I have a chart, too. This is a chart here. But the chart I would like tosuggest is one that looks at the comparison between the changes ofunemployment in the last major recession in the early 1 990s and the datathat we have today. And the black line is the 1990s, and the red line is

17

the current. And one thing it seems to suggest is that even though growthtook hold, the job market lagged significantly with increasedunemployment growth.

And, Commissioner, is there anything in the numbers that wouldsuggest that we are not going to see a duplication of this phenomenon,that even with positive economic growth we are still going to seeincreased unemployment rates?

Dr. Utgoff. I think it is very hard to predict the future. There aremixed signals in the economy. And so I don't - myself don't see anythingthat would lead to a repetition of the early 1990s recession.

Senator Reed. Let me also turn to another issue, and that is the issueof part-time employment. Apparently, the number of people unemployedfor more than 26 weeks declined in July and August. The number ofpeople who worked part time for economic reasons increased by morethan twice as much. And more than 4.2 million people remained ininvoluntary part-time work in September. This could be a situationwhere again the good jobs are hard to get and people are just takinganything they can get to make ends meet.

Do you have any insights about this part-time employment situation?Dr. Utgoff. Well, Mr. Rones tells me and shows me the figures that

say the number who are working part time for economic reasons has notreally changed over the last year. It was about 4.1 million in lastSeptember, and it is 4.2 million in this September.

Senator Reed. So you see no trends emerging from people who areworking part time involuntarily?

Dr. Utgoff. I am just looking at this, and I don't see any trends in thedata that we have with us today.

Senator Reed. Now, there is another aspect of work, and that istemporary employment. And from the information I have, nearlytwo-thirds of the new jobs in private service-producing industries thisyear have been temps. Finns do not appear to be making the kinds ofcommitments to long-term employment that they have in the past.

Does this high proportion of temporary hire suggest that business isstill very uncertain about the future and is just sort of hedging their bets?

Dr. Utgoff. Well, I think many economists look at help supply, asit is called now, as a leading indicator, and that when that rises, whenemployment help supply rises, that foreshadows hiring of permanentworkers.

Senator Reed. But would you characterize it as you did initially,that we are still in a period of significant uncertainty? That it could goeither way? That this is, with temporary workers, with part-timeemployment, businesses are still able to reverse course if there is notsufficient demand?

Dr. Utgoff. That is true.

18

Senator Reed. So put another way, you are not seeing a robust,strong, vigorous, unalterable growth in GDP or anything else, that this isa time of economic uncertainty and challenge?

Dr. Utgoff. I think that is the consensus forecast.Senator Reed. One of the other aspects of the employment numbers

has been the significant increase in government employees. 41,000individuals were hired, many of them for the Transportation SecurityAdministration. Without this government hiring, what would thenumbers look like in terms of unemployment rates or-

Dr. Utgoff. Let me - we will get those figures and compare them tothe unemployed and give you an unemployment rate without governmentworkers in it for the record.

Senator Reed. Okay. But what would be your sense?Dr. Utgoff. There has been substantial government employment.Mr. Rones. In terms of the employment, if you take the government

figure out this month, we had a decline of 47,000, because overallgovernment didn't change. As you point out, there were some increasesin the Federal Government figure. Last month, in that revised figure, halfof the gain was in government. So we had 107,000 increase inemployment, as we mentioned earlier, but only 54,000 of that was in theprivate sector.

Senator Reed. So the irony here is that these numbers might reflectvigorous government hiring as much or more so than a private sector thatis beginning to expand?

Dr. Utgoff. The government hiring figures have been a substantialfraction of the total employment increase in the last several months.

Senator Reed. Let me turn in the final time that I have to the issueof job losses, particularly in the manufacturing sector. One of the fearsthat we all have is that we are losing, perhaps on a permanent basis,manufacturing jobs, which are some of the best jobs in our economy,with health benefits. And this I think is particularly heightened by therecent Census Bureau information, that income is falling, poverty isincreasing, health benefits and health coverage are decreasingdramatically for Americans. And here we have jobs that usually pay welland have health benefits, and they seemed to be going away. This lossseems to be escalating. After losing only an average of 10,000 jobs amonth since December, factory payroll shrank by 68,000 in August andanother 35,000 in September.

How pervasive are these declines? Do you see this as some type ofaberration, or is this an erosion of jobs that won't be stemmed?

Dr. Utgoff. Well, I think it is fair to say that the erosion withinmanufacturing has been broadly across all manufacturing industries.Other than that, I am not sure what is going on in manufacturing. Thatwould be very hard to predict.

Senator Reed. Well, again, you know, the fear that we have - andit is a significant one - is that these are the good jobs, that if they go

19

away people might find themselves, as the numbers might suggest, withonly part-time work, trying to make ends meet, looking for that job thatwill replace the good job they had.

And what I find - and I know my time has expired - what I findanecdotally as I go about Rhode Island is that when I was younger theunemployed seemed to be entry level workers who seasonally got put outof work or went from one job to another in a sort of transient fashion.Now I am finding 50-year-old professionals, middle management peoplethat have lost their jobs not because of their own shortcomings butbecause the job went away, the factory went away, and that is anincreasing concern.

My time has expired. I thank the Chairman. Thank you,Commissioner. Thank you.

Representative Saxton. Commissioner, thank you very much forbeing with us this morning. We have enjoyed having you here. We havehad a good exchange. And so I would like to again thank my colleaguesfor their kind words, and thank you again, Commissioner, for being here.The hearing is adjourned.[Whereupon, at 10:35 a.m., the Committee was adjourned.]

20

SUBMISSIONS FOR THE RECORD

PREPARED STATEMENT OFREPRESENTATIVE JIM SAXTON, CHAIRMAN

I am very pleased to welcome BLS Commissioner Kathleen Utgoffto this first appearance before the Joint Economic Committee. As youknow, this Committee has a long-standing relationship with BLS, and welook forward to working with you in coming years.

The employment data released today are consistent with other datashowing moderate expansion of the U.S. economy. The unemploymentrate was 5.6 percent, while household survey employment increased by711,000. The payroll measure of employment was essentially unchangedin September, although it was revised upward to 107,000 in August.Recent payroll employment data reflect the economic slowdown evidentin a host of data since the early months of 2000.

For example, the percentage of the population employed peaked inApril of 2000, and the number of unemployed started increasing in thefall of 2000. The deterioration in manufacturing employment began evenearlier. Manufacturing employment peaked at 18.9 million in April 1998,and has been trending downward ever since. Since April 1998, 2.2million factory jobs have been lost.

One major factor behind the economic slowdown that began in 2000is the stock market decline. The hardest-hit sectors have includedtechnology and Internet-related companies, resulting in investment lossesfor many employees, retirees, and other investors. any will recall that theNASDAQ peaked in March of 2000, but the extent and speed of itsdecline is not so widely recognized.

Between March 2000 and January 2001, the technology richNASDAQ index fell from a level of 4803 to 2657, a decline of 45percent. Nearly $3 trillion of wealth was wiped out in this period endingin January of 2001. Contrary to some recent attempts at historicalrevisionism, clearly a huge investment meltdown was well underwaybefore any changes in Administration personnel and policies in 2001.

Economic growth, as measured by the total output of goods andservices (GDP), fell dramatically in the middle of 2000. In the secondquarter of 2000 real GDP growth was 4.8 percent, but in the second halfof the year growth had slowed to an annual rate of about one-fifth thatrate. Industrial production, one of four major indicators used todetermine the timing of recessions and expansions, peaked in June of2000, then trended downward through the end of the year.

The economic and financial deterioration has caused the budget toswing into deficit. On its own, the 2002 impact of the Bush tax cut,scored at $38 billion dollars, would still have left a huge budget surplusamounting to over $250 billion. However, this economic and financialmarket deterioration since 2000 accounted for well over $300 billion inlost revenues and added spending, erasing the surplus and pushing thebudget into deficit.

21

The economic slowdown so evident in 2000 turned into a recessionin the first quarter of 2001. In the current issue of The Atlantic magazine,Clinton Administration chief economist, Dr. Joseph Stiglitz, stated"...the economy was slipping into recession even before Bush tookoffice, and the corporate scandals that are rocking America began muchearlier." While I do not agree with his entire article, Dr. Stiglitz is righton the critical factual point regarding the origins of the recession.

The current economy has strengths and weaknesses, and there arevalid reasons to favor policies to promote stronger economic growth.However, the factual record refutes attempts to link the economicslowdown with changes in tax policy. The steps taken in 2001 to relaxmonetary policy and reduce the tax burden softened the damage inflictedby the recession.

Given the potential of deflationary forces to undermine the currenteconomic expansion, additional policy changes may be necessary. Inparticular, I would urge the Federal Reserve to consider an additionaleasing of monetary policy to preempt the possible danger of deflation toprice stability. The Federal Reserve's deft actions in the recent past havedemonstrated their ability to prevent potentially deflationary forces fromdamaging the U.S. as well as the international economy.

Employees on Nonfarm PayrollsDifference - Period to Period SA, Thousands

1999 2000 2001 2002

Source: Bureau of Labor Statistics / Haver Analytics

600

400

200

0

-200

-400

-600

Stock Price Index: NASDAQ Composite215/71 = 100

50004803 --------------------

4000 -- -- - - - - - -_I, | v \ By January 2001:, NASDAQ fell

by 2,146 points, or 45% from Its/ | \ March 2000 peak

3000 ---- --- - - - - ----------

2657

2000…-I - ---- -- --- …

March 00 Ja6 011000 -

1997 1998 1999 2000 2001 2002

Sources: Wall Street Journal / Haver Analytics

Gross Domestic Product% Change -Annual rate SAAR, BlI.Chn.1996$

-2 -

1997 1998 1999 2000 2001 2002-2-~~~~~u1997 1998 1999 2000 2001 2002an 777-

Source: Bureau of Economic Analysis / Haver Analytics

Industrial Production Index% Change -Annual Rate SA, 1992=100

10

5 -3Ub.C~s 7

-10- ---- |m

-15

1999 2000 2001 2002

Source: Bureau of Economic Analysis / Haver Analytics

26

PREPARED STATEMENT OFSENATOR JACK REED, VICE CHAIRMAN

Thank you, Chairman Saxton, for convening this hearing. I also wantto welcome the new Commissioner of the Bureau of Labor Statistics, Dr.Kathleen Utgoff. I look forward to working with you and thank you foryour testimony before us today.

Today, there are more than eight million unemployed Americans, andmore than 1.5 million additional workers who want a job, but are notcounted among the unemployed. Payroll employment fell by 43,000 jobsin September.

Long-term unemployment rose significantly in September, up by111,000. Today, 1.6 million Americans have been unemployed for morethan 26 weeks - twice as many as at the beginning of 2001.

Although the economy is clearly still in a slump, some might arguethat the recession is over because GDP has shown some growth. But tobring the unemployment rate down significantly we would need anannual growth rate of more than 3 percent, and we are not getting that.Certainly thejob market recession is not over. The economy has lost over2 million private payroll jobs since January 2001. We have yet to see thekind of strong job growth that signifies a real recovery. If this is aneconomic recovery, it looks just like the kind of jobless recovery we hadin the early 1990s.

This is sobering and distressing news, which should be a call toaction.

The unemployed face a tough job market. Unemployment benefitsprovide some necessary relief for hard-pressed workers who have beenunable to find a job during this downturn.

It's estimated that over the next five months alone, 3 million joblessworkers will be harmed if Congress fails to pass an extension ofunemployment benefits. The federal unemployment insurance trust fundcurrently has a $24 billion surplus, which is more than sufficient toprovide additional weeks of benefits to workers who have or will soonexhaust their benefits.

We have already begun to see the human toll of unraveling economicprogress as family incomes are falling for the first time in nearly adecade, poverty is on the rise, and families at all income levels are losingtheir health insurance.

The task before us as policymakers is to put the economy back on apath of strong and sustainable growth. Extending unemployment benefitsto workers before the current program expires will not only help millionsof families weather these difficult economic times, but it will alsoprovide a boost to the economy without undermining our long-term fiscaldiscipline.

Mr. Chairman, I look forward to the testimony of CommissionerUtgoff on the state of our labor markets.

27

FOR DELIVERY: 9:30 A.M., B.D.T.FRIDAY, OCTOBER 4, 2002

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 Daylight Time.

Statement of

Kathleen P. UtgoffCommissioner

Bureau of Labor Statistics

before the

Joint Economic Committee

UNITED STATES CONGRESS

Friday, October 4, 2002

Mr. Chairman and Members of the Committee:

I appreciate this opportunity to comment on the labor

market data we released this morning.

Nonfarm payroll employment, at 130.9 million, was

essentially unchanged (down 43,000) in September, after

increasing by 107,000 in August (as revised). From April

through August, nonfarm payroll employment growth had

averaged 54,000 a month. September job losses were

concentrated in manufacturing and transportation.

Employment in health services and in finance, insurance,

and real estate rose over the month. The unemployment

28

2

rate, at 5.6 percent in September, was about the same as in

August.

Looking in more detail at the data from our survey of

employers for September, job losses continued in

manufacturing (-35,000). The industry lost almost 100,000

jobs in August and September combined, after losing a total

of 80,000 in the prior 4 months. In September, job losses

were concentrated in durable goods manufacturing, with the

largest declines in electrical equipment, transportation

equipment, and industrial machinery. In nondurable goods,

an employment increase in food products more than offset a

loss in apparel. The manufacturing workweek in September,

at 40.9 hours, was unchanged over the month, while factory

overtime edged down by one-tenth of an hour to 4.1 hours.

Employment in transportation and public utilities fell

by 32,000 in September, with most of the decline occurring

in transportation. Trucking had an unusually large

employment decline in September (-17,000). Air

transportation lost 12,000 jobs over the month. Employment

in the industry has shown no clear trend so far this year,

following losses totaling. 132,000 in the last 4 months of

2001.

29

3

Finance, insurance, and real estate added 16,000 jobs

over the month. Most of September increase was in finance,

primarily in mortgage bankers and brokers.

Employment in other major private-sector industries

was little changed in September. For the services

industry, September had the smallest job gain (+28,000) in

a string of increases that dates back to March. In

September, job gains in health services and engineering and

management services were partly offset by job losses in

amusement and recreation services. The Federal government

continued to add workers in the Transportation Security

Administration.

Average hourly earnings of production or

nonsupervisory workers in the private sector rose by 5

cents to $14.87 in September. Over the year, hourly

earnings increased by 3.0 percent.

Turning to data from our survey of households, both

the number of unemployed persons, at 8.1 million, and the

unemployment rate, at 5.6 percent, shoved no statistically

significant change in September. The jobless rates for all

the major worker groups -adult men, adult women, teenagers,

whites, blacks, and Hispanics-were essentially the same as

in August.

30

4

In summary, payroll employment was little changed in

September. The unemployment rate, at 5.6 percent, was

about the same as.in the prior month.

My colleagues and I would be glad to answer any

questions you might have.

31

N ews ^ ^ United StatesB' VV ;> ~~Department

Bureau of Labor Statistics Washington, D.C. 20212

Tedcmical informuon:Householddaus:

Estbflisun dasa

Media contas

(202) 69146378htWnww-bi

691-6555hWpJA-ww.gbbgrm/

691-5902

ChW U t~ftrW M. _.W43v

O CCt 199S- _2D3

- , a.. .s..,..... !I

°i a~ro I

USDL02-570

Tmnsnzision o(mnateial in this release isembargoed until 8:30A.. (ED)Friday. October4. 2002.

THE EMPLOYMENTSITUATIONr SEPTEMBER 2002

Both nonfann payrll emplouwanddcurenemewunesse ayessuctrauzungedinSeptober,the Bureau of Labor Statistics of the U.S. Deprmment of Labor eponed today. Joo losesin matfwovitngand Iransportaton offset gains in finance ad health services.

-~ iL sn Wso . 5wS

a -

, ( . ..i - - .. , !- - . .. .. .....io M_~~~a

The numberof uneployedlee- n(U miein)wAddueeloynmuraze(5.6pee nt)wecasenfally unhangedinSeptember. Thejobleas rmesforte orw daegroups-edizt m (52pve ,c).adult womca (4.9pe ),ta s(I.7pent). whites(S.1 pee), hblac (9.6 peeea).and Hispantics (7.4 penuwedno a is lyificantcehnpin Seprmb. (Sentabl A-Iand A-2.)

Total employmenm eneswed by tbehouseboldarwey.roe by 71 IDOOto 135.2iilon inSeozber.alts onl jusmnenl Neary hlf ds ince was amgg whoqexpeneelae sa al swingpineo mbe bnmAugusandSqember. 11 tal _non was up by 0.2 pentaga poise to63.0 peent lrsiowa0.6 pLeeapoimlower tin

September2001 and 1.8 peaag poltJ loweraltan it pcakin Apil 2000. (Sec utbeA-1.)

+e_

32

2

Tab!. A. Major Indicators oflabor market activity, seasonaly adjusted

0--b r^u to~ d.1

Quary avges Mentfy denb Aug.-

Cay 2002 2002 SeP

n_ I III J uly I Aug. SI cS eanc

BOUSEBOUD DATA Labor force sat

Civilim labor force. .....-. _ 3_.. 142,605 142,761 142,390 142,616| 143,277 661

Employm. . . 134,149 134,568 134,045 134,4741 135,185 711

Unemploynt ......... 8,193 8,345 8,142j 8,092 -50

Not in. labfo7rc1........ . 71,059 71,6' 71.633 71,6091 71,152 .457

All worer........._.._...__ ... ............

Adult an . .. ... _._._

Adult womnI.. .....................

Teenagers.....................................

WhL.eA.............. .. .

Blalck.._.

Hispanic orig I. .. .,.,_

eSTABLAEKMB DATA

Nonifna employment.......................

Gooda-p ing.........................

COnS"Uatiuctin .................. ....

Svice-produciD8'. ......_,

lprvate.trd. ...- ..............

Government. .. _....................

M - 1a turi nv ........ ..... ___ ... ....Min rmg ............ . .

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

Average bourly earmigs,totalp rivate .._...._......................

Average weekly earnings

Unemployment rates

5.9 5.7 5.9 5.7 5.6 -0.1

5.3 5.2 5.2 5.2 5.2 .0

52 5.0 5.2 4.9 4.9 .0

17.1 16.9 17.7 17.2 15.7 -15

52 5.1 5.3 5.1 5.1 .0

10.7 9.7 9.9 9.6 9.6 .0

7.4 75 7. 75 7-4 -.1

EmPloyment

130,706 p130,847 130,790 p130,897 p130,854 p.43

23,879 p23,783 23,812 p23,787 p23,749 p-38

6.544 p6,541 6,519 p6,553 p6,552 p-I

16.776 p16,688 16,742 p16,679

p16,644 p-35

106,827 p107,064 106,978 p107.110 plO7,105 p-5

23,327 p23,304 23,339 p23,295 pl3,279 p-16

41,090 p41,316 41.215 p41,352 p41,380 p28

21,201 p21,265 21,228 p2I,28 p21,25 p4

Hour of wo&P

3421 P34 11 34.01 p34.1I p34.3

41.0 p40.8w 40.1 p40.91 p40.9142 rngi 4D0 04.21 p4.1

pO.2

P.O

U-.

Indexes of agegat weekly bows (1 982-100?

148.31 p148.01 147.51 p148.01 p148.61 _PO6

Earning~

314.71 pS14.82 S14.78 p114.82 pS14.87

503.58 p505.97 502.52 p505.36 p510.0 4

p$0.05

p4.68

' Incluhdes other ikdoscs, not shown separately.2DatA relat to private proction or nonsuervisory workers.

p dclmiuY-

wwA vA.._.._....__.._._....___.

33

3The civilian labor krwe increased by 661,000 over the rnfil to 143.3 million, seasoially adus and

the labor force paiticipation rate row by 02 percentage point to 66.8 percent (See table A-I.)

About 7.2 million pona (not seasonally l~std) held mre thm one job in Septiber. Thesemultiple jobholders rpresented 5.4 percent of te oul employed. (See table A-10.)

Pmmson Not In die Labor Force (Houschold Sive Data)

About 1.5 rillion pes (not seasonally adut) wertiargimily, admied to the labor force inSeptmber, carmparm d with 1.3 miion a year lier. These mffivdrals reported dat they wanted and wereavailable fir work and had looked for a job someinne in the prior 12 rnondar. They were not counited asuempyloyed, however, because fty had no acivwly searched for work in the 4 weeks pteceding die survey.The number of discouraged workers was 387,000 in Seprambe, up fmm 280,000 a year earlier. Dis-couraged woielS a subset of the marginally attadced, were not currmdy looking for woik specdicallybecause they believed no jobs were available for hem. (See table A-10.)

Mdustrv Payroll Enrioyrte s Survey Data)

Total nofarm payroll employmemt was esenaally unchanged (43.000) in S ~ener at 130.9 millionIn the prior 4 onxt ersnploymert had icrased by 217,000, including a gain of 107,000 (as revised) inAugust. (See table B-1.)

Manufacturing employment decreased by 35,000 in September. Job losses have accelerated over thelast 2 morin, foMowing a mnodmation in delines beween Muvh and July. ThIS tfmd is especially evideat inelecsinic equipan arid itdustrial rachinery, which lost 11 ,OO and 9,000 jobs in Sqtmber, recvey.Aircrft and parts and fuiture and fixes lost 6,000 jobs each im Squte Arcraft anufocurs havereduced payrolls by 65,000 waskers over the year, pritarly due to reduced demiand for passenger jets.

Tranportation employment fell by 26,000 in Septermber. Despite a 12,000 job loss over the month airtrarivortation has had no net employment change so far this year. This follows losses that totaled 132,000 inthe last 4 mon of 2001. M mt ie tdng industry had hd stey for ie first 7 monts of tyear, but since July has falle by 2X000. Empboynme in c = edinued to deline in Septenib,since April 2001, the industry has lost 145,000 jobs.

Employmnt in the sevices industry was fittle chand in Sqftnber (+28,000), following a gain of137,000 in August. Health services adled 21,000 jobs in Scptembernployment in the Winiy has risenby 282,000 over the pass 12 mi Employment in engineeing and managemret services increased by18,000 in Squtepnber. Amusement and recreation services lhst 26,000 jobs, as seasonal layoffs were largerduM usual.

Finance employment gew by 9,000 over the monh, vwth most of the gain cnng among mongagebankers (46,000). Over the past yewr, mortgage banking has added 44,000 jobs. Federal govenenemempbloyrnt (rduding postal woes) was up in Sqternber, mainly due to the hirng of aditilonal airpcitseprity wokers.

Weerlv Hours (stablihent Survey l

The average wodmweek for production or norupervisory woikers on private nonflon payrols increasedby 0.2 hour in September to 34.3 hours seasonally edust& lhis follows a rise of 0.1 hour in Aust.These gams offset Jly's 0.3 hour lossn I'm niza ng workweek was unchanged at 409 hours.Manufacturing overtnoe edged down by 0. hour to 4.1 homrs. (See table B-2.)

34

4

hew indem of awegat weekly lirs of poduction or naipwimy works on private nmfarpayroli, rose by 0.4 percen in Sqitenbr to 148.6 (1982-100) The index was downby 0.3 percent over the month to 92.1. (See table B-S.)

Houdy and Weeddv Eano (Edsablishremn SwwevDa)

Averae hou1ly eanmp of production or nonsupery wode on pnvate nonm payrolls increasedby 5 cents in September to $14.87, seasonally adjusted. Avr weddy eani ns by 0.9 percent o

be month to S510.04. Over the year, aveage houniy earnings grew by 3.0 peae, and average weddyearung incrd by 3.7 per (See table B-3.)

The Employment Situation for October 2002 is scheduled to be released on Friday, Novenber 1, at830 AlA (EST).

In acrdnce with .annual practice, th emblisnent survey bas cmnpletd preirnirrytabulabiac of the universe coun s for the fast quarter of this year. The tabulains indicatethat the estimate of overa payroll agpbynet will require a downward reision ofpIduatly 284,000, or twote of one pemct for the Mr 2002 feenonth.

The historical aveaap for benchmdm k revisions over dte last ten yeas las been plus or minusthree-tenths of one percen

35

S

Upcomint Chanes to Household and National Nonfarm Payroll Daft Series

Household Data Series

Effective with the release of November 2002 data, the Current Population Survey (CPS)sample size will be decreased from about 60,000 to about 55,000 eligible households as acost savings measure. The sample cat will occur in 31 stares and the District of Columbiaand wil reduce by about half the nmniber of households added to fte CPS sample in the fallof 2000. This decrease in de sample wig have a negigble dfect on the reliabilty of nationallabor force estinates.

Effective with the release of January 2003 data, several dcanges to the CPS will affectestinates contained in the Employment Sitaon news rease

* Population controls that reflect the rembs of Ceasus 2000 will be used in the monthlyCPS estiation process. In addito, CPS data senes from January 2000 throughDecember 2002 will be revised to reflect the introduction of the Census 2000-basedpopulation controls.

* lhquestions on ace and Hispanic ongin inthe CPS wll be modifed to comply with darnew standards for federal statistical agencies. A major change under those stands isthat respondents may select more than one race when answering the survey. Rrsondentswill continue to be asked a sqxprat question to detennmine if they are Hispanic. TheEmployment Situation news release wil present data for persons who mport they arewhite and no other race, black or Afnican American and no other race, and Asian and noother race. Data will continue to be presented for Hispanics separately.

* The CPS will adopt the Censaus industry and occupaiton classification systems derivedfrorn the 2002 North American Ibdustry Classification System and the 2000 StandardOccupational Classification systeL These new classification systems represent corpletebreaks in the tuie series for occupation and industry data As a reult, seasonallyadjusted occupation and inry estimates fnom the household survey wil not bepresented until sufficient time series become available for seasonal adjustment.

* The CPS program will begin using the X-12 ARIMA software for seasonal adjustment oftime series data. Because of the other revisions being introduced with the Janary data,the annual revision of 5 years of seasonally adjusted data that typiclly ocns with therelease of data for December will be delayed until the release of data for January.

Questions about upcoming changes to the CPS data series can be directed to the Divisionof Labor Force Statistics at 202-691-6378.

National Nonfarm PavroU Data Series

NAICS conversion. The nonfian payroll series, produced from the CurrentEmployment Statistics (CES) progran, will be converted from the 1987 Standard IndustrialClassification (SIC) basis to the 2002 North American Industuy Classification System(NAICS) basis with the June 6. 2003, release of May 2003 estimates. The NAICSconveion involves major definitional changes to many of the camently published SIC-based

36

6

series. After the conversion to NAICS, SIC-based series will no longer be produced orpublishedL Historical time senes will be reconstructed as paut of the NAICS conversionprocess. All published series will have a NAICS-based history extending back to at leastJanuary 1990. For total wnfann and other high-level aggregates, NAICS history will beginm January 1939, the current starting date for these series. For more detailed series, thestg date will vy depending on the scope of the definitional changes betwn SIC andNAICS. The NAICS-based reconstruction effort will cover all CES published data types.all employees, women workers, production workers, avenage weekly bowUs, average hourlyearngs, and derivative series (for example, xes of aggregat weekly hems).

Completion of the CES sample redesign. June 6,2003, also will mask the completionof the CES sample redesign pbase-in. The redesign converts the CES from a quota-basedsample to a probability-based sample. In June 2003, the services industres will be convertedto the new sample design; all other private sector industries have already been converted.The final stage of sample redesig phase-in may result in level shifts for average weeldy hlurs,avenge houry earigs, production worker, and women worker seris New levels fbr theseseries are being recomputed from the NAICS-based probability sample.

Concurrent seasonal adjustment. Also beginning in June 2003, the CES programwiU convert to concurrent seasona aljustment, which uses all available montily estimates,including those for the current rnh, in developing seasonal factars. Currently, die CESprogran projects seasonal factors twice a year. With the itroduction of concurrent seasonaladustment, BIS will no longer publish seasonal actor for CES national estimates.

Change to federal government series. Beginning in June 2003, the CES series forfedersl government employment will be revised slightly in scope and definition due to achange in sourc; data and estimatio methods. The current national scries is an end-of-mionthfederal employee count produced by the Office of Personnel Management, and it exchldessome workers, mostly employees who wouk in Department of Defense-owned establishmentssuch as military base commissarie The CES national series will include these workersAlso, federal government employment will be estimated fium a sample of federal establish-merts, will be bendmaiked annually to counts from unemployment nsurance tax records, andwill reflect employee counts as of the pay period including the 12th of the month, consistetwith oher CES industry series. Tbe histrical time series for federal government employmentwill be revised to reflect these changes.

Fuer inftintm on upcotmng changes to CES data smes is available tough the BLSpublic database on the Intlemet, via the CES homepage at http:/Vww.bls.govfces/, or bycalling 202-691-6555.

37

Explanatory Note

Thi anews Penulto eoibct ErrD bltt sje e doC Dtrll PPubalivn Soeny (bogIsid servey) 'ad the Carat

fWY1 te, lbs infornsttb an Iaborinterna or le a rlpe. endnoamlaYmeel thdt ret in lbs A Wiles. I d HOWEHODDATA. nt ha* pi dwyofabout 60,000 bdriDt anGDwtdby teUS. Cmu fims JadisB f ftUnoftbcSIi~ols(Rl5).

The establishmnent strvy pvOvfda, tle Injeesserail an lbeemmrt =aars, and eordnop of d n fn pynmilblhd

appeas Ib dn B sbes., Gud ESTABUISmSENT DATA. Thinfirmrilan In ab d from psyrali reon by BLS in esnlI

with SIaIegt e Ini=e2001, Setsmopls indtiedabMna350XD0eAhieo= anayibyg banbs 39 sillimn peopla

Forbhtb s sy., lbs dau fnbraigs r n tit relato *pWosk W psyperio.i tIn do eosbold Seemy, lb ebre Wsk i

sly l cantr wueek dtia malaise lbe 12fl day of dtameth.Is lb e ntliaMM carey. lbs reftense psield is Ohe pay pealedinorelrg lb 12&th wD cay rc my rat *cwanead dinctly to Oicaledar Yo

Coteage, defnitias. and deeencesbetweeo survepy

tlsshaik t wy The tnapt. In selecbtd Daled dlbt s. er

sknos mtetmdjob oulvitiseacbpCera 16ysndovaibs osarsple ho m d i nbc fie cdtser lo e aArnpltoydanrant in lbs ibnr farns

?mplswreaclified a qeapkW difthadid ey rka an toapsidcropicys des mm8 l refsoea wesl; dW b In dter n biaee,Faoer. an O lccnk *We d hem; or W th v pRy at ser 15

been in a famiy biness or Crm. People an also cmalerd ampLWd ifDrysee tmpally AgenicBntomeainrJobs haease. of

PepIs sene cladiftied a f fspyjs if they meet all of lbs fi-bftsgaf They had-o=ploynntdatrintSe euwee;thsynaschlbifntaewilabaihandtheysttdv- cefabb BDd erpoy r easd .. ,. do dclb 4 ne ekc aris d endn wtwlo eana l al k Pa is off bft sJobaeal eqidurecailneed ant be lahiag Ih na to be cousted an maeqdayaL TbeIMesPloYrcan damb derived fo

tent cs bW bod srvey Wt no nay

depe tson the aipdity for or mn ptf o teempo ae

TblcteanibaJU, inthsvanmf eIedInd umepi_or The Dac clarlcid as aepnjd Gr aepi,sd ne nt h

Ikebhre-Jinse. Tbassese#kyounssrswilsna I WnnAsplyeds,a; es rt ordee laborfen Theei if telbaisbbr Smc an a prnt of lb poFelsoe, and the e

PePedNOW elto is lt empinyed an. a F at of tlb ppbDDmstohfl t saey. The amle -setdadis tanass diene

-s1uuasFederaloStatandleocal Vvbemnisatrj,. E.Wkyewno

macf nn pIhC#ot am tsevr mccrad pay hr any pet of diereiroo pay piOd. mnakefi proits an paid tea. P ave

I Inmeanincjob theyboi imoad L a Ano pesmefiorM sb_ eessond risn onl n pntp cLiOO in lto ends-

~s~meemaiieasspavaraywukroitbceaWI eProdaingMotor.

Deee. pyle' e la np aand mnalodoicgical diffeaenso bolwaon tho, hosabold andeblmaeasrv rltedtinimntdinrtinc anpie t .

_stoims duttled ftom the steeys. Amvg do a

.Tbeem~mAsdftio ..ulnl~th elfr udissnardpvaibcddi nldua naeanQnepinyThnmp are erbidfrtanid ablntr cauny.

* Tha hotmind amy idrab pbeopl an Fmerod assirwon ltsRopld.Tbcaslub m m"ydoesnot.

* Iiwbomslartdsomyialimirsdra ermk16eanofapendoldeantTin oeldblishnynt nedva ta s De liuitnedhyq* hti baelird pase baWa dipiolioin of iriblal, _e

J doidwic aoamanndedyneesoa tuf lboybldraarneolanjnnhbtaeeemt smvsy ar~eyeasseaa mnole. San enejeb aidtmnappessneacnme. oomo prnildbtmmttdar zr

COM dilfltsran bet the two mnvpy a= dscrbd In-Ccmpaoi ienplc E _im fnamn basehai end PlSosW which may be orheaed fran, BIB spon rqu.

Seaonal adjus tOver lb. coesD of. Dm pb rir on zf the ntee inhor Ithere fre nd

lbs lovels of amploymont and unomployscsat rdogo sihopflumsmli dan to stib dsoosA emtb asd cdoso it wral.red nr wanded prodFin, inestts, mnajr boidany a ldsop send coasog of adholr. Thseafdetofsuciesncend vwrinlcat beoy vey ; trm i fishansromanmanyoumszfOrsmh ausu9n peevet of abs mnlb-tomo eanges, in _mapisyrwL

BCIos thtee tssoorl eMM IbliOw a cars nr l1m fegUISrpatt beme yea, Irlas eon st5tisia treadscenbeeli ntadby ede" lthe bnn a ftm, macb to malb These d tonusneb nossesal dawalopnala, sob r e decen In _mmenu

atevity or Inase. In do partisipalan of -mm in dIo abbr fanoa,eo o rpo stra eap e. los nis of byout esentin lblranr ftm inc Je Isn itlbly tobes any odaerust!a

M -bM reisiW to Uey. waig It dimsto datenn f ldebi of oro aaifty hla risen Gr de4lHwd. Hoaum becaulbofeaofsartudemb rogecip Re inpeo.. yurcaikovaes.lbst~stoltsDosranlt GUII yearcaD bn dJrzd D Or albbhenpnichange. Inofaras ldo waseman adsoteent a e mob oonvoly. toadjutd. iga povl a cssetal tIon rilb which to analyzeedan in oDtnmoo n edvy

In b lbs hoassdeolcdand estlistm eartnvey nonsaany&djsW sere tDG y adjusid Hows, ft dsIWenes for may s G rFaabSch tol Payroll erloysarsoeslplayn t sin m rtmajar iduseydivllezuk ets l employmo. and

38

apalsont m computed by areptuns dpdc_ aly adjnatd

component xCL Fm tW3

unam1lorpma is derved bygummei the asoned SW" ftfr mom geine ompx nontot; tisdiffe an bom a esnplnywen± eoa &a *uMd be oUbtWd byditectly andg th taotl or by anabintnh tde dreon, ma-L% or

muo dcalled ag Catere,Thfe vaiad do% usd OD make toe sisonadjoiftwe ae

cecalvaetod twice a yam For Flba ubol ay, tbe f. wrecd fa F ftheMaehY.Zmpetl-*anp3*tceditrtbDeemberpeiod. For the eablidarecut smMy, upd faceta fn _ovWedjotmost m calcakim for teo bMrOctubcrpatid and inuaducedaloeg vidi o achmaI36andaflalfo dollovembaevApnPtiMtiIn bol arvouy -ustos to Itbxicel dd&at =Mu aaonce a yano.

RetabIlity of U19 esdnIteSatadcs Wed an do bonackid end aebchtent r" we

btbbe inzdgu~ n orl2~t. Wboe=hinbsfndo dasepoph a i htbe_ m rftsrneydtbflumd-tepapa3dU1vlmhy epewn

The wed diffleeac, or sawrift wanr, vadee depasdeS on fet

emi =mple oleeo and is vedebtiy o meased by gotanduiertarof theadenate, Theaisabout a9, centclancear

Imlefeonfildwes aefeatimetsbaaadeca aaple wildilef iby

o mm gm 1.6 sund anon do ans a popolalto, vaebe of uoahzn m BISB adyaa mu ay coductedat

per"Wepie, ~y is o

292,9O. Sape to admia of fotal _apoyma baraam by1O^fOO tmwe mor itoh to do nlb The 9ow confidceinatoo tDheoDbhlcdgetplw.l92,t0t0DbJ92,00M

ooio +2 29 ) Thue Dg de am mum tht do ppmt d ueatbyheipnpttadM nn wo doe abont9g

p ceadckuee be kW aew'oawih dcaw Hoe wtth3*th3*

L Sb eo th b aw e ta 1 claalmotashetws, _e weld

muany w bIIIsbto " et b4 tobet, inceed. 14

dow"4 do w tempbroatag domtia bffalWWO wedoaman o

d .1e w am, ht tb teelyn (idn Is9ba M would ) be

n _meypanattbad,3*idovtted. Thep ocaec

farbte ndbly _ dhlp b3 do wtmqlcm m it ts 4f .19

hpe~d.~leaa~amyte*ivdealsodt'I'sbase loeadui ~iehd~ 3* doheofdoin heO

aimbee ubtanb- ead ca eaab d fbsabas.~ lbpeachea ealla to abelbceo -%bea do date as 3*ndd

om hie enc a rice cwfty ad WatInal psa le naeMOM eI ca be tmpaqs do ehebf of the caady

_ pdob

The bontod ad aebtithant nrwa tn 0lso affeond byaO WUtgp,. NWAabnlin C _ U ocCWrfrmy tu

including be ftn to aD# e oat of 2epapalltiort sbilhtyto obtatn lbibmastin for OD respcadentlo In _pe ist Ofunr-lpee at of ID* toeo vift e t ofa h on atinely bicsie, witohIscby aspeadatita. and ecr, ada in Mheconiectin arcesingOrtiem date.

Por aeybl, ill doe anaittn o, etsb for9 do

te et2 thmbn ela n-aabmtakt beplabeton ; hIbrMe.thU_ atatmbeladplbaloy o thetbkLe Itte only

deb two a elw te swtm to a *auddy als, when aety

an aDle tqtnt bas be rece 1 d, do fte is ceadoodfinal.

Anothr maj oroMM of aUmaPfto MM be do abfisbovatamir ys tO bdo tosbilb apo on a fteVy baaia emplapt

_ byabw&L ToI aeruta sasfcuioofdut" dowb (idcwar sltedon of , eaieam bane

as bin sdjust h Is acled ID do sm'as aelmiegPacotrasutmeby a specl numedtjba Is Adhetot mn"t Simple.

on pan rcetaionbhipp bween the antple-b-cd -stiofeapbymal utdd couatofacepltuetdualbil Melw.

The amenpleased. etsmmese ou do aa1ablmu Osy muadjnod iama yma (an la bgpd baed) W mi aesovantofr*3501l

Inemddmaees.idiwmfewmebe wem domuc aphbead

c.P)lepwt-r m ado a* uch eaniverve ta lsba.. me

Th. w b.*t.b ~do boaarpbtm hrM in attCpUMISC .O

ceotatwle. Ose do pied &deaft dooosit * evl for totagodomploysttat ha agald 03 -al taplgh MOe IvD

0.7 _

Adftonffi ,sudtc. and oGs hoftillafMe ceucphave etatbln M- Ia to RAyfome awd

X ,l d n f ll~~~IisgoibfibrI26,00peero Ss"PKw yrflem do U.& OUPOnx Ped s OMeWbV mfJ DC 20402 AD IIa mt be pid by a acbeack aounaawpmpqlbe*tdSuplt*1 dotDtcuflits.bycb*eft to tebdawcid an VWL

Baeployua egd labe also pwrovde W U ofAlbt ca .a doe bouseold arsey dat pbtl"labe 3 1at

_eae. Fa nameglopstd aMOth. ha adce" I te

M-n of th cetby of de emu dea - 1thkliI~muuceaveyadbMteWMW=4VhedatoIDad.Wk fa M pi nlbd htM A 24 _ tH Of he

pmad_aa st * he Eatak wd bei mmg et eeatbla 3* I

i_ _ta s Pge tqn. Vob pba 2201 -M20;TflD _= au pl 14004077439.

kW --ti --- 04k

Ea0¢~~=I==[ =I=Im

39

MMWDOATA HIDSBOODLT

leapt#AEA*qyddA.-Od.N. -- ,bySd"qb_*_tw

. n _ r~ I _*_iw Wp--w W _Iw^ft " O%

mTE~~~~~~~~~Q 2TI 42 . MA21 2tiVt MO tr7O 2 VIJ 214= MQP

__tbi% UL 113.9 %Vf 1Uj SAM *UXI 031 I"s 14

_ _______ ___ _~~~~~~~~NA 7Jt , n MAN INA? %X00 WM no 37,2 M7S11'_~~~~~~~~~~~~~~~~3 AD___ SuA AG,> m.9 a~st trS asX 4nJZ atl

___. _ .........mil. _.0 T1 To" SX 77 /61 Tt1, x W703 f 7 0

t_.~~~~~~~~~~~~~~~141 _____ 45 " V11.1S 71L4 MIS Ko 000 mm

Egw _ _ 11 ___" TX, 71; 7e "AS ,.W "A 'l2 "AdtE=____~~~~~~~~~~~~~~~" ___ 70. M t MO7 zxo 04 Mr as77x~~~~~~~~~~~~~~~~W ,1 koc 3n7 n s sn7 n Jw n2 mm

_ 4~~~~~~~~~~~~~~~~A 14__3 S__ OS Kub oJ *7t sm *At stil Ko

c_~~~~~~~~~~~~~~~~~K 7- _ _11 414 -nXtI *rxS tar4 *fla *os 1172 MJO3 tb Xncb~~~~~~b>Xa____~~~~~~~Si ____6 aftm amo G&W7 0630a4 b^7 se,n0Stl

t~~~~~~~~~~~~~~~~~~M 2. r 0V I' L120 *12S e.1t 1214 as2 zml

u _ _ ________ ~~~~~~~~~~~7,10 3,40 3Jto 3,10 33o X.8s 31t %ut 7 '

Wowi 16 *a nd rawr

5 -=-------~~~~~~~~~~As sw *kW~ a&II aSt2 mm eko wV7 mma___________~~~~~~~~du AM Ss7 t7 aurx UA24 azas AS R.R Ai"^~~~~~~~~~~~~~~~~~s A" " 67J0 66. 5R 64J $7,t Kgws

N d _ _ _ = = * 2 SJ21t WKJ2~~~~~~~~~~~~~S "SO 1077 5sv CT4 m L

______ _______ 27|4~~l~tV 101AS IM Xt to"" UtOz x a 7to IV 1074l ?~~~~~~~~~~~~~~~~~0ISf as au a__u WA WA 52, a" a S

jj---~~~~~~~~~~~~~~~~ -_ V3 7at PY4 g47 "A~ WA G

=;d-----~~~~~~~~~~~~MP -as Star_ Stt2 ow? Saiii 2w 0L 2t 5at 0$me

_ 1 * _ _ | X*J Ki~~~~~~~~~~~~~~' tLo t 62 ttO 2l V7CS

Bo... _ _i. fI a

Ad O" 3" I = I =w ISF I, = I S :

40

tHlWEND DATA HOU"LD DATA

To AdL S.V"PM WM fddkft _c -ya ,-I :"

_~~~~~~~~~~~~~~~~4 &W _.6 tnD tI nW AMs nonD t actn;

C>_o_ ___ .___ t nt tt ZaD str $t D tr2D X 2 §2 3,2r sut

2;~~~~~~~~~~~~~~~~Io SI= = J aND Wta 0XV5 r 10 r/ .O tra s t1i 41.

_Beab_~~~~~~~~~~~~~4 1scs 13 a A no a a ml ns I" ml

___________~~~~~~~~~~~~. 4D is st n X ty 4Ao 4. cn

.Zb______. ~~~~~~~~~~~STA z a's all 5.4 673 l W.t$ O.*t as t a.

OA w 4,40 Lod----- -= SIM t.a: I.M JA 41 toyo J X

c § "-t~~~w dt _ _ r~~t 7.^e *S2 7M 7.7"57"A7"I SO 7 i a2 W719 Su^

1 W _._ _ _ _ _~~~~~~~~~~~~~& s7. A UsSt 4" t as W~ 423 7a

_-~~~~~~~~~~~~~~~~ _._._. ___ an. on UN 1 J zet. .00 be "Iu z~~~~~~~~~~~~~~~~Q ___ __. fi _4 .__A $1 I

Cl_1.b Id4 t .____ _-_ St M Am9 VA" 1408 "An AmX `%M I7

=~~~~~~~~~SU ____4 1._.2aS7 now2| $1,t79 ISV 4m 2uf 2n42

aw~ ~ ~~ ~~~~~~~~~~~~W _" _.___ _.____.__rT 42~~~~~~~~~~~~~~~~~~~~AD _. 'An __ _ e ,.7 _ A i e

_ttwt~~~~~~~~~~~~~~~~' t10 0 A12 WT 9 A

41

I' Dit0~. DATA1OUBDO V_-A.3A4 1. t, lkl -any

O hL

HeOUEOW DATA

NOM A bi93d AAo An~~ - w. - *8

-.. ~~ 15398u ISmt

3*190 n231 AM7 23314 21512 15.9 2KM- -- ..ii~~~~~i..i~& i..[Si'i. tseli I1.= 10.1 IN0.4 MM4 14.3- - 7.8 87.7 473 07.0 *7.0 574 MI *1- - 14137~~~SU tun6 10.141 1I1 1481 1.9 3515 VI03 11.of_,~~~~~~~~~~~~~~3 a .sua D t" 0 on av tasc o

ON I.21 1.53 UUM 1.123 1.15 1.230 US306I420.~~~6MI93~~~~ ~ ~ 0.3 7?8 1.1 LS ?A 7.4 7.6 7T6 1

Mi~o4 d-.tSots7 6t8.J.64.34s#0.3p - NwP 1W D a -5_>

- O

1nhA4 b19NM i .4w d z57 t eft _ t*I _

Eae~~~~~~~~~~~~~~~M Medtht mz 2

eckws Mb 2 eFt w Z2 l

_t__ =____ ___ ._ 1 MIit t3*t2 11 e~t 1 "4.o tt Mi WM 4tiI IV20 11*77 11.660 IB 118 1.30 "Xs7 11m1 11333 14.006tI 31 4413 416 43 416 us4 31 441____- 3.7 as*7 11 1126 i1.3 118 IAN* 0m 1on6_, _______ 1.0 441 411 42 40.t 45 105 4J 0 424

3Miqb~~~~~~~~~, 7.1~~S G $7.7 71 7.7 8.M 71= G*77 6?.F 7.

60.4, 57.7 M18 57.93 8718 5701 57.01 Su71 613_41_ ___- 30.712 S8M 3733 10 346 34.73 ma5 sun 3713351D364......_________ ................. _ 30123 3470rl 249 0.*21 35.53 34476 55.390 319 30.1

81.4 SL7 611 61.5 Su. 3.6 61.8 CL1 81.4'.47 1.42 1.201 1.3* 12" 7.31 UN3 1.93 I'm41 LO t4 4.1 La0 Le6 Al 4.I .0

Om b*bft ftp.O

CA. _WIdWWPW -..- 4t9 1404 45D 4524 4441 "A? 0436 416 4LSMchdmft6.-ft-.---- SM1.30 3539 0*47 2333 32173 32.3. 31193 3318 33.41rd_-- __- ==mg"nJ n4 70. m2e 714 77.6 S74 7me 0-- ~~~~ 30.~X487 30.73 31.61 33110 31.13 31 .413 23.93 VI.M 32)13- 71A 6.6 15s 707 7)1 MG. M. au. Ms.= M _ , _ = _ _ _ _ . _ J11 7 1 .4 0 I 3 I. 1 3 l A, 17 1 .5t401 I. 3 1.3k13b~~.MM. _ 12 41 45 13 46 Z 7 44 4. LI

C-V-P$=Ml7jba l* -b-atw _-

O~~b1Mi~~~op493. .. ~~~ ... 0170S 40.3 35AM 413M 3.93 4%4.4 44.30 40)3 MU142*090350.. .. ~~~~~~~. ~~ 3016 37.77 30.39 3616 -0.44 3016 2723 *723 11.37~~~~ 701~~~~~~~~~~~T 77.0 15.4 74. 7. 76 77A 7143 143330.07 ANN 30233 30130 .0 3712 3*7 34.74 16174 2036E~~o'oa*78oop3~~~~,43. . 771~i 34.3 I13 v"8 7Ij6 753 71. 10.1 I30132I8006~~~~~~WM. ~~~~~ 71X 2.2 Xs.0 3.0s 2.9 73 7 7 3

5 ~ - - . ~ I *~~d34513~M1366*706l~b684~3M663..5M03t08. ~ 6840b4I3~4b3 3&60.81.3Mb0S6

CHAACIERITOC

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42

HCUEILD ATAHOUMFOLD DATA

TC>X ~ td

43

I'DSIBIOLD DATA HO9 940 DATA

mm A4

01 2D22 -N a

-L g?1 on5 9.0 &1 AV EJ El7 to~~~~~~ 2~~~~~~~~~~.514 2.1 15 4ES 6.2 A0 8. 42 92t 2.714 2.002 8150 (4 _.2 _ 2 4J 41~~59.0994I995 .. ~~~~~~~i1.519 0452 IAN 141 5t 1,.9 07) 52 SI)

".0., 1. 3A01 AT & 50 1 i S.7 5U7

99499.900900 a 5.12i 1u s.o _.4 _ _, a 4O4 Ts 72*_Z___ _ _ 270 X0.05 122 2.4 12 121 *21 *J5S~ 5.5 2. 1l 12* *2Y5 4. 0.2 82 02 52 615FW-79Co 0 .7 64 U t2 4 AT Ls El L

Powg -IA30 ________ A A to 50 7 4 s 59 59

- IAN9 I5 2U t4 2 AS 71 01 72 7.

IT d _ __ I 21 14 5E0 44 L9 U 402 AS

-_ _ _ 050 1.80 5.21t9 7 U72 . . 6. I 42 6.

2 5 5 4 2_ 4 2 5 6.4 i s 4 A a s L S

=- -- _,_ | 24 2C 71 ES UI IX §5 2

Ist 5 6, _=__ 0 44 417N 4S AS AA 5J AS to_50 2" l _2 5 . ?7 W 4 20 4 1 t9t508h4 #~52*9~._____ .. . ..... ..... _ _.__ ._ 1.7 5.0. 6on U7 0 A OA to9 U9__*w~~~~~~~~~~~~~~tr 10) 7 SI G_ Al * AuJ _ 4t7lt

~~~~~~~~~~~~~~~~o X * d AS ?A :A $A tSol2* OU 429 U_ 04 4L GA 19 15

~~~~~ 43~~~~~~~~~~Lo 42?3 40 22 &.0 LI U 2A Is7593 20 SI7 1 El As2 .7 ES to

509549859.iv944999149..Wo.149. 9~~~4" As 5. 2 44 14 Sm. 5 04 1 LT

8-.oO" -tkpodt R46. . -%. - -0 -ftb ~ p.b

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Stoo. A.; 0`0. 0.91 &Io A49 Jis h,4& .39 t 3 30 _2 k70 2007 _4 2

L14954941450................. .......... X.214 2:02 212 m 21o29 2.2 2.3 2r014 7092.52? 2._4 2.12 2. t A 2.1 297 tru 24 2.019 . . _14 .b SAT 2._ 2.497 170 2.932 2.509 toN 7W05 22*014a 57 till 1.7e t1.0 5,424 LA.8 1,5 la521

097 0.449 5.43 1~~42 1.n4 '199 'in2 5.04 Law9~~~~00~~~9514~~~~~ 50.0~~O 16.0 07. 52 V7.1 17.2 Its 042 57=Z~~~~~h-s .= ~~~~~~~~~ T2 1u t. 7 toi Ir as AA; C7

W 5 90. " c................ _ 0 IN4D 7t2 O.O 5 0 t6o" 41 1

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44

HMSE3YO1D DATA401J E 130 W D A75

T6Wb AJ.?.5 I .3o, 537W

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MUNBER C0 UWIPLOM

Al5.mW lpO104105.25544.055I~ot ...~ 3.2w 4N4 kw _-= 09_W 5M0 .N) CM 4.020.5.1......- ~~~~ 7W t~~ll 714 1.114 1217 7.057 1.22~~~I4 7.151 we

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Alo._._ ....... ...... . --. .. _b .0 _._ .1 ... 5 U1 52 O00

212? 2231 2207 LIU2 Z432 2.W 227 30 2.2522 L414 "I7 `02 44 411W 541 51 67 ax

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230 0. tO t 1 42 2 41.2 42.3415.0.0 - ~~~~~~~ 122 II.) 11.2~~~IIJ Ili MIS 70 U' (0.0 OA

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A6-o',I U 10~~~~1 2.0 2 Zs± 32. 12 22 2L2 12.

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(u.Ir_; F_ -.fJ-d| - |- ............ - 4.7 5.7 IoA &0 U0 5 o 67 B

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45

IXUEDO DATA

TAbh& U . " t *dM

HOUSEHIMD IWAA

46

ESTABUSHMENT DATA ESTAMISHMENT DATA

TWO B4. Empdoyo..oo an ofm pPW148 by he611Y

(inl mckmaldst)

No smasormw 114Jo894_I SaOorvilly 041$Wd

____ ___ ___ 2001 0 Z02 I Z Aug. 20D1 2 2 20 c2 20 0 2W " - I . -,201 01 - ,I= sP

Totl ........... ....... .. 132.135 130,08 130.673 131.151 131,819 1130.702 130.?36 130,790 13089?P 1MAU9

TOW ........ -. 111,288 112,484 110,063 110.005 110,778 189.408 10S6,3 189.88 100.618 109.888

Good9-rv9dung 2. . . .. 4. 24.180 28.207 28,085 24.678 Z).870 23.88 20.812 22.M8 23.749

86181...9 ........ ~...... 879 508 043 Oil 671 608 0us 081 065 863Maed ,8*0 ................,... .......... ... 35.0 22.8 3226 32.7 20 3 32 32 33 32 3

Colfinkr8..... ............... ...... 81.8 78.8 7805 78.7 82 80 00 T8 79 7901ad 9etaco 48.5 332.7 227.9 334.2 343 334 32 328 323 331Nor-.ft he 4s.I04 ...... 114.7 1148 '116-7 1162 III 102 118 110 III III

Combuallwon em881 Sol6 6.88 8,78 6,874 8,041 8.04 6.018 8.55 8.682(.MwWuldkV ~ommaelm8 ............... I1.07. 1888. 1.520 i.,0084 1.482 144 1.404 1.448 1.484 1,488Ham yoormiremono~ eptbwlft1 ........ 996.3 971.3 870.9 984.7 034 9we 910 89 80B 0an

baod e 39 ontr088 ...... ............. 4,42123 4.371,2 4.387.2 4,314.9 4.308 4,179 4.100 4.170 4.191 4.189

M80r0A 919 17.494 18.48 19.77 18.70 I7.42 18,771 18.787 18,742 16,879 18.644~~6884n66~~~~0grs . ~~~~'11.780 11.23 11,277 11242 1 1.719 111.240 11.233 71.207 1MISS 1t,176

Dume oos .. ..... . .......... 10.487 9.91 9.910 9.84 10.448 9.083 9.944 9,82 9.076 8.834PbowbI .... ... ............ 8.088 S.08 8.089 SABO0 6.871 8.819 SA80 8,808 8.878 0.044

twu*.t &-A wood poducts ........... 790. 779.1 702.4 778.0 764 770 787 788 767 794mo~~o a0,n ..- 06. 42U. 494.9 480.4 507 494 405 485 490 489

Slam~ ndy. wd glass 18,1S 73.8 684.2 865.8 082.7 688 049 0GU 084 806 008Pdmary ImM 8umls 44 5 88.0 880.0 809.8 983 NY7 893 088 680 088

S" inlm w bs. dd p~wm- 200.8 187.1 188.8 108. (1) (1) (1) (I) (I) (I)FabolooWsnulaIl pd s..............~. 1,487. 1.418.0 1,418.6 1.410,3 1,465 1,428 1.A25 1428 1,418 1.413

I J6181I"a oo WM NW 9401TH18 .- 1.960,2 1,022. 1 .808 1,79.7 1,067 1.834 1.82 1.826 1.810 1,801ca"Pobe8= alk o~boqdnm l. .... 231.1 202.1 298.9 36.8 321 308 3014 301 206 204

EMW0-k Old OW58r688bW 6 UPOMM---IM 1,6114212 1AO,60. 1.283,7 11.085 1,43 .,428 1 A26 1.40 1.396slco8 8lpw8wacco11mboo. 821.3 0899 882. 947.2 an8 8 we8 063 865 084

Trna ln1.751,3 1.609,2 1,871.8 11.858,4 1.760 1.870 I.87 1.881 1.8868 1,867me w~t - c~rwt.. .... 826.0 081.0 918.0 91iA 837 974 926 900 9104 810Aw.mft W pars~s.....,, 482.8 409.7 408,3 309.1 483 416 411 408 400 3988

fthn00Sfldw bd "AJCsd NU..... 2. 8575 801.7 790. 833 807 800 80 788 798Mo08I89,oamww~d~o919.,.....,.,.,,,, 278, 371.0 272. 372.8 376 372 371 274 370 374

Nomdwftft goods 7.037 8,83 8.809 O.88 08.985 6.8068.813 SAW0 (k80 8.818Produodwmwoi~o 4561 4.844 4.878 A.80 4,748 4AM0 .4. 4.82 4.820 4.631

Food and o d .1, .....o '1,35. 1.700.? 1.738,7 1,720. 1.80 1.88 1,88 1.897 1.063 1.6Tobaopmdocb ...... ....................... 25.11 32,8 37.1 20.1 38 .34 34 30 26 27Teoib ,8 ........... 487,8 428.8 420.0 428A 484 434 432 2 427 420

gA pwUnd ot08 ft roduob ..-...,.... 88W.58208 032. 017,2 081 820 .G 52 25 823 615Puperal~~~~s~o. .. --..----- I2, 13.5 813.7 818.7 62 612 812 612 812 81

A~s849a10 ~8r .... ,~..,,..........A. .48, 1A.472 1,402.0 1,40084 1,471 1,407 1.408 1A 1,401 1,483Chwin a~sut ,0epdp6 -a----.---- 1.016.8 1,011A I089. 1.009.9 1.019 7,00 1.000 1.0 1,007 1.0111Petroleum aro w olp o... ........ . 128.8 1585 139.2 12V. 126 122 130 120 158 129Ruts, W 088618. plmalc Prdutsd8 ..... 947.1 6312 932.8 929. 948 93 826 82 38 ON8 630L.8wsnO4w pr400r.............. 60.7 645 688 68,4 . S? 05 80 88 Ss S?

~~~~~~~~~ ~~~~~~~~10?.147 1081,438 106,48 187,06 107.14 0868,82 108.97 106.978 107.1110 107,108

T~mnspcft onw op88buMUse .-.- ...- 7.097 8,784 8.784 8.783 7.044 8.78 8.790 0.760 8.76 .31Trarmpovlooos . ...n 4.83 4,201 4.299 4,23 4,487 4.326 4.334 4.326 4.320 4.294

Railroa "Uspoltaftm . . 232.8 227,9 237.8 226.0 232 038 328 327 225 328Local wid 186 dwu1 96.61 664bavv ,., 486.8 4188 408.1 478.4 477 479 472 471 494 447Tnjftgwi ard zi1 .,.,..,,, 1,871,3 1,4.947 0,08 1,941.7 1.841 1,02 1.82D 1.43 1,82 1,612Water werPwoaslb Im18. 200.4 204,3 1064 192 193 180 192 199 1go17WW 0WW by Sir -.....-...- l,6.T 1.194.2 1,183.8 1.16186 1.288 1,19 1.172 11.167 1.178 1.182Podne8IU8.iospnattlon ........... 15.2 14.9 14.8 14.9 0 Is I0 10 16 iSso

Tropotalo I ..... ........ 493O0424.8 423. 420.2 482 420 424 422 421 418~CoonvmftOu wo18p480

uUOles ,. 2,063 2.483 2455 2,44 Z.687 2,485 2.46 2.462 2.442 .2C9.o'"uio6461 - - ,,., .1.116 1,813.05 .88 1,3887 1,700 1.82 7.816 1,008 1,590 1,09B18010, L ao niysvgn~o SS.88.0 848.1 68. 848.0 091 622 941 844 8s8 848

Oil11,111oIs S8 -----.. . .8 .712 SAM5 8.92 8,747 8561 6091 8.679 8,872 C.687Dwrstlegoo0 .......... . 88 3 .822 3.822 3,897 3.89811 3A18 3.816 3,914 3,900 3.900No.89.0* goo0s - .... , ,77 28 2.777 2.778 2.748 .2. 2.708O 2,785 2.787 2787

S" b£6be atotoibtW.

47

ESTABU284IWDATA ESTABUSO38O1 DATA

78808.1. Suywoy... Io 9.ON) -by I*dnsyecoo-o~d

00 t8-ft28

I Wmins.48y .pJ8d Iseo-my0 a4~ __

RSW8.8 &af 233.6 23,48 23.4( 22,317 23.806 23.327 23.306 2333 232950 23,27eLOMdm80 ib 4 wWgamien vjpom.-. I. ,683.1 1.106.3 108.8 1 1,0662 10,06 I 100 1068 I.I 1.6 18OsI ou48u~~ s~~88 .~.,... 2,688. 2,2.2.8 081Z~ 2,611.6 2X82 2,60 2.88 2.85 3.881 2.4

RM 8,1846q.b 2,8283 2,488I 2,478 2470.4 2.8 3A 6Q 2,54 .13 2.808d ..... ,., 3,428. 3.406 2.288, 3,8.1 3.428 3.28 2,204 38 2382 3,M8

Au~rn~ dealm " O"O SUS~ 2.44", 2.43, 2,448,2 24486 2,42 2,434 2,432 2.42 2.444 2,428NOW *W und mrdnbm 127.4 1.123,2 I.123,2 1,133.8 1.123 1.133 i128 1.127 1.120 1.128A06psMMfwd WCcOSOY~ St" .. 1,174.3 1.176.1 1184.2 1.16081 1,188 1.106 1,173 1,178 1.177 1,188

Fun " w he U~wdi ar ..... 1,128.3 1,137.4 1,137.8 1,128.0 1.141 1.148 1.148 1.182 1.183 1.162Eo~kV.nddzks80'qIce...- .. 8.349 8318S 8.3211 8,241.4 8,214 8.130 8.121 8.144 8.128 8.127

MW ~~~~3.104.2 .8411A 3.868, 3.878 k2,12 3.088 8.06 3,08 3.088 3.061

78 80. IYU.88708,u~maI4.64 7,727 7.812 7.816 ,78 7.728 7.7) 7.r23 7.737 7.747 73783117888. ~ ~ ~~~~~~~~~~~A 3.8( ,41 3.843 I.2 3,613 283 2,613 3 .819 381 .82 3,832

D8P08bfYku88Mw . 2,088 Z.881 UN068 2,070-0 2,081 2,873 2,071 2,073 2,078 2,078Can80rr brb .. 1,432,7 1,486,2 1.488, i,844,0 i.437 1.48 1,444 1,448 1.449 1,448S*1qS810046UM - 2%184 23.8 254.0 283-3 206 26 284 283 28 824

bs0l84 wwo 8u 7288 7(6.1 7741 r,2 733 788 102 757 774 8ii-V ~~338,1 374.7 378, 37A. 33 389 288 372 378 381

0oovift "aolwfw~rl8owst , . 758, 7241 720. 718.1 788 723 12 718 714 714"15k88 M 0wlnv.8arrtolRIe. ..... 218.8 280,3 288. 206.4 261 261 283 281 208 281

118885.08, . ................ 2.37 2,374 2,372 2,8 2,378 ,W 2.38 238 2,38 2,387 .2.36105owme61m... ,.....,,, -. 180, 1,684.8 1,88. 187 1, 1,8(6 1.683 1,87 1.878 1.84 1078km .mgons bcm urd ws'6 ... 77 788.8 782.4 794. 777 78 787 788 783 783

Re* am" ~ ~ ... 1,680 1,888 1W 1,872 1881 1.080 1.84 1,083 1,8 .1,082

8m .. -V. ..... , 41.188 4',.02 41.828 MAU4 41,08 4I.00 41.182 41.215 41.30 41,360Ag34*xswmm mnb...,....., 8.1 848,2 8341 018, 487 808 88 (3 W8 074Hm5148lsrk51~~~j~aom ..... 1,i610.0 1.8541 1.429 1M.34 1,68 1.788 1.88 1,78 1.788 1.77

Pmwul..rv~~~~~~~~m .~... 31.338 1,233. 1.248 1,2481e 1.274 1.27 I 1.38 1.20 1,2 1,286-i m Z " 9 .614,0 8.3061 8.702 9.4WQ, 8,82 8.320 8.23 9,V 829 0.284

8ar88bu8r g 1024.1 1,010A 1.04M I8 1.080 .20 1.023 1.833 I.04 1,03 1.040P= os1m6 s.. - .3A,48 302,228.7 3,268 3,342 3.283 3.108 3.28i 3,188 3,21 3.23

I 9iuPP01Y *e .. . .123,2 2,8061 2,10, 3.028,0 3.02 2.88 2,80 2.876 2.02 2.2Crwv.08ram dell eo8rS.A.. .32222.1 2,103.1 2,18&3, 2,182. 2.233 2Z180 Z.181 2,183 2,183 2.194

Aft pok, mvkk rd s . ..... _-1,21.7 1,24.4 1271.1 1.2(6. 1.281 1.28 1.306 1.248 1,206 1.38LOWIWMMM~ ~ ,,J OM N .... . 378,32 MA1 3802. 379,2 378 870 378 379 277 578884200 p08n 6. 78.A 088, 088.1 88. S(6 076 So1 14 802 883

AM10M088(6I.00 .468 ..... 1.772,0 1,648, 1637. 1,788. 1,740 1.82 1181 1,6 t.88 MM8NMVossrve. 10.442,2 10,714.8 10.728,8 18.128, 10.402 18,82 18.88 10.88 10.713 10.734

Offic" 8e&*h tod nvft 88 ...,. 2613A 3.0712 3,062.4 277.2 2,018 2,04 2,08 268 2,07 2,080NmtWrdPmr4w e lJ . . 1171 1,8821 1,068, 1,970 1,81 1,A8 1,88 1,68 1.3 1,68H88PUi, 4.1.28 4.74019 4,248. 4.248,0 4.120 4.207 4.221 4.233 4.242 4.260km, 1 8 ,u*, 2818 8441. 848.8 0808 428 844 043 046 W6 (60

Lqi8m8,,.....,...........,......,.....,..,. .i2, 1.082, 1.83 1,868. 048 t1. 1.006 1088 1888 1,071.2408.2 2.22 2,23.8 2,488 2,482 2.818 2,811 .S 2AX2 2.533

.... 3.081,2 3,121.7I 3.1888 2,7.8 3. 3. 3.194 3.106 3.181 3,20 3.M0cra8 4.7 we7 SgMS .. ............ 730. .8 882 878, 723.8 722 722 ra I' 73 04 728Reedlofi.. ow ._.,.. . 78, 8131 91 808, 878 081 804 804 887 8099.8v...............,...,..,.., 1120 .118.1 118, 1884 111 118 106 1(6 18 108 I804 O8801PnbM"0.. 2,488,2 2,843.8208.1 2,418.0 2,478 2,48 Z.484 2,678 2,472 2,478

E8.ruwwrwouoq w8.*ws...- 3,0t1 UM88, 5,888 3.82, 3.810 3,89 3MM3 2.34 3.833 3,66107;;U; we*88.tgt omlm.... .00, USIA, 1148. 1.272. 1.0 1.042 1.024 1.032 1,83 1IM0MVVDV81!.old ptrt o6O~ . . 1.171 ,0 .22ZA 1M.31, 1,218,0 1.178 ,0 1.2m V04 1.214 i,210 1.21

8u~mbeSql _- - - _.._ 48.8 4810 47.7 48. (1) (I) (I) (1) (1) MI

0G8060.18 20.81 20= . 20638110 38.18 21.043 31,2 21,211 21.= 21.281 21,388Fo~~~~wW Z6~2,20 2.828 2,42 2,8 2.82 3180 2.80 2,807 2.61 2.97

FbdrbL 587P.Wh Bmc....... .T177.4 1.818, 11182 1,617 1.774 1377 1.78 1.790 1.798 1116SWa .. - ..... ,., ,.. 4.613 4.883 4,408 4,830 4,938 4108 4.83 4.880 4,844 4,688

. - . -~~~~~~. 2101. 'a 03M.0 1.88119 Z134, Z,140 2.141 2,12 2,108 2,143 2.18308ur81a1.Qoooym mt. ............ 2,611,2 3,634.13 2,81 2,808 2,78 2,504 210 IZ788 .81 2,79I3:LC~ .........i ......,.................. 37 1.8 278 1,3 34 113.01 13,78 13.71 13.21 13.M80888.04 MU,3,88822 ,7. 7,884 T"8 7.770 ?7.70 7.78 7.83 7,610

008714.8 go~mw8 ....... ........ 8,8. 821 ,11&8,8 80 S.80 6,681 ,80" 8,08 8.88 8 2

118 ahwe =d eV rot pwmbl8 086001 amObd bwm,8 ta 2 U 87518148.8wmw m pow0a8 ~70 is uno 8366w IP to W."Aby ..d P *pu48Iy.

11"Mcapow co80 894811481 .88518.8 prs09b

48

E8AaU004U8T DATA E8A..981O( DATA

Table .3.Avw~. -.. lyhowzsoprodwciluora IswpUtMwq Ion,38 I.*4 aoafm Weolft by kdoduby

N iot m u-f *bd Seemorfly aub

Ind.usty IoPtI A47 I d 9~Sol Mai I A. I J4y I 0.l I =0.20120 fz00. I00 J 2901 S 300 2002

Tabd prftW ~~34.4 34.2 34. 34A 34.1 3402 343 34.A 34.1 34.3

G.0dawocdufr, ...... ~ 40.0 4010 40.7 4018 40.2 40.3 40.5 40.0 40.3 40.3

Lit.o. 44.9 43.0 42.4 AM. 4390 43.0 42.3 42.7 432. 4218

Cardbuonoo1.. ........ 30.9 30.2 30.0 301 34.2 20.7 30.0 30.2 38U 30.0

MumdbcW*l .. .......................... M1. 40.3 41.1 41.2 40.0 40.9 41.1 40.7 40.9 401030,14h80 bo............. ........ 4.3 4.0 4.5 41 3.9 4.2 4.3 4.0 4.2 4.1

0W30stlg00i A........U... 4 40.5 41A4 411 40.9 41.3 4106 41.0 41.3 41.3OV* US4.1 3.0 4R4 41 3.9 4.6 4.2 319 4.0 4.2.

Lb&M ~ dp.d41.6 411 41.3 41.7 41.2 40.0 41.0 412 41.0 41.3OwIdbm 600 I.XSS - 30.7 30. 4056 A0.? 30.1 40. 40.2 40.1 40.3 40.1903 CW.MO0 40.1 43. 44.1 44.5 43.9 43A 42.7 43.2 42.3 43.3Pil m01Wo0. 44,2 43.7 44.3 44A 43.7 44.0 441 44.0 44.3 43.

B 00988.4. .01 00000901 p.008009 40. 45.9 4318 482 4532 40.0 40. 481 40.1 437Folur09ic b0. fW abl~00e- - . 41.0 40.0 40.0 411 41.2 41.9 43.0 41.7 41.7 411h000100 sb .94001... 40.4 40.0 4016 40.7 40.3 40.7 4019 40.3 40.8 401BD.0030 W01CO elect.00ici ONO47Wa 39.4 30.0 3.0. 39.3 30.1 20A4 30A 307 30.7 30.0T0900

010091.q*O0ln- . 401. 40.3 42.0 43.3 41.6 42.3 42.0 41.7 42.1 43.0

MOW0 964*4. vOW qOMM0 42.9 41.0 44A4 46.2 42.4 44.2 44.1 429 43.7 441h.0h.000ft 0W04.,o 41.2 40.0 40.7 40.7 41.0 401 4019 40A 4010 40.7Mleabrowstmrwarafa.ks V 30.1 30.7 301 37.7 9018 2918 301 30 3015

MoodwaObegods ~ . ... 40.7 40.0 4016 4010 40.2 40.4 40A0 40.2 40. 40.20V90303f hn....... ..... . 4.0 4.3 .4.0 418 4.1 4.3 4.3 4.2 4.2 4.1

Food VW MrWW ....... .. 42.1 41.0 4118 401. 41.0 412 40.0 4110 41.3 40.7Tobeam pmdcto . . 4014 43.1 40.0 40.7 30.7 4116 40.0 42.1 40.3 40.0T.01boondl I h, I40.2 401 43.1 41.7 30. 411 41.5 40.8 411 41.3A47pO64800100t 080~d~tl 8 V3. 301 30.7 AS1 309 37.0 32.0 301 38L7 37.1Pqw wW~Med procd0 ..... .......... 42.2 41.0 41.0 42.2 41.7 401 41.5 41.2 41.7 4115P.0o0,Uwrd pub ....... ..........- . .. 301 37.0 3718 371 30.0 071 37.7 3723 37.7 37.3chvwjob amo WM. pmdck . . 42.3 41.0 42.6 4301 42.1 42.3 42.5 43.1 42.0 42.9Paotrnw oMp b42. 4118 41.1 A2.3 23 (2) (2) (2 3 (2 (2)Rub~berwolo,4a.pb ....... ..... 41.2 40.3 41.0 A1.3 4018 40.2 40.0 41 .0 41.2 401Le..a "wam e 03.pw a lbto9 :-- 30.9 30.0 30.0 39.3 39.4 98. 391 30U 0 35.2

0ante-frclk80V . ......... 321 3230 33.1 33.1 32.7 321 32. 321 83.7 319

23*,po,09nIoi 31Pubb u~tob 30.2 3804 28.7 091 3.9 39A 30.3 382 3014 310

P480le800*4 bode2.6 303 30.4 29 30.3 38. U8S A 9 3505

Ra00fi nif ..............................-. 28.0 20 20.0 292 2013 20.1 30.1 209 91 3.1

FU08b..001ur1r.01600.d9red.estate 30.7 2018 30.1 3008 30.0 38. 300 32 0 0

SWAM ------- ~~328 321 22.1 3221 3.7 3386 317 31 32 32

I at mkvb I. pma.1wsm Wolins have VW 001~9800 .v .004 in cwWo0cd03 ard .inmmpw'o03y moowkm PI% I not I4 p1-1. I umomr01l .4od beccumme 08

0wac0.0 Orip8403...*e0 -~059 -* 3.098-. ,6901801 emopomod. .6*ch Is mU~ 5,410. lb 9. 0w-,vW430 a04

appeoftefekly bur.83u of 90.41* m090.)88 no06 0.1080

49

VETABUM!NWT DATA ESaHVMfT DATA

TU SL. Awsgwb n hrM 16yf sm d d . o c664 o ooo rpu m Ibr1

I C llP I O p6'ftby.11h

AI6 I ASep, 3I 906If*I

6~7 sskI *s I ~# S4I8. t I ~5 .

TOW p I - S114.50 S14J6 $4* 514.63 64 660.0S $5006.8 0515t.SSeaorog t 14A3 14.75 14.t2 14tu 4J7 6492S 60035 510,04

04t o60c WV 18,13 16.45 16.48 166 a .IO610 666.00 67074 87SAG

t ____ _--___ 7.1 17rN6 1.72 17.15 774J4 7min5 76.6 7T657

Cmuh f __ _ . 8A.1 10.00 18.60 1ts.0 735.6 74O.0 162 74 8

s10.01 16.28 16.31 15,42 616 .61 614.08 62 .24 6 .60

oi36bgoo6h 16.49 1S. 16.n 15.01 630.74 6 .2 6633 661.0St3rb6rt0 td PedSb IZ244 n1st n2.67 12z 6170 S17.04 £16.14 62.42FM ft 8 W 60a6. 12.3 12 68 1 .72 1178 401.6 4 6A 9 616.43 516.62

W. ta.E amOmPdt _ ._ 16.21 1.S .2n 1t.7S 686.7 t.59 684.43 60.10Pf1y _.________. 17.23 17.60 1746 1706 765 70512 77148 703.o

m m uowa ud046o aw w4ucb 0 26.00 21.6? 20.0 21.03 960.31 6,0 607.22 s 7nsF1a l omu421o l t 14A2 14t 14.72 14.62 696S 6mm0 61as0 616.48

hWt lo yUM" dq*pff ..t .__. 161 16.47 186 tebe 646.00 t0.t0 671.62 678.21e963 6 4W 0OW .WI nb6 to _._ 14U 82 1s.6o 16.04 16.15 sttn s21.tt 0632.6 564.611 _ nt16.__ _._ 6 ¶6.37 6.60o 50.04 8II8 7l6.01 64340 667.73

IdcbrVM**suWleGQpnWt 19 1.73 1386 50.64 20.77 648.42 616.18 61106 6 SS OtWUmt 1 01 ._._.__ 00 15.24 1S5 15.46 61A.68 6s60 621.0 6M.?$

t 4 9 nw- nW-dW -_. 12.58 12.50 12.5 12,44 4t7.0 46Stt 471.33 460.1S

t &U6goo t4. 0 14.8 1t 4.1 14.72 StZM 6.6 M61T7 66a6.Fho1dW t tt 12_7 1St34 13.325 1. 546.04 646t4 663t5 ss7.t1lbtow__xb .............. 20.71 353 20.66 2050 O6M6$ 662.6 t t49 826.3sT67 ___________. ..40 1S.74 tt.7t 11.76 11.75 40 406.17 464.S 40e.6AP m o mid a x *-- OM 8.04 6.M .a6 1OAO 560.12 3671 366.17 309.00Ptwwid aftdpoi VA01 17373 176 17.70 720.0 73O5.7 730.50 746O.S

t b twt.4 _.__. ttB 165 6.32 19.31 t1062 717.50 665S. 620JS 841.31a 2a F-- ------ n2.24 22.22 5L0.6 22.L7 964.10 9Bt0 t07A9 S42.44

R1bbw a0t O. L. P b. 0p du ... _. 13.60 15.70 13.71 1.70 66.20 66453 665.46 65.316t87OM6tO ltpd" _ .................. 1024 10t37 10.27 10.03 5t76b. 37332 569.72 365.07

BSoICDudWt_ ...__ 14.01 14 .15 14 .1 9 4460 46.464 468.27 4756.

Tun*&& d p1 ulms . ___ 1.81M 17.33 17.0 17A8 645. AO 547 06A.81 66.72

Whclwivtwe t-_ ___ .__-- . . .. _ 16_ 68O t 16.10 t11 1 0 20 B 69 616.63 621.31 6S3iS2

la9t.___ . O8 60 _t.01 10.16 264.6 6.41 35630 206.3

Fh o d ad IS .___M__. 16S 16.52 t131 .68ta 606.7 683 660.70 a"

S .. _.......------ - 14.6S 16.02 13.04 15. 487.68 4Stt 4831 666.87

I 86.�l0b1�6.2. P P1186*067,

I SW' Fi , latb I'tbbZ P. ,-

50

ESTAB84ENT DATA a8TABUSH0M9ET DATA

Th" " Averg. hou mnnpmorpd t woo orreaw~my wk-.1

-pi. noaftm pqwib by

~~~~~.- -~~~~~~~~~~~~uaImov,8.58. &y muns dol088s7 2881 2m 2002 32 3 28 0 o

TOWi prkw88Ofmt doolov., WAS4 114.70 114.7o $1428 114J82 $14.A7 03VtmSwt ._.n 8o01 8.12 8.4 e14 8.14 NA (3)

-o88.~98lc81g .~..... --.--* -... 183 18.38 1. i8m INA3 1847 2MvX ~ 1282 17.t7 17.70 t7z 17s 17.81 t 4c tmo ........ ......... 1830 18.77 1a.81 1aw7 181 1884 .3MWU&tW . .........*........... 14.98 18627 18.31 18.28 15.13 18.38 .2

E)iOAVV rrel*1, ..... 14.28 14.U3 14.88 14.57 14.9 14f8 .3

SrAMp . 1.897 14.24 14.29 14.32 14.37 14.42 .3I~nmx to old p.b8UMM 18.87 17.31 17.37 17.33 t17.4 17.84 .eWhlsa _8d _._ . 18 18.2 .O 18.14 18.27 10.31 .2Rawe 1... _8 se .9 8 1o8. n1o.0 lo0 1o0.o .1Fkace bmmy, wWs mi

t 0388..... s 1882 18.17 1827 18am t843 182 .554~im __ t4.83 1N8. 1819 1838 1.29 15.35 A

1 Sg ee0, mm aa. 2122 .thr8mT 0WW c PAN .1 lor UMM08n Wage Emm bb = .r . w tou Owe pd4 t

Om cb"mIN8 (V)" to and to 4.Osto the rok of & eNod 8MO-ho8.eurS. _ zO _ 2902 b Al P oNA prl* 0.

"Sat'.... A pow tm July 1M b MOM P o pionkwwy.

51

EABUSt MT MWA ESA5T lMt DATA

(l8182-100)

8281. c1.y w40poJc .

S 8 -_ . -. .__ _

Cons .. __.._.._.__._.

W" g oodts

F08w trnt wod 6Pa24i

S868 rim p4468 -__0408tn00 bbywdrn

Mob l88a8844eMu4

F i Mid ____._p..__Td~t rrt.888~ .... --

buf __...._.-

A ._-..__._._.

ROWS NW 88i p_ __------- - -Lo~r and 44t _08 911Pbttotpwtw.____

cMOwr ld pWAD _ ....

Cftm ttcatpa...__._

Trl.qIra. lt V ut~ __. _

t br. Ow.s. _i __._____F0 buft.Fkmm kmmm ---|*Mm ._-t*_.

Nobt_4ly q-d _I Seemu07.b.d

)201 20;5 07 200261 200 202 2002 2i2 2w

161112.1

87.8

1418124.2122.780.8

1524a.s90.9

110.2144.77188988

823122.1

538805

940514.7a8.774.0

135.7228

1692

1MI1

127.

147.0

1420

21.7

100.0

106a

0080

81526i28

13X712tD

74.1IM

B130828078.1882

130287.1SUb88.0

ist"

0D24ZSgm

10s284.0

842131 .7

22A

'lep.7

13M7

12&5

10.0

1002

42ts

101.0

tO9D

58.7

834

00.213B.S124A117.8u7e

to"

61.7308

e788

5508

atJ

4849"

to"e

7Z.8122.

zzs

1261

is"

24Z0483

t21B

SG.4

72.1

5348t

50t5

107a

IeNA

8S38

120.01228t11tJ78.180.3100.1

78.15078807.5

814

t2tJ6718

4386088882

t9"74.2

1342248

1*91

1i88

121A4

1aJ.7

M4.

2158

1408

sto

138

04.011.

888

a1"l.2882.8

16.0

492

805.124.2

5108

41t2

112

7180136.1248

12I.7

1484

13D.7

212A4

888808881.8088.2. P * 91811*5U7.

U481

100.

S00

105.7

02Z.7

1475

1o0.

St$

17.4 I 17A I 17&8

9218

12z411087848058

110.1

82210568144.0879900

es4118.6Gsrs8186sts

9Wo88.0

70813822.1

134At

1247

IVA147.1

211.8

83,2

"co88.8

70J

158.2113.3

81.71O084144.7

W.282.

11"117.182.985.84315e4s

96.7

10s.2228t

132.9

126.7

147.1

14O

2127

s2J

t08.

12&2

7et~l88.4

102.7138.8vT.s8o78

88.4

88.11UD8

042

84s

93.4108.7

04.8tTt.S

12t6.022.7

87.5

12A.

215l.8

10&7

U&LO

178.3

924

138421238113.8

T69.1528

7se

7188

144t2875059

88.4

67.981234t2

t048

1082

14.9

141LO

14.0

2128S

1488

004.7

S0.0

1780

92.1

04a1352212ILJ

74.798.1

1078818r8.7

148.587.381.0

88.1

1548I00.6

60243894.5

tor.488272.015082248

1884

1338

12a2

1489

1418

214.1

1 m- tb~ 1. I e P . ,JOY

52

E67ABUMET GATA

T~b" 84. 1 nd o t d _

Tini penI---

Over t-mmn "pnIm .......

2080 _2001

Ovw qox*-p=

Ows~omolt pmo

20002001...

3860..-|-*--.--v

OYWs I-M*X ._Are.

2002.. .200i

Ovw 12v Sp=

tm ..... ... ,

2001o _~

2000 . .

2DO------2000

2002t_.- ---..

sm20t6 .200l.t20402 ~

to 2~stt

3860*.

Jan. ;I| Feb I Met. I A P .Iule I ly I Mg I Sft0t7I OCt. bv. I DOM

e2485.280.849.447.3

62.308.240.448.40.1

70.260.201.l44.737.0

89i61.2

C1441.635.2

67.608.6$5Ts487414.

62307.661.448.1412

67.4

60A42.741.4

87.9

60.9

P36.6

59.160.A67.8OD.349.7

40.842.A

80.1

434

07.8

38.86P7.2

8025`.51.242447.8

mg.5s163.243A4es

00.7

40144.4

PlO OmOml,68. 347MOMMS'

e7.805.5ml1

47.380.

02,760.252.437A48.0

8.57.264.240A

P48.3

6s6L

57,

432494

6B.Z57.256SJ4280.1

6216086

52.43StS

pay.

64.087.157.844,8

48.8

58.466.1

ial31.2

62937.0

ese 64.1 62.7 01.71.o 60.7 Si 63.2

862 5613 s3J 53.037.6 37.3 382 34.1

08.154A51.442.S

Ne87

08.10828.2e8.0

P40.0

82h6 62.764.2 620422. 1 2413

62261.1",.23.o

Manuhickwhig Pso .130 51om18

* . . T . . . . . . 1

67.047.444.834.635.3

38.239.3.2

21.324.6

GM738447.820.2

54.6

40.018.3

IS.r

ale41.26.222ee

aso

37.0

67.03983

30.1

36.046.216.820.8

812234.6

12se

4P.0

tt.6

83.242e483138.240.4

* scs38.748.J

37.1

48.2

14.02g.8

t2430.313.8t

P18.8

48.048.023.0474

48.144.8C2.s130.6

40.1404a0.018.238.2

44.736.03e6.10.4

44.9

40.3

26.347.1

48.2

412

19.840.1

46227.8

41.818.6

638.0

40.47S.

35.31z I

4T443A60.730.404

Sal242,6621223241.2

42.842.07.913.2

P30.2

40.139.034211.0

38.20.0

24.948.8

41.i44.1

46.017.3

P36.0

X8014.7

30.240.133.800.0

62.042.830.838.7Pae

4s04e.38.810.

P3s"

44a48128.O

31.P40,4

42.0 1 32 1 3227 i 40.442. 44.1 1 47. I 48.22 1.0 342 390 36.016.2 MO . 19.4 I&18O

3st1 30444.5 48.236.2 32418I 14.0

37.6404

20.711.0

ESTABHUStTMDATA

57.257.1824

42AP47.T

0 2.0 5 7 .8 I 0 8.872 BO64 6I.18SZ I82 52.740.5 I 381 3 44.1

s0sJ s7.868.7 50.61.2 s1.036.3 53.7

87.161.283.238.3

SOA40.7

1.6 -826

402stJl48,732.1

622452.3.8

0 0 .2 I 0 861.2 62.048.7 40.534.1 3586

6Y 6 .6.

44'5 42.93313 34.0

soc63e47.73444

S0,6 I 42.3 1 41.64tf 51.5 49.342.3 1 47.1 40.31.3 2&1 30.9

41243.0

13.2

34J445818.112.9

44s8 474213 I 21.717,6 1 16.8

38.7 1 S4244 3 44.6

14.0 12. 6

38444.822112.0

I~ 3wdo 600 0u444 -~I,2 wid Camel0 $PM" NOTE. Pax- -. Ow powd of k16 WMn UIOfO)OOw _ wu odX tur 51 6 12.noh r st 06w. 3,410 howIO4 5 prw on..ofO SdoSll 800,5 5 a_47.4OwDtm w n . 0t s pnwd ShWO U1 oouA6560I bd _MO* W

P .pw~l~u~y. Sww~g 304 hfU1anlt1 . dt

. . . . .

. . . . . . . . . . .

. . . . . . . . . .. .

. . . . . . . . . .

53

Ocf f6 6

The Honorable Paul S. SarbanesUnited States SenateWashington, D.C. 20510

Dear Senator Sarbanes:

At the Joint Economic Committee meeting on October 4, youasked whether the proportion of the unemployed that hasbeen jobless for 27 weeks or more was the highest since1994. You correctly noted that it was nearly 20 percent(19.5 percent) in September 2002. Although.the proportionwas slightly higher in May 2002 (19.6 percent), both theMay and September levels are the highest recorded valuessince late-1994. I have enclosed a table showing the

-complete historical series.

I hope this information is helpful to you. Please let meknow if you have any additional questions.

Sincerely yours,

KATHLEEN P. UTGOFFCommissioner

Enclosure

54

in,,sdV7 u6 v po~ I l.to mipy. 1 186 "~b 662. sinewt~dtSl~d

y .Wun P46 U AP MY im id AMg SW 0ct sw VW6

1946 GA 52 4. 44 5.1

19 4 4 3 . 6 .4 5.1

10 15.0 I6.l 113 13. 123

1iSI ao OA 72 782 6.

Wm £L 4.S * 47 6 4.3

IN4 4.8 46 50 . Z .

IN4 4. 8 4.6 6.low 13.3 14.7 134 1.5 M1 S

low 9.6 10.6 t6 7.7 £619 6 8. £6 £6 £0 £7

ts 77 £1 7.7 10. 1.6

196o 14.4 183 1. 18.2 16.

910 12.9 13n0 11.7 11.9 10.6

1981 1S . 13.7 145 18 6 17.7

* 9a 2 16. 17.7 16.3 16.2 16.51943 133 14.0 14.8 14.7 14.4

1964 12.8 12.4 12.6 12.1 134

1lo 11.1 11.0 102 10.3 10.2195 9£9 es 92 6.0 59S

16S 7 (Lo 6.s £2 6.1 53

196 66 6.2 £3 S 50

109 4.9 4.3 44 4. 4.7

190 4.5 4.6 £50 £3 5£9

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U & Deparbntei of Labor Commwona, lorBu~set of Labor StaiistksrotWasNton. D.C. 20212

The Honorable Melvin L. WattHouse of RepresentativesWashington, D.C. 20515

Dear Congressman Watt:

At the Joint Economic Committee meeting on October 4, youasked about unemployment rates among whites and blacks. Ihave enclosed a table showing changes in unemployment ratesby race, sex, and age since the economic recession began inMarch 2001. Each of the series has its own peaks andtroughs, but I felt that using a common timeframe,beginning with the start of the recession, would simplifythe analysis.

The data show that unemployment rates for blacks continueto be at least twice as high as those for whites. Thepercentage point increase in unemployment rates for adultblack men and women during the recession has been about thesame as for their white counterparts. The percent increase(that is, the percentage point change divided by the March2001 rate) in these rates, however, has been greater forwhites, because their unemployment rates were much loverwhen the recession- began.

I hope this information is helpful to you. Please let meknow if you have additional questions. Also, Philip Rones,Asaistant Commissioner for Current Employment Analysis, canbe reached at 202-691-6378 and would be happy to answer anyfollow-up questions that you or your staff may haveregarding these data.

Sincerely yours,

RKTHLEEN P. UTGOFFCommissioner

Enclosure

56

Unemployment rates by sex, race, and age, March 2001 and September 2002, seasoaally adjusted

White

Total wbht, both sexes

Men, 20 years and overWoten, 20 years and mer

Men, 16 to 19 yearsWomen, 16 to 19 years

Bla&

Total, black, both sexes

Men, 20 years and overWomen, 20 years and over

Men, 16 to 19 yearsWomen, 16 to 19 yas

3.7

3.33.1

12.311.0

8A

8.26.3

28.728.0

5.1 1.4

4.74.3

15.312.3

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34.720.8

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37.S

42.438.7

24.411.8

14.3

13.425.4

20.9-25.7

Soww. Bure o Labor Sta~cs, Curent Poiht Srv

0

Mar-01 Sepm Change Percent d=ge

S. Hrg. 107-821

ECONOMIC OUTLOOK

HEARING

before the

JOINT ECONOMIC COMMITTEE

CONGRESS OF THE UNITED STATES

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

November 13, 2002

Printed for the use of the Joint Economic Committee

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON: 2002

cc 83-925

For sale by the Superintendent of Documents, U.S. Government Printing OfficeInternet: bookstore.gpo.gov Phone: (202) 512-1800 Fax: (202) 512-2250

Mail: Stop SSOP, Washington, DC 20402-0001

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, TexasJENNIFER DUNN, WashingtonPHIL ENGLISH, PennsylvaniaADAM H. PUTNAM, FloridaPETE STARK, CaliforniaCAROLYN B. MALONEY, New YorkMELVIN L. WATT, North CarolinaBARON P. HILL, Indiana

SENATEJACK REED, Rhode Island, Vice ChairmanEDWARD M. KENNEDY, MassachusettsPAUL S. SARBANES, MarylandJEFF BINGAMAN, New MexicoJON S. CORZINE, New JerseyROBERT G. TORRICELLI, New JerseyROBERT F. BENNETT, UTAHSAM BROWNBACK, KANSASJEFF SESSIONS, ALABAMAMIKE CRAPo, IdahoLINCOLN CHAFEE, Rhode Island

CHRISTOPHER FRENZE, Executive Director

ROBERT KELEHER, Chief MacroeconomistPATRICIA RUGGLES, Minority Staff Director

(ii)

CONTENTS

Opening Statement of Member

Representative Jim Saxton, Chairman ..... .............. 1Senator Jack Reed, Vice Chairman ..... ............... 2

Witness

Statement of the Honorable Alan Greenspan, Chairman, Board ofGovernors of the Federal Reserve System .... ......... 3

Submissions for the Record

Prepared Statement of Representative Jim Saxton, Chairman ... . 26Prepared Statement of Senator Jack Reed, Vice Chairman ..... 27Prepared Statement of the Honorable Alan Greenspan, Chairman, Board

of Governors of the Federal Reserve System .... ........ 28

(iii)

ECONOMIC OUTLOOKWednesday, November 13, 2002

CONGRESS OF THE UNITED STATES,JOINT ECONOMIC COMMITTEE,

WASHINGTON, D. C.

The Committee met, pursuant to notice, at 10:04 a.m., in Room 311,Cannon House Office Building, the Honorable Jim Saxton, Chairman ofthe Committee, presiding.

Present: Representatives Saxton, Dunn, Stark, Hill, Watt, andMaloney; Senators Reed, Bingaman, Sarbanes, and Corzine.

Staff Present: Chris Frenze, Robert Keleher, Colleen J. Healy, BrianHigginbotham, Pat Ruggles, Chad Stone, Daphne Clones-Federing,Matthew Salomon, Donald Marron, Jeff Wrase, and Dianne Preece.

OPENING STATEMENT OFREPRESENTATIVE JIM SAXTON, CHAIRMAN

Representative Saxton. Good morning. I am pleased to welcomeChairman Greenspan before the Joint Economic Committee (JEC) thismorning to testify on the economic outlook. According to a recentCommerce Department release, the economy grew at 3.1 percent in thethird quarter of 2002. Consumer spending accounted for much of thisperformance, though there was a pickup in the rate of investment inequipment and software, its largest since 2000. Overall, however,investment has been quite weak during this expansion. The growth rateof the economy during the first three quarters of 2002 was about 3percent.

Consumer spending explains much of the result while realnonresidential fixed investment actually fell in the first two quarters of theyear, finally eking out a small gain in the third quarter.

In 2002, personal income trended upward and productivity growthhas been very strong. Inflation and interest rates remain low, and newhome sales have been strong.

In summary, the economy has expanded at a moderate rate so far thisyear. However, manufacturing activity, which has improved for severalmonths, recently has shown signs of slippage. Overall, payrollemployment growth has been soft as employers wait for signs of a fastereconomy. There is concern that most recently available data may signala slowing of the economy. Furthermore, the uncertainties involved in thewar against terrorism and the international security situation imposeadditional costs on the economy. While the resilience of the Americanpeople and the economy has been remarkable, security costs have exacteda toll on the economic growth.

Given the absence of evidence of inflation currently or in theforeseeable future, the Federal Reserve action last week to reduce thefederal funds rate by a half a percentage point to 1-1/4 percent wasappropriate. However, a relaxation of monetary policy alone may not besufficient to ensure sustained economic expansion. Given the persistentweakness in investment, it would be prudent to consider further changes

2

in tax policy to offset economic uncertainty and improve the prospects forinvestment growth.

Chairman, thank you for being here. Before we hear from you, wewould like to hear from our Vice Chairman, the gentleman, Senator Reed.[The prepared statement of Chairman Saxton appears in the Submissionsfor the Record on page 26.]

OPENING STATEMENT OFSENATOR JACK REED, VICE CHAIRMAN

Senator Reed. Thank you very much, Mr. Chairman. It is a pleasureto welcome Chairman Greenspan this morning.

Last week, the Federal Open Market Committee (FOMC) surprisedus not by the fact that they lowered interest rates, but by how much theylowered them. That the Fed took such decisive action confirms whatmany of us have been saying for some time: the economy is in a slump,growth is too slow, too many people are out of work, and things don'tseem to be getting better on their own.

I don't know if the Fed's actions will be enough to turn the economyaround; I certainly hope they will be for the sake of the American people.But the way things are going now, it looks as if we are headed for ajobless recovery like the one we had after the last recession when theunemployment rate kept rising long after the recession was technicallyover. Under those circumstances, I think it would be unconscionable ifwe let the extended unemployment benefits program expire at the end ofthe year, as it is now scheduled to do.

So, whatever else we think might be necessary to help the economyrecover, I hope we can begin by making sure that people who exhausttheir regular unemployment benefits in a tough job market are not left outin the cold.

I know Chairman Greenspan's job is to conduct monetary policy, butmonetary policy doesn't operate in a vacuum. Sound fiscal policies, likethose we pursued in the 1990s, complement monetary policy in creatingan environment of attractive interest rates that stimulate investment andproductivity growth.

In contrast, large budget deficits, like those we experienced from theearly 1980s to the early 1990s, are a drain on national savings that isharmful to long-term growth.

I am afraid that the fiscal discipline of the 1990s is a fading memory,and that we are heading for a repeat of the fiscal mistakes of the 1980s.The 1980s tax cuts were a mistake at the time, but similar policies wouldbe even more of a mistake today. At least in the 1980s, the pressures onthe budget from the retirement of the baby boom generation were off inthe distant future and there was time to restore fiscal discipline. Thistime, however, the biggest tax cuts will be kicking in at just about thesame time that the baby boom starts retiring.

I hope that in addition to discussing his views on the economicoutlook, Chairman Greenspan will spend some time talking about how the

3

choices we make in the coming year about taxes and other fiscal prioritieswill affect that outlook.

Mr. Chairman, I look forward to your testimony.[The prepared statement of Senator Jack Reed, Vice Chairman, appear inthe Submissions for the Record on page 27.]

Representative Saxton. Thank you very much, Senator Reed.We again, Mr. Chairman, appreciate you being here with us again.

We, Members of this Committee, continue to focus on the economy andhave watched with interest a Fed monetary policy as it has worked toensure continued economic growth without inflation, and we are verypleased to have seen the results of your leadership in this regard. So, weare ready and anxious to hear your remarks this morning, and so at thispoint, the floor is yours, sir. Thank you for being here.

OPENING STATEMENT OF THEHONORABLE ALAN GREENSPAN, CHAIRMAN,

BOARD OF GOVERNORS OF THEFEDERAL RESERVE SYSTEM

Mr. Greenspan. Thank you very much, Mr. Chairman, andMembers of the Committee.

The past year has been both a difficult and a remarkable one for theUnited States economy. A year ago, we were struggling to understand thepotential economic consequences of the events of September 11. At thattime, it was unclear how households and businesses would react to thisunprecedented shock as well as to the declines in equity markets andcutbacks in investment spending that had already been underway.Economic forecasts were lowered sharply, and analysts feared that eventhese downward revised projections might be undone by a significantretrenchment in aggregate demand. The American economy, however,proved to be remarkably resilient. In the event, real GDP over the pastfour quarters grew three percent, a very respectable pace given the blowsthat the economy endured.

Although economic growth was relatively well-maintained over thepast year, several forces have continued to weigh on the economy: thelengthy adjustment of capital spending, the fallout from the revelations ofcorporate malfeasance, the further decline in equity values, andheightened geopolitical risks.

Over the last few months, these forces have taken their toll onactivity, and evidence has accumulated that the economy has hit a softpatch. Households have become more cautious in their purchases, whilebusiness spending has yet to show any substantial vigor. In financialmarkets, risk spreads in both investment-grade and non-investment-gradesecurities have widened. It was in this context that the Federal OpenMarket Committee further reduced our target federal funds rate last week.

The consumer until recently has been the driving force of thisexpansion. Faced with falling equity prices, uncertainty about futureemployment prospects, and the emergence of the terrorist threats,

4

consumer spending has slowed over the course of the past year, but hasnot yet slumped as some had earlier feared it might. Tax cuts andextended unemployment insurance provided a timely boost to disposableincome, and the deep discounts offered by many businesses on theirproducts were most supportive.

In particular, automotive manufacturers responded to the events ofSeptember 11 with cut-rate financing and generous rebates. Theseincentives were an enormous success in supporting, indeed increasing, thedemand for new cars and trucks. Sales surged each time the incentivepackages were sweetened, and, of course, fell back a bit when theyexpired. Some decline in sales was to be expected in recent months afterthe extraordinary run-up recorded in the summer. However, it will bearwatching to see whether this most recent softening is a payback forborrowed earlier strength in sales or whether it represents someweakening in the underlying pace of demand.

Stimulated by mortgage interest rates that are at lows not seen indecades, home sales and housing starts have remained strong. Moreover,the underlying demand for new housing units has received support froman expanding population, in part resulting from high levels ofimmigration.

Besides sustaining the demand for new construction, mortgagemarkets have also been a powerful stabilizing force over the past twoyears of economic distress by facilitating the extraction of some of theequity that homeowners have built up over the years. This effect occursthrough three channels: the turnover of the housing stock, home equityloans, and cashouts associated with the refinancing of existing mortgages.

Sales of existing homes have been the major source of extraction ofequity. Because the buyer of an existing home almost invariably takesout a mortgage that exceeds the loan cancelled by the seller, the net debton that home rises by the amount of the difference. And, not surprisingly,the increase in net debt tends to approximate the seller's realized capitalgain on the sale. That realized gain is financed essentially by themortgage extension to the home buyer, and the proceeds, in turn, are usedto finance some combination of a down payment on a newly purchasedhome, a reduction of other household debt, or purchases of goods andservices or other assets.

Home equity loans and funds from cashouts are generally extractionsof unrealized capital gains. Cashouts, as you know, reflect the additionaldebt incurred when refinancings in excess of the remaining balance on theoriginal loan are taken in cash.

According to survey data, roughly half of equity extractions areallocated for the combination of personal consumption expenditures andoutlays on home modernization. These data and some preliminaryeconometric results suggest that a dollar of equity extracted from housinghas a more powerful effect on consumer spending than does a dollarchange in the value of common stocks. Of course, the net decline in themarket value of stocks has greatly exceeded the additions to capital gainson homes over the past two years. So, despite the greater apparent

5

sensitivity of consumption to capital gains on homes, the net effect of allchanges in household wealth on consumer spending since early 2000 hasbeen negative. Indeed, the recent softness in consumption suggests thatthis net wealth erosion has continued to weigh on household spending.

That said, it is important to recognize that the extraction of equityfrom homes has been a significant support to consumption during a periodwhen other asset prices were declining sharply. Were it not for thisphenomenon, economic activity would have been notably weaker in thewake of the decline in the value of household financial assets.

In the business sector, there has been few signs of any appreciablevigor. Uncertainty about the economic outlook and heightenedgeopolitical risks have made companies reluctant to expand theiroperations, hire workers, or buy new equipment. Executives consistentlyreport that in today's intensely competitive global marketplace, it is nolonger feasible to raise prices in order to improve profitability.

There are many alternatives for most products, and with technologydriving down the costs of acquiring information, buyers today can and doeasily shift to a lower-priced seller. In such a setting, firms must focus onthe cost side of their operations if they are to generate greater returns totheir shareholders. Negotiations with their suppliers are aimed atreducing the costs of materials and services. Some companies have alsoeschewed the traditional annual pay increment in favor of compensationpackages for their rank-and-file workers that are linked to individualperformance goals. And, most important, businesses have revamped theiroperations to achieve substantial reduction in costs.

On a consolidated basis for the corporate sector as a whole, loweredcosts are generally associated with increased output per hour. Much ofthe recent report of improvements in cost control doubtless have reflectedthe paring of so-called "fat" in corporate operations, fat that accumulatedduring the long expansion of the 1990s when management focusedattention primarily on the perceived profitability of expansion and less onthe increments to profitability that derived from cost savings. Managers,now refocused, are pressing hard to identify and eliminate thoseredundant or nonessential activities that accumulated in the boom years.

With margins under pressure, businesses have also been reallocatingtheir capital so as to use it more productively. Moreover, for equipmentwith active secondary markets, such as computers and networking gear,productivity may also have been boosted by reallocation to firms thatcould use the equipment more efficiently. For example, healthy firmsreportedly have been buying equipment from failed dot-coms.

Businesses may also have managed to eke out increases in output perhour by employing their existing workforce more intensively. Unlikecutting fat, which permanently elevates the levels of productivity, thesegains in output per hour are often temporary as more demandingworkloads eventually begin to tax workers and impede efficiency.

But the impressive performance of productivity also appears tosupport the view that the step-up in the pace of structural productivitygrowth that occurred in the latter part of the 1990s has not as yet faltered.

6

Indeed, the high growth of productivity during the past year merelyextends recent experience. Over the past seven years, output per hour hasbeen growing at an annual rate of more than 2-1/2 percent on averagecompared with a rate of roughly 1-1/2 percent during the preceding twodecades. Although we cannot know with certainty until the books areclosed, the growth of productivity since 1995 appears to be among thelargest in decades.

Arguably, the pickup in productivity growth since 1995 reflectslargely the ongoing incorporation of innovations in computing andcommunications technologies into the capital stock and businesspractices. Indeed, the transition to the higher permanent level ofproductivity associated with these innovations is likely not yet completed.Once the current level of risk recedes, businesses will no doubt move toexploit the profitable investment opportunities made possible by theongoing advances in technology.

However, history does raise some warning flags concerning thelength of time that productivity growth remains elevated. Gains inproductivity remained quite rapid for years after the innovations thatfollowed the surge in inventions a century ago. But in other episodes, theperiod of elevated growth of productivity was shorter. Regrettably,examples are too few to generalize. Hence, policymakers have nosubstitute for continued close surveillance ofthe evolution of productivityduring this current period of significant innovation.

In summary, Mr. Chairman, as we noted last week, the Federal OpenMarket Committee continues to believe that an accommodative stance ofmonetary policy coupled with still robust underlying growth inproductivity, is providing important ongoing support to economicactivity. However, incoming economic data have tended to confirm thatgreater uncertainty, in part, attributable to heightened geopolitical risks,is currently inhibiting spending, production, and employment. Inflationand inflation expectations remain contained.

In these circumstances, the Committee believed that the actions takenlast week to ease monetary policy should prove helpful as the economyworks its way through its current soft spot.

Thank you, Mr. Chairman. I look forward to your questions andthose of the Committee.[The prepared statement of Chairman Greenspan appears in theSubmissions for the Record on page 28.]

Representative Saxton. Mr. Chairman, thank you very much forthat very insightful statement. I have some questions that have to do withyour statement, but let me start on a slightly different note - it is apositive note, actually. Mr. Chairman, when you became chairman backin the late 1 980s, inflation was average or was running around 4 percent.Of course, it never remains constant. It was up and down. But basically,the trend was in the 4 percent range. And we have a chart to your rightand our left which shows the inflation trend during the years that youhave been chairman. And I just wanted to point this out, becausesometimes these kinds of things escape the public.

7

We see that that line indicating the rate of inflation droppedsignificantly from the late 1980s until, of course, today, when it is downunder 2 percent. I would just like to say for the record and for whoevermay be watching or listening, that this was not an accident; this waslargely a result of Fed policy. And, as a former realtor, in keepingcompany with some of my real estate friends, I would notice that whenthere would be a short-term tightening of monetary policy by the Fed, Iwould hear grumbles from various parts of the community. But today Idon't hear grumbles.

I hear people commending Fed policy for creating a situation inwhich we can have low, long-term rates. And that is, at least in my view,primarily because of Fed policy and driving inflation, to a large extent,out of the economy. And I would just like to point that out for the recordthis morning. And if you want to comment on it later, that is fine.

Mr. Greenspan. Mr. Chairman, may I amend that for a moment? Ijust want to point out that a major change occurred with ChairmanVolcker and his colleagues starting in 1979 which came to grips withwhat was a dangerously expanding inflationary environment. And thereally difficult work that occurred to suppress those imbalances occurredunder my predecessor and his colleagues. What we did is hopefully tryto reinforce it and cement it. And I think that the period going backessentially to the 1979 episode where there was a fundamental change inthe way monetary policy was handled, it indicated that the process issomething we are increasingly aware of and adjusting to. But to fail togive credit to those in the Federal Reserve who were really on the firingline before I showed up on the scene, I think is not to fully understand therecord.

Representative Saxton. I agree with you totally. And that chartpoints out very clearly that it was in the early 1 980s that this trend began.But I think it important that everyone on the Committee and othersunderstand that long-term interest rates to a large degree depend on a lowrate of inflation.

I started in the real estate business in 1966. Mortgage rates were sixpercent. And today, I don't know what they are this week, but I believethey are a little bit under six percent. And that is a great thing forhomeowners. Of course, the housing industry has been a large driver, ifyou will, of the economy, particularly this year. And, in my view, it is inlarge part because of low interest rates, as a result of low inflation, as aresult of Fed policy over the last couple of decades.

Mr. Greenspan. Well, we thank you in any event, sir.Representative Saxton. Mr. Chairman, in your statement, you

talked about the current softening in the economy. We had average GDPgrowth of about three percent during the first three quarters of the year,and the projected GDP growth for the fourth quarter is about half that, alittle bit better than half that, 1.6 percent. And the question arises as towhether this is a result of some underlying economic problems, or if it isa temporary phenomenon brought about as a result of previous consumerpurchases which may have been robust to the point where people

8

purchased earlier what they might have purchased in this quarter and asa result of perhaps some cash resulting from refinancing of homes,resales, et cetera. I think this is an extremely important point. I believethat we have projections next year of more robust growth than 1.6 percentas a result of various surveys. And it seems to be the general thoughtprocess, anyway. Can you expand on the temporary nature as opposed tothe permanent nature of this downturn that we are experiencing in thefourth quarter of the year?

Mr. Greenspan. Mr. Chairman, as I point out in my writtentestimony, our best judgment is that we are going through a soft patch thatis not something which is a precursor of far more significant weakening.The reason for it, as best we can judge, is a combination of the aftereffects and still marginally important issues of the decline in stock prices,but increasingly the fallout from corporate governance malfeasanceproblems, and of course most recently and perhaps most importantly, thegeopolitical risks surrounding the negotiations with Iraq.

The economy as such is not evidently significantly out of balance.That is, we do not have excess inventories. We do not have, as best wecan judge, a debilitatingly large overhang of capital stock fromoverbuilding of plant and equipment. We don't have the usual internalweaknesses that presage an economy going down in a cumulative manner.What we do have is a very large degree of uncertainty both as aconsequence of corporate governance and as a consequence ofgeopolitical risks, and they are creating some significant hesitation,mainly in the business sector, but presumably at least in part amongstconsumers as well.

Our judgment is when this uncertainty is lifted, when this riskpremium essentially is restored to normal, as it will be, that the numberof the activities which are basically built in to the type of market economythat we have will take force and begin to increase the rate of growth. Andwhile I obviously cannot speak for other forecasters around the country,you are quite right that the general consensus is for a gradual pick-up inthe rate of growth next year. That, I suspect, pretty much rests onpresumption that that overhang of uncertainty is lifted.

Representative Saxton. Thank you, Mr. Chairman. Last week,there was some surprise, as you know, with the 50 basis point ratereduction. The widely anticipated amount would have been about halfthat. Can you elaborate on why the 50 basis point reduction rather thanwhat we may have expected?

Mr. Greenspan. As I think I mentioned to this Committee before,in evaluating monetary policy it is important to recognize that we veryoften, in trying to evaluate alternate policies, ask ourselves the question:what are the consequences if we take policy A and we are wrong relativeto being wrong on taking policy B?

In the current period, what we are observing is a gradual erosion ofeconomic activity which occurred sometime in the summer. Remember,most of the GDP growth in the third quarter is largely from sharpincreases in July, and in some cases, early August. But it has been

9

softening since then. Our best judgment, and indeed, the data to dateconfirmed that this is a gradual, not a cumulative decline. But there is aprobability, small as it may be, that we may be wrong, that this may bethe beginning of something more than appears most likely. And becausethe probability of the emergence of inflationary pressures now seems soremote that the insurance premium, if I may put it that way, for goingdown 50 basis points - which would be the right policy, if, indeed we arewrong in our expectation that we are going through a soft patch whichwill unwind very quickly - if we are wrong on that, then the 50 basispoints was the right policy. If we turn out to be right on that, as weexpect we will on the outlook, then clearly we will reverse the policy atsome point in the future, because you cannot stay at one and a quarterfederal funds rate indefinitely without ultimately engendering inflationarypressures.

But all of the evidence that we have on the question of pricing powerin this economy suggests that there is very little evidence that anypressures will reemerge in a timeframe which is too short for us torespond sufficiently adequately to fend it off.

So, it was our conclusion that even though the expectation of asignificant decline is - I should say, the probability of a significantacceleration is quite small, the cost of taking out insurance against it wasso low that it, in effect, tilted the decision to 50 basis points.

Representative Saxton. Thank you very much. Let me explore justone other subject. We talked about inflation earlier. The subject ofdeflation has become a topic of conversation recently. I have a two-partquestion. The first part is, very simply, do you see deflation as a dangerin the near or in any term? And secondly, should the Fed find itself in anenvironment where interest rates are very low, perhaps near zero, andcannot be lowered when an easier policy is called for, what alternativepolicy tools or guides is the Fed prepared to use?

Mr. Greenspan. Mr. Chairman, our view is that we are quite a fardistance from deflationary forces taking hold. We have been looking atthis process for quite a long period of time. In fact, we even had seminarsseveral years ago examining the various possibilities of what seemed mostinconceivable to us in the early postwar period; namely, that with a fiatmoney system, you could engender a deflationary environment. But wehave seen that that is clearly possible, and we have examined it in someconsiderable detail, both with respect to Japan, the results of which weissued as a public analysis, and obviously looked at it in fairlyconsiderable detail with respect to the United States.

Theoretically, clearly it is a concern, and indeed, we are watching itabout as closely as we can because there is an asymmetry between theimpact of inflation and deflation, and it is somewhat easier to containinflation than to contain deflation, and our view is that price stability isthe optimum position, as I have mentioned to you before.

So, yes, we are looking at it. Our conclusion is that we are not closeto a deflationary cliff. If we ever get to that point, remember, we are notlimited with respect to purchasing only the assets which affect the

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overnight federal funds rate. We, in the past, have engaged in purchasingassets all along the maturity spectrum of the yield curve. And, indeed,during World War II and until the accord with the Treasury in 1951, theFederal Reserve essentially pegged the long end of the Treasury market,accumulating at some points some very significant amounts of Treasuryissues.

So if we ever got to the point - and I must say to you I find itextraordinarily remote that that will happen - and we got to the pointwhere we could no longer lower the target federal funds rate, we could,nonetheless, increase the liquidity of the system by moving out on thematurity schedule as far out as we wanted, and as a consequence there isvirtually no meaningful limit to what we could inject into the system werethat necessary. But let me reemphasize. This is an academic exercise andacademic evaluation. We have seen no evidence at this point that we areclose to a dangerous point with respect to deflation, but we are veryconsciously aware that we cannot allow that to creep up on us unseen, sowe put a lot of resources in examining and reevaluating this conclusionall the time.

Representative Saxton. Another, perhaps, way of saying that wouldbe that we have established this level of inflation at or slightly below 2percent, and there is no evidence that it is either going to increase ordecrease any time soon.

Mr. Greenspan. I think that is an excellent summary, Mr. Chairman.Representative Saxton. Thank you.At this point I would like to turn to Senator Reed for whatever

questions he may have.Senator Reed. Thank you very much, Mr. Chairman. And thank

you, Chairman Greenspan, for your always thoughtful testimony.In the 1 990s, you were the staunchest advocate for fiscal discipline,

reminding us that the relationship between a growing budget deficit andadverse impact on investment, national savings, and ultimately economicgrowth. But has anything in your thinking changed about thatrelationship?

Mr. Greenspan. It has not, Senator.Senator Reed. One of the issues that I raised with respect to my

statement was the impending baby boom retirement dilemma. And withsome of the tax cuts that have already been passed, it seems to me wehave weakened our ability to respond to that predictable and inevitablechallenge. Some of the numbers that have been generated by theDemocratic staff of this Committee suggest, for example, that if wesimply took half of the revenue lost by making permanent last year's taxcuts over the next 75 years, we could cover all the shortfalls in SocialSecurity system based upon the demographic challenge. Do you think weare in a vulnerable position to deal with this baby boom crisis as itapproaches?

Mr. Greenspan. Senator, as I have testified before other Committeesof the Congress recently, my view is that with the Federal Government

I1

commitments becoming increasingly longer term, and involved in eithervarious different types of entitlement programs or long-term taxprograms, our focus of necessity must be extended. There are very fewthings that anyone can forecast with a degree of certainty out 8, 9, 10years.

The one we can is that the ratio of retirees to workers is going to risequite materially and have a very significant impact on the federal budgetprocess in the year 2010 and beyond. I think it is essential that weconstruct a fiscal policy structure; that we have in place an ongoing,continuous evaluation of what the budget will look like as the years goon, fully recognizing how difficult forecasting is.

But it is essential to get a sense of where the long-term is going, andas a consequence of that, as I have said many times in the past, we oughtto have much more in the way of sunsetting of legislation, reallyautomatically reviewing legislation to see whether it is fitting into variouspriorities which the Congress and the administration have set out over thelonger term. And, indeed, it is those priorities which will determine whatthose economic revenue resources are employed for.

But once you have done that, once you have got a system in placewhich, say, has methods of reevaluation through sunsetting or triggeringdevices which create changes in the path of either an entitlement programor tax programs, owing to some contingency that might or might notarise, unless you do that, you do not have a focus on what the longer-termfiscal outlook is.

And, as best I can judge, we should get back to our discretionary capsand PAYGO rules and a structure which, even though I thought wasunlikely to be effective years ago, has been. It is really quite impressivehow well Congress' approach to the very large budget deficits in previousdecades were finally addressed. And, indeed, it wasn't until we gotsurpluses that the system broke down.

I think it is essential that we restore the positions that we hadpreviously. And the reason I think this is terribly important is that unlesswe know where we are going and answer questions with respect to taxes,expenditures of various different forms for short-term stimulus - andindeed, we may need short-term stimulus at some point - we have nosense of what the implications of those actions are over the long term.

What I hope we do not do is engage in actions which, in retrospect,we could have avoided if we thought through the consequences of whatit would be doing to the budget.

So I am merely suggesting that it is the process which needs to besignificantly improved. And I don't think it takes very much time. All ofthe data are readily available. Congress could construct a 12-year forecastof the outlook and set in place numerous mechanisms to adjust it if it isgoing wrong, I would say within two weeks. It is not a project thatrequires effort. It requires decisions. But the data that are required tomake those decisions are readily available. And unless and until that isdone, in my judgment, it is very difficult to answer questions about whatform of stimulus, if you chose to do that, would be the most appropriate,

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because it is important to know what the long-term implications of allthose actions are.

Senator Reed. Mr. Chairman, from your response, you suggest thatone of the saving graces in the last two years has not only been the budgetrules, but fixed terms for tax proposals or for entitlement proposals. Andit seems that the proposal now to make these tax cuts permanent flies inthe face of those sunset provisions you lauded. Is that your view?

Mr. Greenspan. No, not necessarily. Indeed, I would suspect withrespect to the question of the permanence of the most recent tax cuts, Ithink the markets are assuming that they are permanent, largely becausethey don't believe it is credible that when the deadline approaches that theCongress will not reenact the levels. So, that is not an issue as far as I amconcerned. I know that there is a presumption that if you make those taxcuts permanent, it will add stimulus to the economy. I doubt it. I thinkthat the market has already presumed that they are permanent, and theonly thing that probably could have a negative effect later on is when themarkets find out they may be wrong. But that is not a short-term issue.

Senator Reed. What are the markets assuming about SocialSecurity?

Mr. Greenspan. That we don't have a policy. That something willhave to happen at some point. And, I guess if there is such a thing as amarket that is viewing these things, it hopes for the best.

Senator Reed. Let me turn to another aspect of the proposedpermanency of the tax cut. It seems to me that as a way to stimulateconsumption, it is not the most appropriate response since most of thebenefits are heavily weighted to the very wealthiest Americans. And Ithink, just in terms of sheer numbers, there are more low-incomeAmericans that will consume and they won't benefit from the next roundof tax cuts. And if the theory is to stimulate the investment by increasingnational savings, then you run into the dilemma of the deficit which willbe engendered by the tax cuts.

So in terms of a policy to get the economy going, it seems to fail onboth not being particularly tuned in to consumption nor particularlyrespectful of long-term national savings and investment.

Mr. Greenspan. Well, Senator, I don't want to get involved in theindividual items of policy with respect to potential stimulus. But let mejust make one point. Some of the work that we have been doing suggeststhat the swings in consumption in the upper quintile of Americanhouseholds is really quite a significantly important element within theaggregate total of personal consumption expenditures.

So the general view that there is not significant spending up there,and that therefore you don't get the stimulus, I am not sure is accurate.We are not exactly sure that our data are correct, but it certainly is movingin that direction.

Senator Reed. Well, that would depend, I think, - the presumptionis that the marginal propensity to consume is inversely related to income.Is that presumption being undercut?

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Mr. Greenspan. Well, the marginal propensity to consume hasalways been thought to be very much higher in the lower income groupsthan in the upper income groups, and I think that is correct, but I have asuspicion that the differences are much less. In short, remember, we arenot talking about the average consumption; we are talking about themarginal consumption. And there is even a hypotheses which somepeople have that it may be close to a constant. I don't think that, but Idon't think that it is a very significantly larger - it is not a huge difference.

Senator Reed. Let me turn to one final point, Mr. Chairman. Thatis, in the November meeting, not only did you cut rates, but you alsoreverted to a neutral bias which I understand assumes that there is anequal likelihood of a pickup in inflation or a slowdown in GDP growth.And that - which raises the possibility at least of an additional rate cut.But then in your response to the Chairman, you suggested that you seethese, the overnight rates going up eventually. Can you help explain?

Mr. Greenspan. Well, remember that balance of risks is essentiallythe judgment of where the economy is going, where its balance of risksis in the context of monetary policy. Because remember, we stipulatedthat with respect to our goals of policy. The way we view that - and Imust say it is how I view it, because remember, there are other membersof the FOMC who are voting on this, but they don't all say why they arevoting so I cannot really tell - but basically, our view is that theeconomy's most likely projection is to come out of this soft spot and tostart accelerating. In the context of the intermediate period, we view thatthe risks are balanced, especially because we have moved the funds ratedown significantly. So all we are basically saying is that the barrier tolowering it further is higher, but it does not mean that should economicevents emerge that require us to move it, we will not be inhibited byjudgments that we made about the balance at an earlier period.

Senator Reed. Thank you very much, Mr. Chairman. Thank you.Representative Saxton. Thank you.Senator Bingaman.Senator Bingaman. Thank you very much.Thank you, Mr. Chairman, for your testimony. As I understand your

answer to the last few questions, you believe that it may be necessary toengage in some type of short-term stimulus at some point, but not at thispoint. Is that accurate?

Mr. Greenspan. I am in the process of thinking about that, and Icannot say to you, Senator, that I have come to a firm conclusion. It is thecase that while the economy is softening or stagnant, if you want to putit that way, there is no evidence, at least up to the moment, that it isaccelerating on the down side. Indeed, the longer we go through a periodof just sort of sluggishness, the closer we get to the risk premiumsbeginning to fall, and investment beginning to rise.

So, if I were to assume that the outlook is exactly what the mostprobable path is, then I would say no additional stimulus is necessary.But then you get to the question of, what happens if you are wrong? And

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it is that type of problem which I am trying to confront, and I don't reallyhave a judgment at this stage which I feel comfortable with.

Senator Bingaman. Well, in order to guard against that risk, you -the Federal Reserve lowered- interest rates a full half-point in order, asI understand your earlier testimony, partly in order to guard against therisk that the upturn that you expect will not be there as expected. Wouldit make sense for the Congress and the administration to be going forwardwith a stimulus package on the same theory, that is, that we - in order tobe safe, we ought to put more stimulus into the economy?

Mr. Greenspan. It would be if you could make the statement thatthe costs of that program were as deminimus as it is in monetary policy,because we can reverse and we don't see any real significant dangers ofinflationary pressures emerging. The reason I would like to see astructure for the federal budget in place and agreed upon by both theadministration and the Congress as a pattern of where we are going is Ithink it would enable us to answer that question far more efficiently withrespect to fiscal policy as I think we can do with respect to monetarypolicy.

In other words, we believe that we can be significantly ahead of thecurve in any inflationary set of pressures that might emerge, and thereforewe can readily reverse and contain any negative effects from stimuluspolicy that we put in place. Until you have a longer-term framework forfiscal policy, I am not sure you can make that judgment either way. Anduntil that you are capable of making the judgment of what is the premiumcost of the insurance, then I think it is difficult to make a judgment as towhether to buy that insurance.

Senator Bingaman. I also understood you to say that if wedetermine a set of stimulus proposals are appropriate, that making the taxcut permanent is not a significant part of stimulating the economy in theshort term, as you see it.

Mr. Greenspan. That would be my judgment, Senator.Senator Bingaman. Let me ask about the current account deficit.

As I understand the statistics now, our current account deficit is larger asa share of our gross domestic product than it has ever been. Is that acause for concern? Is that a factor that you consider in establishingmonetary policy or that we should consider in trying to pass provisionsrelative to fiscal policy?

Mr. Greenspan. Senator, the reason for this chronic and growingchronic deficit is that our propensity to import goods and services relativeto our income is much higher than those of our trading partners. And soif the world economy is such that everyone would be growing at the samerate in their gross domestic product, we would have an ever-increasingshare of imports relative to others. In other words, the ratio of imports toGDP in the United States would be continuously rising where it probablywouldn't be rising as much in other countries.

That means that our exports would fall short relative to our imports,and it has, and continuously increased the current account deficit. In

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short, the rise in GDP abroad induces less exports from the United Statesthan the increases in the GDP in the United States induces imports fromabroad. And that has been going on, as best we can judge, for decades.The differential propensity to import has narrowed some, but not enoughto prevent this from continuing.

I have argued for a very long period of time that this cannot go on.It cannot go on because clearly as our current account deficit continues,the net debt to foreigners of necessity rises and the servicing costs of thatdebt rises. And without getting into the arithmetic of what the problemsare, it becomes an ultimately unsustainable process. So it has to give atsome point.

I have been arguing for years that it cannot go on and it will stop. Ithas continued, and the reason it has continued is that the investmentopportunities in the United States have continued to improve relative tothe rest of the world, so that what is occurring is a very massive flow ofinvestment funds into the United States. And indeed, when the dollar isrising, that is basically saying that the demand for dollars coming fromthe inflow from abroad for investment is greater than the so-called ex antedemand of importers to purchase foreign currencies to finance theirimports.

And indeed, during the period when our current account deficit wasrising very rapidly, it was also a period when the dollar wasstrengthening, which tells us that the current account deficit was risingbecause of the inflow of capital, meaning that the inflow of capital wasbasically creating a situation in which as the exchange rate rose, it wouldtend to create an ever-increasing capability of importing goods andservices relative to exports.

So it is a type of situation that we know cannot exist indefinitely. Weknow it most certainly relates to the issue of differential growth rates inthe economy.

My own guess is that it will eventually simmer down because ourpropensity to import will continue to decline and eventually match therest of the world, in which case it will bring the deficit down, but I havebeen wrong on this for years. I have been waiting. I am still waiting. Iexpect to be waiting five years from now.

Representative Saxton. Senator Bingaman, some of our other panelMembers have to leave, and so if we can, we probably have time for asecond round.

So, Mr. Hill.Representative Hill. Thank you, Mr. Chairman.Mr. Chairman, thank you for being here this morning. The debate in

Congress is somewhat centered on the importance of eliminating thedeficit. Back in the 1990s, you thought that eliminating the deficit interms of monetary policy was more important than cutting deficits.

You know, there are those who say that the debt is not a problem, thatthe proportion to the GDP - of the debt to the GDP is what is important.What is your view on the deficit? What is more important?

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Mr. Greenspan. Well, I do think that it is certainly the case that thedebt to the public has come down significantly as a share of the GDP, andthat clearly has been very helpful and probably an important factor inbringing down long-term interest rates.

But remember, we have very large contingent liabilities, somethingin the area of $10 trillion, more than $10 trillion, I expect. To a largeextent, the expectation that the payments already accrued to people in thework force for Social Security may not be paid, that is what contingentmeans.

Now, unless I am sitting on Mars, that makes no sense to me. Theprobability that more than a very small fraction of those contingentliabilities will not, in fact, have the same status of debt to the public seemsnoncredible to me, so that in looking at our overall fiscal situation, weshould be looking at not only the debt to the public, but the veryextraordinarily expanding contingent liabilities which the federalgovernment has been taking on in recent decades. And unless we factorthat into our view of how to handle our budget, I think we are missingwhat the basic, underlying economic forces are.

If they are truly contingent liabilities and are quite subject to revisionby the Congress, then indeed they should stay that way, but the vast,overwhelming proportion of those liabilities, in my judgment, are no lessreal than those of the debt issuance to the public currently.

So, as I indicated earlier to Senator Reed, I think it is important forour unified budget system, which is what we deal with in the Congressand we deal with in its impact directly on the economy, to have along-term structure to enable us to evaluate it. But I think increasinglywe are going to find that it is going to be very important to have aconsistent set of accounts which result from contingent liabilities arisingwhere the contingencies are truly in quotes.

Representative Hill. Well, let me be specific then, because we inCongress have to make decisions about the tax cuts versus the deficit.Should we delay the tax cuts that have not gone into effect yet for reasonsof making sure that we get control of the deficit?

Which is more important, controlling the deficit or delaying the taxcuts?

Mr. Greenspan. Well, first of all, I have stated my personal views.I believe to maintain sound fiscal policy, it is important to constrainoutlays, in which case you have a much lower-level of taxation, which Ithink is important for economic growth.

When you get to individual programs, as I have said previously, Ihappen to think that it is probably unwise to unwind the long-term tax cut,because I think it is already built into the economic system, and in sodoing, there are potential adverse consequences which I don't think aredesirable.

But having said that, we are dealing with a situation in whichCongress has got to look at all of the various elements within the budgetand make judgments of what the Congress' priorities are. There is no

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infinite amount of resources available, and the demands on budgetprocesses always exceed the resources available. There is no alternativeto making decisions with respect to individual priorities.

If you ask me as an individual citizen, as an economist, I will giveyou my views, but I don't have any votes in the Congress, which isprobably fortunate for the country. But these judgments have got to bemade.

The only thing I can emphasize is the fact of what the economicimpact of various different alternatives are likely to be over the longerrun. But within that framework, these are value judgments which mustbe made by the Congress acting for the American people. No one else,other than the administration and the Congress, has given that-

Representative Hill. Thank you, Mr. Chairman. I know SenatorSarbanes needs to get going.

Representative Saxton. The gentleman from Maryland, SenatorSarbanes.

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

I want to follow along on that very fine line of questioning thatCongressman Hill was just engaged in. In every previous recession, wehave repeatedly extended the unemployment insurance benefits. Now,you spoke a moment ago about constraining outlays, but what is yourview on extending unemployment insurance benefits when we are in aslow economic time and the job market is not picking up and people havebeen laid off? That is an immediate problem we face here.

Mr. Greenspan. Senator, the unemployment insurance system hasbeen fairly restrained and I think quite sensibly as a general policy, andthe reason basically is that economists and others do worry that if youhave too generous an unemployment system, you will tend to createlevels of unemployment that are higher than necessary and get numbersof people whose incentives to work will be reduced.

But when you get into a period where jobs are falling, then thearguments that people make about creating incentives not to work are nolonger valid and hence, I have always argued that in periods like this theeconomic restraints on the unemployment insurance system almost surelyought to be eased to recognize the fact that people are unemployedbecause they couldn't get a job not because they don't feel like working.

That is clearly the case now and is likely to be the case in theimmediate future.

Senator Sarbanes. Thank you. I have two or three questions. I willrun through them very quickly, because I would like to try to cover all ofthese issues. In your last appearance before the JEC in April, I submitteda question for the record concerning our international trade deficit andgrowing foreign indebtedness. I would like to quote from your responseand then ask a further question on this issue, and it follows along withwhat Senator Bingaman was asking just a short while ago.

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In your written response, you emphasize that private investors havebeen responsible for virtually all of the capital inflow that was increasingthe value of the dollar - this is back in April now - and you said it isdifficult to predict how long global investors will continue to place theirfunds disproportionately in U.S. assets.

"To this point, the United States has had little apparent difficulty inattracting funds from abroad. The fact that the foreign exchange value ofthe dollar has drifted higher on balance during the past few years suggeststhat incipient net private financial inflows are at least equal to the deficiton the current account. Private foreign purchases of U.S. securities alonehave either met or exceeded the entire current account deficit during thepast 3 years."

Now, as I look at the figures, it seems the situation has changed afteryour April response. In fact, in 2001, the balance on current account wasminus $393 billion, an incredible figure when you think about it. Only$5 billion was foreign official assets in the United States, net foreignofficial assets.

But in the second quarter of this year, foreign governments accountedfor $47 billion in net capital inflow, almost 40 percent of $123 billioncurrent account for the quarter. So there is, I think, a rather dramatic shiftthat took place since that last question was put to you and we had yourresponse.

Do you take a different view of the situation when foreigngovernments are intervening so extensively to support the dollar andeffectively suppressing their own currency, which seems to behappening? What is your take on this rather marked shift that hastranspired?

Mr. Greenspan. Well, I can't say more than to confirm yournumbers. That is correct, there has been a very significant accumulationon the part of reserve balances held in the United States for foreignofficial agencies.

I can't respond to the issue of the exchange rate because, as youknow, it is the general agreement within this government that only theSecretary of the Treasury can comment directly on the exchange rate andI would like to stay away from that issue except to confirm the fact thatnothing you have said I find at variance with the facts.

Senator Sarbanes. Some are commenting now that the Fed has goneso low on the interest rates that its ability to deal in the future with afurther softening economy, if that should happen, has been undercut orcurtailed or minimized. They draw an analogy with the Japanesesituation.

I would be interested in how you address that question. You are nowdown to 1.25 percent; and you know, we still have some room, but not alot of room. And what is your response to this current that is nowappearing in a fair amount of commentary, that the Fed is losing itscapability to address economic slowdown?

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Mr. Greenspan. Senator, we are far from that. I think that there isan implication in the notion that we are getting close to our capability thatwe are restricted solely to overnight finds, but our history as aninstitution indicates that there have been innumerable occasions when wehave moved out well beyond the short-term assets and invested quitesignificantly in longer-term U.S. treasuries.

As I recall, starting with the beginning of World War II, we at theFederal Reserve essentially contained long-term rates - in a sense peggedthem at 2.5 percent. Indeed, for all maturities over 25 years, we werepegging rates at 2.5 percent, and on certain conditions, especially rightafter World War II, we accumulated long-term Treasuries in very largerelative quantities. So we do have the capability, if we were required todo so, to go well beyond any activities related solely to overnight rates.

Now, that would be a material change in policy, and it is notsomething we would do without very considerable deliberation. But thenotion that we are somehow statutorily or otherwise restricted is clearlyincorrect, and we do have quite significant capabilities to do a lot morethan is implied by the 1.25 federal funds rate.

Senator Sarbanes. Mr. Chairman, what are we to make of the factthat the Europeans, the EU, which has a growth rate under the U.S.growth rate, but yet they are pegging their interest rates at a significantlyhigher level than the U.S. is doing?

And then, of course, you have this dysfunction almost. Shouldn'tthey be trying to move their economies up faster if we are going to get aworldwide movement in that direction? Of course, I haven't even broughtin the Japanese situation, the world's second largest economy and theeconomic stagnation which exists in Japan, but what is your take on theEuropean approach to this question?

Mr. Greenspan. Well, the legal mandate of the European CentralBank is different from ours, and their basic requirement is to maintain astable currency and low inflation. And as a consequence of that, theirtrade-offs and priorities are different from ours, and it is not self-evidentwhich of the two regimes is the most appropriate. I do think we are goingto learn in this period whether in fact their particular approach or ours isthe more appropriate one.

There is less difference, however, than I think appears on the surface,and there is certainly less difference in the general views of where theeconomies are moving. But it is true that there are actual differencescurrently in our postures, and there are arguments on both sides. Weobviously believe our arguments, or we would be doing the same thingthey are doing.

Senator Sarbanes. What do you think of this argument from a chiefeconomist of one of the Munich banks who says, all of the economicarguments are in favor of cutting rates today, speaking about the EuropeCentral Bank, that they will have to do it in the next month or two.

"Mr. Hufner and other critics said that in holding the line now, theEuropean banks seem motivated less by economical calculation than by

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the desire to avoid looking like a handmaiden of the Fed. It is never agood thing when the Fed cuts rates on a Wednesday and the ECB cutsthem on a Thursday, Mr. Hufner said. It gives them the image of a juniorpartner which they don't want to have."

What is your reaction to that?Mr. Greenspan. My reaction is, knowing my counterparts in the

ECB and in Europe generally, that is not a fair description of theirmotives or their attitudes. Indeed, we coordinate on many occasions. Wediffer, and I am not going to argue that we are right and they are wrong.

Look, their economy is almost as large as ours.Senator Sarbanes. That's right.Mr. Greenspan. And monetary policy is not an easy activity. There

is very considerable room for differences of opinion, but the presumptionthat their motives are that they don't want to be a handmaiden of theFederal Reserve strikes me as a bit ludicrous.

Senator Sarbanes. Thank you.Representative Saxton. Thank you, Senator Sarbanes. Good

question.Mr. Chairman, several Members here have talked - or have asked

about your take on unwinding the 2001 tax cuts. I just want to make surethat we are clear. Would you just state for the record in as clear a way asyou can where you stand as an economist on repealing the tax cuts thatwere passed last year?

Mr. Greenspan. Well, Mr. Chairman, as I indicated, because Ibelieve that the markets presume that the tax cuts are permanent and that,as a consequence, making them permanent would therefore have nostimulative effect on the economy, it is also the case that if you were torescind them, the markets would adjust negatively, in my judgment andI have not been in favor of doing that, as I indicated in past testimonybefore the Congress.

Representative Saxton. Thank you.Mr. Chairman, some months ago when you visited with us in a forum

similar to this, you described a period of economic growth to come in twophases, the first phase being generated or pushed forward by consumeractivity and the second phase then being pushed forward by investmentactivity. And you commented then that investment activity had not yetkicked in, and I suspect that the same situation - at least it appears to methat the same situation exists today.

What is it that government, either the Congress or the administration,can do or that the Fed can do to help stimulate investment activity?

Mr. Greenspan. As I indicated earlier, Mr. Chairman, myimpression is that the underlying long-term investment opportunities arein place, but they are being inhibited by very large uncertainties relativeto corporate governance first and then, more importantly, the geopoliticalrisks. When and if - or I should say - when those uncertainties areremoved, then the underlying incentives will be adequate with the

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existing degree of cash flow and profitability, in my judgment, toengender a marked improvement in capital investment.

There is very little that I can perceive that policy per se can do whichreally matters all that much to address the issues of geopolitical risks. Ithink that thanks to Senator Sarbanes and Congressman Oxley, we havegot a bill in place which is, I think, helpful, but with respect to thecorporate governance issue, that is going to take a while to work out. SoI am not sure what one does in this regard except to try to maintain theeconomy as best we can until these uncertainties are lifted, as they willbe.

Representative Saxton. Well, thank you.One of the other issues that I believe is having an effect on - negative

effect on the economy is the change in the so-called wealth effect. We'veobviously experienced a bear market; as a result, asset price declines haveoccurred, and those asset price declines can have an adverse impact onhouseholds and consumption and business and investment, as well as thepublic sector.

What are the key ways a bear market in stocks can effect theeconomy? In what sectors are the adverse effects, let us say, the mostprominent? And given the significance of these adverse effects, shouldthe Fed pay attention or respond to sharp asset price movements?

Mr. Greenspan. Well, Mr. Chairman, the effects on householdconsumption are reasonably well documented in the sense that what wefind when there are significant capital gains on stocks held by householdsis that they tend to spend a portion of those capital gains and hence, thepublished savings rate - which, remember, is savings excluding capitalgains as a ratio to income excluding capital gains - tends to fall.

In other words, I should put it this way: in addition to consumptionout of income, you have consumption out of capital gains, which isfinanced largely by borrowing.

Clearly, when stock prices or other asset prices fall, you get lessconsumption financed by capital gains, and it has a negative overallimpact on the economy and similarly, the impact of declining stock pricestends to affect long-term values in an economy and, hence, also impactson capital investment. We don't target asset prices per se, but what we doendeavor to respond to is the way asset prices affect the economy; andthat is the way in which monetary policy is impacted by changes in thestock market or in housing prices.

Representative Saxton. Thank you very much, Mr. Chairman.We are going to move now to Mr. Stark.Representative Stark. Thank you, Mr. Chairman.Thank you, Mr. Greenspan. I would like to just ask - I know you

don't like hypotheticals, but I have to ask anyway.As you know, we have a President who has somewhat of an

obsession, it appears, to plunge us into a war, and on the assumption thatwe will be there 1 or 2 years at $100-$130 billion a year in a conflict andperhaps another year or 2 policing it, 2 to 4 billion bucks a month by a

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variety of estimates. So let us say over 4 years we would spendsomewhere between $200 and $300 billion on a war effort in Iraq.

I have no concept of what that might or might not do to oil prices ifyou-

Mr. Greenspan. In fact, that is very significantly on-Representative Stark. What would that do to the economy? We

obviously would have to borrow, because they are not going to raisetaxes. What would you advise the President if he asked you what wouldthis - what effect would this have on our economy?

Representative Saxton. If I may break in for just one moment here,we have got a vote on, and since I am the only person from my side of theaisle here, I am going to have to go vote at some point here in the next 10minutes or so. So if we can-

Representative Stark. Fine.Mr. Greenspan. I will try to answer quickly.First of all, let me just say that the numbers you quote are clearly very

much on the high side of normal estimating procedures of what areasonable length of time of a war would create. Also it is important toremember that the actual level of defense expenditures as a percent of theGDP has come down very significantly through most of the post-WorldWar II period and especially, obviously, since Vietnam. So in that regard,there is a much larger private sector to absorb these particular costs.

Nonetheless, these are numbers - your numbers, if I put them thatway - that if it gets to that level, these are not de minimus, and I think wehave to address them accordingly.

I would be very doubtful if the impact on the economy is more thanmodest, largely because this is not Vietnam or Korea. With Korea, it hada really monumental effect, basically because the economy was so muchsmaller than it is today, and the size of the operations are not all that muchdifferent.

So it is a concern, but not an overriding one, Congressman.Representative Stark. Thank you.Representative Saxton. Thank you. Senator Corzine.Senator Corzine. Thank you, Mr. Chairman. And it is good to see

Chairman Greenspan. I apologize for being tardy.I guess I have a question that follows on what Chairman Saxton asked

about. You have repeated a number of times that the market alreadyexpects that tax cuts, or a market economy has built in these tax cuts, andthey will have whatever impact they have. What presumes, or has builtinto it, an assumption, or at least an unasked question, whether these arethe optimal tax cuts for stimulating the economy?

There may very well be a reasoned argument for freezing these andhaving other tax cuts if you thought fiscal policy needed to be part of themix of stimulating the economy. And then, second of all, isn't there alsobuilt into market and economic expectations that we have issues with howwe fund Social Security and our Medicare systems in the future, that are

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also weighing at some level, someplace in people's expectations, realproblems, that come and do some offsetting with regard to those tax cuts?

So on both of those issues I guess the simple question is, do we havethe optimal mix for stimulating the economy with regard to the tax cuts?

I could go through a whole checklist, and we don't have time, butdon't we also have the countervailing force that we have serious problemswith long-run fiscal considerations that weigh against some of thosestimulative effects of a tax cut?

Mr. Greenspan. Well, Senator, I agree with the substance of yourremarks, and indeed that is the reason why I said earlier that prior toaddressing any of these subjects, it is important for the Congress and theadministration to have a long-term budget structure which wecontinuously update and evaluate so that we have a mechanism to makejudgments as to whether we do have an optimal mix - optimal in thesense of either value judgments relative to priorities within the overallbudget choice process or with respect to the economy. Unless we havegot a way of knowing how we are going to phase into the almostinevitable rise in retirees as a ratio to workers, say 9, 10 years from now,I don't know how you answer these questions. You have no structureagainst which to make alternate evaluations.

Indeed, you may well be right: is the existing tax structure optimal inthe longer term for what we have to deal with? The answer is, I don'tknow if you can answer that question without getting what the otheralternative possibilities are. And I argued, I think, certainly before youcame in, Senator, that we have all the data. You could put together a full12-15-year budget with triggers, sunsetting, all of the mechanismsrequired to make sure it phases in and make fundamental judgments.

It is not that we are missing any information. It is that we are missingdeliberations and choices, and unless and until those are made and putinto a fiscal structure, I don't see how you can answer the question youraise, which is the reason I say, prior to addressing these things, that weneed to get the process back to where it was. We need to reestablish thebasic caps on discretionary spending, on PAYGO, introduce new thingslike triggers or other things which give us a vehicle to function with.

Senator Corzine. I could support everything you are saying, Mr.Chairman, but I think what people hear when it is singularly focused onwhether the tax cut is built into the expectations of the economy, to thedecision-making, that that sounds like - at least to some ears, that that isan endorsement of that, without taking into consideration all these otherissues that are operating at the same time.

Mr. Greenspan. Well, I am giving my judgment, as I indicatedpreviously. Fortunately, I don't have the vote that you do and theCongress does, because I am not sure the world would be better off, butthe issue here is that from what I know at this moment, all other thingsequal, I think it would be a mistake to do that.

But it is conceivable that a structure maybe in which you can literallysay, what are the alternatives, and indeed if we could do it some other

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way, is this superior? It is perfectly credible that I would say, yes, that isa superior procedure.

Senator Corzine. One 15-second question. I heard you mention,earlier, corporate accountability, some of the other issues that haveoverlaid confidence in the economy, certainly confidence in markets.You continue to believe that some of the confusion and implementationof the corporate accountability efforts is a concern to the economy and themarketplace in general?

Mr. Greenspan. I would say that-Senator Corzine. Starting with personnel, but the inability to get in

place some of the reforms that we have talked about because those thingsare predicative.

Mr. Greenspan. Actually, Senator, I don't think so. I think that asthe stock market came down and the bubble burst and the - as I put it -infectious greed automatically disappeared because there was nothing tobe greedy about, everything changed. I think we have gone to very majorimprovements in corporate accounting. I believe numbers of issues thatwe are concerned about are readily being resolved. I think we needSarbanes-Oxley not immediately for current procedures, but for thefuture, because none of the activities which were so rampant - and Iwould say disgraceful, if I may put it that way - several years ago aretaking place today.

The actions of conservatism that we all took for granted 20 years agoare coming back and, indeed, are probably largely in place. We no longerhave audit committees which sit there and do nothing. They have becomescrupulous. We no longer have CEOs who are requesting their auditorsto give them a better set of numbers than they deserve, if I may put it thatway. Things have changed.

So is there an urgency to do all of this? No. Is it important that it bedone? Absolutely.

Representative Saxton. Mr. Chairman, Chairman Greenspan, thankyou for being with us today. We appreciate your indulgence and thankyou also for being willing to answer and comment on such a broad rangeof questions, everything from spending to tax policy, of course, monetarypolicy and all the other issues that we talked about today. Thank you forbeing with us, and we will look forward to seeing you in the future. Andour best.

Mr. Greenspan. Thank you very much, Mr. Chairman.[Whereupon, at 12:34 p.m., the Committee was adjourned.]

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SUBMISSIONS FOR THE RECORD

PREPARED STATEMENT OFREPRESENTATIVE JIM SAXTON, CHAIRMAN

I am pleased to welcome Chairman Greenspan before the JointEconomic Committee this morning to testify on the economic outlook.

According to a recent Commerce Department release, the economygrew at a 3.1 percent rate in the third quarter of 2002. Consumerspending accounted for much of this performance, though there was apick-up in the rate of investment in equipment and software, its largestsince 2000. Overall, however, investment has been quite weak duringthis expansion.

The growth rate for the economy during the first three quarters of2002 was about 3 percent as well. Consumer spending explains much of

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this result, while real nonresidential fixed investment actually fell in thefirst two quarters of the year, finally eking out a small gain in the thirdquarter. In 2002, personal income has trended upward, and productivitygrowth has been very strong. Inflation and interest rates remain low, andnew home sales have been strong.

In summary, the economy has expanded at a moderate rate so far thisyear. However, manufacturing activity, which had improved for severalmonths, recently has shown signs of slippage. Overall payrollemployment growth has been soft, as employers wait for signs of fasterrecovery. There is concern that the most recently available data maysignal a slowing of the economy.

Furthermore, the uncertainties involved in the war against terrorismand in the international security situation impose additional costs on theeconomy. While the resilience of the American people and economy hasbeen remarkable, security costs have exacted a toll on economic growth.

Given the absence of evidence of inflation currently or in theforeseeable future, the Federal Reserve action last week to reduce thefederal funds rate by half a percentage point to 1.25 percent wasappropriate. However, a relaxation of monetary policy alone may not besufficient to ensure sustained economic expansion. Given the persistentweakness in investment, it would be prudent to consider further changesin tax policy to offset economic uncertainty and improve the prospects forinvestment and growth.

PREPARED STATEMENT OFSENATOR JACK REED, VICE CHAIRMAN

It's a pleasure to welcome Chairman Greenspan this morning. Lastweek the Federal Open Market Committee surprised us - not by the factthat they lowered interest rates, but by how much they lowered them.That the Fed took such decisive action confirms what many of us havebeen saying for some time: the economy is in a slump. Growth is tooslow, too many people are out of work, and things don't seem to begetting better on their own.

I don't know if the Fed's actions will be enough to turn the economyaround. I certainly hope they will be for the sake of the American people.But the way things are going now, it looks as if, at best, we are headed foranotherjobless recovery like the one we had after the last recession, whenthe unemployment rate kept rising long after the recession was technicallyover. Under those circumstances, I think it would be unconscionable if

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we let the extended unemployment benefits program expire at the end ofthe year as it is now scheduled to do. So whatever else we think might benecessary to help the economy recover, I hope we can begin by makingsure that people who exhaust their regular unemployment benefits in atough job market are not left out in the cold.

I know Chairman Greenspan's job is to conduct monetary policy. Butmonetary policy doesn't operate in a vacuum. Sound fiscal policies, likethose we pursued in the 1990s, complement monetary policy in creatingan environment of attractive interest rates that stimulate investment andproductivity growth. In contrast, large budget deficits like those weexperienced from the early 1980s to the early 1990s are a drain onnational saving that is harmful to long-term growth.

I am afraid that the fiscal discipline of the 1990s is a fading memoryand that we are headed for a repeat of the fiscal mistakes of the 1980s.The 1980s tax cuts were a mistake at the time, but similar policies wouldbe even more of a mistake now. At least in the 1980s, the pressures on thebudget from the retirement of the baby boom were off in the distant futureand there was time to restore fiscal discipline. This time, however, thebiggest tax cuts will be kicking in at just about the same time that thebaby boom starts retiring.

We used to get a clear signal from Chairman Greenspan about theimportance of fiscal discipline and the pre-eminence of deficit reductionand paying down the public debt over tax cuts as the way to stimulateinvestment and growth. But that signal has gotten a little garbled in thepast two years. I hope that in addition to discussing his views on theeconomic outlook, Chairman Greenspan will spend some time talkingabout how the choices we make in the coming year about taxes and otherfiscal priorities will affect that outlook.

Mr. Chairman, I look forward to your testimony.

PREPARED STATEMENT OF THEHONORABLE ALAN GREENSPAN, CHAIRMAN,

BOARD OF GOVERNORS OF THEFEDERAL RESERVE SYSTEM

The past year has been both a difficult and a remarkable one for theUnited States economy. A year ago, we were struggling to understand thepotential economic consequences of the events of September 11. At thattime, it was unclear how households and businesses would react to thisunprecedented shock as well as to the declines in equity markets andcutbacks in investment spending that had already been under way.Economic forecasts were lowered sharply, and analysts feared that eventhese downward-revised projections might be undone by a significantretrenchment in aggregate demand. The United States economy, however,proved to be remarkably resilient: In the event, real GDP over the past

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four quarters grew 3 percent - a very respectable pace given the blowsthat the economy endured.

Although economic growth was relatively well maintained over thepast year, several forces have continued to weigh on the economy: thelengthy adjustment of capital spending, the fallout from the revelations ofcorporate malfeasance, the further decline in equity values, andheightened geopolitical risks. Over the last few months, these forces havetaken their toll on activity, and evidence has accumulated that theeconomy has hit a soft patch. Households have become more cautious intheir purchases, while business spending has yet to show any substantialvigor. In financial markets, risk spreads on both investment-grade andnon-investment-grade securities have widened. It was in this context thatthe Federal Open Market Committee further reduced our target federalfunds rate last week.

The consumer until recently has been the driving force of thisexpansion. Faced with falling equity prices, uncertainty about futureemployment prospects, and the emergence of the terrorist threat,consumer spending has slowed over the course of the past year but hasnot slumped as some had earlier feared it might. Tax cuts and extendedunemployment insurance provided a timely boost to disposable income.And the deep discounts offered by many businesses on their productswere most supportive.

In particular, automotive manufacturers responded to the events ofSeptember 11 with cut-rate financing and generous rebates. Theseincentives were an enormous success in supporting - indeed increasing- the demand for new cars and trucks. Sales surged each time theincentive packages were sweetened and, of course, fell back a bit whenthey expired. Some decline in sales was to be expected in recent monthsafter the extraordinary run-up recorded in the summer. However, it willbear watching to see whether this most recent softening is a payback forborrowed earlier strength in sales or whether it represents someweakening in the underlying pace of demand.

Stimulated by mortgage interest rates that are at lows not seen indecades, home sales and housing starts have remained strong. Moreover,the underlying demand for new housing units has received support froman expanding population, in part resulting from high levels ofimmigration.

Besides sustaining the demand for new construction, mortgagemarkets have also been a powerful stabilizing force over the past twoyears of economic distress by facilitating the extraction of some of theequity that homeowners had built up over the years. This effect occursthrough three channels: the turnover of the housing stock, home equityloans, and cash-outs associated with the refinancing of existingmortgages. Sales of existing homes have been the major source ofextraction of equity. Because the buyer of an existing home almostinvariably takes out a mortgage that exceeds the loan canceled by theseller, the net debt on that home rises by the amount of the difference.And, not surprisingly, the increase in net debt tends to approximate the

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sellers' realized capital gain on the sale. That realized capital gain isfinanced essentially by the mortgage extension to the homebuyer, and theproceeds, in turn, are used to finance some combination of a downpayment on a newly purchased home, a reduction of other householddebt, or purchases of goods and services or other assets.

Home equity loans and funds from cash-outs are generally extractionsof unrealized capital gains. Cash-outs, as you know, reflect the additionaldebt incurred when refinancings in excess ofthe remaining balance on theoriginal loan are taken in cash.

According to survey data, roughly half of equity extractions areallocated to the combination of personal consumption expenditures andoutlays on home modernization. These data and some preliminaryeconometric results suggest that a dollar of equity extracted from housinghas a more powerful effect on consumer spending than does a dollarchange in the value of common stocks. Of course, the net decline in themarket value of stocks has greatly exceededthe additions to capital gains on homes over the past two years. So despitethe greater apparent sensitivity of consumption to capital gains on homes,the net effect of all changes in household wealth on consumer spendingsince early 2000 has been negative. Indeed, the recent softness inconsumption suggests that this net wealth erosion has continued to weighon household spending. That said, it is important to recognize that theextraction of equity from homes has been a significant support toconsumption during a period when other asset prices were decliningsharply. Were it not for this phenomenon, economic activity would havebeen notably weaker in the wake of the decline in the value of householdfinancial assets.

In the business sector, there have been few signs of any appreciablevigor. Uncertainty about the economic outlook and heightenedgeopolitical risks have made companies reluctant to expand theiroperations, hire workers, or buy new equipment. Executives consistentlyreport that in today's intensely competitive global marketplace it is nolonger feasible to raise prices in order to improve profitability.

There are many alternatives for most products, and with technologydriving down the cost of acquiring information, buyers today can (and do)easily shift to the low-price seller. In such a setting, firms must focus onthe cost side of their operations if they are to generate greater returns fortheir shareholders. Negotiations with their suppliers are aimed at reducingthe costs of materials and services. Some companies have also eschewedthe traditional annual pay increment in favor of compensation packagesfor their rank-and-file workers that are linked to individual performancegoals. And, most important, businesses have revamped their operationsto achieve substantial reductions in costs.

On a consolidated basis for the corporate sector as a whole, loweredcosts are generally associated with increased output per hour. Much of therecent reported improvements in cost control doubtless have reflected theparing of so-called "fat" in corporate operations - fat that accumulatedduring the long expansion of the 1990s, when management focused

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attention primarily on the perceived profitability of expansion and less onthe increments to profitability that derive from cost savings. Managers,now refocused, are pressing hard to identify and eliminate thoseredundant or nonessential activities that accumulated in the boom years.

With margins under pressure, businesses have also been reallocatingtheir capital so as to use it more productively. Moreover, for equipmentwith active secondary markets, such as computers and networking gear,productivity may also have been boosted by a reallocation to firms thatcould use the equipment more efficiently. For example, healthy firmsreportedly have been buying equipment from failed dot-coins.

Businesses may also have managed to eke out increases in output perhour by employing their existing workforce more intensively. Unlikecutting fat, which permanently elevates the levels of productivity, thesegains in output per hour are often temporary, as more demandingworkloads eventually begin to tax workers and impede efficiency.

But the impressive performance of productivity also appears tosupport the view that the step-up in the pace of structural productivitygrowth that occurred in the latter part of the 1990s has not, as yet,faltered. Indeed, the high growth of productivity during the past yearmerely extends recent experience. Over the past seven years, output perhour has been growing at an annual rate of more than 2-1/2 percent, onaverage, compared with a rate of roughly 1-1/2 percent during thepreceding two decades. Although we cannot know with certainty until thebooks are closed, the growth of productivity since 1995 appears to beamong the largest in decades.

Arguably, the pickup in productivity growth since 1995 reflectslargely the ongoing incorporation of innovations in computing andcommunications technologies into the capital stock and businesspractices. Indeed, the transition to the higher permanent level ofproductivity associated with these innovations is likely not yet completed.Once the current level of risk recedes, businesses will no doubt move toexploit the profitable investment opportunities made possible by theongoing advances in technology.

However, history does raise some warning flags concerning thelength of time that productivity growth remains elevated. Gains inproductivity remained quite rapid for years after the innovations thatfollowed the surge in inventions a century ago. But in other episodes, theperiod of elevated growth of productivity was shorter. Regrettably,examples are too few to generalize. Hence, policymakers have nosubstitute for continued close surveillance ofthe evolution of productivityduring this current period of significant innovation.

In summary, as we noted last week, "The [Federal Open Market]Committee continues to believe that an accommodative stance ofmonetary policy, coupled with still-robust underlying growth inproductivity, is providing important ongoing support to economicactivity. However, incoming economic data have tended to confirm thatgreater uncertainty, in part attributable to heightened geopolitical risks,is currently inhibiting spending, production, and employment. Inflation

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and inflation expectations remain well contained." In these circumstances,the Committee believed that the actions taken last week to ease monetarypolicy should prove helpful as the economy works its way through thiscurrent soft spot.