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Friday, December 30, 2011

Job Growth During the Recovery


Linda Levine
Specialist in Labor Economics

Congress in recent years passed a number of bills intended in part to jump-start a recovery in the labor market from the recession that began in December 2007 (e.g., P.L. 111-5 and P.L. 111-226). Members of the 112th Congress are interested in the labor market’s response to these measures to help them decide how well the legislation has worked and whether additional job-creation legislation may be warranted in light of the pace and composition of job growth since the recession’s official end in June 2009 (e.g., H.R. 12 and S. 1549, S. 1723).

One way to assess the extent and nature of recovery in the labor market is to compare employment data from the end of the recession with more recent data gathered in surveys that the government regularly conducts. Accordingly, to determine if and how much job growth has occurred thus far in the recovery, this report examines the change in the number of jobs between the recovery’s start in June 2009 and November 2011. (November was the latest month for which data were available at the time of the report’s preparation.) To provide historical context, the results are compared with job growth during the 10 prior recoveries. Data for November 2011 are compared with December 2007, as well, to discern how close the number of jobs has come to the level at the recession’s onset. Employment data by job and individual characteristics for December 2007, June 2009, and November 2011 also are analyzed to ascertain how different sectors and demographic groups have fared during the recession and recovery.

A “jobless recovery” prevailed across employers in the private nonfarm sector until March 2010. That is to say, after the latest recession’s end in June 2009, the number of private-sector jobs generally continued to fall until nine months into the recovery. The recovery was jobless until October 2010, 16 months into the recovery, across all employers. At that point, net job growth in the total nonfarm economy began not because government employment started to rise but because it fell more slowly while private sector employment continued to grow. Despite the number of jobs on employers’ payrolls having exceeded its level at the recovery’s start, a few more years will likely elapse before the 7 milion-8 million jobs lost during the recession are recouped given the pace of job growth in 2011.

The two industries hardest hit by the recession have been recovering at different rates. While manufacturing employment in November 2011 surpassed its level at the recession’s end, construction jobs were almost 500,000 shy of their total in June 2009 . Some of the states with the most depressed housing markets as well as manufacturing-dependent states have experienced relatively large job losses (Arizona, California, Florida, Indiana, Michigan, Nevada, and Ohio). Smaller job losses among women than men during the recession are partly explained by construction and manufacturing having predominantly male workforces. Further job losses among women during the recovery compared with gains among men are partly explained by women’s substantial presence in the occupations (e.g., teachers) that account for much of local and state government workforces. The employment of Hispanic workers returned fairly quickly to its level at the recession’s start, despite the ethnic group’s concentration in the hard-hit construction industry. Hispanic employment also is concentrated in the leisure and hospitality industry group, which, as of November 2011, had recouped about 98% of jobs lost during the recession. Workers with at least a bachelor’s degree fared better than less educated workers during the recession and recovery, having regained all their job losses.



Date of Report: December 12, 2011
Number of Pages: 14
Order Number: R41434
Price: $29.95

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Contract “Bundling” Under the Small Business Act: Existing Law and Proposed Amendments


Kate M. Manuel
Legislative Attorney

“Bundling” refers to the consolidation of two or more requirements for goods or services previously provided or performed under separate smaller contracts into a solicitation for a single contract that is likely to be unsuitable for award to a small business because of its size or scope. Although bundling can potentially reduce costs or improve performance for federal agencies, it can also limit opportunities for small businesses to receive federal prime contracts. For this reason, Congress amended the Small Business Act in 1997 to require that procuring activities comply with certain procedures before issuing a bundled solicitation. Specifically, the 1997 amendments require that procuring activities (1) conduct market research to justify acquisition strategies that could lead to bundled contracts, (2) provide advance notice of bundled solicitations to the Small Business Administration (SBA) and incumbent small business contractors, and (3) implement certain procurement strategies when solicitations involve “substantial bundling.” These steps are intended to ensure that any bundling is “necessary and justified.” Only “unnecessary and unjustified” bundling is prohibited under the 1997 and subsequent amendments.

The 111th Congress further amended the Small Business Act in 2010 to address concerns about bundling. Among other things, the Small Business Jobs Act (P.L. 111-240) requires that (1) agencies include in each solicitation above the “substantial bundling threshold” provisions inviting bids from teams or joint ventures of small businesses; (2) SBA promulgate regulations establishing a government-wide policy on contract bundling to be posted on each agency’s website; (3) agencies publish listings of and rationales for bundled contracts on their websites; and (4) SBA report periodically on the activities performed by its procurement center representatives (PCRs) and commercial market representatives (CMRs). PCRs and CMRs are SBA employees that work with procuring activities and private firms, respectively, to promote contracting with small businesses.

P.L. 111-240 also amended the Small Business Act to subject all federal agencies to limitations upon the “consolidation” of contract requirements similar to those that the National Defense Authorization Act for FY2004 imposed upon defense agencies. The definition of “consolidation” is much like the definition of “bundling,” encompassing the use of a solicitation to obtain offers for a single contract that satisfies two or more requirements previously provided or performed under two or more separate contracts that were lower in cost than the contract for which offers are solicited. Specifically, P.L. 111-240 prohibits agencies from carrying out an acquisition strategy that includes consolidation of contract requirements valued in excess of $2 million unless the agency makes a written determination that consolidation of the contract requirements is necessary and justified, among other things. It is presently unclear whether or how the new provisions on consolidation will be integrated with the existing provisions regarding bundling, especially in the SBA regulations and the Federal Acquisition Regulation (FAR).

Members of the 112th Congress have introduced several bills addressing contract bundling, including legislation that would expand the definition of “bundling” to include new requirements and construction, as well as strengthen the authority of the Administrator of Small Business in working with contracting agencies to restructure bundled procurements (e.g., H.R. 2424, S. 1334). Other legislation would require reporting on bundled procurements issued by particular agencies (e.g., H.R. 2000).



Date of Report: December 13, 2011
Number of Pages: 19
Order Number: R41133
Price: $29.95

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Business Investment and Employment Tax Incentives to Stimulate the Economy


Thomas L. Hungerford
Specialist in Public Finance

Jane G. Gravelle
Senior Specialist in Economic Policy


According to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), the U.S. economy was in recession from December 2007 to June 2009. Congress passed and the President signed an economic stimulus package, the American Recovery and Reinvestment Act of 2009 (P.L. 111-5), in February 2009. The $787 billion package included $286 billion in tax cuts to help stimulate the economy. Among the tax reductions, many were tax incentives directed to business. The preliminary estimate of fourth quarter real gross domestic product (GDP) growth is 5.9%; the unemployment rate, a lagging indicator, averaged 9.6% in the third quarter and 10.0% in the fourth quarter of 2009. Federal Reserve Chairman Ben Bernanke expects the economy to continue growing at a modest pace, but predicts that bank lending will remain constrained and the job market will remain weak into at least 2010. To further assist unemployed workers, help business, and stimulate housing markets, Congress passed the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92). The Obama Administration has advocated further business tax incentives to spur investment and employment, especially for small business. The House and Senate passed the Hiring Incentives to Restore Employment (HIRE) Act, which includes an employment tax credit. The President signed the act into law on March 18, 2010. In December 2010, P.L. 111-312 extended and expanded the business tax provisions, among other provisions, including a temporary reduction in the employee’s portion of the payroll tax.

Several proposals, largely relating to the extension and increase of the temporary payroll tax, included further investment incentives as well as reductions in payroll taxes by employers. While a payroll tax on the individual side expands demand in the same way as other income tax cuts, the employer tax forgiveness is similar to an employer-side wage subsidy, which acts through a different mechanism.

The two most common measures to provide business tax incentives for new investment are investment tax credits and accelerated deductions for depreciation. The evidence, however, suggests that a business tax subsidy may not necessarily be the best choice for fiscal stimulus, largely because of the uncertainty of its success in stimulating aggregate demand. If such subsidies are used, however, the most effective short-run policy is probably a temporary investment subsidy. Permanent investment subsidies may distort the allocation of investment in the long run.

Employment and wage subsidies are designed to increase employment directly by reducing a firm’s wage bill. The tax system is a frequently used means for providing employment subsidies. Most of the business tax incentives for hiring currently under discussion are modeled partially on the New Jobs Tax Credit (NJTC) from 1977 and 1978. Evidence provided in various studies suggests that incremental tax credits have the potential of increasing employment, but in practice may not be as effective in increasing employment as desired. There are several reasons why this may be the case. First, jobs tax credits are often complex and many employers, especially small businesses, may not want to incur the necessary record-keeping costs. Second, since eligibility for the tax credit is determined when the firm files the annual tax return, firms do not know if they are eligible for the credit at the time hiring decisions are made. Third, many firms may not even be aware of the availability of the tax credit until it is time to file a tax return. Lastly, product demand appears to be the primary determinant of hiring, and this issue would affect the effectiveness of a payroll tax holiday on the employer side.


Date of Report: December 1
2, 2011
Number of Pages: 2
0
Order Number: R4
1034
Price: $29.95

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Contracting Programs for Alaska Native Corporations: Historical Development and Legal Authorities


Kate M. Manuel
Legislative Attorney

John R. Luckey
Legislative Attorney

Jane M. Smith
Legislative Attorney


According to some reports, federal contract dollars awarded to Alaska Native Corporations (ANCs) and their subsidiaries increased by 916% between FY2000 and FY2008, going from $508.4 million to $5.2 billion. The dollars awarded to ANC-owned firms through the Small Business Administration’s (SBA’s) 8(a) Program, in particular, reportedly tripled between FY2004 ($1.1 billion) and FY2008 ($3.9 billion). This widely reported increase has generated congressional and public interest in the legal authorities governing contracting with these entities.

Federal agencies can presently contract with ANCs or ANC-owned firms under various authorities. The identity of the procuring agency and the small business status of the ANC or ANC-owned firm determine, in part, which authority governs in particular circumstances. First, the Armed Services Procurement Act (ASPA) of 1947 and the Federal Property and Administrative Services Act (FPASA) of 1949, as amended, generally give defense and civilian agencies, respectively, broad authority to contract with any qualified, responsible source, including ANCs and ANC-owned firms. These acts also authorize agencies to make sole-source awards to ANCs or ANC-owned firms in certain circumstances (e.g., single source, unusual or compelling circumstances), although such sole-source awards must be justified in writing and approved by agency officials. Second, Section 15 of the Small Business Act of 1958 authorizes agencies to “set aside” contracts for small businesses by conducting competitions in which only they can compete. Section 15 does not, however, authorize sole-source awards. Third, Section 8(a) of the Small Business Act authorizes set-asides and sole-source awards to small businesses owned and controlled by socially and economically disadvantaged individuals or groups. Under Section 8(a), contracts valued in excess of $4 million ($6.5 million for manufacturing contracts) must be set aside for 8(a) firms and cannot be awarded noncompetitively unless (1) there is not a reasonable expectation that at least two eligible and responsible 8(a) firms will submit offers at a fair market price or (2) the SBA accepts the requirement on behalf of an 8(a) firm owned by an ANC, Indian tribe, or, in the case of Department of Defense (DOD) contracts, a Native Hawaiian Organization. Until 2009, such sole-source awards were not subject to justifications or approvals, unlike those under ASPA and FPASA. Fourth, various statutes pertaining to Native Americans provide for the payment of a 5% bonus to federal contractors that subcontract with ANCs; allow contracts with “large” ANCs to count toward federal prime contractors’ goals for subcontracting with small businesses; and provide that any size ANC counts as a disadvantaged business enterprise for certain transportation contracts. Fifth, various appropriations riders allow DOD to contract out functions performed by government employees to ANCs without going through the competitive sourcing process normally required.

Members of the 112th Congress have introduced legislation (H.R. 598, S. 236) that would generally subject ANC-owned firms participating in the 8(a) Program to the same treatment as individually owned firms. Among other things, this legislation would preclude ANC-owned firms from receiving sole-source awards valued in excess of $4 million ($6.5 million for manufacturing contracts) under the authority of Section 8(a) of the Small Business Act.

SBA also recently promulgated regulations that prohibit ANC-owned firms from receiving a solesource 8(a) contract that is a follow-on contract to an 8(a) contract that was performed immediately previously by another firm owned by the same ANC, as well as require ANC-owned firms to report annually on the benefits provided to Alaska Natives through the ANC’s participation in the 8(a) Program.



Date of Report: December 15, 2011
Number of Pages: 27
Order Number: R40855
Price: $29.95

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Tuesday, December 27, 2011

Consumer Bankruptcy and Household Debt


Mark Jickling
Specialist in Financial Economics

Jennifer Teefy
Information Research Specialist


The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA; P.L. 109-8) included the most significant amendments to consumer bankruptcy procedures since the 1970s. Bankruptcy reform was enacted in response to the high number of consumer bankruptcy filings, which in 2004 and 2005 reached five times the level of the early 1980s. Why did filings increase so dramatically during a period that included two of the longest economic expansions in U.S. history? Because bankruptcy is by definition a condition of excessive debt, many would expect to see a corresponding increase in the debt burden of U.S. households over the same period. However, while household debt has indeed grown, debt costs as a percentage of income have risen only moderately. What aggregate statistics do not show is that the debt burden does not fall evenly on all families. Financial distress is common among lower-income households: in 2007, 27% of families in the bottom fifth of the income distribution spent more than 40% of their income to repay debt.

Following the effective date of BAPCPA, in October 2005, there was a sharp reduction in the number of bankruptcy filings, reflecting the “rush to the courthouse” in the months before the new law took effect. Since the 2006 lows, the number of filings has risen steadily. In 2010, personal bankruptcy filings reached 1.5 million, roughly equal to the pre-BAPCPA level. It appears that BAPCPA has not produced the effect its supporters hoped for—a substantial and permanent reduction in the rate of consumer bankruptcy.

With the recession that began in December 2007, the long-term upward trend in consumer indebtedness was interrupted. Beginning in the middle of 2008, the amount of debt held by U.S. households declined for 11 consecutive quarters. Through the third quarter of 2011, households reduced their debt burden by $853 billion, or 6.5%. Causes and implications of this trend are discussed in CRS Report R41623, Household Deleveraging: Why Is Consumer Debt Falling?, by Mark Jickling and Darryl E. Getter.

This report presents statistics on bankruptcy filings, household debt, and families in financial distress. It will be updated as new statistics become available.



Date of Report: December 12, 2011
Number of Pages: 9
Order Number: RS20777
Price: $19.95

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