U.S.

T R E A SUR Y D E PA R T M E NT

U PDA T E D E ST I M A T E S OF N E W L Y H I R E D E M PL O Y E E S
E L I G I B L E F O R T H E H I R E A C T T A X E X E M PT I O N
Report Includes State-by-State Estimates of Eligible Hires

September 6, 2010
 Updated Estimates of Newly Hired Employees
Eligible for HIRE Act Tax Exemption

Report Includes State-by-State Estimates of Eligible Hires

This report updates and supplements the U.S. Department of Treasury’s ongoing analysis of the
number of newly hired workers whose employers could potentially qualify for tax exemptions
under the Hiring Incentives to Restore Employment (HIRE) Act of 2010. The HIRE Act exempts
employers from paying their 6.2 percent share of the Social Security payroll tax for the
remainder of 2010 for eligible new hires, and provides a $1,000 tax credit to employers if they
retain eligible workers for 52 weeks. This report provides monthly updated estimates of
potential eligibility under the HIRE Act, including data through July 2010. According to the
updated estimates, from February 2010 to July 2010, businesses hired 6.9 million new workers
who had been unemployed for eight weeks or longer; that figure will grow over the year as
additional eligible employees are hired.

This report includes state-by-state estimates of the number of newly hired workers whose
employers potentially qualify for the HIRE Act tax exemption under the HIRE Act. In addition,
this report includes regional breakdowns of the industries in which eligible workers are being
hired.

The HIRE Act, which President Obama signed into law in March 2010, is an example of a
targeted, time-limited program that promotes private-sector job growth. The HIRE Act gives
employers an incentive to accelerate hiring this year because the payroll tax exemption expires at
the end of 2010.

The updated estimates extend previous Treasury analysis by including workers hired between
June and July 2010. Among the key findings are:

• From February to July of 2010, an estimated 6.9 million workers who had been
unemployed for eight weeks or longer were hired by employers who are eligible for the
HIRE Act payroll tax exemption. This estimate includes 1.3 million workers who were
hired between June and July 2010. (see Table 1)

• Newly hired workers whose employers are eligible for the HIRE Act payroll tax
exemption constitute 11.8 percent of all workers who were unemployed for eight weeks
or longer since the law took effect in February 2010. In other words, about one in eight
workers who have been unemployed for eight weeks or longer are hired in the subsequent
month. (see Table 2 and Figure 1)

• The 10 states with the largest number of workers whose employers potentially qualify for
HIRE Act tax exemptions are: California (946,337 hires); Texas (461,075); New York
(405,001), Florida (364,410); Illinois (325,421); Pennsylvania (287,530); Ohio (261,830);
Georgia (217,526); Michigan (209,406); and New Jersey (206,932). Table 6 reports the
number of eligible new hires for each state.

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In addition to these findings, Table 3 reports the demographic characteristics of the newly hired,
eligible workers. Table 4 reports the industries in which the newly hired workers were employed
prior to their period of unemployment and the industries in which the newly hired workers found
jobs. About one fifth of newly hired exemption-eligible workers were previously employed in
the construction industry. Similarly, employers in the construction industry have hired the
largest share of exemption-eligible workers since February 2010, though that share is slightly
lower than the share previously employed in construction. Table 5 reports the industries for each
of the four geographic regions.

Comprehensive data on the use of the HIRE Act from the Internal Revenue Service (IRS) will
not be available until after employers file tax returns in 2011. In the interim, Treasury’s Office
of Economic Policy is providing monthly estimates of the number of newly hired workers whose
employers potentially qualify for the HIRE Act tax exemption. These interim estimates are
based on Treasury analysis of the Current Population Survey, a monthly survey conducted by the
Bureau of Labor Statistics.

Additional Background on the HIRE Act

On March 18, 2010 President Obama signed into law the Hiring Incentives to Restore
Employment (HIRE) Act of 2010. The HIRE Act provides employers an incentive to hire
workers who have been unemployed for 60 days or longer by exempting wages paid to these
workers from the employer’s 6.2 percent contribution of Social Security payroll taxes for the
remainder of 2010. In addition, the HIRE Act allows employers to claim a tax credit of up to
$1,000 for each newly hired qualifying worker who is retained for one year. If, for example, an
employer hires an unemployed worker and pays that worker $40,000 in salary this year, the
HIRE Act tax exemption will reduce the employer’s payroll tax obligations by up to $2,480 this
year (6.2 percent of $40,000), and, if the employer retains that worker for 52 weeks, the
employer will receive in addition a $1,000 tax credit, bringing the total tax savings to as much as
$3,480.

Employers can claim the HIRE Act tax exemption for all wages paid to qualifying employees
through the remainder of 2010.

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Methodology

The estimates in this report use the Current Population Survey, which is the basis for official
government labor force statistics, such as the unemployment rate. The CPS consists of a
representative sample of about 50,000 housing units a month, and labor force questions are asked
concerning all working-age adult members in the household. The labor force questions relate to
the worker’s labor force status in the CPS reference week, which is the week that contains the
12th day of the month. The specific date that a worker transitions from one labor force status to
another is not reported.

The rotation group design of the CPS allows us to create two-month linked samples by matching
surveyed workers in one month to their records in the next month. This is possible for
approximately three fourths of the CPS sample.

For this report, workers are identified as eligible for the tax exemption if they report that they
have been unemployed for eight weeks or longer in the first month of the two month period.
Eligible workers who report holding a job with a private employer in the second month of the
two-month period are classified as qualifying for the tax exemption under the HIRE Act.

A full description of the methods used to construct these estimates can be found in the July 12,
2010 Treasury report, which is available at: http://www.treas.gov/press/releases/docs/HIREAct-
Analysis-7-11-2010-FINAL.pdf

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 Table 1: Estimated Number of New Hires
for which Employer is Eligible for HIRE Act Tax Exemption
New Average
Transition months Exemption-Eligible Hires Weekly Earnings*
Feb-10 to Mar-10 1,385,937 $476
Mar-10 to Apr-10 1,765,519 $536
Apr-10 to May-10 1,319,394 $524
May-10 to June-10 1,137,858 $518
June-10 to July-10 1,273,247 $453
Total 6,881,956 $501
Note: *Average weekly earnings are estimated from the out-going rotation group
subsample of the CPS. Earnings are reported on the new job in the second month of the
linked sample (i.e., pertaining to March through July).

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 Table 2: Monthly Transition Rates
for Workers Unemployed 8 Weeks or More

Total Employment Status in 2nd Month

Workers Private
Unemployed Exemption- Out of
≥ 8 weeks Eligible Other Still labor
Months in 1st Month Employment * employment ** unemployed force
Dec, ‘08 to Jan, ‘09 6,465,697 9.3% 2.0% 66.7% 22.0%
Jan to Feb, 2009 7,973,379 10.3% 2.3% 67.4% 20.1%
Feb to Mar, 2009 9,014,765 11.0% 2.6% 66.3% 20.0%
Mar to Apr, 2009 9,829,540 14.2% 3.2% 64.1% 18.5%
Apr to May, 2009 9,691,569 11.1% 2.2% 67.0% 19.7%
May to Jun, 2009 9,753,553 11.2% 2.0% 68.7% 18.1%
Jun to Jul, 2009 9,934,851 11.8% 2.6% 67.3% 18.4%
Jul to Aug, 2009 10,618,786 10.1% 2.3% 66.6% 20.9%
Aug to Sep, 2009 10,868,047 11.3% 3.7% 65.7% 19.3%
Sep to Oct, 2009 11,040,918 10.1% 2.5% 68.1% 19.2%
Oct to Nov, 2009 10,804,514 10.7% 1.8% 68.6% 18.9%
Nov to Dec, 2009 10,928,733 7.9% 1.6% 70.6% 19.9%
Dec, ‘09 to Jan, ‘10 10,821,742 8.3% 1.5% 69.8% 20.4%
Jan to Feb, 2010 11,904,522 8.9% 1.7% 71.2% 18.2%
Feb to Mar, 2010 12,201,584 11.4% 2.3% 67.2% 19.1%
Mar to Apr, 2010 12,546,709 14.1% 2.9% 63.7% 19.4%
Apr to May, 2010 11,807,334 11.2% 2.9% 66.4% 19.5%
May to Jun, 2010 10,959,952 10.4% 1.7% 66.6% 21.3%
Jun to Jul, 2010 10,485,566 12.1% 2.5% 65.6% 19.8%
Jul to Aug, 2010 11,121,822 - - - -

Feb to June 2010 (Average) 11.8% 2.5% 65.9% 19.8%

* **
Note: Exemption-eligible jobs include all private, non-self-employed jobs; Other
employment includes government, self-employment, and employment without pay.

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 Table 3: Demographic Characteristics of New Hires and Unemployed in 2010,
by HIRE Act Tax Exemption Eligibility
Eligible for HIRE Act Tax Exemption All
Unemployed
Feb to Mar to Apr to May to Jun to Total Feb to
Mar Apr May Jun Jul Feb to Jul Jul
Gender
Men 67.9% 68.8% 63.7% 62.2% 61.8% 65.2% 59.3%
Women 32.1% 31.2% 36.3% 37.8% 38.2% 34.8% 40.7%
Age
less than 25 24.7% 19.9% 26.9% 27.8% 29.1% 25.2% 26.2%
25 to 54 65.8% 70.9% 63.4% 60.1% 62.9% 65.2% 59.7%
55+ 9.5% 9.3% 9.7% 12.2% 7.9% 9.6% 14.1%
Race
White 77.8% 80.7% 77.1% 76.1% 73.2% 77.3% 74.2%
Black 17.0% 13.5% 18.1% 15.3% 19.0% 16.4% 18.6%
Other 5.2% 5.8% 4.8% 8.6% 7.7% 6.3% 7.2%
Hispanic origin 23.1% 21.8% 21.2% 23.7% 21.8% 22.3% 18.3%
Education
Less than H.S. 24.2% 19.9% 17.1% 23.8% 19.2% 20.8% 21.1%
H.S. diploma 40.3% 39.4% 43.7% 35.3% 40.1% 39.8% 37.1%
Some college 21.6% 27.2% 27.0% 22.5% 27.4% 25.3% 26.6%
Bachelor's degree 11.3% 10.9% 8.5% 15.9% 10.9% 11.3% 11.7%
Beyond college 2.5% 2.7% 3.8% 2.5% 2.3% 2.7% 3.6%

Note: Each panel presents the share of the sample in that row category. For example, 67.9
percent of the eligible hires from February to March were male and 32.1 percent were female,
while 60.1 percent of all unemployed workers from February to May were male and 39.8 percent
were female.

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 Table 4: Industry of HIRE Act Exemption-Eligible New Hires and Unemployed,
Total February to July, 2010
HIRE Act Former
Exemption-Eligible New Hires Industry of All
Former Industry New Industry Unemployed

Construction 20.3% 17.7% 16.2%

Manufacturing 12.1% 9.9% 12.7%
Retail trade 13.0% 12.2% 13.3%
Transportation and utilities 5.4% 5.0% 4.1%
Financial activities 4.3% 4.2% 5.2%
Professional and business services 11.6% 13.5% 12.8%
Educational and health services 8.5% 9.2% 11.4%
Leisure and hospitality 11.5% 13.3% 12.0%
All other industries 13.4% 15.1% 12.2%

Note: All other industries include: Agriculture, forestry, fishing, and hunting, mining,
information, wholesale trade and other services.

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Table 5: Industry of HIRE Act Exemption-Eligible New Hires and Unemployed,
Total February to July, 2010 by region

Northeast Region

Eligible for HIRE Act Tax Relief Total

Unemployed
Major Industry Former Industry New Industry Feb to Jul
Construction 25.9% 19.2% 13.3%
Manufacturing 11.2% 11.5% 13.1%
Retail trade 12.0% 7.3% 14.2%
Transportation and
utilities 3.5% 3.4% 3.1%
Financial activities 5.5% 6.0% 6.9%
Professional and
business services 11.4% 15.7% 13.7%
Educational and
health services 9.9% 14.7% 13.7%
Leisure and
hospitality 9.6% 13.3% 11.5%
All others 10.9% 8.9% 10.5%

Midwest Region

Eligible for HIRE Act Tax Relief Total

Unemployed
Major Industry Former Industry New Industry Feb to Jul
Construction 22.9% 20.0% 17.6%
Manufacturing 15.4% 11.7% 16.0%
Retail trade 10.3% 13.0% 11.9%
Transportation and
utilities 6.0% 4.2% 4.7%
Financial activities 3.0% 2.6% 3.6%
Professional and
business services 14.9% 15.1% 13.0%
Educational and
health services 6.5% 10.4% 11.6%
Leisure and
hospitality 10.7% 11.8% 11.2%
All others 10.3% 11.3% 10.4%

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Table 5 Continued: Industry of HIRE Act Exemption-Eligible New Hires and Unemployed,
Total February to July, 2010 by region

South Region

Eligible for HIRE Act Tax Relief Total

Unemployed
Major Industry Former Industry New Industry Feb to Jul
Construction 17.1% 16.4% 15.6%
Manufacturing 11.7% 8.5% 12.1%
Retail trade 16.4% 15.7% 13.7%
Transportation and
utilities 5.9% 5.6% 4.6%
Financial activities 3.3% 4.0% 5.1%
Professional and
business services 9.5% 11.1% 12.4%
Educational and
health services 10.3% 8.0% 11.3%
Leisure and
hospitality 12.8% 14.8% 13.0%
All others 13.0% 16.0% 12.2%

West Region

Eligible for HIRE Act Tax Relief Total

Unemployed
Major Industry Former Industry New Industry Feb to Jul
Construction 18.5% 16.5% 17.5%
Manufacturing 10.2% 9.2% 10.3%
Retail trade 12.0% 10.4% 13.4%
Transportation and
utilities 5.3% 5.9% 3.7%
Financial activities 5.7% 4.6% 5.7%
Professional and
business services 11.3% 13.6% 12.4%
Educational and
health services 7.2% 6.1% 10.0%
Leisure and
hospitality 11.7% 12.9% 11.9%
All others 18.2% 20.9% 14.9%

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 Table 6: Number of New Hires for which Employer is
Eligible for HIRE Act Tax Exemption, by State
Number of Number of
State eligible hires State eligible hires
AL 98,555 MT 18,138
AK 23,609 NE 21,830
AZ 196,479 NV 87,634
AR 55,668 NH 26,052
CA 946,337 NJ 206,932
CO 131,140 NM 37,216
CT 73,060 NY 405,001
DE 16,166 NC 205,212
DC 11,438 ND 10,173
FL 364,410 OH 261,830
GA 217,526 OK 42,857
HI 23,750 OR 97,150
ID 34,968 PA 287,530
IL 325,421 RI 26,604
IN 203,776 SC 114,054
IA 67,723 SD 13,019
KS 51,004 TN 117,579
KY 98,728 TX 461,075
LA 94,231 UT 67,810
ME 35,802 VT 11,096
MD 115,273 VA 142,931
MA 102,377 WA 203,757
MI 209,406 WV 25,699
MN 126,233 WI 136,760
MS 52,121 WY 12,407
MO 166,409 Total 6,881,956

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Figure 1: Monthly Transition Rate to Private Exemption-Eligible Employment,
For Workers Unemployed 8 Weeks or More

Note: This chart presents data reported in Table 2. The solid line represents the estimated
transition rates into private exemption-eligible employment for each month. The dashed
lines represent the estimated transition rate plus and minus one standard error. Standard
errors are computed using the sample weights provided by the CPS for the initial month of
each two month linked sample.

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