Once again it is a pleasure to welcome Commissioner Abraham before the Joint Economic Committee. I would also like to thank the BLS for the study of the issues raised by the Boskin Commission report that is being released today. As I have said before, the BLS is one of the finest statistical agencies in the world, and this BLS study makes an important contribution to our understanding of the measurement issues related to the CPI. In exploring these difficult issues, the BLS study confirms the central role of quality change in the whole controversy.

      The employment data released today shows that the current business cycle upturn continues to generate job gains. According to the payroll survey, 138,000 jobs were created in May, and the April gain was revised upward to 323,000. Manufacturing employment declined. The household survey indicates that employment rose by 255,000 last month.

      The civilian unemployment rate, which had fallen to 4.9 percent in the previous month, stood at 4.8 percent in May. The employment-population ratio, an important measure of the economy's ability to create enough jobs, climbed to 63.9 percent, a record high. The main soft spot is that other BLS data indicate that the earnings of middle income Americans continue to stagnate.

      The bottom line is that the sustained cyclical expansion continues to generate economic and employment growth. Let's give credit where credit is due: to the workers, entrepreneurs and farmers across this country whose efforts have expanded the economy. To the extent Federal policy has played a role, the anti-inflationary policies of the Federal Reserve have sustained this expansion by keeping inflation and interest rates low, laying a solid foundation for continued economic growth and lower unemployment rates. The notion that low inflation leads to high unemployment is contradicted by the experience of the last three decades.

      In recent months there has been much scrutiny of labor market data for clues about the implications for future Federal Reserve policy. Our research here at the JEC indicates that while labor market data have important uses, they are not reliable guides of current or future inflation. This JEC research finds that price measures such as the CPI and forward looking indicators such as commodity prices, the value of the dollar, and bond yields are more reliable indicators of inflation. According to these price measures, there is no real evidence that current or future inflation is a danger. The good news is that the economy is growing at a healthy pace, unemployment remains low, and inflation is flagging.

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