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Dr Dev Kambhampati | CBO- Economic Outlook 2014 to 2024

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Dr Dev Kambhampati | CBO- Economic Outlook 2014 to 2024

Dr Dev Kambhampati | CBO- Economic Outlook 2014 to 2024

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  • 1. E) CONGRESSIONAL BUDGET OFFICE The Economic Ouilook for 2014 In 2024 in 15 Slides August 2014 For more details, see www. cbo. gov/ publiccnfion/45653.
  • 2. CBO Economic Growth and Its Sources
  • 3. Real Gill’ Percentage Change 6 9 Actual j Projeded -4 1999 2004 2009 2014 2019 2024 CBO projects that the growth of real (intlation—adjusted) GDP will increase after this year, to an annual average rate of 3.4 percent from the fourth quarter ot 2014 through the fourth quarter of 2016, before moderating in subsequent years. Note: Values trom 1999 through 2013—the thin line—retlect revisions to the national income and product accounts that the Bureau of Economic Analysis made on July 30, 2014. Values tram 2013 through 2024—the thick line—retlect the data available and projections made before July 30. 2
  • 4. CBO Contributions to the Growth of Real GDP Percentage Points 1 Addition to Growth in 2015 09 Compared to 2014 Business Investment Consumer Spending More rapid growth in business investment and consumer spending will significantly boost economic growth in 2015, CBO projects.
  • 5. CBO Capital Services Percentage Change 7 _ Actual 1 Projected 1 0 I I I I I 1954 1964 1974 1984 1994 2004 2014 2024 Over the next tew years, business investment is likely to grow more rapidly as the ettects of weak demand for goods and services tade, boosting businesses’ incentive to increase capital services.
  • 6. CBO Real Compensation of Employees Percentage Change 6 1 / -(lI1(]l l f’II>j<: ItIIIl _4 I I I I 1999 2004 2009 2014 2019 2024 Faster growth in the compensation of employees will support faster growth in consumer spending in the next few years. Note: Values from 1999 through 201 3—the thin line—reflect revisions to the national income and product accounts that the Bureau of Economic Analysis made on July 30, 2014. Values from 2013 through 2024—the thick line—reflect the data available and projections made before July 30. 5
  • 7. CBO GDP and Potential GDP Trillions of 2009 Dollars 24 20 16 12 H'IStaIi<al l Prajactarl 1 Potential GDP 2004 2009 2014 2019 2024 The gap between the economy's actual and potential output narrows to its historical average by the end of2017 in CBO's projection. Note: Historical data for GDP reflect revisions to the national income and product accounts that the Bureau of Economic Analysis made on July 30, 2014. Historical values for potential GDP and all projected values reflect the data available before July 30.
  • 8. CBO The Labor Market
  • 9. The Labor Force, Employment, and Unemployment Percentage of the Population 70 Actual 3 Projected 65 Unemployed 60 Employed 55 Labor Force Participation Rate 50 0 1954 1964 1974 1984 1994 2004 2014 2024 The labor force and employment are projected to grow more slowly than the population after 2015, primarily reflecting the retirement of members of the baby—boom generation. CBO
  • 10. CBO Unemployment Rate Percent 12 T Actual 10- 1999 2004 2009 2014 2019 2024 The underutilization of resources—or ”slack”—in the labor market, partly reflected in an elevated unemployment rate, is expected to largely disappear by the end of 201 7.
  • 11. CBO Workers Who Are Employed Part Time Percentage of Total Employment 24 — All Part-Time Workers 20 K-% 16 — 12 ~ Workers Who Work Part Time 8 — for Economic Reasons 4 0 I I I I I 1994 1998 2002 2006 2010 2014 The incidence of part—time employment for economic reasons remains much higher than it was before the 2007-2009 recession. 10
  • 12. Measures of the Underutilization of Labor Percent 20 * 16 12 U-6 8 ’ Short-Term Unemployment 4 _ Long-Term 0 I Unemployment 1994 1998 2002 2006 2010 2014 By some measures, the underutilization of labor remains quite high, but the rate of short—term unemployment is close to its average over the 2001-2007 business cycle. Note: The U-6 measure of the underutilization of labor combines the number of people who are unemployed, the number of people who are ma rginally attached to the labor force, and the number of people who work part time for economic reasons. CBO 11
  • 13. CBO Measures of Wages and Salaries Paid to Employees Percentage Change 5 _ Average Hourly Earnings 4 _ 3 2 _ j _ Wages and Salaries for Private Industry Workers 0 I I I I t 1994 1998 2002 2006 2010 2014 Despite the decline in the unemployment rate in recent years, wages and salaries paid to employees continue to grow slowly. 12
  • 14. CBO Inflation and Interest Rates
  • 15. CBO A‘. -r.9 r lrI. I.to: Iror. Percentage Change in PCE Prices 5 T Actual j Projected 4 = 1 3 — 1 l Overall Inflation 2 l i ’ ' 77 T "J Ff‘ . /AV Core Inflation 4‘ l 1 ‘ l 0 t I l I I 1999 2004 2009 2014 2019 2024 CBO anticipates that prices will rise at a modest pace over the next several years, reflecting the remaining slack in the economy and widely held expectations for low and stable inflation. Note: Values from 1999 through 2013—the thin lines—reflect revisions to the national income and product accounts that the Bureau of Economic Analysis made on July 30, 2014. Values from 2013 through 2024—the thick lines—reflect the data available and projections made before July 30. PCE = personal consumption expenditures. j4
  • 16. CBO Interest Rates on Treasury Securities Percent Actual ‘ Projectecl 10-Year Treasury Notes 3-Month Treasury Bills 1999 2004 2009 2014 2019 2024 From 2014 to 2019, interest rates will be pushed up by market participants’ expectations of an improving economy and an end to the Federal Reserve’s purchases of long—term Treasury securities and mortgage—backed securities, CBO anticipates. 15
  • 17. About This Document Alexander Arnon, Maureen Costantino, Kim Kowalewski, Mark Lasky, Leah Loversky, and Charles Whalen prepared these slides. For more details about CBO’s economic forecast as well as the agency's most recent budget projections, see An Update to the Budget and Economic Outlook: 2014 to 2024 (August 2014), wvvw. cbo. gov/ publication/45653 That report is the result of work by many analysts at CBO.