The 2016 Economic Report of the President says that the economy will continue modest, steady growth this year but that inequality remains higher in the United States than in other countries and has been growing faster.
The annual report, released Monday and written by the Council of Economic Advisers, said that President Obama’s proposals to raise the minimum wage, put money into early childhood education and help low-income families with children would ease inequality.
While the report concluded that some of the inequality was the result of competition and higher productivity stemming from technological advances, it also said that some was the result of undeserved income paid to individuals and companies.
Political analysts say that inequality may be one reason Obama’s approval ratings have not been higher, given that economic disaster was averted in 2009 and jobs have been added for a record consecutive number of months.
The annual economic report touted the president’s achievements.
“The U.S. economy has just completed the best two years of job growth since the 1990s and the fastest two-year decline in the unemployment rate since the 1980s while extending the longest streak of job growth on record,” it said. “Consumers are more confident about the economy than they have been in over a decade, and wages are rising at the fastest pace since the financial crisis.”
At the same time, it pointed to challenges for the economy, including lackluster growth abroad hurting U.S. exports, slow productivity growth, and smaller than expected benefits from low oil prices.
The report said that slow foreign demand hurt GDP growth, which slowed to 1.8 percent in 2015, down from 2.5 percent in 2013 and 2014. The sharp drop in oil prices boosted the economy by 0.2 percent, less than expected. While low oil prices boosted consumption by 0.5 percent, it hurt drilling and other activity related to the oil and gas sector, dragging down the economy 0.3 percent in that area. The report also said getting productivity growth back to its long-term trend was “a critical challenge.”
The report said that the drop in participation in the labor force had hurt GDP growth, but Jason Furman, chairman of the Council of Economic Advisers, said that was largely a result of demographic changes — the retirement of the Baby Boom generation and a leveling off of the number of women working.
Furman said that immigration reform could offset that if it led to an orderly influx of legal immigrants. “The one aspect of demographics that’s not destiny is immigration reform,” he said in a briefing on the report.
The report also made a strong argument in favor of government assistance to help low-income young children who were at greater risk of disease and poor school performance: “These early-life disadvantages contribute to later-in-life disparities in education, income, employment, health, and exposure to the criminal justice system,” the report said.