Presentation of the OECD 2018 Economic Report of USA

OECD ECONOMIC SURVEY UNITED STATES 2018 Sustaining growth and raising employment Washington D.C., 6 June 2018 http://www.oecd.org/eco/surveys/economic-survey-united-states.htm

@OECDeconomy @OECD

The expansion is continuing Trillion USD (2009 prices) 18

Real GDP

17 16 15 14 13

12

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Source: OECD Analytical Database.

2

Unemployment continues to fall Unemployment rates

% of the labour force United States 9 G7 OECD

7 5 3

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Source: OECD Analytical Database.

3

Fiscal stimulus is boosting growth % 4,5 4,0

% 4,5

Impact of US fiscal stimulus

4,0

3,5

3,5

3,0

3,0

2,5

2,5

2,0

2,0

1,5

1,5

1,0

1,0

0,5

0,5

0,0

0,0

2017

2018 United States

Source: OECD Economic Outlook 103.

2019

2017

2018

2019

G20 excluding US 4

Growth is projected to strengthen

2017

2018

2019

Gross domestic product (GDP)

2.3

2.9

2.8

Private consumption

2.8

2.5

2.2

Government consumption

0.1

2.2

4.3

Gross fixed capital formation

3.4

4.9

4.7

Exports of goods and services

3.4

4.8

4.4

Imports of goods and services

4.0

5.3

5.3

Unemployment rate Personal consumption expenditures deflator

4.3

3.9

3.6

1.7

2.2

2.2

Note: annual growth rates, with the exception of the unemployment rate, which is % of the labour force.

Source: OECD Economic Outlook 103.

5

The government deficit is set to rise Federal government net saving as a % of GDP, calendar year

Source: Bureau of Economic Analysis, OECD.

6

Higher growth and spending restraint are needed to stabilise public debt Federal debt held by the public, % of GDP, fiscal years 150

Baseline

Making tax reforms permanent

Higher GDP growth and slower spending growth

150

140

140

130

130

120

120

110

110

100

100

90

90

80

80

70

70

60

60

50 2015

2020

Source: OECD calculations.

2025

2030

2035

50 2040

7

Inflation is returning to target Y-o-y % changes

6

CPI

PCE Coreยน

5 4

Inflation target

3 2 1 0 -1

2006

2008

2010

2012

2014

2016

2018

-2

1. Personal Consumption Expenditures excluding food and energy price index.

Source: OECD Analytical Database.

8

Monetary policy is tightening %

United States

Euro area

Japan

%

6

6

5

5

4

4

3

3

2

2

1

1

0

0

-1

-1

Note: Policy rates are the federal effective funds rate for the United States, the main refinancing operations for the euro area and the complementarity lending facility rate for Japan.

Source: OECD Analytical Database.

9

Recommendations to sustain economic growth • Implement the recently-passed corporate tax reform and make the temporary investment incentives set to expire to be permanent.

• Ensure long-term sustainability by reining in spending growth, particularly by reforming entitlement programmes where appropriate.

• Continue to raise interest rates at a gradual pace as long as inflation remains close to the Fed’s target and the labour market remains close to full employment.

10

Labour productivity growth has been weak after the crisis Labour productivity Average annual growth

2,5

OECD

United States

2,0 1,5 1,0 0,5

0,0

Source: OECD Analytical Database.

1997-2007

2008-2017

11

Business investment1 has begun to recover Contributions to annual real GDP growth

Contributions to annual real GDP growth

1,5

1,5

1,0

1,0

0,5

0,5

0,0

0,0

-0,5

-0,5

-1,0

-1,0

Intellectual property products

-1,5

Structures

-1,5

-2,0

Equipment

-2,0

-2,5

Private non-residential fixed investment (forecast) 2000

2002

2004

1. Private non-residential fixed investment Source: BEA and OECD calculations.

2006

2008

2010

2012

2014

2016

2018 2019

-2,5

12

Business dynamism has slowed A. Entry rates

% 12

United States

Euro area

Japan

10

10

8

8

6

6

4

4

2

2

0

2002

2004

2006

2008

2010

2012

20142015

B. Exit rates

% 12

0

United States

2002

2004

2006

Euro area

2008

2010

Japan

2012

20142015

Notes: Number of enterprise entries and exits in year t over number of active enterprises in year t. Data for the United States are estimated in 2013-15, using separate data from the US Census Bureau. The Euro Area estimates are an unweighted average of entry and exit rates in member states Source: OECD Economic Outlook, Volume 2017 Issue 2.

13

Restrictive regulations on businesses can be reduced OECD Product Market Regulation indicator Latest year available Scale 0 (least) - 6 (most restrictive)

2,8 2,4 2 1,6 1,2 0,8 0,4 0

TUR

NLD

Least restrictive

Source: OECD Product Market Regulation database.

OECD

USA

Most restrictive

14

Room to reduce obstacles to trade in services Scale from 0 (least) to 1 (the most restrictive), 2017

0,6

United States

0,5

Best OECD

0,6

Average OECD

0,5

Notes: the index includes regulatory transparency, barriers to competition, other discriminatory measures, restrictions on movement of people and restrictions on foreign entry.

Source: OECD Services Trade Restrictiveness Index (STRI).

Air transport

Courier

Maritime transport

Insurance

Broadcasting

Construction

Logistics cargo-handling

Logistics customs brokerage

Commercial banking

Logistics freight forwarding

Engineering

Logistics storage and warehouse

Legal

0,0

Architecture

0

Computer

0,1 Road freight transport

0,1 Accounting

0,2

Sound recording

0,2

Motion pictures

0,3

Rail freight transport

0,3

Distribution

0,4

Telecom

0,4

15

Reducing trade barriers further could boost trade Increase in trade from multilateral tariff reductions Estimated medium-term impact of lowering tariffs in all G20 economies % 8

Real Import demand

Real Export demand

7 6 5 4 3

2 1

0

World

United States

European Union

China

Note: Scenario in which tariffs are reduced by all G20 economies to the lowest level applied by any G20 country. With the exception of food and textiles the lowest tariff rate is 0.

Source: OECD METRO model simulations.

16

Trade has been an important driver of job growth U.S. employment embodied in exports and domestic demand, accumulated growth 35

Exports

35

Domestic demand

30

30

25

25

20

20

15

15

10

10

5

5

0

0

-5

-5

-10 2005

2006

2007

2008

2009

2010

2011

Note: Index of employment in export and final domestic demand sectors, 2005 = 0 Source: OECD Inter-Country Input-Output (ICIO) tables.

2012

2013

2014

-10 2015

17

Recommendations to boost productivity • Ease restrictions in services trade.

• Direct state control over business enterprises is relatively high. Privatise state-owned utilities and transport authorities.

• Regulatory protection for incumbents is relatively high in some markets. Remove exemptions from anti-trust law, including in the digital economy.

• Technological change creates challenges for the competition authorities as large market shares may create barriers to competition. Broaden merger analysis to ensure greater competition.

18

Labour force participation not yet at pre-crisis levels Prime age participation rates OECD

% 88

USA

JPN

GBR

86 84 82

80

2006

2008

2010

2012

2014

2016

Note: OECD refers to a simple average. Prime age includes individuals between the ages of 25 and 54.

Source: OECD Employment and Labour Market Statistics

2018

19

Workers receive relatively little support to find new jobs Public spending on Active labour market policies (ALMPs), Latest available date % of GDP 2.2

% of GDP 2.2

DNK

SWE

FRA

FIN

HUN

NLD

AUT

BEL

LUX

0.0

DEU

0.0

ESP

0.2

CHE

0.2

IRL

0.4

PRT

0.4

OECD

0.6

NOR

0.6

ITA

0.8

POL

0.8

CZE

1.0

KOR

1.0

SVN

1.2

CAN

1.2

AUS

1.4

SVK

1.4

CHL

1.6

ISR

1.6

LVA

1.8

JPN

1.8

USAยน

2.0

MEX

2.0

1. Includes Temporary Assistance for Needy Families (TANF) work-related activities. Other TANF expenditure (0.20% of GDP) is not included.

Source: OECD Labour Market Programme Database.

20

Some young people struggle to enter the labour market 20-24 year-olds not in employment, education or training (NEET), latest available date % of 20-24 year-olds 35

% of 20-24 year-olds 35 30

25

25

20

20

15

15

10

10

5

5

0

0

ISL NLD DNK LUX JPN CHE DEU SWE NOR CZE AUS SVN NZL AUT EST BEL CAN GBR USA OECD SVK FIN HUN ISR POL LVA IRL CHL PRT FRA MEX GRC ESP ITA TUR

30

Source: OECD Education at a Glance: Transition from school to work database.

21

Labour force participation rates vary a lot across the United States

Note: Civilian noninstitutional population ages 16 and older Source: Bureau of Labor Statistics.

22

Inter-State migration has slowed Migration rate between states 1980-2017 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 1980

1990

Source: U.S. Census Bureau, Current Population Survey.

2000

2010

2017

23

Housing cost overburden % of population in the bottom quintile spending more than 40% of disposable income on rents or mortgages 70

OECD

60

United States

50 40

30 20 10 0

‌on rents (private tenants)

Source: OECD Affordable Housing Database.

...on mortgages

24

Occupational licensing adds to constraints on mobility % of employed with a certification or licence 50

50

45

45

40

40

35

35

30

30

25

25

20

20

15

15

10

10

5

5

0

Total

Private industries

Source: Bureau of Labor Statistics.

Federal

State

Local

Self-employed workers, unincorporated

0

25

Recommendations for helping workers find jobs • Promote active labour market policies, such as job placement services and support to geographic mobility.

• Increase investment in infrastructure, (making use of greater private-sector financing, user fees and flexible risk-sharing arrangements).

• Expand the use of apprenticeships and on-thejob training to ease the school-to-work transition.

26

Recommendations to reduce barriers to mobility • Reform the GSEs to redirect housing support to the rental market.

• Use federal money to encourage States and localities to remove zoning restrictions. • Encourage State and local governments to deregulate occupational licensing.

27

Well-being is generally high Indicators of well-being

US position in OECD country ranking (1 to 35) 20% top performers

60% middle performers

US position in OECD country ranking (1 to 35)

20% bottom performers

United States 2

1

5

16 19

19

Social connections

Education & Health status skills

15

14

14

25 28

Work & life balance

Personal security

Source: OECD Better Life Index database.

Jobs & earnings

Subjective Environmental Civic well-being quality engagement & governance

Housing

Income

28

Gains in life expectancy have stalled recently Life expectancy at birth A. Total population

B. Male population

Years

C. Female population

Years

90

90

Japan United States OECD members

85

Years 90

Japan United States OECD members

85

85

80

80

80

75

75

75

70

70

70

65

1965

1975

1985

1995

2005

2015

65

1965

Source: World Bank Development Indicators (WDI).

1975

1985

1995

Japan United States OECD members

2005

2015

65

1965

1975

1985

1995

2005

2015

29

Deaths from overdoses are rising Overdoses deaths involving opioids Per 100,000 resident population 15,0

12,5 10,0 7,5 5,0

2,5 0,0 1999

2002

Source: National Center for Health Statistics.

2005

2008

2011

2014

2016

30

Too many opioids are prescribed Daily doses per million inhabitants per day

50000 45000 40000 35000 30000

25000 20000 15000 10000 5000

0

USA

Source: National Center for Health Statistics and OECD calculations.

rest of OECD

31

Low labour force participation and high opioid use are closely connected

By State, 2016 Participation rate

Participation rate

75

75

70

70

65

65

60

60

55

55

50

50 20

30

40

50

60

70

80

90

100

110

120

130

Opoid prescribing rate per 100 persons

Source: Bureau of Labor Statistics, Centers for Disease Control and Prevention.

32

Recommendations to address the opioid crisis • Adopt best practice for opioid prescriptions.

• Improve access to drugs that can reverse the effects of opioid overdoses.

• Promote and expand medically assisted treatment options.

• Help reintegrate into employment those who have successfully completed treatment for addiction.

33

For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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