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Table 1-1.—Administration Economic Forecast 1YearNominalGDPReal GDP(chaintype)Percent change, Q4-to-Q4Consumerpriceindex(CPI-U)GDP priceindex(chaintype)Unemploymentrate(percent)Interestrate,91-dayTreasurybills 2(percent)Interestrate,10-yearTreasurynotes(percent)Level, calendar yearNonfarmpayrollemployment(averagemonthlychange,Q4-to-Q4,thousands)32006 (actual)........ 5.4 2.6 2.7 1.9 4.6 4.7 4.8 1922007..................... 5.1 2.7 2.3 3.9 4.6 4.4 4.7 1292008..................... 4.8 2.7 2.0 2.1 4.9 3.7 4.6 1092009..................... 5.1 3.0 2.0 2.2 4.9 3.8 4.9 1292010..................... 5.0 3.0 2.0 2.3 4.8 4.0 5.1 1182011..................... 5.0 2.9 2.0 2.3 4.8 4.1 5.2 1122012..................... 4.9 2.8 2.0 2.3 4.8 4.1 5.3 1022013..................... 4.9 2.8 2.0 2.3 4.8 4.1 5.3 921 Based on data available as of November 15, 2007.2 Secondary market discount basis.3 The figures do not reflect the upcoming BLS benchmark which is expected to reduce 2006 and 2007 job growth by acumulative 300,000 jobs.Sources: Council of Economic Advisers, Department of Commerce (Bureau of Economic Analysis and Economics andStatistics Administration), Department of Labor (Bureau of Labor Statistics), Department of the Treasury, and Offi ce ofManagement and Budget.forecasters for those years. After 2008, the year-by-year pace is close to theestimated growth rate of potential real GDP, a measure of the rate of growthof productive capacity. (An economy is said to be growing at its potentialrate when all of its resources are utilized and inflation is stable. The supplysidecomponents of potential GDP growth are presented in Table 1-2 andare discussed below.) The unemployment rate is projected to be roughly flatin 2008 and 2009 at around its December 2007 level before edging backdown to 4.8 percent thereafter. As discussed below, potential GDP growth isexpected to slow in the medium term as productivity growth reverts towardits long-run trend (about 2.5 percent per year), and to slow further duringthe period from 2008 to 2011 as labor force growth declines due to the retirementof the baby-boom generation.The growth rate of the economy over the long run is determined by itssupply-side components, which include population, labor force participation,the ratio of nonfarm business employment to household employment, thelength of the workweek, and labor productivity. The Administration’s forecastfor the contribution of the growth rates of different supply-side factorsto real GDP growth is shown in Table 1-2.The labor force participation rate generally fell from 2001 to 2007 andis projected to trend lower through 2013. The recent behavior stands incontrast to the long period of increase from 1960 through 1996. Looking44 | Economic Report of the <strong>President</strong>
Table 1-2.—Supply-Side Components of Real GDP Growth, 1953–2013[Average annual percent change]Item1953 Q2to1973 Q41973 Q4to1995 Q21995 Q2to2001 Q12001 Q1to2007 Q32007 Q3to2013 Q41) Civilian noninstitutional population aged 16+ 1 ........................... 1.6 1.4 1.2 1.2 0.92) PLUS: Civilian labor force participation rate............................... 0.2 0.4 0.1 -0.3 -0.23) EQUALS: Civilian labor force 2 ...................................................... 1.8 1.8 1.4 0.9 0.74) PLUS: Civilian employment rate ................................................. -0.1 0.0 0.3 -0.1 0.05) EQUALS: Civilian employment 2 ................................................... 1.7 1.8 1.6 0.8 0.76) PLUS: Nonfarm business employment asa share of civilian employment 2,3 ..................................... -0.1 0.1 0.4 -0.5 0.07) EQUALS: Nonfarm business employment 4 .................................. 1.6 1.9 2.0 0.4 0.78) PLUS: average weekly hours (nonfarm business) ....................... -0.3 -0.3 -0.1 -0.2 0.09) EQUALS: Hours of all persons (nonfarm business) 4 .................... 1.3 1.6 1.9 0.2 0.710) PLUS: Output per hour (productivity, nonfarm business) 4 ........... 2.5 1.5 2.4 2.7 2.511) EQUALS: Nonfarm business output 4 ........................................... 3.8 3.1 4.3 2.9 3.212) PLUS: Ratio of real GDP to nonfarm business output 5 ................ -0.2 -0.2 -0.5 -0.3 -0.413) EQUALS: Real GDP ...................................................................... 3.6 2.8 3.8 2.6 2.81 Adjusted by CEA to smooth discontinuities in the population series since 1990.2 BLS research series adjusted to smooth irregularities in the population series since 1990.3 Line 6 translates the civilian employment growth rate into the nonfarm business employment growth rate.4 Nonfarm employment, workweek, productivity, and output sourced from the BLS productivity and cost database.5 Line 12 translates nonfarm business output back into output for all sectors (GDP), which includes the output of farms andgeneral government.Note: 1953 Q2, 1973 Q4, and 2001 Q1 are NBER business-cycle peaks.Detail may not add to total because of rounding.Sources: Council of Economic Advisers, Department of Commerce (Bureau of Economic Analysis) and Department of Labor(Bureau of Labor Statistics).Box 1-3: Aging and the Pattern of Labor Force ParticipationThe overall labor force participation rate trended up to 67.1 percentin 1997, and after holding steady between 1997 and 2000, has generallyedged lower during the past 7 years. Men’s labor force participation ratesfell fairly steadily through 2004. Women’s labor force participation rosesteadily through 1999, and has edged lower since then.continued on the next pageChapter 1 | 45
Page 1 and 2: EconomicReportof thePresidentTransm
Page 4 and 5: C O N T E N T SPageECONOMIC REPORT
Page 7 and 8: ECONOMIC REPORT OF THE PRESIDENTTo
Page 9: $2 billion to a new international c
Page 13: LETTER OF TRANSMITTALCouncil of Eco
Page 16 and 17: chapter 3. the causes and consequen
Page 18 and 19: appendixesA. Report to the Presiden
Page 20 and 21: 2-5. Mortgage Lending Today........
Page 22 and 23: Chapter 1: The Year in Reviewand th
Page 24 and 25: Chapter 3: The Causes and Consequen
Page 26 and 27: • Tax reductions in 2001 and 2003
Page 28 and 29: • More effective statistical use
Page 30 and 31: • Real GDP posted solid 2.5 perce
Page 32 and 33: elative to non-energy prices, while
Page 34 and 35: nonconforming mortgages in 2007. In
Page 36 and 37: In addition to incomes and mortgage
Page 38 and 39: Business InventoriesInventory inves
Page 40 and 41: Indeed, the growth in foreign econo
Page 42 and 43: During the 12 months of 2007, the u
Page 44 and 45: output measures announced in the an
Page 46 and 47: and government purchases. In contra
Page 50 and 51: Box 1-3 — continuedParticipation
Page 52 and 53: finalized), below its 1963-2006 ave
Page 55 and 56: C H A P T E R 2Credit and Housing M
Page 57 and 58: lends a debtor money today, which t
Page 59 and 60: Box 2-1 — continuedPrime loan: Lo
Page 61 and 62: Box 2-2 — continuedNRSROs. Critic
Page 63 and 64: Box 2-3 — continuedMortgage defau
Page 65 and 66: Box 2-3 — continuedmortgage defau
Page 67 and 68: Corporate bond yields also rose rel
Page 69 and 70: conduits in that SIVs have less acc
Page 71 and 72: International ImplicationsA notable
Page 73 and 74: come together to create a coordinat
Page 75 and 76: home is forgiven, that portion is t
Page 77 and 78: alternatives offered in the convent
Page 79 and 80: to such a change in wealth, which a
Page 81: lending. FHA Modernization will enc
Page 84 and 85: Economists often call attention to
Page 86 and 87: Box 3-1: Trade in ServicesDiscussio
Page 88 and 89: Box 3-2: The Current Account Defici
Page 90 and 91: Growth in Domestic ProductionA seco
Page 92 and 93: Exports and Foreign Direct Investme
Page 94 and 95: in CFIUS’s role in protecting nat
Page 96 and 97: these goods than if they were produ
Page 98 and 99:
y import competition are electrical
Page 101 and 102:
C H A P T E R 4The Importance of He
Page 103 and 104:
Box 4-1: Health Effects on Job Prod
Page 105 and 106:
health care spending growth. Rising
Page 107 and 108:
While the study focused on spending
Page 109 and 110:
Box 4-2 — continuedand without pr
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effective price of zero. Even if a
Page 113 and 114:
deduction for health insurance to a
Page 115 and 116:
To reduce the extent to which high-
Page 117 and 118:
Administration supports broad adopt
Page 119 and 120:
C H A P T E R 5Tax PolicySocieties
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in 2000. Tax revenues increased str
Page 123 and 124:
Alternative Minimum TaxPrior to 196
Page 125 and 126:
The Impact of Recent Tax Reductions
Page 127 and 128:
35 percent marginal tax rate on the
Page 129 and 130:
C corporations fall under the corpo
Page 131 and 132:
Significance of Tax Cuts to Individ
Page 133 and 134:
Box 5-1: Marriage Penalty BasicsIt
Page 135 and 136:
The Structure of Business TaxesDesp
Page 137 and 138:
investments are made. A more modest
Page 139 and 140:
able to defer $35 of tax liability
Page 141 and 142:
C H A P T E R 6The Nation’s Infra
Page 143 and 144:
A monopolistic bridge owner may cho
Page 145 and 146:
etween places to accommodating grow
Page 147 and 148:
the same time. At hours when many d
Page 149 and 150:
BridgesOn August 1, 2007, the I-35W
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where shippers have an alternative
Page 153 and 154:
Freight shipments into and out of t
Page 155 and 156:
Box 6-2: Delays at New York City Ai
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uilt, the marginal cost of transmis
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access was in mobile wireless conne
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Infrastructure PolicyThough the U.S
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could shorten the wait by adding an
Page 165 and 166:
In 2005, the Federal Aviation Admin
Page 167 and 168:
C H A P T E R 7Searching for Altern
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The first U.S. oil well was drilled
Page 171 and 172:
Most of the oil consumed in the Uni
Page 173 and 174:
Also, depending on the fuel and tec
Page 175 and 176:
Table 7-1. —Estimated Average Lev
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Nevada. The facility is expected to
Page 179 and 180:
Wind PowerWind power supplies about
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amounts of electricity, it could be
Page 183 and 184:
years, as corn-based ethanol produc
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the power, range, and convenient fu
Page 187 and 188:
other petroleum products is project
Page 189 and 190:
To help meet the growing demand for
Page 191 and 192:
C H A P T E R 8Improving Economic S
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The second largest Federal statisti
Page 195 and 196:
As shown in Chart 8-3, spending on
Page 197 and 198:
Monetary and fiscal policymakers al
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service-sector output much more fre
Page 201 and 202:
Box 8-1: How to Reverse a Decline i
Page 203 and 204:
Information Protection and Statisti
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forward instead of the growth rate
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Appendix AREPORT TO THE PRESIDENT O
Page 210 and 211:
Council Members and Their Dates of
Page 213 and 214:
Report to the President on theActiv
Page 215 and 216:
The Council also prepared in-depth
Page 217 and 218:
The Staff of the Council of Economi
Page 219:
Jane Tufts, Bruce Kaplan, and Anna
Page 223 and 224:
C O N T E N T SNational Income or E
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Prices—ContinuedPageB-63. Changes
Page 227 and 228:
General NotesDetail in these tables
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Table B-1.—Gross domestic product
Page 231 and 232:
Table B-2.—Real gross domestic pr
Page 233 and 234:
Table B-4.—Percent changes in rea
Page 235 and 236:
Table B-5.—Contributions to perce
Page 237 and 238:
Table B-6.—Chain-type quantity in
Page 239 and 240:
Table B-7.—Chain-type price index
Page 241 and 242:
Table B-9.—Real gross domestic pr
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Table B-11.—Real gross value adde
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Table B-12.—Gross domestic produc
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Table B-13.—Real gross domestic p
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Table B-15.—Gross value added and
Page 251 and 252:
Table B-17.—Real personal consump
Page 253 and 254:
Table B-19.—Real private fixed in
Page 255 and 256:
Table B-21.—Real government consu
Page 257 and 258:
QuarterTable B-23.—Real private i
Page 259 and 260:
Table B-25.—Real exports and impo
Page 261 and 262:
Table B-27.—Relation of national
Page 263 and 264:
Table B-28.—National income by ty
Page 265 and 266:
Table B-29.—Sources of personal i
Page 267 and 268:
Table B-31.—Total and per capita
Page 269 and 270:
Table B-32.—Gross saving and inve
Page 271 and 272:
Population, Employment, Wages, and
Page 273 and 274:
Table B-35.—Civilian population a
Page 275 and 276:
Table B-37.—Civilian employment b
Page 277 and 278:
Table B-39.—Civilian labor force
Page 279 and 280:
Table B-41.—Civilian employment/p
Page 281 and 282:
Table B-43.—Civilian unemployment
Page 283 and 284:
Table B-45.—Unemployment insuranc
Page 285 and 286:
Table B-46.—Employees on nonagric
Page 287 and 288:
Table B-48.—Employment cost index
Page 289 and 290:
Table B-50.—Changes in productivi
Page 291 and 292:
Table B-52.—Industrial production
Page 293 and 294:
Table B-54.—Capacity utilization
Page 295 and 296:
Table B-56.—New private housing u
Page 297 and 298:
Table B-58.—Manufacturers’ ship
Page 299 and 300:
PricesTable B-60.—Consumer price
Page 301 and 302:
Table B-61.—Consumer price indexe
Page 303 and 304:
Table B-63.—Changes in special co
Page 305 and 306:
Year or monthTable B-65.—Producer
Page 307 and 308:
Table B-66.—Producer price indexe
Page 309 and 310:
Table B-67.—Producer price indexe
Page 311 and 312:
Year and monthMoney Stock, Credit,
Page 313 and 314:
Table B-70.—Components of money s
Page 315 and 316:
Table B-72.—Bank credit at all co
Page 317 and 318:
Table B-73.—Bond yields and inter
Page 319 and 320:
Table B-74.—Credit market borrowi
Page 321 and 322:
Table B-76.—Mortgage debt outstan
Page 323 and 324:
Government FinanceTable B-78.—Fed
Page 325 and 326:
Table B-80.—Federal receipts and
Page 327 and 328:
Table B-82.—Federal and State and
Page 329 and 330:
Table B-84.—Federal Government cu
Page 331 and 332:
Table B-86.—State and local gover
Page 333 and 334:
Table B-88.—Maturity distribution
Page 335 and 336:
Corporate Profits and FinanceTable
Page 337 and 338:
Table B-92.—Corporate profits of
Page 339 and 340:
Table B-94.—Relation of profits a
Page 341 and 342:
Year or monthTable B-96.—Common s
Page 343 and 344:
Table B-98.—Farm business balance
Page 345 and 346:
YearTotalTable B-100.—Farm input
Page 347 and 348:
Table B-102.—U.S. exports and imp
Page 349 and 350:
Table B-103.—U.S. international t
Page 351 and 352:
Table B-105.—U.S. international t
Page 353 and 354:
Table B-107.—International invest
Page 355 and 356:
Table B-109.—Civilian unemploymen
Page 357 and 358:
Table B-111.—International reserv
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