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November 2007, Vol. 130, No. 11
The U.S. economy to 2016: slower growth as boomers begin to retire
Betty W. Su
As of late 2007, the U.S. population is aging, with baby boomers approaching their retirement years. The high productivity growth of the late 1990s and early 2000s appears to be slowing. Globalization marches on. In this context, the Bureau of Labor Statistics (BLS) has projected economic trends for the U.S. economy to 2016. Under the assumptions used in developing these projections, gross domestic product (GDP) is expected to reach $14.9 trillion in chained 2000 dollars by 2016, an increase of $3.6 trillion over the 2006–16 projection span. Rising by an average annual rate of 2.8 percent, GDP is projected to grow at a slower pace, less than the 3.1 percent posted over the preceding 10-year period.
Demographic factors are a primary driving force in determining the growth potential of the economy over the long term. BLS anticipates that, as the 77 million baby boomers begin to retire in the next few years, the pace of labor force growth will slow down over the projection horizon.1 Other factors, such as capital input and productivity growth, also will contribute to the slower growth. As regards employment prospects in the next decade, slower growth in civilian household employment is expected, from a rate of 1.3 percent per year during the 1996–2006 period to 0.8 percent annually between 2006 and 2016. The latter percentage translates into an employment increase of 11.5 million over the projection horizon, less than the increase of 17.7 million across the 1996–2006 decade. The BLS employment projection is accompanied by an assumed unemployment rate of 5.0 percent in 2016, up from 4.6 percent in 2006.
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1 Baby boomers are the generation of Americans who were born between 1946 and 1964. For a full discussion of BLS population and labor force projections, see Mitra Toossi, "Labor force projections to 2016: more workers in their golden years," this issue, pp. 33–52.
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