Council of Economic Advisers Blog

  • Third Estimate of GDP for the Fourth Quarter of 2014

    Overall, today’s GDP report is consistent with a wide range of indicators showing continued labor market strengthening and improvement in household and corporate balance sheets. This estimate of fourth-quarter GDP affirms the robust underlying growth of the largest and most stable components of economic output, while the same volatile factors that increased growth in the third quarter subtracted from it in the fourth. Indeed, the sum of private consumption and fixed investment rose at the fastest pace in four years, despite the lower rate of overall growth. Personal consumption expenditures, which account for more than two thirds of output, grew 4.4 percent at an annual rate in the fourth quarter—the fastest single quarter since 2006. Despite the solid trend, the economy faces headwinds from weak growth abroad—as well as the lingering effects of winter weather—that economists generally expect to reduce GDP growth temporarily in the first quarter of 2015. There is more work to do to ensure that the recovery’s strong underlying trend is sustained and shared across a broad range of households. The President’s FY2016 Budget lays out a strategy to strengthen our middle class and help America's hard-working families get ahead.


    1. Real gross domestic product (GDP) grew 2.2 percent at an annual rate in the fourth quarter of 2014, according to the third estimate from the Bureau of Economic Analysis. The report reflects especially fast growth in personal consumption expenditures (revised further upward in the final release) and continued strong increases in residential and business fixed investment. At the same time, the large third-quarter increases in Federal defense spending and net exports retreated somewhat in the fourth quarter. Despite the recent volatility of such transitory componentsand though headwinds from abroad and winter weather may slow growth in the first quarter of 2015the solid underlying trend of strong consumption and investment growth persists (see point 5).

  • Continuing the Affordable Care Act’s Progress on Delivery System Reform Is an Economic Imperative

    Yesterday marked the fifth anniversary of the Affordable Care Act. Over the five years since the law passed, our health care system has seen considerable progress: a dramatic expansion of health insurance coverage that has pushed the nation’s uninsured rate to its lowest level ever; historically slow growth in health care costs that has saved billions for workers, businesses, and governments; and striking improvements in the quality of patient care that have avoided tens of thousands of patient deaths. But much remains to be done.

    Notably, despite major progress facilitated by the Affordable Care Act, our health care system remains dominated by “fee-for-service” payment systems that pay doctors and hospitals based on the quantity of care they provide, not the outcomes they achieve for patients. Economists broadly agree that traditional fee-for-service payment systems increase costs and reduce the quality of care patients receive, and recent evidence has bolstered the case that alternative ways of paying providers that reward quality and efficiency can generate substantial improvements in care.

    Indeed, facilitating the deployment of new payment models, like bundled payments and Accountable Care Organizations, may be the best tool we have to ensure that the exceptionally slow growth in health costs we have seen in recent years continues in the years ahead. And if deploying such models does allow us to sustain the recent slow growth in health costs, the economic gains could be immense. To illustrate that fact, consider:

  • Promoting Skills and Training for Low-Income Workers

    Last year, the President directed Vice President Biden to lead a review of federal job training programs in order to identify and implement steps to make these programs more “job-driven” and responsive to the needs of employers. The idea was that -- even as the economy continues to recover, with more open jobs than at any point since 2001 -- we need to do more to make sure that we are giving workers the skills they need to compete for those jobs. This is core to the President’s vision for “middle-class economics,” in which Americans who are unemployed or in low-wage jobs have the opportunity to train and find jobs that create pathways to the middle-class.

    Friday, as part of this effort, Secretaries Vilsack and Perez announced $200 million for projects designed to identify the most effective strategies to help participants in the Supplemental Nutrition Assistance Program (SNAP) improve their skills and find jobs.

  • The Employment Situation in February

    With another strong employment report, we have now seen twelve straight months of private-sector job gains above 200,000 -- the first time that has happened since 1977. Moreover, 2014 was the best year for job growth since the late 1990s and 2015 has continued at this pace. But additional steps are needed to continue strengthening wages for the middle class. As outlined in the 2015 Economic Report of the President, the optimal environment for sustained middle-class income growth features policies that grow productivity, promote a more equitable distribution of income, and support labor force participation. The President’s focus on middle-class economics is designed with those goals in mind.


    1. The private sector has added 12.0 million jobs over 60 straight months of job growth, extending the longest streak on record. Today we learned that total nonfarm payroll employment rose by 295,000 in February, largely due to a 288,000 increase in private-sector employment. Although private-sector job gains in December and January were revised down, the private employment gains over the past twelve months total 3.2 million—the largest 12-month increase since 1998.

  • Former Top Economic Advisers Show Strong Bipartisan Support for Passing Trade Promotion Authority

    Today, fourteen former chairs of the President’s Council of Economic Advisers sent a letter to the leadership in Congress expressing their strong support for renewal of Trade Promotion Authority (TPA). The economists signing the letter have served each of the last seven Presidents—all the way back to President Ford—demonstrating the rich, bipartisan history of support for Trade Promotion Authority.

    In his State of the Union, the President called on Congress to work with him to secure approval of bipartisan trade promotion legislation – building on the 80 year history of Democrats and Republicans working together to promote American exports that support American jobs that pay higher-than-average wages. Export-related jobs pay up to 18 percent more, on average, than non-export-related jobs. TPA establishes clear procedures for the consideration of trade agreements and reaffirms that U.S. negotiators and the President have the support of Congress when fighting for the interests of American workers and American small businesses.

    As detailed in the recently released Economic Report of the President authored by our current Council of Economic Advisers, exports driven by high-standard trade agreements like the ones the President is negotiating can have profoundly positive impacts here at home – including yesterday’s announcement by the Department of Commerce that exports of goods and services supported 11.7 million jobs in the United States in 2014. Today’s letter signers agree, stating in the letter that:

    Expanded trade through these agreements will contribute to higher incomes and stronger productivity growth over time in both the United States and other countries.  U.S. businesses will enjoy improved access to overseas markets, while the greater variety of choices and lower prices trade brings will allow household budgets to go further to the benefit of American families.

    Trade Promotion Authority will help us secure the best possible agreements with the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (T-TIP). Yet, TPA hasn't been updated in over a decade. Today’s letter is another powerful statement that it’s time to get it done.

    Read the full letter here

  • Second Estimate of GDP for the Fourth Quarter of 2014

    Today’s estimate of fourth-quarter economic growth affirms the strong underlying trend of the largest and most persistent components of output, while reflecting downward revisions to more volatile sectors. The combination of personal consumption and business fixed investment—known as private domestic final purchases—grew at a somewhat faster pace than in the third quarter, indicating the same positive trend. Meanwhile, the more volatile and transitory factors that boosted growth in the third quarter subtracted from it in the fourth. Overall, today’s report is consistent with a wide range of indicators showing further labor market strengthening, increasing domestic energy security, continued low health cost growth, and resiliency in the face of slower growth in the global economy. The President’s approach to middle-class economics would build on this growth while helping to ensure that our recovery is widely shared with all American families.


    1. Real gross domestic product (GDP) grew 2.2 percent at an annual rate in the fourth quarter of 2014, according to the second estimate from the Bureau of Economic Analysis. The report reflects especially strong consumption growth, an upward revision to business fixed investment, and continued residential investment increases. At the same time, the large third-quarter increase in Federal defense spending reversed, and inventory investment was revised down (see point 2). Overall, real GDP has risen 2.4 percent versus the fourth quarter of 2013.