ECONOMIC REPORT OF THE PRESIDENT

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Figure 2-5 Government Purchases as Share of Nominal GDP, 1948–2015 Percent 16 14 12 State and Local 10 8 Federal Defense 2015:Q4 6 4 Federal Nondefense 2 0 1948 1958 1968 1978 1988 1998 2008 2018 Source: Bureau of Economic Analysis; Haver Analytics. Percent 1.0 Figure 2-6 Forecast of Federal Funds Rate at Year End 2015 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 Market-Implied Federal Funds Rate Midpoint of FOMC Modal Forecast Dec-2015 0.0 Dec-2014 Mar-2015 Jun-2015 Sep-2015 Dec-2015 Note: Market-implied rate is computed using federal funds rate futures contracts. Source: Bloomberg Professional Service; CEA calculations. The Year in Review and the Years Ahead | 61
Box 2-2: Challenges in the State and Local Sector During the current expansion, growth in State and local purchases has been the weakest of any business-cycle recovery in the post-World War II period (Figure 2-iii). During the four quarters of 2010, State and local purchases subtracted 0.5 percentage point from GDP growth, and then subtracted about another 0.3 percentage point in both 2011 and 2012. Spending in this sector stabilized in 2013 and added modestly to GDP growth in 2014 and 2015. State and local governments also cut jobs early in the recovery. Beginning in 2013, though, this trend began to shift. State and local governments have added 210,000 jobs since January 2013. Even so, employment in this sector remains 528,000 below its previous high in 2008, with about 40 percent of this net job loss in educational services. The 1.4-percent decline in education employment exceeded the 0.9-percent decline in the school-age population (ages 5 to 19) over the 2008-14 period. This mismatch implies a rising student-teacher ratio. Figure 2-iii Real State and Local Government Purchases During Recoveries, 1960–2015 Index (Level at Trough=100) 120 115 110 Average 1991 105 100 2001 95 90 2009 85 80 -24 -20 -16 -12 -8 -4 0 4 8 12 16 20 24 28 Quarters from Trough Note: "Average" indicates average across recessionary periods from 1960–2007, excluding the 1980 recession due to overlap with the 1981‒1982 recession. Source: Bureau of Economic Analysis, National Income and Product Accounts; National Bureau of Economic Research; CEA calculations. Despite some recovery in 2015, there are still factors likely to restrain State and local spending growth. State and local governments continue to spend more than they collect in revenues and their aggregate deficit during the first three quarters of 2015 amounted to nearly 1 percent of nominal GDP. This deficit has shrunk, however, during the recovery (Figure 2-iv). During 2015, State and local expenditures (including transfers and interest payments, as well as purchases) were roughly flat at about 14 percent of GDP, and revenues held at about 62 | 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
Page 16 and 17: C O N T E N T S CHAPTER 1 INCLUSIVE
Page 18 and 19: CHAPTER 5 TECHNOLOGY AND INNOVATION
Page 20 and 21: APPENDIXES A. Report to the Preside
Page 22 and 23: 3.4. Percent Gap Between Actual and
Page 24 and 25: 6.6. Relationship between Output Gr
Page 26 and 27: C H A P T E R 1 INCLUSIVE GROWTH IN
Page 28 and 29: To promote inclusive growth, both c
Page 30 and 31: Percent 20 15 Figure 1-1 Share of I
Page 32 and 33: Table 1-1 Increase in Income Share
Page 34 and 35: Figure 1-3 Distribution of Househol
Page 36 and 37: narrows the pool of human capital t
Page 38 and 39: over the past several decades has b
Page 40 and 41: Figure 1-6a The "Great Gatsby Curve
Page 42 and 43: Figure 1-7 Change in Employment by
Page 44 and 45: and sellers—consumer and producer
Page 46 and 47: Percent 15 10 Figure 1-9 Corporate
Page 48 and 49: Percent 30 Figure 1-11 Share of Wor
Page 50 and 51: Figure 1-12 Real Construction Costs
Page 52 and 53: promoting equality of opportunity;
Page 54 and 55: 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 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 106 and 107: Figure 2-32 Nominal Wage Growth Ove
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
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International Economics (Petri and
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History Forecast 1953:Q2 to 2015:Q3
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inflation up to 2007 and then expec
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Upside and Downside Forecast Risks.
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earlier forecasts. Figure 3-1 shows
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Real GDP/WAP Growth 2011-2014 Figur
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economists would expect capital dee
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Figure 3-i Actual and Forecasted Wo
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affected the demographic trajectory
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over the first three quarters of 20
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Percentage Points 35 30 Figure 3-7
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the President for a discussion of t
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Box 3-2: Market Volatility in the S
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potential for rapid spillovers betw
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absorb unexpectedly high losses. In
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Box 3-3: Commodity Prices and Infla
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In November 2015, the IMF voted to
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Billions of U.S. Dollars 250 200 15
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U.S. exports are 12.5 percent of th
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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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