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Social Security 2009 Trustees Report

Social Security 2009 Trustees Report

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Published by Ragnar Danneskjold

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Published by: Ragnar Danneskjold on May 02, 2010
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05/25/2013

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The real growth rate in gross domestic product (GDP) equals the combined
growth rates for total employment, productivity, and average hours worked.
Total employment is the sum of the U.S. Armed Forces and total civilian
employment, which is based on the projected total civilian labor force and
unemployment rates. For the 40-year period from 1967 to 2007, the average
growth rate in real GDP was 3.0percent, combining the approximate growth
rates of 1.6, 1.7, and -0.2percent for its components—total employment,
productivity, and average hours worked, respectively.

For the intermediate assumptions, the average annual growth in real GDP is
projected to be 2.4percent from 2008 to 2018, a slower rate than the
3.0percent average observed over the historical 40-year period from 1967 to
2007. This slowdown is primarily due to slower projected growth in total
employment. For the low-cost assumptions, annual growth in real GDP is
projected to average 3.1percent over the decade ending in 2018. The rela-
tively faster growth is due mostly to higher assumed rates of growth for
employment and worker productivity. For the high-cost assumptions, real
GDP is assumed to fall in the third and fourth quarters of 2008 and in the
first three quarters of 2009, resulting in a total decline in real GDP for these
five quarters of 4.0percent. After 10 quarters of recovery, a second reces-
sion, with a total decline in real GDP of 2.1percent, is assumed to begin in
the second quarter of 2012 and last twoquarters. After the second recession,
a moderate economic recovery is assumed through 2015, with continued
modest economic growth thereafter. For the high-cost assumptions, annual
growth in real GDP is projected to average 1.8percent for the decade ending
in 2018.

101

Economic Assumptions and Methods

After 2018, no economic cycles are assumed for the three alternatives.
Accordingly, projected rates of growth in real GDP are determined by the
projected full-employment rate of growth for total employment, and the
assumed full-employment rates of growth for total U.S. economy productiv-
ity and average hours worked. For the intermediate assumptions, the pro-
jected rate of growth for real GDP falls toward the assumed productivity
growth rate because of the projected decline in labor force growth over the
period. At the end of the 75-year projection period, the annual growth in real
GDP is 2.1percent, due to the assumed ultimate percent changes of about
0.4, 1.7, and 0.0 for total employment, productivity, and average hours
worked, respectively.

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