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very reluctant to put that money out for long term. I asked them why in this little seminar meeting, and they said:
We think that mortgage rates are going to jump soon when the Federal Reserve slams on the brakes, and then we would be open to the criticism and open to the weakness that we put out our money at lower mortgage rates when they are soon going to be higher.
There is that constant image in their mind of a Federal Reserve that is suddenly going to tighten money and raise interest rates. And I think that therefore it is of tremendous importance, as Alice Rivlin has emphasized and other witnesses have emphasized, to shift a good bit of our emphasis to the level of interest rates, rather than simply the rate of increase in one type of money supply, or another.
I agree with you entirely, there has been a shift from M-1 to M-2 and we ought to put equal emphasis on the 2—but even greater emphasis on the course of interest rates.
Senator PROXMIRE. Well, I appreciate that. Now, I want to make it clear that I don't disagree with your argument that it's miseducation to argue that the deficit, or excessive spending is causing inflation now; obviously that is nonsense and is not true.
But my concern is that the Government at all levels is getting too big and insentitive because of its size. We haven't been able to solve the problems that we should have been able to solve, we are just throwing money at them. I would prefer to follow a more discriminating and lower cost operation, and see if we can make better progress that way.
Mr. HELLER. I have been known to advocate tax cuts instead of spending increases a few times in my life, just as you are implying. I can't disagree with the fact that we ought to do a better job in delivering public services. We are at the point where we have programs that really don't return must for the dollar, no question about it. But I don't think we should kid ourselves, or kid the American people, particularly about the size of the Federal Government, it is not going to overwhelm us.
I really think that Congress, under these new procedures, is getting control of that spending process. I thought last year was a very impressive demonstration of fiscal responsibility. And I for one would like to be reassured that that new process is taking hold, and that Congress, really for the first time, effectively looks at the total spending, not just individual pieces. If this is the case, I think the country's concern over excessive Government spending should be very considerably allayed. They ought to be very considerably reassured by what's going on in Congress. I would like to think of this as a watershed of change toward fiscal responsibility in Congress.
Senator PROXMIRE. Thank you very much.
Representative Long. We have another 5 or 10 minutes, if you have any additional questions you would like to pose.
Thank you very much, Mr. Heller, we appreciate your coming. Mr. Shiskin is here. Senator Proxmire?
Senator PROXMIRE. Mr. Shiskin, we are delighted to have you, and we are especially delighted to have you this morning when the news is so good; it's better than it's been for a long, long time. A drop of five-tenths of 1 percent in unemployment obviously is significant,
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it is very good news, just as good news as the fact that employment also increased. Both the hole in the doughtnut got smaller, and the doughnut itself got bigger, so, we'll have a lot more to eat. I think that's happy news.
I understand you have a prepared statement, so, we will have you deliver it, and then we will have some questions.
STATEMENT OF HON. JULIUS SHISKIN, COMMISSIONER, BUREAU
OF LABOR STATISTICS, DEPARTMENT OF LABOR Mr. Shiskin. Mr. Chairman and members of the committee, I welcome the opportunity to explain to the Joint Economic Committee certain features and implications of the comprehensive and complex body of data released at 10 a.m. this morning in our press release, the employment situation.
The cyclical recovery in the employment situation, which began early in 1975, continued in January. Substantial and widespread declines in unemployment were accompanied by strong gains in employment and aggregate hours, particularly in manufacturing, the cyclically sensitive component of total employment.
At 7.8 percent, the unemployment rate was 0.5 percentage point below December and 0.8 below the level only 3 months ago. The revised seasonally-adjusted unemployment rate shows a pattern roughly similar to that during the recovery of 1971–73 when it hung high for many months before dropping fairly rapidly. The decline in unemployment has been widespread, with substantial declines in the rates for household heads, married men, full-time workers, adult males, black workers, and white workers. The decline in job-loser unemployment, which is highly sensitive to cyclical forces, was substantial for the second consecutive month. Teenage unemployment, however, continues to fluctuate narrowly at a very high level. Despite these sharp declines, the unemployment rate remains very high by historical standards.
Total employment and nonagricultural employment both rose sharply in January. The increase in total civilian employment between December and January was 800,000, one of the largest increases on record. Total employment has now risen by more than 2 million since March 1975, its recession trough. Similarly, the rise in nonagricultural employment in both the household and payroll surveys has been substantial over the last few months. In January, nonagricultural employment, as measured by the household survey, was 2 million higher than at the trough for this series, also March, and 1.7 million higher than in June. As measured by the payroll survey, nonagricultural employment was 1.8 million higher than at the trough for that series, June. That is, if you look at the two comparisons since June, when the trough was reached in the payroll survey, the changes are almost identical.
The diffusion index shows that in January, 68 percent of the 172 industries posted employment increases. This was slightly greater than in October through December, but lower than in a few previous months. The industries showing most improvement were manufacturing and trade.
The employment-population ratio for all civilian workers rose sharply in January, as did this ratio for all three major components— teenagers, adult men, and especially adult women.
Average hours worked continued to rise. While the rise in manufacturing between December and January was small, this followed a substantial rise in the previous month.
As a result of the increases in employment and hours, aggregate hours continued to grow, with another strong rise evident in manufacturing, the cyclically sensitive industry component.
I want also to make next a few observations about the participation rate, where some very major and dramatic changes have been taking place.
The overall labor force participation rate in January was about the same as in December 1975 and also January 1975. This overall stability results from two contrary trends, male labor force participation has continued its historical decline and female participation has continued to increase. The female participation rate reached another new high in January, 46.6 percent of their civilian population, an increase of 0.8 since January a year ago. Male labor force participation, on the other hand, went from 80.4 to 79.5 percent over the year. In 1955, the adult female participation rate was 35.4 percent, while the rate for adult males was 87.6.
Senator PROXMIRE. Are these seasonally adjusted ? Mr. SHISKIN. Yes, sir. Mr. Chairman, I think that a revolution in the pattern of working life in the United States has been taking place, and I would urge all persons concerned with labor-force statistics to study these trends carefully. What is happening, in a nutshell, is that older men are leaving the labor force and many young women, mostly with children, are coming in. These developments have resulted in a dramatic change in the composition of the labor force.
Well, in summary, the employment situation continued to improve in January with widespread reductions in unemployment and substantial gains in employment and aggregate hours. After seven months of recovery, nonfarm payroll employment has made up almost threefourths of the decline in the recession. While unemployment has also improved, less than 25 percent of the rise has been made up. Thus far, the recovery in employment is stronger than that following the severe recession of 1957–58, but the recovery in unemployment is weaker. Thank you.
I have a few statistical notes on the revised seasonal adjustment method, and also on the measures U-1 to U-7 which were published recently, and which received considerable attention. And finally I note that the release of the Wholesale Price Index figures has been deferred for a week because of the large workload we have had in introducing the new weights based on the 1972 Censuses of Manufacturers and Minerals Industries and the Census of Agriculture. I won't read these notes, but I would like to have them incorporated in the record.
Senator PROXMIRE. Without objection, they will certainly be put in the record.
[The press release, together with the material referred to follow:]
74-796 0 - 76 - 3
Unemployment declined and employment rose in January, as the Nation's unemployment
rate dropped from 8.3 percent in December to 7.8 percent, it was reported today by the
Bureau of Labor Statistics of the U. S. Department of Labor. The jobless rate had
reached a high of 8.9 percent (as revised) last May; most of the subsequent improvement
has occurred between October and January.
Total employment--as measured by the monthly survey of households--increased by
800,000 in January, after adjustment for normal seasonal fluctuations. At 86.2 million, the employment level was 2.1 million above last March's recession low and very close to the pre-recession peak reached in July 1974.
Nonagricultural payroll employment--as measured by the monthly survey of establish
ments--rose by 360,000 in January, with nearly three-quarters of the gain taking place
in manufacturing and trade. The payroll total of 78.1 million jobs was 1.8 million above the June 1975 low but still 700,000 short of the previous September's peak.
As is usual at this time of year, seasonally adjusted data from the household
survey have been revised; the current revisions are based upon experience through
December 1975. A note on this process and a table depicting the overall unemployment
rate as originally reported and as revised appear on page 6.
The number of persons unemployed fell by about 450,000 in January to 7.3 million
(seasonally adjusted). Since October, unemployment has declined by 770,000, after having
held close to the 8-million mark since April. The unemployment rate fell to 7.8 percent
from the 8.3 percent registered in December. For the second consecutive month, the drop
in unemployment occurred entirely among those who had lost their last job, the jobless
group most sensitive to cyclical fluctuations.
(See tables A-1 and A-S.)
The overall decline in joblessness was reflected in improvements among most com
ponent labor force groups. The unemployment rate for adult men fell from 6.6 to 5.8 percent, while the rate for adult women moved down from 8.0 to 7.5 percent. Paralleling
these declines were sizeable decreases in the unemployment rates for household heads,
married men, and full-time workers. On the other hand, the rate for teenagers--19.9
po preliminary NA, not available.