Managing Director Christine Lagarde’s Opening Remarks for the United States 2016 Article IV Press Conference

IMF News, June 22, 2016

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The U.S. economy is described as "in good shape," despite recent setbacks.
Unemployment is "well below 5 percent."
In the past year an average of "200,000 new jobs were created every month."
Household incomes are "rising at a healthy clip."
Growth projection: "We think that growth should be 2.2 percent this year and higher still in 2017."

Identified four forces that pose a challenge to future growth:
- "Declining labor force participation"
- "Falling productivity growth"
- "Polarization in the distribution of income and wealth"
- "High levels of poverty in the U.S."

On labor force participation:
- "The U.S. population is aging and, as a result, a smaller share of the population will be active in the labor force in the coming years."
- Policy priority: "Mitigating the effects of population aging on labor supply and demand."

On productivity:
- Productivity growth "has fallen from 1.7 percent in the decade prior to 2007 to 0.4 percent in the past five years."
- The fall in productivity growth is linked "in part, to falling dynamism both in the U.S. labor markets and in the formation of new and productive enterprises."
- Past gains in average per capita incomes were driven largely by "productivity, innovation, and efficiency."

On polarization:
- "Since 2000 around one quarter of a percent of the population has moved from earning close to the median income to earning 1.5 or more times the median."
- "More than 3 percent of the population has moved into the group that earns less than half of the median income."
- IMF calculations suggest "since 1999, this polarization of the income distribution has knocked around 3½ percent off of badly needed consumer demand. That is around one year’s consumption over a period of 15 years."

On poverty:
- "The latest data shows almost 15 percent of Americans—or 46.7 million people—living in poverty."
- Poverty is "even higher for certain minority groups; for single parent (and particularly female-headed) households; for children; and for those with disabilities."
- Poverty "eats into labor force participation, and undermines the ability to invest in education and improve health outcomes," creating "an inter-generational persistence of poverty."
- Poverty thresholds: "Thresholds vary from $15,379 for a 2-person household to $24,230 for a 4-person household."

Labor force gender gap and leave policy:
- "U.S. female labor force participation is 12 percent lower than that for men."
- "The U.S. is the only country among advanced economies without paid maternity leave at the national level."

Support lower-income households:
- "Higher federal minimum wage"
- "More generous earned income tax credit"
- "Upgraded social programs for the nonworking poor"

Improve benefits to raise labor supply and support families:
- "Paid family leave to care for a child or a parent"
- "Childcare assistance"
- "A better disability insurance program"

Broaden labor supply and productivity via immigration and skills:
- "Sensible skills-based immigration reform could also raise the labor supply and boost productivity."

Boost productivity through public policy complements:
- "A better tax system"
- "Efforts toward more trade integration"
- "Better infrastructure"
- "A stronger and more vocationally oriented education system"

Emphasis on private-sector role:
- "Productivity gains must inherently be based in the private sector. But public policies can help."

If the four forces—participation, productivity, polarization, and poverty—are left unchecked they "will corrode the underpinnings of growth (both potential and actual) and hold back gains in U.S. living standards."
Despite recent temporary setbacks, near-term growth prospects are described as good, with confidence that by countering the four forces "the U.S. can remain on the frontier of innovation and opportunity."

Managing Director Christine Lagarde’s Opening Remarks for the United States 2016 Article IV Press Conference, June 22, 2016.