The nation’s economic recovery is stronger than in most of the 34 Organization for Economic Cooperation and Development (OECD) countries but it will remain sluggish unless new reforms are implemented that further to boost growth, according to a new survey.
The recovery is taking root in a wide array of sectors but growth could be bolstered by tax, education, job training, immigration and workplace reforms, all of which could improve the economic prospects of middle-class families, the report said.
“Steadfast action is needed to implement the reforms that will bolster the economy’s growth potential and make it more inclusive and greener,” he said during an event with Jason FurmanJason FurmanThe White House budget plan shortchanges our economic future Economy adds 227K jobs in January All things considered, TPP would've been a plus for US economy MORE, chairman of the White House’s Council of Economic Advisers.
To that end, Gurría specifically said he welcomed President Obama’s recent announcement to further cut carbon emissions.
Overall, the survey said that the economy, nearly six years out from the financial crisis, is showing positive signs of growth — most banks have healthy balance sheets, housing prices are rising and unemployment has fallen.
Yet amid the recovery “many families are being put under financial pressure by stagnant real incomes, underwater mortgages and high costs of education and healthcare,” the report said.
“Many workers feel that their jobs interfere excessively with their family lives, making it challenging to achieve a satisfactory work-family balance," the survey said.
Progress has been made in addressing some of these challenges.
Congress and the Obama administration have extended expiring tax benefits for the middle class and sought to avoid "draconian cuts" in discretionary spending.
Meanwhile, the Affordable Care Act has allowed millions of previously uninsured persons to obtain health insurance coverage, the report said.
“Many Americans have benefited from the recovery: job growth has been steady, unemployment has fallen and house prices are again rising, all helping to restore higher levels of consumer confidence,” the report said.
But the labor market is still battling back to normal levels. While unemployment has declined there are still too many discouraged workers who have stopped looking for jobs and many part-timers who would like to work longer hours.
In addition, finding a job remains challenging, especially for the large number of long-term unemployed. Those who have been out of work for at least six months still represent more than one-third of all the unemployed.
The report encourages close cooperation between businesses and government to tackle these challenges, which includes upgrading workers' skills.
The report concludes that the economic rebound on the whole has been weaker than in the past not only because of the lingering effects of the financial criss but also due to unusually large cut backs in public spending, including government employment, and the long-expected retirement of baby boomers.
The same areas where the economy is showing strength also present risks to accelerating growth: weakness in the housing market, financial market turbulence and a possible weakening of productivity.
The pace of the economy's recovery also suggests that the Federal Reserve's exit from its massive monetary stimulus should occur at a gradual pace.
Looking down the road, economic growth is expected to gain speed through this year and into 2015.
Steady gains in the labor market will provide support for consumer spending, which represents 70 percent of economic activity.
A combination of low mortgage rates and demand from household formation should boost house prices and construction, the report said.
The improvement in corporate balance sheets "will facilitate a rebound in business investment once aggregate demand accelerates."
The fiscal stance, which exerted a drag on the recovery, has become significantly less restrictive, and growth should pick up to a 2.5 percent annual pace this year and 3.5 percent in 2015.
The survey also highlights the high level of income inequality in the United States and the struggle of middle-class and disadvantaged families to find a job and deal with the high costs of education and healthcare.
“While this cannot be improved easily, the report praises reforms recently adopted or being considered: healthcare reform will help vulnerable families access high-quality care; dealing with mental health will help reduce job loss and disability; preschool education would be a good investment in children’s future and help middle-class parents; and paid maternity leave would help working women," the report noted.
The OECD also noted the nation's energy boom, which has boosted the recovery and job creation while turning the country into the world's largest natural gas producer.
“The energy boom led by hydraulic fracturing brings a welcome impulse to growth,” the report said.
The survey recognizes the various environmental challenges and safety issues resulting from the energy increase, while noting that renewable energy has also seen a boost.
The survey recommends introducing "an adequate pricing of greenhouse gas emissions and supporting innovation in energy saving and low carbon technology."