Press Releases

Statement of Deputy Assistant Secretary for Macroeconomic Analysis Seth Carpenter for the Treasury Borrowing Advisory Committee of the Securities Industry and Financial Markets Association

(Archived Content)


WASHINGTON - The U.S. economy has been growing steadily for nearly four years, with real GDP rising at an average annual rate of just over 2 percent since mid-2009.  The progress we have made has been led by the private sector.  Growth of private domestic final demand has outpaced real GDP growth, rising at a 2.5 percent annual rate since the recovery began in mid-2009.  The private sector has been adding workers to payroll for 40 straight months, with 7.2 million private-sector jobs created during that period.  While the economy continues to face challenges, the fundamentals underpinning private-sector activity are generally supportive, and conditions in the housing market are improving.  Private forecasters expect economic activity to strengthen in the second half of this year with real GDP rising 2.1 percent over the four quarters of 2013, up from 1.7 percent during 2012.

Real GDP growth accelerated in the first quarter of this year to a 1.8 percent annual rate from 0.4 percent in 2012Q4, due primarily to a buildup of private inventories and stronger growth of consumer spending.  These developments were partly offset by slower growth of business fixed investment and a wider trade deficit.  Government spending continued to fall.  The advance estimate of real GDP growth in the second quarter will be released later this week, on Wednesday, July 31.  Economic indicators currently available suggest that growth remained subdued. 

The June labor market report showed continued steady improvement in employment conditions through the first half of this year.  Nonfarm payrolls increased by 195,000 in June, and the level of employment in the prior two months was revised substantially higher.  Payroll job gains averaged 196,000 per month in the second quarter, little changed from the 208,000 average recorded in the prior 6 months.  The unemployment rate was unchanged at 7.6 percent in June, and the labor force participation rate edged up for a second straight month.

Activity in the housing sector has picked up notably over the past year.  Housing starts through the first six months of 2013 were 17 percent higher than averaged during all of last year.  Sales of new and existing homes have increased by 25 percent and 7 percent, respectively, so far this year compared to all of 2012.  The stock of homes for sale has expanded in recent months, but is still relatively lean compared with the current sales pace, particularly in the new home market.  This has helped lift house prices: the three major house price indices have been rising steadily for more than a year and are now at their highest levels since 2008.  Mortgage interest rates have moved sharply higher in the past two months, rising by nearly a full percentage point since early May.  Despite rising house prices and the recent run-up in mortgage rates, housing affordability remains at a historically high level.

Headline consumer price inflation remains low.  Over the twelve months ending in June, the consumer price index (CPI) rose 1.8 percent, little changed from the 1.7 percent increase over the year ending in June 2012.  Excluding energy and food prices, the core CPI increased 1.6 percent over the year ending in June.  That was down from 2.2 percent a year ago and was the smallest 12-month increase in two years.  Transitory factors, including falling prices for medical care services, account for some of the slowdown in core inflation recently.

Over the past three years, the United States has made notable progress toward stabilizing the country’s fiscal outlook.  The Administration’s FY 2014 Budget would replace the sequester and lower the budget deficit substantially further over the next decade and put the debt on a declining path as a share of the economy.  According to the Mid-Session Review of the FY 2014 Budget, the deficit will decline from 7.0 percent of GDP in FY 2012 to 4.7 percent of GDP in FY 2013.  The deficit is projected to fall below 3 percent of GDP by FY2017 and reach primary balance in FY 2019.  By the end of the 10-year budget window in FY 2023, the deficit is projected to fall to roughly 2 percent of GDP. The debt-to-GDP ratio is projected to peak at around 78 percent of GDP in FY 2015 and 2016 and then begin to decline, falling to 75.4 percent in FY 2023. 

The recovery in the United States continued at a moderate pace in early 2013.  Real GDP rose for a 15th straight quarter, U.S. businesses continued to add workers to their payrolls, and the unemployment rate dipped to a four-year low.  The U.S. economy is poised for stronger growth going forward.  Substantial progress has been made addressing the excesses and imbalances that triggered the financial crisis.  Household debt relative to income has fallen more than 20 percentage points and is near a 10-year low.  Financial sector leverage is down, and credit is expanding.  The housing sector is showing clear signs of improvement.  The budget deficit has declined substantially as a share of the economy, and is projected to fall to around 2 percent of GDP over the next decade, putting our nation’s finances on a sustainable path for the longer term.