Council of Economic Advisers Blog

  • The Employment Situation in October

    The upward revisions to job growth in August and September, combined with solid third quarter GDP growth reported yesterday, suggest that the economy was gaining traction in the months leading up to the government shutdown. There should be no debate that the shutdown and debt limit brinksmanship inflicted unnecessary damage on the economy in October. The employment report shows differing accounts, with the more reliable payroll survey recording strong job growth and the much noisier household survey showing an increase in the unemployment rate and a large drop in employment. But the mission for Congress remains clear: to take steps that increase certainty, speed growth, and boost job creation.

    FIVE KEY POINTS IN TODAY’S REPORT FROM THE BUREAU OF LABOR STATISTICS

    1. America’s resilient businesses have added jobs for 44 consecutive months, with private sector employment increasing by a total of 7.8 million over that period. Today we learned that total nonfarm payroll employment rose by 204,000 in October, due entirely to a 212,000 increase in private employment. Private sector job growth was revised up for August (to 207,000) and September (to 150,000) so that for the third quarter, private sector employment rose by an average of 152,000 per month (compared to the 129,000 per month average pace estimated in last month’s jobs report).

  • Advance Estimate of GDP for the Third Quarter of 2013

    During the third quarter, the economy grew at its fastest pace in a year, an indication that the recovery was continuing to gain traction in the months before the government shutdown. GDP growth was boosted by a positive contribution from consumer durables purchases, the continued recovery in the housing sector, and net exports. We now have an opportunity to build on this progress by increasing certainty for businesses and investing in jobs and growth, while avoiding the types of self-inflicted wounds that restrained the economy in the early part of the fourth quarter.

    FIVE KEY POINTS IN TODAY’S REPORT FROM THE BUREAU OF ECONOMIC ANALYSIS

    1. Real gross domestic product rose at a solid 2.8 percent annual pace in the third quarter, the fastest quarterly pace in the last year, and the 10th consecutive quarter of growth. The rate of growth picked up slightly from the also-solid 2.5 percent rate observed in the second quarter. The economy has made substantial progress since the end of the recession, with real GDP now 5.3 percent higher than it was at its peak prior to the recession. Nevertheless, more work must be done to increase economic growth and boost job creation. 

  • Economic Activity During the Government Shutdown and Debt Limit Brinksmanship

    The government shutdown and debt limit brinksmanship have had a substantial negative impact on the economy. A new report released today by the Council of Economic Advisers (CEA) attempts to estimate the actual impact of the shutdown and default brinksmanship on economic activity as measured by eight different daily or weekly economic indicators. Overall it finds that a range of eight economic indicators in what we call a “Weekly Economic Index” are consistent with a 0.25 percentage point reduction in the annualized GDP growth rate in the fourth quarter and a reduction of about 120,000 private sector jobs in the first two weeks of October (estimates use indicators available through October 12th). These estimates very likely understate the full economic effects of the episode because of its effects that continued, and will continue, past October 12th.

    The shutdown directly affected the economy by withdrawing government services for a sixteen day period, which not only had direct impacts but also had a range of indirect effects on the private sector. For example the travel industry was hurt by the closing of national parks, businesses in oil and gas and other industries were hurt by the cessation of permits for oil and gas drilling, the housing industry was hurt by the cessation of IRS verifications for mortgage applications, and small businesses were hurt by the shutdown of Small Business Administration loan guarantees. In addition, a reduction in consumer confidence and an increase in uncertainty associated not just with the shutdown but also the brinksmanship over the debt limit affected consumer spending, investment and hiring decisions as well.

  • The Employment Situation in September

    While job growth remained solid in September, there is no question that the focus of policy should be on how to achieve a faster pace of job growth by increasing certainty and investing in jobs, rather than the self-inflicted wounds of the past several weeks that increased uncertainty and inhibited job growth. Today’s delayed report describes the economy more than a month ago. More recent indicators suggest the labor market worsened in the month of October. 

    Five key points in today’s report from the bureau of labor statistics


    1. Private sector employment has risen for 43 consecutive months, with businesses adding a total of 7.6 million jobs over that period. Today we learned that total non-farm payroll employment rose by 148,000 in September, with the private sector accounting for 126,000 of that gain. Private sector job growth was revised down for July (to 100,000) but up for August (to 161,000).  In sum, private sector employment rose by an average of 129,000 per month in the third quarter, lower than we can be fully satisfied with, partially reflecting the effects of fiscal contraction. This underscores the continued importance of taking steps that speed the recovery and boost job creation, while avoiding self-inflicted wounds like a government shutdown and debt ceiling brinksmanship that have the opposite effect.

  • The Dramatic Slowdown in Health Costs and What It Means for the Economy, Families and the Budget

    New data out yesterday from the Centers for Medicare and Medicaid Services (CMS) and discussed in a piece in Health Affairs show that economy-wide health spending continues to grow at a historically slow rate.  After adjusting for inflation, health spending growth was 1.7 percent (3.9 percent nominal) in 2011, is estimated at 2.1 percent in 2012 (3.9 percent nominal), and is projected at 2.3 percent (3.8 percent nominal) for 2013.  Assuming the projections hold, these rates of spending growth are the three lowest on record, well below the 4.2 percent average inflation-adjusted rate observed over the decade ending in 2010 and the 5.5 percent average inflation-adjusted rate from 1965 to 2010. As the President said earlier today, these reductions in health cost growth are good for American companies’ bottom lines, good for our economy, and good for jobs.  

    growth in health expenditures

  • New Data: Most of the Increase in Employment is in Full-Time Positions Since the Affordable Care Act Became Law

    Ed. Note: This post was updated February 10, 2014 to reflect the most recent data.

    Data from the Bureau of Labor Statistics  show that of the overall increase in employment since the Affordable Care Act became law, more than 9 out of 10 positions have been full-time.

    The Affordable Care Act continues to improve the functioning of labor markets in a range of ways including helping to slow the growth of premiums, creating affordable new options for small businesses, reducing the “job lock” that can keep workers from taking the best job for them, and generally improving health outcomes and reducing absenteeism. We are already seeing tangible changes in affordability, including employer premium growth at less than one-third the rate of the late 1990s and early 2000s.

    Businesses owners who are looking to take advantage of tax credits, and other benefits under the law aimed at making coverage more affordable are encouraged to visit Business.USA.gov/healthcare for more information.

    Moreover, to date there is no economy-wide evidence that the employer responsibility requirement, which is scheduled to go into effect in 2015, has increased part-time employment. In fact, a range of labor market data shows that our patterns of part-time employment are typical given our current economic recovery. This finding was reinforced by a recent Congressional Budget Office (CBO) report, which concluded that there is “no compelling evidence that part-time employment has increased as a result of the ACA.”  Five charts make five key points in this area:

    1. Since the Affordable Care Act became law, the economy has created 6.5 million full-time jobs, while the number of part-time jobs has been essentially unchanged.  Over the 46 months since the Affordable Care Act was signed into law, the number of employed people has increased by 6.4 million, reflecting a 6.5 million increase in the number of people with full-time jobs and a negligible decline in the number of people with part-time jobs. The net increase in employment over this period is therefore due entirely to an increase in full-time work.