TEXT FOR DELIVERY: 9:30 A.M., E.S.T. FRIDAY, MARCH 4, 1994 ___________________________________________________________ Advance copies of this statement are made available to the press under lock-up conditions with the explicit understanding that the data are embargoed until 8:30 a.m. Eastern time. ____________________________________________ Statement of Katharine G. Abraham Commissioner Bureau of Labor Statistics before the Joint Economic Committee UNITED STATES CONGRESS March 4, 1994 Mr. Chairman and Members of the Committee: My colleagues and I are pleased to have the opportunity to comment on the employment situation in February. The nation's labor markets continued to improve last month. Nonfarm payroll employment rebounded from January's weather-related weakness, although the impact of this winter's severe weather was still apparent in several industries. The unemployment rate was 6.5 percent in February; it had been 6.7 percent a month earlier. These figures are consistent with a continuation of the downward trend in unemployment witnessed throughout 1993. Payroll employment rose by 217,000 in February. This gain follows a month of no employment change, according to -2- our revised figures. Although the February gain was of a magnitude similar to the substantial monthly job increases posted in the final months of last year, some of February's improvement reflects a return to payrolls of workers who had been off work in the prior month as a result of the bad weather. At the same time, employment and working hours were held down by another siege of bad weather during February. The largest gain in February was in the services industry, where employment rose by 121,000. Business services added 62,000 jobs in February, more than making up for the small loss in the prior month. Continued bad weather prevented a complete recovery from the sharp drop in amusement and recreation industry employment experienced in January. Health services added jobs at about the same pace as in prior months. Retail trade also experienced a substantial rise that may be in part a comeback from January's exceptionally bad weather. There were job gains in general merchandise stores, food stores, and automotive dealers and service stations. In contrast, the eating and drinking industry, which has accounted for much of the retail trade growth in recent years, declined for the second consecutive month. Many of those employed in the industry work only part time and, if they miss a day or two of work due to bad weather, may be off the payroll for the entire survey period. -3- Elsewhere in the service-producing sector, employment rose in wholesale trade and trucking. These industries have been adding jobs in recent months, reflecting the increased activity in the nation's distribution network as the economy improves. Employment also continued to rise in finance, particularly in the mortgage and securities segments. The impact of February's bad weather was apparent in both construction and manufacturing, although the nature of the impact differed. In construction, employment was down by about 20,000 for the second month in a row. It is, of course, not surprising that construction layoffs would be larger than normal because of the unusually severe and widespread bad weather that the nation has experienced this winter. It is worth noting that construction employment had been on an upward trend until the recent spate of bad weather. In manufacturing, employment rose for the fifth straight month in February, bringing the total increase in manufacturing employment since September to 78,000. Factory hours, however, were off sharply (0.7 hour) from the exceptionally high levels of recent months, again due to the bad weather. Returning to the data from our survey of households, the published figures indicate a decline of two-tenths in the overall unemployment rate between January and February and an employment increase of 287,000 over the same period. We must, however, be cautious in interpreting these figures, which are based on the first results from our redesigned -4- household survey. In particular, our continuing analysis of last year's parallel survey data suggests that the seasonal pattern of unemployment as measured by the old and the new household surveys may differ. We suspect that the seasonal factors we are currently using, which of necessity are based on data from the old survey, may have led us to exaggerate slightly the real improvement in unemployment since December, as measured using the new procedures. Similarly, the use of this same set of factors may cause the trend in unemployment during the spring and early summer months to appear less favorable than it actually is, as the normal influx of summer jobseekers identified by our new survey instrument may be larger than that picked up by the old one. As discussed last month, we again have prepared a monthly unemployment rate projection based on the relationship between the "old" unemployment rate and other economic data. The projected rate for February is 6.4 percent, essentially the same as that for January, though the increasingly large standard errors surrounding these projections should be taken into account. The chart attached to my statement shows that, whether unemployment is estimated on the new or the old basis, the overall unemployment rate has fallen substantially since the beginning of last year. There are two unusual movements in February's data that I would like to highlight for the Committee. First, the number of persons working part time for economic reasons -5- (sometimes referred to as the partially unemployed) dropped by about half a million. This may reflect problems with applying seasonal factors based on data from the old survey to our new measure. Second, there also was a substantial drop in the number of persons who were unemployed for less than 5 weeks, which pushed up the average duration of unemployment. It is believed that this development stems at least in part from technical factors associated with the introduction of the improved survey questionnaire. In summary, the labor market continued to improve in February, despite the impact of this winter's unusually harsh weather. Our payroll survey showed a substantial gain in employment, as services and retail trade rebounded from January's slump and the upward trend in other industries such as manufacturing, wholesale trade, and transportation continued. The adverse effects of winter remained apparent, however, both in the decline in construction employment and in the sharp drop in factory hours. Unemployment appears to have continued its downward trend, but we need additional months of data before we can be confident as to the extent of the improvement. My colleagues and I now will be happy to answer any questions you may have.