## 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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## Bibliographic details
- Published: June 22, 2016

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### Overall assessment and near-term outlook
- 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."

### Four forces challenging future growth
- 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."

### Policy recommendations and priorities
- 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."

### Conclusion
- 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.*

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## References

- [United States and the IMF](http://www.imf.org/external/country/USA/index.htm)
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_Source: https://www.imf.org/en/news/articles/2015/09/28/04/53/sp062216_