ECONOMIC REPORT OF THE PRESIDENT

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Figure 2-31 Nominal Wage Inflation Over Past Year, 2003–2016 12-Month Percent Change 5 4 3 Average Hourly Earnings (Nov-2016) 2 Employment Cost Index (2016:Q3) 1 Compensation per Hour (2015) 0 2003 2005 2007 2009 2011 2013 2015 2017 Note: Compensation per hour refers to the productivity and cost measure for nonfarm business. The Employment Cost Index ialso refers to the nonfarm sector, but uses a different survey. Aver-age hourly earnings refers to production & nonsupervisory workers. Shading denotes recession. Source: Bureau of Labor Statistics; Department of Labor; Haver Analytics. Figure 2-32 Consumer Price Inflation, 2012–2016 12-Month Percent Change 3.0 2.5 2.0 1.5 Federal Reserve Longer-Run Objective Core PCE Oct-2016 1.0 0.5 Total PCE 0.0 2012 2013 2014 2015 2016 Source: Bureau of Economic Analysis. The Year in Review and the Years Ahead | 121
productive innovation. There is no silver bullet for improving productivity growth, but sound policy across a range of initiatives could support it, raising real wages and living standards in the process. Wage and Price Inflation Nominal wage inflation has trended up over the course of the recovery as the labor market has continued to strengthen amid robust job growth. Average nominal hourly earnings for private sector production and nonsupervisory employees increased 2.4 percent during the 12–month period ended November 2016, up from 2.3 percent during the year-earlier period. Nominal hourly compensation for private-sector workers, as measured by the employment cost index, increased 2.2 percent during the four quarters through 2016:Q3, up from 1.9 percent in the four quarters of 2015. Alternatively, the more-volatile compensation per hour measure for the non-farm business sector, as measured by the labor productivity and cost dataset, increased 2.2 percent during the four quarters through 2016:Q3, below its 3.1-percent rise during the four quarters of 2015. Taken together, as shown in Figure 2-31, nominal wage inflation has increased with the strong recovery in the labor market. However, the pace remains below the pre-crisis pace. Consumer prices, as measured by the price index for personal consumption expenditures (PCE) and shown in Figure 2-32, increased roughly 1.4 percent over the 12 months ended in October 2016. The growth rate was held down by continued declines in energy prices, leaving overall inflation well below the Federal Reserve’s longer-run objective of 2 percent. Core inflation—which excludes energy and food prices and tends to be a better predictor of future inflation than overall inflation—was also less than the 2-percent target, ranging between 1.6 and 1.7 percent thus far in 2016.15 Lower imported goods prices, as well as the pass through of 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. While inflation has picked up in recent months, nominal earnings have also continued to grow considerably 15 The Federal Reserve defines its inflation objective in terms of the PCE price index. The consumer price index (CPI) is an alternate measure of prices paid by consumers and is used to index some government transfers, such as Social Security benefits. Largely because of a different method of aggregating the individual components, PCE inflation has averaged about 0.3-percentage point a year less than the CPI inflation since 1979. Recently, though, the gap between core price inflation has been larger across the two indices. During the 12 months ended in October 2016, for example, core CPI prices increased 2.2 percent, more than the 1.7-percent increase in core PCE prices. 122 | 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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eforms in history. Banks have sharp
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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: EIGHT YE
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. THE ECONOMIC RATIONALE FOR FEDERA
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2.4. Government Purchases as Share
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4.iii. Premium for the Benchmark Pl
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6.18. Systemic Risk (SRISK) 2005-20
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C H A P T E R 1 EIGHT YEARS OF RECO
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Figure 1-1 Actual and Consensus For
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Figure 1-3 Real Hourly Wage Growth
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Figure 1-4 Real GDP per Capita: Eur
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Figure 1-6 Household Net Worth in t
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Figure 1-8 Global Trade Flows in th
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Subsequent revisions to fourth-quar
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Percent 6 Figure 1-9 Fiscal Expansi
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substantial costs to the Federal Go
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worked to promote innovation and in
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expansion, a period of low producti
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The 2017 Economic Report of the Pre
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Chapter 4: Reforming the Health Car
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to the ACA and other factors. The A
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than 98 percent of Americans should
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Figure 1-13 Borrowers in Income Dri
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success of the financial rescue and
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einforced U.S. leadership in the ru
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Partnership (OGP), a global partner
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Figure 1-16 Labor Productivity Grow
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Labor Force Participation Household
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number of steps to ensure that econ
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C H A P T E R 2 THE YEAR IN REVIEW
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Percent 11 Figure 2-1 Unemployment
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allowing for additional investments
Page 76 and 77: Percentage Point 0.6 0.4 Figure 2-3
Page 78 and 79: public, largely highway constructio
Page 80 and 81: The size of the Federal Reserve’s
Page 82 and 83: Figure 2-5 Private-Sector Payroll E
Page 84 and 85: fell 80 percent from September 2014
Page 86 and 87: Figure 2-8 Rates of Part-Time Work,
Page 88 and 89: Figure 2-v Prime-Age Male Labor For
Page 90 and 91: Output Real GDP grew 1.6 percent ov
Page 92 and 93: Figure 2-11 Compensation and Consum
Page 94 and 95: Table 2-i Optimal Weighting for Hou
Page 96 and 97: esults suggest that, to a first app
Page 98 and 99: Figure 2-viii Real GDP, Average and
Page 100 and 101: Figure 2-13 Consumer Sentiment and
Page 102 and 103: Figure 2-xi Household Debt Service,
Page 104 and 105: Ratio to Annual DPI 1.10 1.05 Figur
Page 106 and 107: Figure 2-17 National House Price In
Page 108 and 109: Index 220 Figure 2-19 Housing Affor
Page 110 and 111: Figure 2-21 Composition of Growth i
Page 112 and 113: Figure 2-23 Capital Services per Un
Page 114 and 115: Box 2-7: Explanations for the Recen
Page 116 and 117: Figure 2-xv Business Fixed Investme
Page 118 and 119: Figure 2-26 Foreign Real GDP and U.
Page 120 and 121: somewhat generalizable (Box 2-8), b
Page 122 and 123: prices weakened and the global econ
Page 124 and 125: inadequate demand has contributed t
Page 128 and 129: Figure 2-33 Real Hourly Wage Growth
Page 130 and 131: Index 6 Figure 2-36 Financial Condi
Page 132 and 133: Percent 4.0 Figure 2-38 Nominal Lon
Page 134 and 135: Dollars per Barrel 80 Figure 2-40 B
Page 136 and 137: Figure 2-41 IMF World Real GDP Grow
Page 138 and 139: against the Mexican peso, the Chine
Page 140 and 141: United Kingdom It has been a turbul
Page 142 and 143: for example, Japan has grown almost
Page 144 and 145: Figure 2-45 Credit to Nonfinancial
Page 146 and 147: Meanwhile, core inflation (excludin
Page 148 and 149: kept rates low across a wide range
Page 150 and 151: Investments in surface transportati
Page 152 and 153: Table 2-2 Supply-Side Components of
Page 154: Conclusion The economy continued to
Page 157 and 158: not increased from 1973 to 2013, in
Page 159 and 160: developments; individual behavior;
Page 161 and 162: action affecting income inequality
Page 163 and 164: have occurred. In doing so, these p
Page 165 and 166: Percent 24 21 18 15 12 9 6 African
Page 167 and 168: without the policy response.5 These
Page 169 and 170: Box 3-2: Income Inequality and the
Page 171 and 172: unable to obtain insurance at any p
Page 173 and 174: Figure 3-7B Percent 50 Uninsured Ra
Page 175 and 176: and have not expanded Medicaid foun
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Box 3-3: Safety Net Policies as Ins
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Millions of People 18 Figure 3-8 Im
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Figure 3-9 Effective Tax Rates for
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Box 3-4: Additional Actions to Make
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$294 million in newly appropriated
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15 10 5 0 -5 -10 -15 Figure 3-12 Pe
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Administration with those of previo
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as a share of potential GDP by Pres
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Figure 3-17 Changes in the Distribu
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30 25 20 15 10 5 0 Single Source: C
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ate on capital gains and dividends
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C H A P T E R 4 REFORMING THE HEALT
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eneficiaries have received cumulati
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form of lower premium costs and ind
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Percent 25 20 Creation of Medicare
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Figure 4-3 Health Insurance Coverag
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90 80 70 60 50 40 30 20 10 0 25 55
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Percent Uninsured 25 CHIP Created 2
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Legislative actions subsequent to C
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Percent Uninsured 40 35 Figure 4-7
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ecause of the ACA’s provision all
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Box 4-2: Dynamics in the Individual
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projected during the debate over th
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whelming majority of Marketplace en
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Figure 4-v Change in Benchmark Prem
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20 Figure 4-10 Share of Workers in
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percent during the decade preceding
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Panel A: Share with a Personal Doct
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Box 4-3: Interpreting Results from
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Fortunately, the OHIE is not the on
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Figure 4-14 Uncompensated Care as a
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Figure 4-15 Uninsured Rate by Popul
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Figure 4-17 Monthly Gain in Private
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Change in Working-Age Employment to
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this cross-sectional relationship b
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ecent discussions of macroeconomic
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Figure 4-23 Life Expectancy at Birt
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Figure 4-24 Mortality Rate vs. Medi
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more to cover Medicare patients tha
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example, through CMMI, the Administ
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orient payment around the entirety
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Percent of Payments 60 Figure 4-26
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covered under ACO contracts at the
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Additional Steps to Reform the Heal
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legislation that overrides the reco
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Figure 4-28 Health Care Price Infla
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Figure 4-30 Trends in Real Prices f
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average growth rate of real per enr
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Figure 4-34 Growth in Real Costs fo
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made a large, readily quantifiable
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in states experiencing weaker and s
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distribution, holding fixed both sp
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individuals among individuals 65 an
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Figure 4-40 Average Real Deductible
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Figure 4-41 Real Per-Enrollee Presc
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educe the growth rate of Medicare s
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improvements will strengthen ACOs
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-5 0 -2 Figure 4-42 Cumulative Perc
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Woolhandler 2015). These analysts a
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productivity on the job. These bene
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Figure 4-46 Premiums and Cost Shari
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(KFF 2016). Another fifth of tradit
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2030 2028 2026 2024 2022 2020 2018
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C H A P T E R 5 INVESTING IN HIGHER
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Gainful Employment regulations. To
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Thousands of 2015 Dollars 900 800 7
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externalities, credit constraints,
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Figure 5-4 Earnings by Age and Educ
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Figure 5-5 Variation in Earnings by
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Box 5-1: Anti-Poverty Efforts and E
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careers. Some of the effects of the
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eligibility cutoff likewise finds s
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Box 5-2: Federal Investments in K-1
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Evaluations of early local Promise
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America’s College Promise Playboo
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Dollars 45,000 40,000 35,000 30,000
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pre-payment penalty. Second, by tyi
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equirements, pushed efforts associa
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Figure 5-16 Size of Outstanding Loa
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Figure 5-17 Average Monthly Payment
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Figure 5-18 Distribution of Key Out
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Figure 5-20 Earnings by Family Inco
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to student needs and improve test s
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Box 5-5: Making Sure Students Enter
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prior, the early FAFSA reform helps
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Figure 5-ii Number of Institutions
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Figure 5-23 Gainful Employment Earn
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Additionally, Pell Grants can be be
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C H A P T E R 6 STRENGTHENING THE F
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with no easy way to get the funds f
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public has limited information, run
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value added of the sector has gradu
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managers. Thus, after fees, savers
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Too Many Resources in Finance? Beyo
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of the firm after the purchase affe
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Percent 100 Figure 6-2 Mortgage Ori
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Figure 6-4 Case-Shiller Home Price
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Figure 6-7 Global OTC Derivative Ma
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consumer and investor protections.
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Figure 6-iv Top 5 Banks as Share of
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cult to replace with services from
Page 380 and 381:
Are U.S. Banks Too Big? The questio
Page 382 and 383:
The three federal banking agencies
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Risk Taking The Dodd-Frank Act took
Page 386 and 387:
Box 6-3: The Performance of Communi
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Figure 6-ix Return on Assets of Ban
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egulators can take a more holistic
Page 392 and 393:
Figure 6-13 Repo and Reverse Repo,
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Figure 6-15 Private Funds Reporting
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Days 60 Figure 6-16 Weighted-Averag
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Figure 6-18 Systemic Risk (SRISK),
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In the absence of another financial
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lower funding costs in 2007-09, “
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through the Dodd-Frank Act and othe
Page 406 and 407:
Prior to the financial crisis, one
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asis.24 One of the advantages of ce
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findings from the NRSRO examination
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Prior to the crisis, enforcement of
Page 414 and 415:
Box 6-5: Addressing the Problem of
Page 416 and 417:
Table 6-i Sources of Investment Adv
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financial system and the systems of
Page 420 and 421:
Box 6-6: The JOBS Act While it was
Page 422 and 423:
Figure 6-23 S&P 500, 2003-2016 Inde
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Figure 6-27 Mortgage Delinquency an
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It created the FSOC to consider ris
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energy efficient and lower greenhou
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of domestic actions to reduce green
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people and vegetation (U.S. Global
Page 435 and 436:
investment are much higher than the
Page 437 and 438:
Delaying Action on Climate Change I
Page 439 and 440:
uses and land management activities
Page 441 and 442:
Carbon Pollution Standards for Powe
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a projected range of $16 billion to
Page 445 and 446:
these resulted in insignificant cha
Page 447 and 448:
Figure 7-4 Corporate Average Fuel E
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diesel fuel and jet fuel. The Vehic
Page 451 and 452:
Box 7-3: Building Resilience to Cur
Page 453 and 454:
sources in the oil and gas sector,
Page 455 and 456:
emissions and total greenhouse gas
Page 457 and 458:
Figure 7-7 Energy Intensity of Real
Page 459 and 460:
Figure 7-10 U.S. Petroleum Consumpt
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Figure 7-12 Energy Intensity Transp
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Figure 7-14c Energy Intensity Comme
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Figure 7-16 U.S. Energy Consumption
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2008 to 7 percent in 2015. Figure 7
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Index, 2008 =0 0.1 0.0 -0.1 Figure
Page 471 and 472:
Figure 7-23 Decomposition of Emissi
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three determinants of emissions? If
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Percent 100 80 Figure 7-26 Sectoral
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characteristics, and management tre
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oil and gas sector) were subsequent
Page 481 and 482:
while creating new jobs and raising
Page 483 and 484:
such as using similar methodologies
Page 485 and 486:
Box 7-4: Supporting Increased Penet
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sector, the fee would incentivize p
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to be used to decompose emissions i
Page 491 and 492:
Reinvestment Act.” NBER Working P
Page 493 and 494:
D’Amico, Stefania, et al. 2012.
Page 495 and 496:
______. 2016. “Chapter 3: Develop
Page 497 and 498:
Chetty, Raj, et al. 2014. “Where
Page 499 and 500:
NBER Working Paper 22170. Cambridge
Page 501 and 502:
American Hospital Association and H
Page 503 and 504:
Cantor, Joel C., et al. 2012. “Ea
Page 505 and 506:
______. 2012a. “Direct Spending a
Page 507 and 508:
Dranove, David, Craig Garthwaite, a
Page 509 and 510:
Wars: Global Solutions for Developi
Page 511 and 512:
Huang, Jidong, and Frank J. Chaloup
Page 513 and 514:
McWilliams, J. Michael. 2016. “Ch
Page 515 and 516:
Pinkovskiy, Maxim. 2014. “The Imp
Page 517 and 518:
______. 2016. “Certification of M
Page 519 and 520:
Arcidiacono, Peter, V. Joseph Hotz,
Page 521 and 522:
Bulman, George, and Caroline Hoxby.
Page 523 and 524:
______. 2015a. “Economic Costs of
Page 525 and 526:
Dobbie, Will, and Roland G. Fryer J
Page 527 and 528:
Committee on Health, Education, Lab
Page 529 and 530:
Jepsen, Christopher, Kenneth Troske
Page 531 and 532:
Marcotte, Dave E., et al. 2005. “
Page 533 and 534:
Reynolds, Arthur J., et al. 2011.
Page 535 and 536:
Chapter 6 Acharya, Viral. V., Deniz
Page 537 and 538:
Fama, Eugene F., and Kenneth R. Fre
Page 539 and 540:
Wheelock, David C., and Paul W. Wil
Page 541 and 542:
______. 2016a. “The Economics of
Page 543 and 544:
______. 2016c. Short Term Energy Ou
Page 545 and 546:
Interagency Working Group on the So
Page 547 and 548:
Office of Management and Budget (OM
Page 550:
A P P E N D I X A REPORT TO THE PRE
Page 553 and 554:
Council Members and Their Dates of
Page 556 and 557:
Report to the President on the Acti
Page 558 and 559:
consulting with a wide variety of o
Page 560 and 561:
In October, the Council released a
Page 562 and 563:
Research Economists David Boddy . .
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A P P E N D I X B STATISTICAL TABLE
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GOVERNMENT FINANCE, INTEREST RATES,
Page 569 and 570:
Year or quarter Table B-1. Percent
Page 571 and 572:
Table B-2. Gross domestic product,
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Table B-3. Quantity and price index
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Table B-5. Real exports and imports
Page 577 and 578:
Year Total Table B-7. Real farm inc
Page 579 and 580:
Table B-9. Median money income (in
Page 581 and 582:
Labor Market Indicators Table B-11.
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Year or month Table B-12. Civilian
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Table B-14. Employees on nonagricul
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Year or month Table B-15. Hours and
Page 589 and 590:
Government Finance, Interest Rates,
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Table B-19. Federal receipts and ou
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Table B-21. Federal and State and l
Page 595 and 596:
Table B-23. U.S. Treasury securitie
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Year and month Bills (at auction) 1
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Year and month Table B-26. Money st
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