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Economic Report of the President 2015

“This morning, the Council of Economic Advisers released the 69th-annual Economic Report of the President, which reviews the United States’ accelerating recovery and ways to further support middle-class families as the recovery continues. The economy is recovering from the Great Recession at an increasing pace, growing at an annual rate of 2.8 percent over the past two years, compared with 2.1 percent over the first three-and-a-half years of the recovery. The speed-up is especially clear in the labor market, where job gains have reached a pace not seen since the 1990s. But it is essential that a broad range of households benefit from the United States’ resurgent growth, so this year’s Report focuses on factors that are important to middle-class incomes: productivity, labor force participation, and income inequality. The President’s approach to economic policies, what he calls “middle-class economics,” aims to improve each of these long-standing elements and ensure that Americans of all income levels share in the accelerating recovery. Below are some highlights from each of the seven chapters in this year’s Report:

Chapter 1 reviews the progress of the recovery and explores the long-term factors that drive middle-class incomes. The U.S. recovery has accelerated in terms of both output and employment, with job growth rising 30 percent faster in 2014 than in 2013 (Figure 1-2). Indeed, the unemployment rate has fallen to levels that, as recently as 2013, were not expected until after 2017. These labor market improvements have begun to translate into wage gains for middle-class workers, but nevertheless, this recent progress cannot make up for decades of sub-par middle-class income growth. The chapter provides historical and international context for middle-class income growth and the three key factors that influence it: productivity growth, changes in labor force participation, and income inequality. The increasing strength of our current recovery provides an opportunity to address these long-standing challenges, and the President supports a wide range of policies, detailed in this Report, that will strengthen all three key factors.

Chapter 2 reviews the macroeconomic performance of the U.S. economy during 2014, including the growth of output and employment, the continued decline in the unemployment rate, the healing of the housing market, and the improvement in the budget deficit as a share of GDP. By most measures, the pace of output growth has risen relative to the beginning of the recovery. Gross domestic product grew 0.7 percentage point faster per year over 2013 and 2014 than over the first three-and-one-half years of the recovery. Meanwhile, U.S. households continued to pay down their debts. Figure 2-15 shows the dramatic rise in the household sector’s liabilities-to-income and debt-service ratios in the run-up to the financial crisis, along with the reduction in these ratios that followed. By the third quarter of 2014, required payments on mortgage and consumer debt had fallen to 9.9 percent of disposable income, nearly the lowest level on record. The chapter explores this and other macroeconomic developments, including the slowdown in global growth, which could pose some downside risk to U.S. economic growth in the future. The chapter also reviews the assumptions about future growth that underlie the President’s Fiscal Year 2016 Budget, including the economic benefits of the President’s agenda. The chapter explores the benefits of immigration reform, infrastructure investment, and business tax reform, among other pro-growth policies that the President supports….”

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