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Statement of Katherine G. Abraham Commissioner of Labor Statistics

On The
Fiscal Year 2001 Request for
Bureau of Labor Statistics

Mr. Chairman and Members of the Committee:

I appreciate this opportunity to discuss the Bureau of Labor Statistics (BLS) appropriation request for 2001.

The BLS is the principal fact-finding agency in the Federal Government in the broad field of labor economics. As such, the BLS collects, processes, analyzes, and disseminates data on employment and unemployment; prices and consumer expenditures; wages and employee benefits; productivity; projections of the labor force and employment by industry and occupation; and occupational injuries and illnesses. Most of the BLS data come from surveys conducted by the BLS field staff, by the Bureau of the Census on a contract basis, or jointly with cooperating agencies of State governments. The BLS strives to have its data satisfy a number of criteria, including relevance to current social and economic issues, timeliness in reflecting today's rapidly changing economy, accuracy and consistently high statistical quality, and impartiality in both subject matter and presentation.


The BLS is responsible for some of the Nation's most sensitive and widely used economic data series. These data are a key source of economic intelligence, and represent critical inputs to economic analysis, planning, research, and decision making by businesses, non-profit organizations, governments, employees, and other individuals. BLS data also are used in the development of other important Federal statistics such as the Gross Domestic Product (GDP). Both the public and private sectors rely heavily upon BLS data for use in a wide range of sensitive contexts, including wage setting, contract and payment escalation, and the allocation of Federal and State funds. Ensuring the high quality of these indicators is of considerable importance.


The BLS 2001 request of $453.6 million and 2,497 FTE (the FTE figure includes staffing for reimbursable activities) would provide the funds necessary to continue core programs that are of vital concern to the Congress, the policy making and program agencies of the Executive Branch, and the public. This level includes program increases that will significantly improve the quality of the information available to both public and private decision-makers. In addition, several recent program initiatives will continue in 2001.

The 2001 budget request includes several new BLS initiatives. One of these initiatives is the inauguration of a new survey measuring how Americans spend their time. This information, which currently is lacking for the United States, will permit a broader assessment of national well-being and national production than is presently possible. Analysts will use these data, combined with demographic information available from the Current Population Survey, to facilitate the examination of how much time is being invested in the care of the young and the elderly in our society; how time use varies between single-parent and two-parent families; how much time people spend building various types of skills; and how much time people spend in various leisure activities, among other questions. The availability of national time-use data will facilitate comparisons of time-use patterns in the United States with patterns in other countries, including augmented GDP-type measures that incorporate estimates of the value of nonmarket work. The program also will provide time-diary estimates of time spent in market work, which the BLS will use to assess the quality of existing estimates of work hours.

The 2001 budget request also includes resources to extend Producer Price Index (PPI) coverage for the first time to the construction sector of the U.S. economy, and to enhance the PPI's service sector coverage. In addition, the requested resources will allow the BLS to develop new industry labor and multifactor productivity series for the service-producing sector.

A third initiative relates to the implementation of the recently passed Workforce Investment Act (WIA) of 1998. Title III, Section 309 of the WIA requires the Secretary of Labor to oversee the development, maintenance, and continuous improvement of a nationwide employment statistics system. The law requires that the first improvement priority for the system be meeting customers' needs for comparable data across States and local areas. The BLS and the Employment and Training Administration (ETA) worked jointly with the States in a Workforce Information Council to develop a proposal that will enhance, expand, and strengthen local area data outputs from BLS Federal-State programs.

As part of this proposal, the BLS will provide technical guidance for a new Federal-State cooperative employment projections program. Because of the current lack of uniform methodological standards, the procedures used to develop and disseminate employment projections vary among States. As a result, the quality of information about future employment opportunities available to the public is not as high as it could be and also varies from State to State. This program enhancement will result in an improved employment projections program in which data generated would be comparable among States, and between States and the Nation.

The BLS also will improve the statistical quality of local area unemployment statistics used to distribute funds for Federal programs. Furthermore, the BLS will provide additional demographic and economic detail regarding local labor markets. This project will enable the BLS to produce more accurate labor force estimates with smaller revisions, improve the targeting of Federal program funds, and increase the quality and quantity of current labor market information for States and local areas.

Finally, the BLS is requesting resources to contract with the National Research Council (NRC) to research ways to expand the Nation's ability to measure discrimination in labor markets and employment relationships.

The budget includes a net increase of $14,993,000 for mandatory cost increases, including Federal pay raises, and increased costs of data collection by the Bureau of the Census and the States under contract with the BLS.


The BLS will complete the revision of the CPI in 2001 using funds provided in 2000 and continue its further efforts to improve the timeliness and accuracy of the CPI. The BLS also will progress with its work to replace the Standard Industrial Classification (SIC) system with the first version of the new North American Industry Classification System (NAICS) and to expand the Employment Cost Index (ECI) sample. In addition, the BLS will continue to work on the Job Openings and Labor Turnover Survey for which it received funding in 1999.

Revisions of the CPI are multiyear efforts. A number of achievements have been made since work began in 1995 on the revision of the CPI. The CPI for the month of January 1998 was calculated using new expenditure weights updated from the 1982 through 1984 period to the 1993 through 1995 period. Effective with data for January 1999, a new sample of housing units and a new estimation methodology are being used to track housing costs. In February 1999, the BLS began using the results from the new Telephone Point of Purchase Survey (TPOPS) to start outlet sample rotation. The telephone-based survey has three advantages over the previous personal visit survey: the results are more comprehensive, the method is more flexible, and the telephone-based survey can be adjusted to replenish samples that experience rapid attrition. In a separate change that was not a part of the Revision as originally conceived, effective with data for January 1999, the geometric mean formula has replaced the arithmetic mean formula in selected categories of the index. The new formula better accounts for consumer substitution in response to relative price change. The last activities associated with the revision will conclude in 2001.

Work also continues on other planned activities associated with the CPI improvement initiative first funded in 1998. These activities include improvements that will make it possible to complete the next CPI weight update more rapidly, improve the measurement of change in the quality of goods and services, provide a basis to bring new goods into the CPI on a more timely basis, and allow the BLS to produce alternate measures of change in the cost of living. The new capacity to develop revised weights will be in place in 2001, and we have announced that the CPI market basket weights will be updated effective with data for January 2002 and every 2 years thereafter. As I believe this brief summary makes clear, the BLS has made, and continues to make, significant technical improvements in the CPI.

In another arena, the BLS will continue its work on replacing the SIC system with the first version of the new NAICS. The new system will reflect the economic and technological changes that have occurred over the past 20 years that are not reflected in the current (outdated) industry classification system. This revision also will provide common industry definitions for Canada, Mexico, and the United States, thereby facilitating economic analyses that cover the whole North American economy. An interagency working group has completed the design of the first version of the NAICS, and the BLS, in order to meet these requirements, must continue the work of recoding each workplace in its establishment list using the new classification system. States are doing this recoding as part of the BLS Federal/State cooperative statistics program and it will be completed in 2001. NAICS-related work will continue beyond 2001 as various programs convert to NAICS through 2003.

As mentioned previously, the BLS also will continue its work to expand the ECI sample. This expansion will allow the BLS to produce more precise indices of the changes in employer wage and benefit costs by major industry and major occupational groups and to produce better annual estimates of employer compensation cost levels. Both employers and employees use the ECI as the only indicator of its kind for tracking changes in labor compensation costs.

We currently are beginning to collect National data on job openings and labor turnover, which can serve as demand-side indicators of labor shortages. The availability of unfilled jobs--the number of job openings or the job openings rate--is an important measure of the tightness of labor markets. The BLS will begin publishing experimental job openings and labor turnover series in 2001 and plans to begin publishing official series in 2003.


In concert with the Department of Labor's 2001 Annual Performance Plan, achievement of the BLS strategic goals will contribute to the Department's larger commitment to a prepared workforce. The BLS has two strategic goals: produce and disseminate timely, accurate, and relevant economic information; and improve the accuracy and usefulness of our economic measures over time. The 2001 BLS budget and annual performance plan include performance measures related to these goals, such as BLS progress towards replacing the SIC system with the NAICS. The funding requested in this 2001 budget also supports these goals.


I would like to take this opportunity to inform you about the steps the BLS has taken to strengthen the security over its sensitive prerelease economic data. As I reported last year, there were two premature releases of data on the BLS public-access website in 1999. These instances received coverage in the media. The early release of any sensitive data by the BLS is unacceptable and I have taken aggressive steps to tighten our controls. As a result, the BLS has changed its procedures for issuing Principal Federal Economic Indicators. The change in procedures for issuing Principal Federal Economic Indicators is just one of many security improvements the BLS has instituted over the past year. The corrective actions the BLS has taken incorporate recommendations made by the Department of Labor's Office of Inspector General based on an independent review of BLS security.


In summary, Mr. Chairman, the BLS seeks to provide high-quality statistics that are used to make well-informed decisions. Support for the 2001 budget request will enable the BLS to continue production of essential data series; continue with further efforts to improve the CPI and with implementation of the first version of the NAICS; and move forward with other important initiatives. This budget reflects a commitment to maintain and, wherever possible, to improve the programs of the BLS.

Mr. Chairman, I thank you again for the opportunity to discuss the BLS appropriation request for 2001. My staff and I will be pleased to answer any questions the Committee might have.

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