ECONOMIC REPORT OF THE PRESIDENT

growth in part driven by the rapid shift of women into the labor force.
Controlling for the number of people in the labor force, growth in this
recovery is quite similar to previous ones (Figure 2-viii).
Beyond the downward pressure on GDP caused by a slower
working-age population growth rate, another economic impact of
demographic shifts in the United States is that they may have reduced
productivity growth. A range of papers finds that higher proportions
of certain age groups are correlated with higher productivity growth
(Feyrer 2007; Aiyar, Ebeke, and Shao 2016; Maestas, Mullen, and Powell
2016). As the share of these age groups employed in the labor force
changes, productivity is affected. In particular, studies find the 40-49
cohort to be correlated with higher productivity (due to a bigger pool
of managerial talent) and 55 and older to be less so. Estimates based on
these papers suggest that somewhere from 0.2 to 0.8 percentage point
of the 1.5 percentage points productivity slowdown from 1995-2005 to
2005-15 could be due to demography. Projections of the composition of
the labor force suggest that the drag on productivity from demographics
may soon be abating (Figure 2-ix).
around its pre-recession levels, oscillating between 87 and 95, driving the
strong consumption growth (Figure 2-13). The Conference Board index hit
its highest level since 2007 in November 2016, although the 2016 average
was only somewhat higher than pre-recession levels.
Meanwhile, U.S. household debt relative to income continued to fall
(Figure 2-14). Before the financial crisis, household debt relative to income
rose dramatically, largely due to net mortgage originations, and then
declined sharply after the crisis, a pattern known as “deleveraging.” (See
Box 2-6 for more on deleveraging.) Charge–offs of delinquent mortgage
debt played an important role in lowering household debt, but the decline
in new mortgage originations and less consumer borrowing played roles as
well (Vidangos 2015). By the end of 2016:Q2, the debt-to-income ratio was
at its lowest level since 2002. The level of mortgage debt relative to income
continued to decline in 2016, while consumer credit (including credit cards,
automobiles, and student loans) relative to income increased slightly.
Moreover, with historically low interest rates, the amount of income
required to service these debts has fallen dramatically. Still, it should be
noted that estimates based on aggregate data could mask higher debt
burdens for some families; that is, the health of personal finances varies
substantially across households. Nonetheless, in aggregate, there is evidence
of deleveraging as discussed in Box 2-6.
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