Senator BENTSEN. Senator Sparkman. Senator SPARKMAN. Senator Bentsen, I have been reading the statement and press release and also listening. I think this is developing into something very interesting. Let me ask this general question. I have not yet been able to digest thoroughly the situation of these teenagers who are unemployed and those reentering the labor force and it is rather important that they do not remain unemployed. I also am concerned about the changes in the Consumer Price Index. Has that been running very much according to form or to expectations? Have our expectations been pretty steady? MS. NORWOOD. As I indicated in my statement, the rates of price increase, both at the producer level and at the consumer level, have been increasing over the last couple of years. Senator SPARK MAN. Is the economic situation, relating to inflation, just about on track for which President Carter had expressed a desire? Ms. NORWOOD. I believe, Senator Sparkman, that the President has indicated publicly, and to the Congress, that he is quite worried about the increasing rate of inflation and that he plans to make some statements fairly soon about measures to try to contain the rising rates. Senator SPARKMAN. It has been a matter of concern with him for some time, hasn't it? MS. NORWOOD. Yes, it has. Senator SPARKMAN. Fighting unemployment and at the same time trying to hold down the rate of inflation and producing jobs, I suppose, is generally considered helping inflation. It is to some extent inflationary. Ms. NORWOOD. Of course, there has always been a large debate about the tradeoff's between unemployment and inflation. I think, however, that in recent years economists have become quite perplexed about this relationship because it does not seem to be as direct as previously had been believed. In fact, some of the studies show that you don't really get a great deal of reduction in inflation by increasing unemployment. So I think this is an area that everybody is worried about, that a great deal of work is going on in, and it is not so clear cut as to what rate of unemployment relates to any particular rate of inflation. Clearly, what we need is to reduce the rate of inflation and to reduce the rate of unemployment. Senator SPARKMAN. Thank you, Ms. Norwood and Senator Bentsen. Senator BENTSEN. Thank you. Of course, we have cut unemployment more than it has ever been in the past, so it is not as dramatic a concern as it was in prior years. You have given us three sets of projections instead of one, three possible paths we can follow for the increase in the labor force. One of the assumptions you cited for these projections is, that the working age population will be increasing more slowly than it has in the past, but that factor will be mitigated somewhat I think, by inflation requiring both husbands and wives to take jobs. Which of these three trendlines do you have most confidence in? Ms. NORWOOD. Senator, the reason that we put out three sets of projections is because we wanted to try to emphasize to the public and to those pec who use our projections that we did not have the answers to all issues. It is very hard to project for a long period of time into the future. Any projection is based upon assumptions. We have, in the past, I think it is quite clear, underestimated the changing position of women in the labor force. We felt that we had to start with a set of facts. One fact, of course, and a very important one, is that the number of young people who were born during the baby boom after World War II, have now grown up or are growing up, and in the future the teenage group will become smaller. This means that the group that we have always in the past felt had a stronger attachment to the labor force will be getting larger. That certainly is a fact. The question of what will happen to the birth rate and what will happen to the labor force participation of women, of men, too-I think that is difficult to predict as is the participation of some of the demographic groups of the population which have had difficult labor market experience. It is very difficult to predict. For that reason we have put out three with a high, a low estimate, and median one. Senator BENTSEN. Well, you ought to be at least a third right. MS. NORWOOD. One of the other things we are doing, Senator, that I think is quite important, is that when we make long-term projections of the economy, we are trying now, after the fact, to go back and look at how good or how bad our projections were. We have published for our economic growth program, our industry projections, one article some time ago looking at how well we did, and we are presently working on another article indicating how well or how badly we did. Senator BENTSEN. Is that an interoffice memo? Ms. NORWOOD. These are going to be published. Senator BENTSEN. Are they? Ms. NORWOOD. Yes. Senator BENTSEN. Ms. Norwood, I have to chair another hearing and this has been very entertaining, but unless Senator Sparkman has any further questions, I thank you very much. Ms. NORWOOD. Thank you. Senator BENTSEN. The committee will stand adjourned. [Whereupon, at 10:55 a.m., the committee adjourned, subject to the call of the Chair.] EMPLOYMENT-UNEMPLOYMENT FRIDAY, DECEMBER 8, 1978 CONGRESS OF THE UNITED STATES, The committee met, pursuant to notice, at 10:03 a.m., in room 6226, Dirksen Senate Office Building, Hon. Lloyd Bentsen (vice chairman of the committee) presiding. Present: Senator Bentsen. Also present: Louis C. Krauthoff II, assistant director; Richard F. Kaufman, assistant director-general counsel; John M. Albertine, L. Douglas Lee, Katie MacArthur, Paul B. Manchester, M. Catherine Miller, and Robert Ash Wallace, professional staff members; Mark Borchelt, administrative assistant; and Stephen J. Entin, minority professional staff member. OPENING STATEMENT OF SENATOR BENTSEN, VICE CHAIRMAN Senator BENTSEN. The hearing will come to order. Ms. Norwood, on Wednesday Mr. Kahn was before us and he told us that we would have to wait a while for the good news on inflation. Today we understand from you that we are going to have to wait a while for the bad news on unemployment. For the next few months it seems that no news is good news. The unemployment rate remained steady last month at 5.8 percent, and there was a substantial and heartening increase in employment. Before you begin, Ms. Norwood, just let me make one observation which you can feel perfectly free to ignore. In regard to the critical economic issues of the day, it seems that we have had too much conventional wisdom and not nearly enough creative intellect. The conventional wisdom has embraced the notion of the inflation-unemployment see-saw. The conventional wisdom tells us that we must stagger through a recession to wring inflation out of the system. The conventional wisdom tells us that increased levels of unemployment are the inevitable price of economic stability. We had four talented economists here this week and they disagreed on many things, but they all told us the best cure for inflation is recession. Well, perhaps they are right. Perhaps the laws of economics are as the laws of physics. But I am not so sure that we have to swallow a recession to salvage our economy. I am not so sure that we have to throw millions of Americans out of work to try to control inflation in this country of ours. This is the first meeting that we have had since Commissioner Shiskin died. He testified almost monthly before the Joint Economic Committee during the 1970's. He was one of the country's foremost economic statisticians. From 1942 when he first started working in the Government, and especially during the period of 1973 when be became head of the Bureau of Labor Statistics, Mr. Shiskin worked unceasingly to improve our understanding of the very important field of economic statistics. And, Ms. Norwood, you are a very worthy acting successor. We are very pleased to have you this morning. We are looking forward to your statement. Would you proceed, please. STATEMENT OF HON. JANET L. NORWOOD, ACTING COMMISSIONER, BUREAU OF LABOR STATISTICS, DEPARTMENT OF LABOR, ACCOMPANIED BY ROBERT L. STEIN, ASSISTANT COMMISSIONER, OFFICE OF CURRENT EMPLOYMENT ANALYSIS; AND JOHN F. EARLY, CHIEF, DIVISION OF INDUSTRIAL PRICES AND PRICE INDEXES Ms. NORWOOD. Thank you, sir. First I would like to introduce Mr. Robert Stein on my right who is our unemployment expert-and employment expert as well. On my left is Mr. John Early, who is our expert on industrial prices. I am glad to have this opportunity to offer the Joint Economic Committee a few brief comments to supplement our "Employment Situation" press release, issued this morning, and our "Producer Price Index" press release, issued yesterday morning. Both employment and the labor force expanded vigorously in November, while the unemployment rate was unchanged at 5.8 percent. After a period of rather sluggish job growth in the summer months, employment has expanded very rapidly in the past 2 months. From October to November, total employment as measured by the household survey, increased by more than a half a million. At the same time, the number of employees on nonfarm payrolls, as measured by the estab lishment survey, moved up by 470,000. The 2-month growth in both series has totaled nearly 900,000. The employment-population ratio in November surpassed 59 percent for the first time on record. The Nation's unemployment rate was 5.8 percent in November, unchanged from October. This rate was almost a full percentage point lower than a year ago and 0.4 point below the first quarter 1978 average. The unemployment rates for most worker groups showed little or no change from October to November. Unemployment has not dropped significantly over the past 2 months, despite the upsurge in employment, because the civilian labor force also has expanded sharply. The labor force participation rate-that is, the percentage of the population 16 years and over who were either working or seeking work-was 63.6 in November, an alltime high. The nearly 500,000 gain in payroll jobs in November reflected advances in both the goods-producing and service-producing industries. Manufacturing employment moved up by 160,000, while contract construction recorded a 40,000 gain. Job strength in these industries has |