Council of Economic Advisers Blog

  • Advance Estimate of GDP for the Fourth Quarter of 2013

    Economic growth was solid in the fourth quarter, a testament to the resilience of American businesses and families. The private sector’s strong performance in the fourth quarter caps off its fastest year of growth since 2003. And over the four quarters of 2013, real GDP grew 2.7 percent, its strongest rate in three years. Nevertheless, the unemployment rate is still unacceptably high, and too many Americans are still looking for a job and fighting to make ends meet. In his State of the Union address on Tuesday night, President Obama outlined his plans to build on the progress made to date and ensure 2014 is a year of action, with steps to increase growth, create new jobs, and expand economic opportunity.

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

    1. Real gross domestic product rose at a solid 3.2 percent annual rate in the fourth quarter, the 11th consecutive quarter of growth. Looking at the various components of GDP, growth in consumer spending picked up from the previous quarter, as did exports, business investment was in line with its recent performance, but Federal spending fell sharply, and housing posted its first quarterly decline since 2010. In the last two quarters economic growth accelerated to a 3.7 percent annual rate and over the four quarters of 2013, real GDP grew 2.7 percent, up from 2.0 percent in 2012. (Note that economists generally prefer to measure growth on a Q4/Q4 basis because that reflects what happened to the economy just in 2013, the alternative annual measure of growth also places considerable weight on what happened to the economy in 2012 and thus does not provide as meaningful a measure.)

     

     

  • The Employment Situation in December

    As our economy continues to make progress, there's a lot more work to do. Though December’s job growth was less than expected, we continue to focus on the longer-term trend in the economy - 2.2 million private sector jobs added and a 1.2 percentage point decline in the unemployment rate over the course of 2013. Today’s numbers are also a reminder of the work that remains, especially on one of our nation’s most immediate and pressing challenges: long-term unemployment. Despite an abundance of evidence indicating that this challenge is far from solved, Congress allowed extended unemployment insurance to lapse at the end of 2013, cutting off a critical lifeline to those who lost a job through no fault of their own and are still searching for work. Several of the charts below—and the updated Council of Economic Advisers report available here—explain why today’s jobs numbers show that while we are making progress, extended unemployment insurance benefits remain necessary and should be the first order of business in 2014.

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

    1. America’s resilient businesses have added jobs for 46 consecutive months, with private sector employment increasing by 8.2 million over that period. Today we learned that total nonfarm payroll employment rose by 74,000 in December, due to an 87,000 increase in private employment. Private sector job growth was revised up for October (to 217,000) and November (to 226,000) so that over the last three months, private employment has risen by an average of 177,000 per month. Policymakers should be doing everything they can to speed job creation. The Council of Economic Advisers estimates that extending the Emergency Unemployment Compensation (EUC) program through 2014 would lead to an additional 240,000 jobs over the course of the year, because the benefits sustain the purchasing power of recipients who support local businesses and their suppliers. This projection is similar to the central estimate released by the Congressional Budget Office.

  • The Economy in 2013

    The economy is finishing 2013 in a stronger place than where it began the year, though more work remains to grow the economy, create jobs, and strengthen the middle class. This is especially notable given the general fiscal environment, including the onset of the sequester in March, and the government shutdown and debt limit brinksmanship in October. The recent budget bill passed by Congress on a bipartisan basis will contribute to certainty, a better fiscal stance over the next year, and more funding for the critical ingredients of longer run growth. But more needs to be done, most immediately extending Unemployment Insurance benefits, and beyond that increasing investments to strengthen growth and making sure that growth is shared. 

    The slides below highlight the key themes and developments in the economy over the course of the year, and also touch on a few longer-term structural trends that continued to unfold in 2013 and will support growth into the future.

    The strengthening of the economy over the course of 2013 is a testament to America’s resilient private sector and America’s workers. Businesses have added 8.1 million jobs over the past 45 months, and are on track to register the third consecutive year of job growth in excess of two million.

    The growth rate of gross domestic product has risen for four straight quarters, and the private components of GDP have grown at a robust 3.7 percent annualized rate over the last two quarters. One of the biggest contributors to recent GDP growth has been the housing sector, which was the epicenter of the financial crisis but is bouncing back and has significant potential going forward.

    There are also several emerging structural trends that supported growth in 2013 and will continue to play an important role in our economy. The United States is now the largest producer of oil and gas in world, passing Russia and Saudi Arabia, and for the first time since 1995, the United States is producing more oil domestically than it imports. A second, less widely appreciated trend is the dramatic slowdown in health care cost growth that in part reflects critical reforms under the Affordable Care Act. Slower health care cost growth means less pressure on employers and the federal budget and more take-home pay for families. Lastly, technological contributions such as cloud computing and mobile broadband and mobile devices continue to help the economy. 

  • The Employment Situation in November

    With solid job growth in November – in addition to strong data on manufacturing activity and auto sales – it is clear that the recovery continues to gain traction. Today’s report was yet another reminder of the resilience of America’s private sector following the disruptive government shutdown and debt limit brinksmanship in the first half of October. Nevertheless, today’s jobs numbers show that too many Americans who have been unemployed for 27 weeks or longer are still struggling to find jobs. That is why the President is calling on Congress to pass the extension of emergency unemployment insurance before it expires at the end of the year, just like they have always done when long-term unemployment remains elevated. The President also continues to work to increase overall growth while ensuring that growth is shared broadly in the form of higher wages and more mobility, which is why he is fighting for a minimum wage increase and expansion of educational opportunities.

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

    1. America’s resilient businesses have added jobs for 45 consecutive months, with private sector employment increasing by more than 8 million over that period. Today we learned that total nonfarm payroll employment rose by 203,000 in November, with 196,000 of that increase in the private sector. Private sector job growth was revised up for September (to 168,000) and October (to 214,000) so that over the last three months, private employment has risen by an average of 193,000 per month. 

    private sector job growth

  • New Report: The Economic Benefits of Extending Unemployment Insurance

    The United States economy continues to recover from the worst economic crisis since the Great Depression, and while substantial progress has been made, more work remains to boost economic growth and speed job creation. Despite ten consecutive quarters of GDP growth and 7.8 million private sector jobs added since early 2010, the unemployment rate is unacceptably high at 7.3 percent, and far too many families are still struggling to regain the foothold they had prior to the crisis.

    The Emergency Unemployment Compensation (EUC) program authorized by Congress in 2008 has provided crucial support to the economy and to millions of Americans who lost jobs through no fault of their own. Under current law, EUC will end on December 28, 2013[1].

    This report argues that allowing EUC to expire would be harmful to millions of workers and their families, counterproductive to the economic recovery, and unprecedented in the context of previous extensions to earlier unemployment insurance programs.

    Download the full report here or read a summary below, including state-by-state effects of allowing EUC benefits to expire.

    Since their inception in 2008, extended unemployment insurance (UI) benefits have provided critical support to millions of workers and their families:

    • Nearly 24 million workers have received extended UI benefits
    • Recipients are a diverse group: roughly half have completed at least some college, including 4.8 million with bachelor’s degrees or higher
    • Including workers’ families, nearly 69 million people have been supported by extended UI benefits, including almost 17 million children
    • In 2012 alone, UI benefits lifted an estimated 2.5 million people out of poverty

  • New Report from the Council of Economic Advisers: The Recent Slowdown in Health Care Cost Growth and the Role of the Affordable Care Act

    The Affordable Care Act (ACA) was passed against a backdrop of decades of rapid growth in health care spending, and one of the ACA’s key goals was to root out serious inefficiencies in the United States health care system that increase costs and compromise patients’ quality of care. Recent data show that health care spending and prices are growing at their slowest rates in decades; it appears that something has changed for the better. While this marked slowdown likely has many causes, and these causes are not yet fully understood, the available evidence suggests that the ACA is contributing to these trends, and, moreover, is helping to improve quality of care for patients. Today the White House Council of Economic Advisers released a new report analyzing recent trends in health costs, the forces driving those trends, and their likely economic benefits. Read the full report here.

    Key points in today's report from the Council of Economic Advisers:

    1. Health care spending is growing at the slowest rate on record: According to the most recent projections, real per capita health care spending has grown at an estimated average annual rate of just 1.3 percent over the three years since 2010. This is the lowest rate on record for any three-year period and less than one-third the long-term historical average stretching back to 1965. This slower growth in spending is reflected in Medicare, Medicaid, and private insurance. 

    2. Health care price inflation is at its lowest rate in 50 years: Measured using personal consumption expenditure price indices, inflation for health care goods and services is currently running at just 1 percent on a year-over-year basis, the lowest level since January 1962.  (Health care inflation measured using the medical CPI is lower than at any time since September 1972.)