The Economy in 2014
Council of Economic Advisers
December 16, 2014

Overview
1
The Economy’s Progress in 2014
• Jobs: By November, 2014 was already the best year of job growth since 1999.
• Wages: Much of the pickup in job creation in 2014 occurred in higher-paying industries, and
overall wage growth continued to exceed inflation.
• Deficit: The deficit as a share of the economy has fallen by about two-thirds, and the FY2014
deficit was below its average over the past forty years. This is part of a broader economic
rebalancing that sets the stage for more sustainable growth in the years ahead.
• Health Care: Employer health insurance premiums grew at a rate tied for the lowest on record,
consistent with the lowest health care price inflation in nearly half a century.
• Energy: The United States is leading the world in both oil and natural gas production,
contributing to a roughly 40 percent drop in oil prices over the second half of the year. At the
same time, solar energy is up tenfold since 2008, while wind energy has increased threefold.
The Challenges that Remain
• Jobs and Wages: The labor market is not yet fully recovered—further reductions in long-term
unemployment and faster wage growth are needed.
• Household Finances: Household finances vary widely across the population, and more must be
done to ensure the benefits of a strengthening economy are widely felt.
• Global Economy: Growth is slowing in many of our key trading partners, requiring a renewed
global emphasis on pro-growth policies.

Overview
2
Key Policy Steps Contributing to the Progress We Have Seen
• The Recovery Act and Subsequent Fiscal Measures: The United States has come further in its recovery than
most other advanced economies around the world, in part because of the President’s aggressive policy
response that included the Recovery Act, the payroll tax cut, and about a dozen additional fiscal measures.
• Response to the Financial Crisis: Even when it was not popular, the President took the necessary steps to
recapitalize the financial sector, rescue the auto industry, and reform financial regulation.
• Affordable Care Act: Changes in the health care system, in part due to the Affordable Care Act, are creating
major savings for households, businesses, and the Federal government.
• All-of-the-Above Energy Strategy: In addition to the energy boom, the United States also made great strides in
energy efficiency, contributing to a 10 percent reduction in carbon emissions from 2007 to 2013—the largest
absolute emissions reduction of any country in the world.
• Catalyzing Technological Innovation: The President signed into law the most sweeping patent reform in
decades, made significant investments in research and development, and will nearly double the amount of
wireless spectrum available for mobile broadband.
• Reducing the Deficit: The Budget Control Act, the Affordable Care Act, and returning to Clinton-era tax rates
for upper-income households will contribute to nearly $4 trillion in deficit reduction over the next decade.
Key Policies to Support Further Progress
• Investing in Infrastructure
• Reforming the Business Tax Code
• Common Sense Reforms to the Immigration System
• Expanding Overseas Markets for America’s Goods and Services
• Investing in Education from Pre-School through College and Training
• Raising the Minimum Wage

Table of Contents
3
I. Labor Market
II. GDP
III. Progress Toward Rebalancing
IV. International
V. Energy
VI. Health

Businesses Have Added 10.9 Million Jobs Over 57 Consecutive Months, the
Longest Streak of Private-Sector Job Growth on Record
4Source: Bureau of Labor Statistics.
Private employment has risen by at least 200,000 for ten consecutive months, the first
time that has happened since the 1990s. In addition, total employment has risen for 50
straight months, also the longest streak on record.
-900
-800
-700
-600
-500
-400
-300
-200
-100
0
100
200
300
400
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
Monthly Change in Private Payroll Employment
Thousands
12-month moving
average
Nov-14
Nov-14

The Pace of Job Growth Has Picked Up to 241,000 Per Month in 2014, Up
From 194,000 Per Month in 2013, and the Most in Any Year Since the 1990s
5
Note: Data for 2014 as of November.
Source: Bureau of Labor Statistics.
95
-298
-424
88
174 186 194
241
2007 2008 2009 2010 2011 2012 2013 2014
-500
-400
-300
-200
-100
0
100
200
300
Average Monthly Job Growth by Year
Average Monthly Job Gain/Loss (Thousands)
Total employment has risen by 2.65 million in the first eleven months of 2014, already totaling more jobs
than in any full calendar year since the late 1990s. The economy is adding jobs at a rate of about 2 percent
per year, also on pace for the largest percentage increase in any calendar year since the late 1990s

The Unemployment Rate Has Fallen Much More Rapidly than Expected
6
Note: Based on forecasts published in March of given year.
Source: Bureau of Labor Statistics; Blue Chip Economic Indicators.
Just last year, forecasters expected that the unemployment rate would remain above 6
percent into 2017—it was 5.8 percent in November 2014.
4
5
6
7
8
9
10
11
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2012 Forecast
2013 Forecast
2014 Forecast
2011 Forecast
2010 Forecast
Unemployment Rate and Consensus Forecasts
Percent

The Alternative Measures of Labor Underutilization are Falling About as Fast
or Faster than the Overall Unemployment Rate
7
Note: As of November 2014. Change in short- and long-term unemployment rates may not sum due to rounding.
Source: Bureau of Labor Statistics.
The long-term unemployment rate remains elevated at 1.8 percent (compared to about
1 percent prior to the recession), but it has fallen disproportionately quickly over the
past year.
-1.2
-1.2
-1.1
-1.7
-0.3
-0.8
-2.0 -1.5 -1.0 -0.5 0.0 0.5 1.0
Overall Unemployment Rate (U-3)
U-4 (U-3 + Discouraged Workers)
U-5 (U-4 + Other Marginally Attached)
U-6 (U-5 + Part-Time for Economic Reasons)
Short-Term Unemployment Rate
Long-Term Unemployment Rate
12-Month Changes in Key Employment Indicators
Percentage Points

The Overall Unemployment Rate is 89 Percent of the Way Back to its Pre-
Recession Average, but More Work Remains on Long-Term Unemployment
8Source: Bureau of Labor Statistics; CEA calculations.
The long-term unemployment rate and U-6 rate that includes involuntary part-time
work are 77 and 72 percent of the way back to their pre-recession averages,
respectively, reflecting continued challenges in these areas.
77
107
​
72
83
87
​
89
324
64
88
84
92
90
74
-4
25
14
12
10
-50 0 50 100 150 200 250 300 350
Long-Term Unemployment Rate
Short-Term Unemployment Rate
U-6 (U-5 + Part-Time for Economic Reasons)
U-5 (U-4 + Other Marginally Attached)
U-4 (U-3 + Discouraged)
Overall Unemployment Rate
Remaining Elevation as of November 2014 Percent Increase to Great Recession Peak Percent Recovered
Percent Change in Indicator Relative to 2001-07 Average
Tracking the Recovery Across Labor Market Indicators
All Data as of November 2014

Essentially All of the Increase in Employment Since 2010 Has
Been in Full-Time Positions
9
Note: Based on Employment Situation table A-9.
Source: Bureau of Labor Statistics.
Overall part-time work has been roughly flat in the recovery, as the number of
involuntary part-time workers declines and the number of voluntary part-time workers
continues to recover from its drop in the recession.
2010 2011 2012 2013 2014 2015
-2
-1
0
1
2
3
4
5
6
7
8
9
10
Change in Employment Since the Beginning of 2010
Millions of Workers
Full-Time
Part-Time
Nov-2014
Nov-2014

The Pickup in Job Growth During 2014 Has Occurred in
Higher-Paying Industries
10
*Excludes temporary help services (shown separately)
Note: Data for 2014 as of November, except earnings for temporary help services lags one month.
Source: Bureau of Labor Statistics; CEA calculations.
For instance, the pace of manufacturing job growth has more than doubled to 15,000 per month this
year, from 7,000 per month last year, and average weekly earnings for manufacturing workers are
about $170 higher than for all private-sector workers.
Mining & Logging
Construction
Manufacturing
Wholesale TradeRetail Trade
Transportation &
Warehousing
Utilities
Information
Financial
Activities
Professional &
Business
Services*
Temporary Help
Services
Education &
Health Services
Leisure &
Hospitality
Other Services
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
$200 $400 $600 $800 $1,000 $1,200 $1,400 $1,600
Change in Job Growth vs. Average Earnings by Industry
Average Weekly Earnings, November 2014
Pick Up (+)/Slow Down (-) in Percentage Change in Employment, 2014 vs.
2013 (percentage pts.)
Average Weekly Earnings for
All Private Sector Workers:
$853.24

In Addition to the 764,000 Manufacturing Jobs Added Since Early 2010, the
Average Workweek in Manufacturing is the Highest Since WWII
11
Note: For production and non-supervisory workers.
Source: Bureau of Labor Statistics.
The average workweek in manufacturing has hit 42.2 hours several times this year, the
highest level since 1945.
37.0
37.5
38.0
38.5
39.0
39.5
40.0
40.5
41.0
41.5
42.0
42.5
43.0
1950 1960 1970 1980 1990 2000 2010
Average Workweek in Manufacturing
Hours
Nov-
2014

Average Earnings Have Been Rising Slightly Quicker than Inflation Since 2013,
But Faster Growth is Needed
12
*Inflation data for November 2014 is based on Bloomberg consensus for CPI-U as of 12/15. Numbers may not sum due to rounding.
Note: Annual average basis. For production and non-supervisory workers.
Source: Bureau of Labor Statistics; CEA calculations.
On average in the first eleven months of this year, nominal hourly earnings were up 2.3
percent compared to last year, while the consumer price index was up 1.7 percent.*
0.3
-1.5
-0.6
0.7 0.7
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2010 2011 2012 2013 2014*
Yearly Growth in Real Average Hourly Earnings
Percent
2001-2007 Average

Economic Growth in the Second and Third Quarters Was Strong
13Source: Bureau of Economic Analysis.
As of the third quarter of 2014, real GDP was 7.8 percent higher than the pre-recession
peak in 2007.
-10
-8
-6
-4
-2
0
2
4
6
07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 13:Q1 14:Q1
Real GDP Growth
Percent
14:Q3
Quarterly % change,
annual rate
Four-quarter
% change

Real GDP Has Been Growing More Quickly Since the
Beginning of Last Year
14Source: Bureau of Economic Analysis; CEA calculations.
This mostly reflects a pickup in consumer spending, a continued solid pace of growth in
business investment, and reduced fiscal drag at the State and local levels. Federal fiscal
drag rose as a result of the sequester in 2013 but has eased in 2014.
Start of Recovery
(09:Q2-12:Q4)
2013 and 2014
(12:Q4-14:Q3)
Gross Domestic Product 2.1 2.7
Consumer Spending 2.0 2.4
Businsess Fixed Investment 5.2 5.3
Residential Investment 5.9 4.7
Exports 7.4 3.7
Imports 6.8 3.2
Federal Gov't - 0.6 - 2.5
State & Local Gov't - 2.2 1.1
Components of Real GDP
(percent change at an annual rate)

Business Investment Has Picked Up in Recent Quarters
15Source: Bureau of Economic Analysis.
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 13:Q1 14:Q1
Real Business Fixed Investment Growth
Percent
14:Q3
Four-quarter
% change
Quarterly % change,
annual rate
In the recovery, business investment has grown at an average annualized rate of more
than 5 percent.

Consumer Sentiment Recently Reached the Highest Level Since January 2007
16Source: Reuters/University of Michigan.
This year’s gains in consumer sentiment likely reflect improving income and
employment expectations, the decline in gasoline prices, and the fiscal certainty secured
for much of the year by the late-2013 Ryan-Murray budget agreement.
40
50
60
70
80
90
100
110
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15
Reuters/Univ. of Michigan Consumer Sentiment Index
Index, 1966:Q1=100
Dec-2014
(prelim.)
Dec-2014

Auto Sales are On Track for the Strongest Year Since 2006
17Source: Bureau of Economic Analysis; Federal Reserve.
6
8
10
12
14
16
18
20
22
24
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
Light Motor Vehicle Sales
Millions of units, seasonally adjusted annual rate
Nov-14
Domestic light vehicle sales are on track to exceed 16 million units in 2014, the highest
since 2006. Additionally, domestic light vehicle production is on track to surpass 11
million units in 2014 for the first time since 2005.

Progress Toward Rebalancing in International Transactions: Current Account
Deficit is Narrowest Since the 1990s
18Source: Bureau of Economic Analysis.
1970:Q1 1980:Q1 1990:Q1 2000:Q1 2010:Q1
-7
-6
-5
-4
-3
-2
-1
0
1
2
Current Account Balance
Percent of GDP
14:Q2
The current account balance is a measure of our net transactions with the rest of the
world in goods, services, and income. Declining oil imports (see slide 30) is one
important factor helping to reduce the current account deficit in recent years.

Progress Toward Rebalancing in the Federal Government: The Deficit Has
Been Cut by Two-Thirds Since FY2009, Now Below its Average Since 1970
19Source: Office of Management and Budget.
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
-12
-10
-8
-6
-4
-2
0
2
4
Federal Budget Balance
Percent of GDP
Fiscal Year
Average
Since 1970
FY14
FY1
4
The last time deficits fell at a faster rate as a share of the economy over a comparable
period of time was during the post-war demobilization from 1945 to 1950.

Progress Toward Rebalancing: A Falling Federal Deficit Has
Boosted Gross National Saving
20Source: Bureau of Economic Analysis
In 2014:Q3, gross national saving edged up to reach its highest level as a share of GDP
since the end of 2006. Gross national saving as a fraction of GDP has increased 4.4
percentage points since its 2009 trough.
12
14
16
18
20
22
24
26
1970:Q1 1980:Q1 1990:Q1 2000:Q1 2010:Q1
Gross National Saving
Percent of GDP
14:Q3

Progress Toward Rebalancing in the Private Sector: Corporate Balance Sheets
Are Healthier Than Any Time in the Last Decade
21Source: Federal Reserve.
In the second quarter of 2014, the non-financial corporate debt-to-equity ratio was 33
percent, the lowest since 2000.
20
30
40
50
60
70
80
2000:Q1 2003:Q1 2006:Q1 2009:Q1 2012:Q1
Nonfinancial Corporate Debt-to-Equity Ratio
Percent
14:Q3

Progress Toward Rebalancing Among Households: Required Debt Service
Payments are Near Record Low
22Source: Federal Reserve.
8
9
10
11
12
13
14
1980:Q1 1990:Q1 2000:Q1 2010:Q1
Household Debt Service Payments
Percent of Disposable Income
14:Q2
Lower debt levels and low interest rates have led to historically low debt service burdens
in the aggregate, but the health of personal finances varies substantially across
households.

The Rise in Home Prices Has Continued to Reduce the
Number of Underwater Mortgages
23Source: Core Logic; Zillow; LPS Analytics; Federal Reserve Board.
The number of underwater mortgages has been cut from a peak of over 14 million to
less than 4 million as of 2014:Q2.
0
2
4
6
8
10
12
14
16
2005:Q1 2007:Q1 2009:Q1 2011:Q1 2013:Q1
Number of Mortgages Underwater
Millions
2014:Q2

The Share of Loans in Serious Delinquency or Foreclosure
Has Been Cut in Half
24Source: Mortgage Bankers Association.
The share of mortgages 90 days past due or in foreclosure has fallen to 4.6 percent in
the third quarter of 2014, down from a peak of more than 9 percent.
0
1
2
3
4
5
6
7
8
9
10
11
2000 2002 2004 2006 2008 2010 2012 2014
Mortgages 90 Days Past Due or in Foreclosure
Percent of All Mortgages
2010-Q1:
9.7%
2014-Q3:
4.6%

The Medium-Term Growth Outlook Has Been Downgraded in
Many Key Economies Around the World – Especially in the BRIC Economies
25
In the most recent World Economic Outlook, the IMF noted that the BRIC economies
have been responsible for half of the IMF’s global growth forecast errors from 2011-14,
despite representing just over a quarter of global GDP.
2.4
1.7 1.7
1.2
2.2
1.3
2.5
9.5
8.1
4.1
5.0
2.6
1.0
1.6
1.3
1.9
1.1
2.4
6.3
6.7
3.1
2.0
0
2
4
6
8
10
12
Forecasted in April 2010
Forecasted in October 2014
Five-Year-Ahead Growth Forecasts in Selected Economies
Percent
Advanced Economies
Emerging Markets
Note: Five-year-ahead forecast is for year-over-year growth in 2015 (blue bars) and 2019 (red bars).
Source: International Monetary Fund, World Economic Outlook (April 2010 and October 2014 editions).

Growth in Europe and Japan Has Been Sluggish, and Many Countries Are
Only Just Beginning to Dig Out of Large Holes
26Source: Bureau of Economic Analysis; national sources via Haver Analytics; CEA calculations.
85
90
95
100
105
110
0 4 8 12 16 20 24 28
Real Gross Domestic Product in Selected Economies
Index, pre-crisis peak=100
Quarters from peak
France
Germany
U.K.
Sum of Italy, Spain, Ireland,
Greece, Portugal
U.S.
Japan
Real GDP in the euro area is still more than 2 percent below its pre-crisis peak, including
nearly 10 percent below its pre-crisis peak in Italy. Japan’s recent slowdown has also
now knocked its real GDP slightly below the pre-recession peak.

Since 2010, the Increase in Employment in the United States Exceeds All
Other Advanced Economies Combined
27
Note: Data for 2014 is a projection based on the October 2014 World Economic Outlook.
Source: International Monetary Fund; CEA calculations.
This is a disproportionate share of the employment gains, given that the United States
represents about 30 percent of the population in advanced economies.
United States
United
Kingdom
Germany
Canada
Japan
Korea
All Other
Share of Net Employment Gain in
Advanced Economies, 2010-2014

U.S. Exports Continue to Grow, but Slowing Growth in Foreign
Economies is a Challenge
28
Note: Foreign real GDP growth rates for the euro area and 25 national economies are weighted by export shares used in the Federal Reserve's H.10 release.
Source: Bureau of Economic Analysis; Federal Reserve; Eurostat; national sources via Haver Analytics; CEA calculations.
-20
-15
-10
-5
0
5
10
15
-6
-4
-2
0
2
4
6
8
2000:Q1 2004:Q1 2008:Q1 2012:Q1
Foreign Real GDP and U.S. Export Growth
Percent, year-over-year Percent, year-over-year
2014:Q3
Trade-Weighted
Foreign Real GDP
Growth (left axis)
Growth in U.S. Real
Exports of Goods and
Services (right axis)
While U.S. exports continue to rise and boost growth, real GDP growth among our
trading partners has slowed to around 2 percent per year (on a trade-weighted basis).

The United States is Leading the World in Combined Oil and
Natural Gas Production
29
*All data is a 12-month moving average as of August 2014, except Saudi Arabia natural gas production is a 2013 annual average.
Source: Energy Information Administration; JODI-Gas database; CEA calculations.
Direct employment in oil and gas production has increased by more than 100,000 since
2010, without accounting for positive spillovers on other industries.
Oil
Natural Gas
0
10
20
30
40
50
60
United States Russia Saudi Arabia
Oil and Natural Gas Production (2013-2014*)
Quadrillion British Thermal Units

Domestic Crude Oil Production Has Continued to Rise While Net
Imports Have Continued to Fall
30Source: Energy Information Administration.
2
3
4
5
6
7
8
9
10
11
12
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
Domestic Crude Oil Production and Net Imports
Million barrels per day
Oct-14
Net Imports
Production
The rise in domestic oil production is part of an all-of-the-above energy strategy, as
wind power generation has tripled since 2008 while utility-scale generation from solar is
up more than tenfold.

Gains in U.S. Oil Production Now More than Offset Global Production
Outages, Putting Downward Pressure on Prices
31
Note: Non-OPEC outage data includes both crude oil and liquid fuels.
Source: Energy Information Administration; Haver Analytics.
0
20
40
60
80
100
120
140
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan-11 Jan-12 Jan-13 Jan-14
Growth of U.S. Production and Global Supply Disruptions
Million Barrels Per Day Dollars Per Barrel
Growth of U.S. Crude
Oil Production
(left axis, as of Oct.)
Growth of Unplanned
Global Supply Disruptions
(left axis, as of Oct.)
Brent Crude Price
(right axis, as of Nov.)
The price of Brent crude has fallen into the $60 per barrel range in mid-December, down
from a recent high of $115 per barrel in June.

The Price of Gasoline is the Lowest Since 2009
32Source: AAA via Bloomberg.
A range of analysts have said that falling gasoline prices will boost the U.S. economy in
2014:Q4 and into 2015.
2.25
2.50
2.75
3.00
3.25
3.50
3.75
4.00
4.25
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15
Retail Gasoline Price
Dollars per Gallon
Dec. 14
Dec. 11

Historically Slow Health Care Price Inflation is Continuing
33Source: Bureau of Economic Analysis; CEA calculations.
Since the Affordable Care Act became law, health care prices have risen at the slowest
rates in nearly 50 years. A significant fraction of the recent slowdown in health care
price inflation can be linked to Medicare reforms in the Affordable Care Act.
-2
0
2
4
6
8
10
12
14
1960 1970 1980 1990 2000 2010
Growth in Personal Consumption Expenditure (PCE) Prices
Percent, year-over-year
PCE Prices for All Goods
and Services
PCE Prices for Health Care
Goods and Services
Oct-
2014

Health Insurance Premium Growth Has Slowed,
Saving Money for Consumers and Businesses
34Source: Kaiser Family Foundation/Health Research and Educational Trust; CEA calculations.
In 2014, employer premiums grew at a rate tied for the slowest since the KFF/HRET
survey began in 1999. If premiums growth had matched its 2000-2010 average since
2010, the average premium would be $1,800 higher today.
11.2
7.9
5.2
3.0
0
2
4
6
8
10
12
14
2000 2000-2010 2010-2014 2014
Growth in Premiums for Employer-Based Family Coverage
Average annual percent increase (nominal)

The Affordable Care Act Has Dramatically Expanded Coverage During 2014
35Source: National Health Interview Survey
Data from three different surveys show that approximately 10 million people have
gained coverage during 2014. Economic evidence shows that having health insurance
improves access to care, financial security, and health and well-being.
10
11
12
13
14
15
16
17
18
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Share of Americans Without Health Insurance
Percent
2014:Q2
2014:Q2