Economic Report of the President

e positive for employment growth. This is because part of the increase inoutput is distributed to workers in the form of higher real wages and benefitsand part to owners of capital in the form of profits. The fraction of nationalincome accorded to profits has risen in recent years, with the share going toprofits at 10.9 percent in the third quarter of 2004, up from an average of9.3 percent during the 1980s and 1990s. The fraction accorded to wagepayments and benefits has been approximately constant over longer periodsof time. A return to the historical pattern would result in rising real wages.The behavior of unemployment during the recent expansion, thoughatypical when compared with expansions from the 1960s through the 1980s,roughly matches the behavior of unemployment during the 1990s: acontinued rise in unemployment after the beginning of the expansion,followed by a gradual decline about a year later.SummaryThe beginnings of the last two expansions have been characterized bymoderate growth in key macroeconomic variables: real GDP, consumption,investment, employment, and unemployment. The beginning of the mostrecent expansion has seen slower growth in investment and employment thanthe last one. The pace of economic expansion picked up, however, in the56 | Economic Report of the President