Despite a recent soft patch reflecting transitory factors, output remains on a moderate growth trajectory sustained by mutually-reinforcing gains in employment, income and household spending. Steady job gains have pushed down the unemployment rate, and recently the labour force has risen. Moderate output gains are likely to resume as these influences wane, with solid domestic demand growth counteracted by relatively sluggish gains in external demand.
Monetary policy is very accommodative, consistent with below-target inflation, weak nominal wage pressures and subdued inflation expectations. The Federal Reserve raised its policy rates last December by ¼ percentage point, and this projection assumes they inch up to 1½ per cent by end-2017 in the context of weak inflationary pressures and asymmetric downside risks to the inflation outlook. Fiscal policy is projected to be roughly neutral in 2016 and 2017. Public debt prospects have improved, but the debt-to-GDP ratio will remain high without higher growth or further consolidation.
Productivity growth has been especially slow in recent years, intensifying a broad-based deceleration initiated in the early 2000s. Although cyclical weakness in demand has contributed to the slowdown, there are signs that structural forces are undermining allocative efficiency, including declines in business dynamism, signs of diminished competitive pressures, and sagging public infrastructure provision. Multiple policies to reinvigorate productivity would be appropriate, such as targeted investments in public infrastructure, eliminating needless inter-jurisdictional differences in occupational licensing, and broadening the scope of antitrust laws.
Economic Survey of the United States (survey page)
The Economic Consequences of Brexit: A Taxing Decision (main web page with paper)
Structural reforms in a difficult time (blog + paper)
Public spending efficiency in the OECD (blog + paper)