FOR DELIVERY: 9:30 A.M., E.D.T. FRIDAY, JUNE 5, 1998 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 Daylight Time. Statement of Katharine G. Abraham Commissioner Bureau of Labor Statistics before the Joint Economic Committee UNITED STATES CONGRESS Friday, June 5, 1998 Mr. Chairman and Members of the Committee: I would like to thank you for the opportunity to comment on the labor market data released this morning. Nonfarm payroll employment continued to increase in May, and the unemployment rate was unchanged following a sharp decline in April. At 4.3 percent for the second consecutive month, the unemployment rate is at its lowest level since early 1970. The number of employees on nonfarm payrolls rose by 296,000 in May, after seasonal adjustment, somewhat above the average monthly gain of 260,000 for the 12 months ending in April. All of the net job growth in May occurred in the service-producing sector. The services industry itself added 151,000 jobs, a large increase following 3 months of below-average gains. Business services accounted for half of the May increase, with strong gains in help supply services and in computer and data processing services. The help supply services increase was the first in that industry since February. Elsewhere in the services industry, engineering and management services added 25,000 jobs, and employment in health services expanded by 17,000. Retail employment advanced by 89,000 in May, the second large increase in a row following weakness in February and March. May gains were widespread in the industry, with especially robust growth in eating and drinking places, department stores, and miscellaneous retail establishments, such as drug stores and gift shops. Employment in transportation and public utilities rose by 22,000 over the month. There was a large increase in transportation employment (17,000) following much slower growth in April. In finance, insurance, and real estate, 20,000 jobs were added in May, mostly in finance. Government employment rose by 41,000; two-thirds of the increase occurred in local education. Federal employment continued to wane. In marked contrast to the robust job gains that occurred throughout much of the service-producing sector of the economy in May, manufacturing employment fell by 26,000. This was the first substantial decrease since the industry began showing signs of weakness in February of this year. Between March 1996 and January 1998, manufacturing had added about 370,000 jobs. Within manufacturing, job losses were generally small but fairly pervasive in May. The largest decline occurred in apparel, which shed another 9,000 jobs. Employment in this industry has been trending downward at a variable pace for 25 years, but the rate of decline appears once again to have accelerated a bit. Small but notable declines occurred over the month in electronic equipment and industrial machinery, two industries that have shown substantial job growth in recent years. There was also a small over-the- month job decline in auto manufacturing. The factory workweek rose by three-tenths of an hour in May, offsetting most of April's decline (four-tenths of an hour, as revised); nevertheless, factory hours have trended down since the beginning of this year. It is reasonable to suspect that at least some of the recent declines in manufacturing employment and hours are related to Asia's economic problems, but we have no way of quantifying their impact. Employment in the construction industry edged down by 9,000 in May, following strong job growth since last fall. Mining employment continued to ebb in May, and has declined by 13,000 since the most recent series peak in September 1997. Mining employment generally has been receding since the late 1970s. Average hourly earnings for all private production or nonsupervisory workers rose by 4 cents in May, following an increase of 6 cents in April. Over the past year, hourly earnings were up by 4.3 percent. Before moving to the data from the household survey, I would like to note that, in accordance with standard practice, these payroll survey figures reflect the incorporation of our regularly scheduled annual benchmark adjustments. Each year, we adjust our sample-based survey estimates to full universe counts of employment, derived principally from the administrative records of the state unemployment insurance tax system. There is no benchmark source for the hours and earnings data, but these series may be affected by the benchmark process because of changes in the industry employment weights and the introduction of new seasonal factors. The impact of the revisions on employment in the March 1997 reference month is an upward adjustment of 431,000, or four-tenths of one percent of the total nonfarm employment level. This is roughly in line with the average percent adjustment over the past decade. The upward adjustment indicates somewhat stronger job growth than previously reported for the year ending in March 1997. Estimates of payroll employment for the post-benchmark period, April 1997 forward, also have been revised to incorporate the new benchmark levels as well as revised seasonal adjustment and bias adjustment factors. The additional net impact of the post-benchmark revisions is negligible. In addition to the benchmark revisions, we are introducing refinements to the seasonal adjustment process for hours and earnings series (as previously announced). The purpose of these methodological enhancements is to correct for distortions in the data related to the varying length of payroll periods across months. Turning to the data from our survey of households, as I mentioned earlier, the jobless rate held at 4.3 percent in May, following a sharp decline in April. Jobless rates for all of the major demographic groups showed essentially no change over the month. Similarly, there was little change in the number of persons employed part time even though they would have preferred full-time work; this figure held at about 3.8 million, although the size of the group is down slightly over the year. Civilian employment changed little in May, and the proportion of the population that is employed held at a historically high level of 64.2 percent. Among persons outside the labor force, there were some 1.2 million individuals (not seasonally adjusted) who were classified as "marginally attached" to the labor market in May. These are persons who want and are available for work and looked for employment at some point in the past year, but are not currently looking for a job. The number of discouraged workers, a subset of this group who have stopped looking for work because they feel their search would be in vain, was 268,000 in May (not seasonally adjusted). The numbers of marginally attached and discouraged workers have declined over the past year. In summary, total nonfarm employment rose in May, lifted by large employment gains in services and retail trade. Employment in manufacturing declined, following several months of little change. The jobless rate held at 4.3 percent, its lowest level in nearly 3 decades. My colleagues and I would be glad to answer your questions. 2 6