Council of Economic Advisers Blog

  • Second Estimate of GDP for the First Quarter of 2015

    Today’s downward revision to GDP growth was entirely accounted for by revisions to inventory investment and net exports, with other changes being small and neutral on balance. The first-quarter slowdown was the result of harsh winter weather, tepid foreign demand, and consumers saving the windfall from lower oil prices. The combination of personal consumption and fixed investment, the most stable components of GDP, has grown 3.4 percent over the past four quarters. This solid long-term economic trend complements the robust pace of job growth and unemployment reduction over the last year. The President is committed to further strengthening these positive trends by opening our exports to new markets with new high-standards free trade agreements that create opportunities for the middle class, expanding investments in infrastructure, and ensuring the sequester does not return in the next fiscal year as outlined in the President’s FY2016 Budget.

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

    1. Real gross domestic product (GDP) fell 0.7 percent at an annual rate in the first quarter of 2015, according to the second estimate from the Bureau of Economic Analysis. The decline follows an increase of 3.6 percent at an annual rate during the second half of 2014. First-quarter growth was likely affected by a number of factors including especially harsh winter weather in the first quarter (see point 3) and a spike in personal saving (see point 4). A decline in the trade balance was another major contributor, partially reflecting the continued drag on U.S. exports from the slowdown in foreign growth. Indeed, net exports subtracted nearly 2 full percentage points from quarterly GDP growth. Structures investment subtracted about 0.7 percentage point from GDP, likely reflecting reduced oil mining in the wake of last year’s decline in oil prices.

  • Creating Opportunity for All in Rural Communities

    Rural America provides the vast majority of food and energy benefits for the rest of the country, is the source of nearly 90 percent of renewable water resources, and is home to important service sector and manufacturing hubs. Despite this critical role in our nation’s economy, too many Americans in rural areas are not sharing in our nation’s economic growth.

    In 2013, 6.2 million Americans in rural areas lived in poverty, including about 1.5 million children. Moreover, in far too many of these communities, high rates of poverty have persisted for generations: Over 300 rural counties have had poverty rates of over 20 percent in every Census since 1980.

    While the fight to eliminate poverty is far from over, today, as part of the White House Rural Council’s ongoing efforts to address rural child poverty, we released a report that finds that programs like refundable tax credits, Social Security, SNAP, and housing assistance lifted about 9.0 million rural people out of poverty in 2013, including about 1.6 million children.

  • Six Examples of the Long-Term Benefits of Anti-Poverty Programs

    Economists have traditionally argued that anti-poverty policy faces a “great tradeoff”—famously articulated by Arthur Okun—between equity and efficiency. Yet, recent work suggests that Okun’s famous tradeoff may be far smaller in practice than traditionally believed and in many cases precisely the opposite could be the case. As discussed by one of us in today’s New York Times, recent economic research, much of it using large, high-quality administrative data, shows that key income support, education, housing, health care, and nutritional assistance programs improve health outcomes, educational attainment, employment, and earnings in adulthood for individuals who received this support in childhood. This research suggests that the investments in nutrition assistance, health care, housing vouchers and other programs included in the President’s Budget would not only help low-income families today, but would also improve our future economic performance.

    In the half century since President Lyndon B. Johnson declared an unconditional War on Poverty, the Federal Government has invested in strategies that aim to relieve and prevent poverty. Partly as a result of these programs, and a large number of additions and reforms since then, between 1967 and 2012, poverty measured by a measure that accounts for tax and transfer payments fell 9.8 percentage points, or 38 percent. In 2013, income and nutrition assistance programs lifted 46 million people, including 10 million children, out of the poverty. Medicaid has also resulted in better health care for tens of millions of Americans. Another 16 million people have gained coverage following the Affordable Care Act’s coverage expansions, as of early 2015.

  • The Employment Situation in April

    The economy added 223,000 jobs in April as the unemployment rate fell to 5.4 percent—the lowest since May 2008—and the participation rate ticked up. This report largely reflects the ongoing recovery, but jobs in April were likely also boosted by a temporary bounce-back from winter weather. Notwithstanding the substantial progress our economy has made, it is critical to continue the overall momentum and further strengthen wage growth. That is why the President is pursuing policies including opening new markets for U.S. goods and services through expanded trade, increasing investments in infrastructure, providing relief from the sequester, and raising the minimum wage.

    FIVE KEY POINTS ON THE LABOR MARKET IN APRIL 2015

    1. The private sector has added 12.3 million jobs over 62 straight months of job growth, extending the longest streak on record. Today we learned that private-sector employment rose by 213,000 in April. Our businesses and the economy as a whole created more than 200,000 jobs in thirteen of the past fourteen months—the first time that has happened since 1995. After taking into account the downward revision for the March jobs number, our economy has added 3.0 million new jobs over the past twelve months, nearly the fastest pace in more than a decade.

     

  • Ten Facts about U.S. Trade

    President Obama’s top priority is to make sure the United States builds on its economic momentum by continuing to grow businesses, create jobs, and expand the middle class. That is why the President is committed to free and fair trade agreements that level the playing field and benefit American businesses and workers.

    A new report released this morning by the Council of Economic Advisers presents original empirical evidence, alongside a summary of the extensive economic literature, on a broad range of effects of enhanced U.S. trade and U.S. free trade agreements (FTAs). Highlights from this report include: 

  • Advance Estimate of GDP for the First Quarter of 2015

    Economic growth in the first quarter was restrained by factors including tepid foreign demand and harsh winter weather. At the same time, households saved most of their gains from low energy prices, Over the past four quarters, the most persistent and stable components of GDP — consumption and fixed investment — have grown 3.3 percent. This trend complements the strong pace of job growth and unemployment reduction over the last year. This report underscores that the U.S. economy is directly affected by the global economy, making clear the importance of advancing Trade Promotion Authority in Congress so the President can take further steps to open up markets abroad to increase U.S. exports and expand opportunities for the middle class. In addition, we could further solidify the positive trends in the domestic economy by expanding investments in infrastructure and ensuring the sequester does not return in the next fiscal year as outlined in the President’s FY2016 Budget.

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

    1. Real gross domestic product (GDP) grew 0.2 percent at an annual rate in the first quarter of 2015, according to the advance estimate from the Bureau of Economic Analysis. The report, which was likely affected by notably harsh winter weather in the first quarter (see point 2), reflects a slowdown in personal consumption as well as declines in fixed investment and net exports — as U.S. exports continue to be restrained by the global growth slowdown (see point 4). Indeed, the decline in net exports subtracted more than a full percentage point from quarterly GDP growth. Another major contributor to the slowdown was declining investment in mining exploration, shafts, and wells — likely reflecting the response to the sharp decline in oil prices — that subtracted more than half a percentage point from quarterly growth. Four-quarter growth of real GDP rose to 3.0 percent as the 2014-Q1 decline dropped out of the four-quarter moving average.