WASHINGTON — The U.S. economy has just completed the best two years of job growth since the 1990s, wages are on the rise and consumers are more confident about the economy than they’ve been in more than a decade. But the United States faced global headwinds that will continue this year, President Barack Obama’s economic advisers said Monday in a new report.
The advisers also made several recommendations to reduce income inequality, though many of them rely on cooperation from a wary GOP-led Congress as well as state and local governments.
For example, the Obama administration supports an increase in the minimum wage, which GOP lawmakers generally oppose. At the local level, the report said that that the expansion of state licensure requirements has made it harder for workers to switch jobs and that local land-use restrictions can constrain housing supply and make it more expensive.
The White House report said falling oil prices had less of an impact on economic growth than many projected, boosting gross domestic product by just 0.2 percent last year.
Overall, the U.S. is doing better than other advanced economies, said Jason Furman, chairman of the Council of Economic Advisers. Wages grew at a rate of 2.5 percent and the unemployment rate dropped to 5 percent by the end of 2015, faster than anyone expected, he said.
Yet, many economists say the recovery has been uneven and left many Americans behind. Furman agreed that more can be done.
“We are still not all the way there. We in particular would like to see faster wage growth,” Furman said.
In the midst of the presidential election, candidates have spoken often about the need to boost economic growth. Furman warned that demographics factors will make it harder to keep pace with historical rates. He said there’s a lot that government policy can do to aid growth, from making investments in early childhood education and roads, bridges and other infrastructure, and approving a trade pact with Pacific Rim countries. But the population growth is slower and the baby boom generation has turned into a retirement boom. The report says that attracting highly skilled immigrants through changes in immigration law would counter the effects of the aging, native-born population.
“Frankly, you’re going to need to do all of those”… to get to “the types of historic productivity growth we’ve had,” Furman said.
Looking ahead, the latest Economic Report of the President expects core inflation to remain low in 2016, while the pickup in wages and employment growth will probably boost consumer spending. The report estimates that the economy will grow 2.7 percent this year, but also offered some cautions.
“Weakness abroad not only reduces our exports, but also raises risks of adverse financial and other spillovers to the U.S. economy,” the report said.
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