Economic Report of the President Together with The Annual Report of the Council of Economic Advisers March 2019
GDP growth during the four quarters of 2018 was the fastest since 2005. This Administration is the first on record to have experienced economic Growth is Beating Market growth that meets or exceeds its own forecasts in each of its first two years Expectations in office. Administration Real GDP Growth Forecasts vs. Actuals Actual President Obama Forecast President Trump Forecast Q4-over-Q4 growth (percent) 4 3.3 3.1 3.1 3.0 3.0 3.0 3 3.1 2.7 2.7 2.6 2.6 2.5 2.6 2.3 2.4 2.3 2.0 2 1.9 1.6 1.5 1 0.3 0.2 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sources: Office of Management and Budget; Bureau of Economic Analysis; CEA calculations. Note: Administration growth forecasts are for that year. For example, the 2009 growth forecast is the forecast published by President Obama’s Administration in 2009. 2
Real GDP grew 3.1 percent during 2018, 0.9 percentage point above the Real GDP is pre-TCJA trend, and 0.8 percentage point faster than the last term of the Rising at a previous administration. Rapid Rate Growth in Real GDP, 2012:Q4 – 2018:Q4 Actual 2012 – 16 growth Actual 2016 – 18 growth Trend growth Compound annual growth rate (percent) 3.5 3.1 3.0 2.5 2.5 2.3 2.2 2.0 2.0 1.5 Pre-TCJA trend Preelection trend 1.0 0.5 0.0 2012:Q4 – 2016:Q4 2016:Q4 – 2017:Q4 2017:Q4 – 2018:Q4 Sources: Bureau of Economic Analysis; CEA calculations. Note: Data represent a compound annual growth rate over the given quarters. The 2016:Q4 – 2017:Q4 preelection trend is calculated for 2009:Q3-2016:Q4. The 2017:Q4 – 2018:Q4 pre-TCJA trend is calculated for 2009:Q3-2017:Q4. TCJA = Tax Cuts and Jobs Act. 3
Venture capital deals surged following passage of TCJA, rising nearly $17 billion over the pre-TCJA trend by the end of 2018. Investment in Startups is Taking Off Real Venture Capital Investment, 2010 – 18 Pre-TCJA Pre-TCJA trend Post-TCJA Dollars (billions, 2012) TCJA 40 2018:Q4 + $16.7 billion over trend 30 20 10 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sources: National Venture Capital Association; Bureau of Economic Analysis; CEA calculations. Note: Data are non-seasonally adjusted. The trend is calculated for 2009:Q3 – 2017:Q4 using year-over-year growth rates. Nominal values are deflated using the chain price index for GDP. TCJA = Tax Cuts and Jobs Act. 4
Investment by independent businesses rose sharply following passage of TCJA, rising $26 billion above pre-TCJA trend by the end of 2018. Investment is Making Long- Term Growth Possible Real Noncorporate Business Fixed Investment, 2010 – 18 Pre-TCJA Pre-TCJA trend Post-TCJA Dollars (billions, 2012, SAAR) 2018:Q4 TCJA 300 + $26.4 billion over 280 trend 260 240 220 200 180 2010 2011 2012 2013 2014 2015 2016 2017 2018 Sources: Federal Reserve Board; Bureau of Economic Analysis; CEA calculations. Note: The trend is calculated for 2009:Q3 – 2017:Q4 using compound annual growth rates. Nominal values are deflated using the chain price index for private nonresidential fixed investment. TCJA = Tax Cuts and Jobs Act. SAAR = seasonally adjusted annual rate. 5
Blue collar employment is surging. There were 215,000 blue collar jobs added in 2018, currently 301,000 above the pre- Manufacturing election expansion period trend. has been Revived Durable Goods Manufacturing Employment, 2010 – 19 Pre-election Pre-election trend Post-election Employment (thousands) Election 8,200 Feb-19 +301,000 jobs created above 8,000 trend 7,800 7,600 7,400 7,200 7,000 6,800 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Sources: Bureau of Labor Statistics, CEA calculations. Note: Trend is calculated for the compound annual growth rate on a sample period from July 2009 through November 2016, with forecasted levels reconstructed from projected rates. 6
In 2018, there was an influx of workers coming off the sidelines. In the 4 th quarter, 73% of the flows into employment came from out of the labor Workers are force rather than from unemployment — the highest share ever recorded. Coming off the Sidelines Share of Workers Coming Off the Sidelines by Administration, 2009 – 18 Share of workers (percent) 72 71.2 70 68 66.5 66 64 63.0 62 60 58 Average of President Obama's full term Average of President Obama's second term Average of President Trump's first term thus far (2009:Q1 - 2016:Q4) (2013:Q1 - 2016:Q4) (2017:Q1 - 2018:Q4) Sources: Bureau of Labor Statistics; CEA calculations. 7
Nominal hourly wages grew 3.4 percent over the last 12 months — the fastest pace since 2009 and the 7 th straight month above 3 percent. In 2018, the Wages are lowest wage earners saw the fastest growth. Rising Nominal Weekly Wage Growth Among All Adult Full-Time Wage and Salary Workers, 2010 – 18 12-month change (percent) 7 2018:Q4 6 10th percentile 5 Median 4 3 2 1 0 -1 2010:Q1 2012:Q1 2014:Q1 2016:Q1 2018:Q1 Sources: Bureau of Labor Statistics; Current Population Survey; CEA calculations. Note: Data are non-seasonally adjusted. 8
The full-income poverty measure indicates poverty declined to only 2.3 percent in 2017 compared to 12.3 percent with the official poverty Poverty Rate is Decreasing measure. Additionally, over 5 million people have been lifted off food stamps since the election. Percentage of the Population Living in Poverty, Based on the Official Poverty Measure and the Full-Income Poverty Measure, 1963 – 2017 Share of population (percent) 20 2017 Official poverty measure 15 12.3 10 5 Full-income poverty measure 2.3 0 1960 1970 1980 1990 2000 2010 Sources: Burkhauser et al. (2019); Census Bureau; National Bureau of Economic Research; CEA calculations. Note: Shading denotes a recession for at least four months of a given year. 9
Decreasing regulatory burden and overturning costly regulations from previous administrations is unlocking economic potential. For every Deregulating significant regulatory action in FY 2018, there were 12 deregulatory and Saving actions. Net regulatory cuts and their savings of $3.2 billion will continue each year, translating to $49 billion in present value savings. Real Annualized Costs of Major New Rules, Fiscal Years 2001 – 2019 Dollars (billions, 2017) 24 Obama administration Trump administration Bush administration 20 $75 billion $56 billion -$3.2 billion 16 12 8 4 0 -4 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Sources: Office of Information and Regulatory Affairs (OIRA); CEA calculations. Note: The cost estimates for years 2001 through 2016 are taken from the most recent OIRA Report to Congress with an estimate for that year. Negative costs indicate cost savings. The real cost estimate for 2019 is a projected estimate from the OIRA Regulatory Budget for fiscal year 2019. Annual cost estimates include all major rules published that year for which both benefits and costs have been estimated. 10
The United States is the largest producer of crude oil and natural gas in the world — surpassing Saudi Arabia and Russia. Unleashing We are also a net natural gas exporter for the first time since American Energy 1957. U.S. and Saudi Arabia Crude Oil Production, 2008 – 19 Barrels per day (millions) Election 13 March 8, 2019 11 Saudi Arabia 9 United States 7 5 3 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: Energy Information Administration. Note: U.S. data are a 4-week moving average of daily field production. Saudi Arabian production data are reported at a monthly frequency and are projected by the EIA for December 2018 and later months. 11
In February 2019, prescription drug prices had the slowest growth in 46 years. The price of prescription drugs relative to the CPI has fallen 11 Drug Prices are percent below its pre-inauguration trend. Declining Inflation-adjusted CPI for Prescription Drugs, 3-Month Centered Moving Average, 2010 – 2019 Pre-inauguration Post-inauguration Pre-inauguration trend Prescription Drugs CPI / All Items CPI (ratio) Inauguration Feb-19 2.30 2.20 – 11 percent below trend 2.10 2.00 1.90 1.80 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Sources: Bureau of Labor Statistics, CEA calculations. Note: CPI covers retail transactions, which are about three-fourths of all Rx drug sales. Inflation adjustments are calculated using the ratio of the CPI of prescription drugs relative to the CPI-U for all items. Trend is calculated for the compound annual growth rate on a sample period from July 2009 through December 2016. 12
Businesses are investing and taking out more loans. C&I loans now exceed $2 trillion and total loans exceed $10 trillion — both the highest ever The Lending Market is recorded. Healthy Commercial and Industrial Loans Held by FDIC-Insured Institutions Dollars (trillions) Crapo bill passed 2.3 2018:Q4 $2.16 trillion 2.1 1.9 1.7 1.5 2015:Q1 2015:Q2 2015:Q3 2015:Q4 2016:Q1 2016:Q2 2016:Q3 2016:Q4 2017:Q1 2017:Q2 2017:Q3 2017:Q4 2018:Q1 2018:Q2 2018:Q3 2018:Q4 Source: Federal Deposit Insurance Corporation. 13
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