The U.S. economy to 2006 (EXCERPT), Monthly Labor Review Online, Nov. 1997

The U.S. economy to 2006

Thomas Boustead

At first glance, the BLS projection of the aggregate U.S. economy for the 1996–2006 period may appear placid, as moderating growth in the labor force constrains economic performance. Real gross domestic product (GDP) is projected to grow at the rate of 2.1 percent per year over the projection period and will reach approximately $8.5 trillion by 2006 in chained (1992) dollars.¹ (See table 1.) By comparison, GDP grew at an average annual rate of 2.3 percent during 1986–96.² Nevertheless, the temperate pace of overall economic growth belies activity occurring below the surface.

Over the next 10 years, certain sectors of the economy will undergo dramatic growth, while others will recede in importance. Reflecting increased globalization of the economy, the foreign trade sector will continue to be the fastest growing component of real GDP. Exports are projected to grow almost 3½ times faster than GDP, while imports are expected to rise at almost 3 times the rate of GDP. By 2006, the levels of exports and imports will each approach 20 percent of GDP.
Besides foreign trade, gross private domestic investment (or, simply, private investment) will also assume a more substantial position in the economy over the 1996–2006 period. Private investment is projected to increase at a rate 1½ times faster than the rate for GDP. Underlying the growth in foreign trade and private investment will be an expanding commerce in high technology and computer- related products. Accordingly, the BLS projection anticipates that new markets and new products will be important features of the economy over the next 10 years.
While some sectors of the economy are expected to advance, others will decline in relative importance over the projection period—most notably, the Federal Government. As it has in the recent past, real defense spending (consumption and gross investment) is projected to decline from 1996 to 2006.³ However, the projection for Federal non-defense spending shows a reversal from recent trends. Unlike the growth rate of 2.0 percent per year posted for 1986–96, nondefense spending is expected to decline 0.8 percent per year from 1996 to 2006. In effect, Federal expenditures will be pressed by efforts to control the Federal deficit in the face of continued growth of transfer payments.

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Footnotes
¹ Real GDP and its components are stated in 1992 chain-weighted dollars. Chain weighting replaces with an averaging technique the past practice of computing real GDP and its components by reference to fixed base-year prices. The averaging technique employs price weights from more than one year. As a result, for a particular year, the chain-weighted components of real GDP generally will not add up to the aggregate chain-weighted real GDP, and there will be a residual. For more details, see "Preview of the Comprehensive Revision of the National Income Accounts: BEA’s New Featured Measures of Output and Prices," Survey of Current Business, July 1995, pp. 33–38.
² Data for 1996 are preliminary.
³ The National Income and Product Accounts now recognize government expenditures on equipment and structures as investment. Accordingly, government purchases are now divided into consumption expenditures and gross investment. This treats government purchases of fixed assets in a manner more symmetric to the treatment of such assets acquired by private business firms. For more details, see "Preview of the Comprehensive Revision of the National Income Accounts: Recognition of Government Investment and Incorporation of a New Methodology for Calculating Depreciation," Survey of Current Business, September 1995, pp. 33–41.

Related Monthly Labor Review articles
American work force, 1992-2005. A special issue. November 1993.: Historical trends, 1950-92, and current uncertainties.; The U.S. economy to 2005: framework for BLS projections.; Another look at the labor force.; Industry output and unemployment.; Occupational employment: wide variations in growth.

BLS projections to 2005-A special issue. November 1995.: Appendix: Employment projections methodology.; Industry output and employment projections to 2005.; Occupational employment to 2005.; Summary of BLS projections to 2005.; The U.S. economy to 2005.; The 2005 labor force: growing, but slowly. (Errata: 1996 Mar. 38.)

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