ECONOMIC REPORT OF THE PRESIDENT

less than a tenth of the overall decline in participation as the economy has
recovered, and is likely to ease further as the unemployment rate continues
to decline. The remaining 40 percent of the decline in the participation rate
since 2009 is unrelated to population aging or changes in the unemployment
rate. This “residual” likely reflects structural factors like the longstanding
downward trend in participation among prime-age workers and other cyclical
factors, such as the high levels of long-term unemployment in the Great
Recession, that are not fully captured in the unemployment rate. In 2015 the
additional drag from unexplained factors largely offset the boost to participation
from the cyclical recovery. In light of ongoing demographic shifts and
longer-term trends, the participation rate is expected to decline modestly
in 2016, even as cyclical factors recede further. The Administration has
proposed policies to support labor force participation through more flexible
workplaces and paid leave, expanded high-quality pre-school, increased
subsidies for child care, and a wage insurance system that would encourage
reentry into work (Box 2-8).
As the recovery in the labor market progresses, the pace of job growth
consistent with a strong overall labor market is likely to fall as the unemployment
rate begins to plateau, particularly in light of demographic patterns
(Box 2-3).
Output
Real GDP grew 1.8 percent over the four quarters of 2015, somewhat
below its pace in recent years. GDP grew at a similar pace as gross domestic
output (GDO)—a more accurate measure of output than GDP—during the
four quarters through 2015:Q3, which is the most recent quarter of GDO
data, (Figure 2-13). Gross domestic output, discussed more in Box 2-4, is a
newly published aggregate calculated as the “average of real GDP and real
gross domestic income.”
The overall composition of demand during 2015 shows that most of
the growth was accounted for by the household spending sectors: consumer
spending and residential investment, while contributions from the other
sectors were small and generally offsetting. Residential investment was the
fastest-growing major component of demand increasing 9.0 percent during
the four quarters of the year, and contributing 0.3 percentage point to the
four-quarter growth of GDP. Consumer spending, which comprises about
two-thirds of GDP, increased 2.6 percent and can account for all the year’s
output growth. In addition, sales of new cars and light trucks hit 17.4 million
in 2015, the highest level on record.
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