ECONOMIC REPORT OF THE PRESIDENT

Upside and Downside Forecast Risks. Like any forecast, the
Administration’s economic forecast is uncertain, and several risks are
worth enumerating here. One upside risk is from the homebuilding sector
which has some upside potential given the current low level of household
formation and its potential for increase. Another upside risk would be
that more workers are drawn back into the labor force than expected. On
the downside, it appears that growth in China and many other emergingmarket
countries is slowing, which may reduce U.S. exports. In addition,
financial market developments—either reflecting spillovers from abroad or
U.S.-specific issues—are another downside risk. Over the longer-run, there
are some downside risks to the estimate of potential growth insofar as more
recent lower productivity growth rates continue. Yet, as Box 2-5, discusses,
some of the recent slowdown in productivity growth may be an artifact of
the measurement issues in the official statistics and not entirely a reflection
of the economy.
Conclusion
The economy continued to strengthen during 2015, especially in
the labor market with robust employment gains and continued declines in
unemployment. Job growth continued to exceed 200,000 a month for the
year as a whole, extending the longest streak of uninterrupted private-sector
job growth on record and contributing to an American recovery that has
outpaced most other advanced economies. Demand is strong is the United
States, especially in the household sector, and will continue to support solid
growth in 2016.At the same time, we face challenges associated with the
slowing global economy that are discussed in the next Chapter.
Looking ahead, some of the most important decisions that we make
as a Nation are the structural policies that influence long-term growth. The
President’s budget sets forth a number of policies that can be expected to
increase the level or long-term growth rate of potential output.
Such policies also aim to boost aggregate demand in the near term and
to improve our long-term competitiveness, while promising fiscal restraint
over the long run. They are an essential complement to policies that make
sure this growth is shared by the middle class and those working to get into
the middle class.
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