ECONOMIC REPORT OF THE PRESIDENT

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Figure 2-32 Nominal Wage Growth Over Past Year, 2003–2015 Percent Change 6 5 4 Compensation per Hour (2015:Q4) Average Hourly Earnings (Dec-2015) 3 2 1 Employment Cost Index (2015:Q4) 0 -1 2003 2005 2007 2009 2011 2013 2015 2017 Note: Compensation per hour is for the business sector. Average hourly earnings are for production and nonsupervisory workers. The employment cost index is for the private sector. Source: Bureau of Labor Statistics; Department of Labor; Haver Analytics. Figure 2-33 Consumer Price Inflation, 2012–2015 12-Month Percent Change 3.0 2.5 2.0 Federal Reserve Longer-Run Objective 1.5 Core PCE 1.0 Dec-15 0.5 Total PCE 0.0 2012 2013 2014 2015 2016 Source: Bureau of Economic Analysis; Haver Analytics. The Year in Review and the Years Ahead | 101
Percent 50 40 30 20 Figure 2-34 Energy and Import Price Inflation, 2005–2015 Non-Oil Import Prices (right axis) Percent 10 8 6 4 10 2015:Q4 2 0 0 -10 -20 -30 PCE Energy Prices (left axis) Dec-2015 -2 -4 -6 -40 -8 -50 -10 2005 2007 2009 2011 2013 2015 Note: The Personal Consumption Expenditures (PCE) energy price index is used to compute inflation. Source: Bureau of Economic Analysis; Haver Analytics. lower energy costs to non-energy goods likely weighed on core inflation this year. The speed and degree to which these factors wane are two keys to the inflationary pressures in the economy this year. Changes in import prices can meaningfully affect domestic price inflation through various channels. If imports become less expensive, then domestic price inflation may be reduced as consumers switch to relatively cheaper goods from abroad. Competitive pressures from lower import prices may also lead domestic producers to lower their prices. Finally, the lower price inflation for imported inputs may be passed through to goods produced domestically. Prices for non-oil imports declined sharply in 2015, weighing on domestic core price inflation (Figure 2-33). Over the four quarters of 2015, the price of non-oil imports fell 3.6 percent, the largest fourquarter decline since 2009:Q3. The decline in non-oil import prices likely reflects a stronger dollar as well as falling non-energy commodity prices. The pass through of non-oil import prices to core inflation is expected to continue, albeit to a lesser extent, in 2016. Survey-based measures of long-term expectations for inflation, have been generally well-anchored, both during the last recession and more recently. This steadiness suggests a view that the factors that pushed down inflation in 2015 will be temporary as well as confidence that the Federal Reserve will be able to address any inflationary pressures in the coming years. Nevertheless, market-based measures of inflation compensation 102 | Chapter 2
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ECONOMIC REPORT OF THE PRESIDENT To
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C O N T E N T S ECONOMIC REPORT OF
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economic report of the president To
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when a hardworking American loses h
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the annual report of the council of
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C O N T E N T S CHAPTER 1 INCLUSIVE
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CHAPTER 5 TECHNOLOGY AND INNOVATION
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APPENDIXES A. Report to the Preside
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3.4. Percent Gap Between Actual and
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6.6. Relationship between Output Gr
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C H A P T E R 1 INCLUSIVE GROWTH IN
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To promote inclusive growth, both c
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Percent 20 15 Figure 1-1 Share of I
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Table 1-1 Increase in Income Share
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Figure 1-3 Distribution of Househol
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narrows the pool of human capital t
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over the past several decades has b
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Figure 1-6a The "Great Gatsby Curve
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Figure 1-7 Change in Employment by
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and sellers—consumer and producer
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Percent 15 10 Figure 1-9 Corporate
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Percent 30 Figure 1-11 Share of Wor
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Figure 1-12 Real Construction Costs
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promoting equality of opportunity;
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the division of rents, they can red
Page 56 and 57: C H A P T E R 2 THE YEAR IN REVIEW
Page 58 and 59: cold weather.1 The economy rebounde
Page 60 and 61: Box 2-1: Impact of Oil Price Declin
Page 62 and 63: Roughly speaking, the decline in th
Page 64 and 65: Percent of GDP 10 Figure 2-3 Federa
Page 66 and 67: Figure 2-5 Government Purchases as
Page 68 and 69: 13 percent of GDP. Until 1990, Stat
Page 70 and 71: of new purchases.2 The increase in
Page 72 and 73: Figure 2-8 Actual and Consensus For
Page 74 and 75: Figure 2-10 Rates of Part-Time Work
Page 76 and 77: less than a tenth of the overall de
Page 78 and 79: Business fixed investment grew 3.1
Page 80 and 81: Percent 10 Figure 2-14 Personal Sav
Page 82 and 83: BEA revises the official statistics
Page 84 and 85: Index* 100 Figure 2-16 Real Income
Page 86 and 87: Box 2-5: Are Official Estimates of
Page 88 and 89: of consumer surplus, which should,
Page 90 and 91: Figure 2-19 National House Price In
Page 92 and 93: Box 2-6: Constraints on Housing Sup
Page 94 and 95: and also was estimated in recent re
Page 96 and 97: market. Nevertheless, the construct
Page 98 and 99: Figure 2-23 Net Investment as a Sha
Page 100 and 101: Percent 80 Figure 2-25 Total Payout
Page 102 and 103: Figure 2-28 Foreign Real GDP and U.
Page 104 and 105: Figure 2-30 Sources of Productivity
Page 108 and 109: Figure 2-35 Long-Term Inflation Exp
Page 110 and 111: Percent 18 Figure 2-36 Nominal 10-Y
Page 112 and 113: Table 2-1 Selected Interest Rates,
Page 114 and 115: are close to those projected by the
Page 116 and 117: International Economics (Petri and
Page 118 and 119: History Forecast 1953:Q2 to 2015:Q3
Page 120 and 121: inflation up to 2007 and then expec
Page 122: Upside and Downside Forecast Risks.
Page 125 and 126: earlier forecasts. Figure 3-1 shows
Page 127 and 128: Real GDP/WAP Growth 2011-2014 Figur
Page 129 and 130: economists would expect capital dee
Page 131 and 132: Figure 3-i Actual and Forecasted Wo
Page 133 and 134: affected the demographic trajectory
Page 135 and 136: over the first three quarters of 20
Page 137 and 138: Percentage Points 35 30 Figure 3-7
Page 139 and 140: the President for a discussion of t
Page 141 and 142: Box 3-2: Market Volatility in the S
Page 143 and 144: potential for rapid spillovers betw
Page 145 and 146: absorb unexpectedly high losses. In
Page 147 and 148: Box 3-3: Commodity Prices and Infla
Page 149 and 150: In November 2015, the IMF voted to
Page 151 and 152: Billions of U.S. Dollars 250 200 15
Page 153 and 154: U.S. exports are 12.5 percent of th
Page 155 and 156: Box 3-4: The Importance of the Tran
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The challenging environment for U.S
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child’s environment. Despite the
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and Rossin-Slater 2015).5 These adv
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Figure 4-2 Official Poverty Rate fo
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Figure 4-3 Likelihood of Scoring Ve
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Percent 100 90 80 70 60 50 40 30 20
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Figure 4-7 Achievement Gap is Large
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Hours per Week 24 22 20 Figure 4-9
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Percent 65 Figure 4-11 Preschool En
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Box 4-1: Gender Differences in Earl
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Card and Rothstein 2007; Dickerson
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depend on how parents choose to inv
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y many factors, which makes it diff
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Box 4-3: Federal Early Childhood Pr
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program served over 45 million Amer
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Reauthorization Act of 2015, signed
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document that desegregation of hosp
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to alleviate hunger by supplementin
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adulthood (Hoynes, Schanzenbach, an
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of preschoolers support their child
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program and up to 15 years after co
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a longer period than is true of mos
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to be higher today than in the past
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Figure 4-18 Most Early Childhood Pr
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the preschool programs in Georgia a
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test scores by 6 to 9 percent of a
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Figure 4-20 Increase in Probability
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increased earnings by 31 percent (F
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Figure 5-1 Labor Productivity Growt
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Competition and Dynamism Play a Cri
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adopts pre-existing technology or k
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Figure 5-2 Quantity and Volume of V
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Box 5-2: Occupational Licensing One
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in consumer welfare as they erode t
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Finally, some workers may acquire s
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Box 5-3: Major Research Initiatives
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Figure 5-5 Federal and Nonfederal R
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Figure 5-7 Federal Research and Dev
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Figure 5-10 Percent of Patent Appli
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percent of all cases in 2009 to ove
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(Bloom, Sadun, and Van Reenen 2012)
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Figure 5-12 Estimated Annual Shipme
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was relatively flat through the 200
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In contrast, recent papers by Autor
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services, such as 4G LTE. At the sa
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Box 5-5: The On-Demand Economy “O
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vision of services that may not hav
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Figure 5-17 Household Income and Ho
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about half since ConnectED was laun
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C H A P T E R 6 THE ECONOMIC BENEFI
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enefits to a wide set of consumers
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Figure 6-1 Composition of Public Sp
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Age, Years 29 27 Figure 6-3 Average
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Type CAN FRA DEU ITA JPN GBR USA 20
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Box 6-1: Clean Energy and Transport
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Industry Government Investment Dire
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infrastructure investment is crucia
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Box 6-2: Elasticity of Output to Pu
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and output ignore potential inter-t
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Thus, ideas are exchanged, workers
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kilometers of road) in 1983 resulte
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Prospects for Increased Infrastruct
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Figure 6-6 Relationship between Out
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there is a clear demand for an infr
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user fees or shadow tolls.11 Throug
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to transportation facilities caused
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Tax-Exempt Bonds Transportation inf
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Recent Legislation In December 2015
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enefit freight movements. The Act a
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C H A P T E R 7 THE 70 TH ANNIVERSA
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and composition of the labor force,
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it, “[t]he CEA and its chairman h
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jected reductions in the deficit. I
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example, the Environmental Protecti
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Keyserling and the Council particip
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Countercyclical Policy in Other Adm
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In designing the Recovery Act, one
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incorporating risk and discounting
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and Freddie had lots of friends in
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(USEC). USEC was responsible for pr
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can be reported to him as the perce
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By contrast, Keyserling had activel
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goals of the government in their ar
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Gather, Analyze, and Interpret Info
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the unemployment insurance system w
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an informational basis for appropri
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had experience working in governmen
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emained. I joined forces with Budge
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Of course, relying on short-term ac
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Carson, Ann. 2015. “Prisoners in
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Kleiner, Morris M. and Alan B. Krue
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Congressional Budget Office (CBO).
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Kocin, Paul J. and Louis Uccellini.
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Fajgelbaum, Pablo and Amit Khandelw
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World Bank. 2016. “Global Economi
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Belfield, Clive R., Milagros Nores,
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Campbell, Jennifer A., Rebekah J. W
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Council of Economic Advisers. 2014.
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Eissa, Nada and Jeffrey B. Liebman.
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Hastings, Justine S. and Ebonya Was
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Kalil, Ariel, Rebecca Ryan, and Mic
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Maxfield, Michelle. 2013. “The Ef
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Olds, David, John Eckenrode, Charle
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Solon, Gary. 1992. “Intergenerati
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Wherry, Laura R., Sarah Miller, Rob
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Bloom, Nicholas, Mark Schankerman,
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Graham, Stuart JH, Cheryl Grim, Tar
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Melitz, Marc J. 2003. “The Impact
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______. 2015. “Patent Assertions:
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Congressional Budget Office. 2009.
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Peshkin, David G., Todd E. Hoerner,
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______. 2001. Designing U.S. Econom
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Krueger, Alan B. 2000. “Honest Br
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Weidenbaum, Murray L. 1983. “An E
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letter of transmittal Council of Ec
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Council Members and Their Dates of
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The Members of the Council Sandra E
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In May, the Council issued a report
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Nirupama S. Rao . . . . . . . . . .
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Jessica Schumer resigned from her p
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C O N T E N T S GDP, INCOME, PRICES
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General Notes Detail in these table
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Table B-1. Percent changes in real
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Table B-2. Gross domestic product,
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Table B-4. Growth rates in real gro
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Year or quarter Total Table B-6. Co
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Table B-8. New private housing unit
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Table B-10. Changes in consumer pri
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Table B-11. Civilian labor force, 1
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Year or month Table B-13. Unemploym
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Table B-14. Employees on nonagricul
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Year or quarter Table B-16. Product
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Table B-18. Federal receipts, outla
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Table B-20. Federal receipts, outla
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Table B-22. State and local governm
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End of month Table B-24. Estimated
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Table B-25. Bond yields and interes
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ECONOMIC REPORT OF THE PRESIDENT

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