We are at a fragile moment in the world economy and cannot afford to do anything to undermine our recovery at a moment such as this.  The unemployment rate is unacceptably high and faster growth is needed to replace the jobs lost in the downturn. This report underscores the need for bipartisan action to help the private sector and the economy grow – such as measures to extend the payroll tax cut and unemployment insurance, pass the pending free trade agreements with re-employment assistance for displaced workers, and create an infrastructure bank to help put Americans back to work.  It also underscores the need to end the uncertainty surrounding the risk of default and put in place a balanced approach to deficit reduction that phases in budget cuts, instills confidence, and allows us to live within our means without shortchanging future growth.

Notable contributions to real GDP growth in the second quarter included net exports (0.6 percentage points) and fixed investment (0.7 p.p.). Defense spending added 0.4 p.p. to GDP, but this gain was offset by declines in state and local government (-0.4 p.p.) and nondefense spending (-0.2 p.p.). Consumer spending rose just 0.1 percent at an annual rate, with a steep decline (23 percent) in motor vehicle consumption accounting for the weakness. The downward revision to first quarter GDP from 1.9 percent to 0.4 percent reflects lower contributions from inventory investment and imports.

In this year’s annual GDP revision, the overall downward revision was concentrated at the end of 2008 and the beginning of 2009, so that growth in 2008:Q4 was revised to -8.9 percent from -6.8 percent and 2009:Q1 was revised to -6.7 percent from -4.9 percent. What was already the deepest reported recession since official quarterly estimates began in 1947 is now reported to have been significantly worse.

Austan Goolsbee is Chairman of the Council of Economic Advisers

Some of our greatest companies began exactly this way.  And immigrants today have great ideas that can change the world. The question is whether they will develop them in the United States or somewhere else. Our immigration system should be designed to encourage talented people to study in the United States and start companies here. But today, foreign students studying science and engineering at America’s top universities are actually discouraged from using the skills they learn to create American jobs and make our economy more competitive. The end result is that we end up training innovators and entrepreneurs for other countries. That makes no sense. Instead of showing these future entrepreneurs and scientists the door, we should be stapling a green card to their diplomas and providing Startup Visas to those with the best ideas.

Earlier this week, Senator Schumer hosted a Senate Subcommittee hearing on the “Economic Imperative for Enacting Immigration Reform”.  A consistent theme among the hearing panelists, which included leaders from Microsoft and Nasdaq, was that reforming our high skill immigration policy is critical to creating American jobs and spurring economic growth.

In a global marketplace, it is an economic imperative to train, attract, and keep talented people here. When immigrants start companies and file patents they create American jobs and ensure that the industries of the 21^st century take root here in the United States.

Immigrant entrepreneurs started 25% of engineering and technology companies between 1995 and 2005, including some of the economy’s biggest names.  And immigrants are inventors.  According to a Duke University study, the share of U.S. patent applications filed by immigrants rose from 7.3% to 24.2% from 1998 to 2006. Nearly a quarter of our scientists and almost half of our engineers are immigrants.

America simply cannot afford to forgo the contributions of the world’s best and the brightest to our economy. To do so would not only be contrary to our values, but also hamper our economic competitiveness. To win the future, we must ensure that highly-skilled immigrants who want to start a business or work in research laboratories do so here, creating American jobs and generating value for our economy. There is bipartisan consensus to enact comprehensive immigration reform; in an op-ed earlier this month, Commerce Secretary Gary Locke and former Commerce Secretary Carlos Gutierrez, who served under President George W. Bush, wrote, “If we don't want to find ourselves playing catch-up in the global competition for the cutting-edge, high-growth industries of tomorrow, we need to do something now.” For generations, the world’s most talented and ambitious entrepreneurs, scientists, and engineers have set their sights on our shores to study, launch start-ups, and create jobs. Let’s keep it that way and allow these high skilled immigrants to pursue the American Dream and make our economy stronger.

Austan Goolsbee is Chairman of the Council of Economic Advisers

The unemployment rate remains unacceptably high and faster growth is needed to replace the jobs lost in the downturn. Today’s report underscores the need for bipartisan action to help the private sector and the economy grow – such as measures to extend the payroll tax cut, pass the pending free trade agreements, and create an infrastructure bank to help put Americans back to work.  It also underscores the need for a balanced approach to deficit reduction that instills confidence and allows us to live within our means without shortchanging future growth.

Overall payroll employment rose by just 18,000 in June.  Sectors with employment increases included leisure and hospitality (+34,000), health care (+13,500), and manufacturing (+6,000). Sectors with employment declines included government (-39,000), financial activities (-15,000), and construction (-9,000).  Manufacturing has added 251,000 jobs since the beginning of 2010, the best period of manufacturing job growth in over a decade. Meanwhile, local governments lost 18,000 jobs in June and have shed 355,000 jobs since the start of 2010.

The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision.  Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.

Austan Goolsbee is Chairman of the Council of Economic Advisers

These agencies will rewrite or remove regulations that have been on the books for decades to achieve their goals at lower costs and abolish regulations that have become obsolete.  Examples of changes now underway include:

• Removing regulations that require outdated technologies, such as film-X-rays instead of digital.
• Eliminating the regulation requiring some gas stations to install vapor recovery systems on their hoses, because vapor recovery is now built into the gas tanks of cars, saving gas station owners about $670 million over the next decade.
• Eliminating 1.9 million annual hours of redundant reporting requirements at the Occupational Safety and Health Administration (OSHA), and harmonizing its hazard classifications with other countries to save $585 million or more per year for employers.

The Administration has committed to completing this thorough review and ensuring that the United States has a regulatory system that protects Americans’ health and well-being, while promoting innovation, competition, and economic prosperity – “A 21^st Century Regulatory System.”

Getting rid of outdated regulations and making regulations smarter benefits America.  But abolishing all regulation, even the ones that provide important benefits, is not smart.  Some regulations are critically important for the country and have benefits that far outweigh the costs.

Take the 1990 changes to the Clean Air Act.  The benefits to America have been estimated to outweigh the costs of these rules by a factor of 25.  These rules prevented over 150,000 premature deaths, 86,000 emergency room visits, and 13 million lost work days.  And that’s just for 2010.

Some regulations, by establishing consumer confidence in an industry, can actually make them better off.  It helps the American beef industry thrive, for example, that consumers know that the Department of Agriculture inspects meat for safety.  In fact, American beef producers volunteer for the government’s quality grading system, and pay for the privilege. 

The administration has been smart about regulations.  It conducts a rigorous cost-benefit analysis of individual regulations before they are put into effect and it often opts for lower cost rules when they generate greater net benefits.  If you look at the benefits and costs of major regulations issued by this administration in fiscal years 2009 and 2010, the estimated benefits are over five times larger than the estimated costs.  The net benefits are over ten times those during the first two years of the Bush Administration, and over three times those during the first two years of the Clinton Administration.  

Furthermore, there has been no increase in rulemaking in this Administration.  On the contrary, the number of rules issued in the first two years of this Administration is approximately the same as the number of rules issued in the first two years of the Bush Administration.

Some people are throwing around scary numbers about the costs regulations are imposing on the US economy.  One group is even claiming that the regulations currently on the books cost the U.S. economy $1.75 trillion in 2008.  The Council of Economic Advisers has looked at those claims and the $1.75 trillion figure is utterly erroneous.  In fact, their own data (which come from the World Bank) show that countries with smarter regulations have higher standards of living, and the United States has one of the best regulatory systems in the world.  And beyond that, their number completely ignores the benefits of regulation.

We must do everything we can to streamline regulation and make it smarter.  But we should also not forget that the rules of the road are important for the health, safety and economic growth of the United States.

Our report highlights how the Administration’s open investment policy allows foreign-based companies to grow and expand their businesses across the country. These companies are building new facilities, investing in research and development, and growing warehouses, sales offices and service centers—creating millions of high-quality, well-paying jobs for American workers. These firms paid out wages and other forms of compensation that averaged more than $71,000 per U.S. employee in 2008, as compared to average earnings of $54,000 for full-time annual workers in the economy as a whole.

The U.S. continues to receive the most foreign direct investment of any country in the world. In 2010, U.S. inbound foreign direct investment rebounded sharply and increased by 49 percent from the economic crisis level it reached in 2009. This investment is particularly important to the U.S. manufacturing sector.  In 2008, the U.S. affiliates of foreign corporations employed 13 percent of the entire manufacturing workforce in the United States. And over 42 percent of the US affiliates’ total value-added production in 2008 was concentrated in the U.S. manufacturing sector.

Last week, the President’s Council on Jobs and Competitiveness put forward a set of ideas for accelerating private sector job growth, and one of their recommendations was further promoting foreign direct investment. Additionally, the Administration launched the SelectUSA Initiative to facilitate additional investment, reconfirming the federal government’s commitment to an open investment climate.

To compete for the best jobs and to develop the industries of the future, the U.S. will continue to pursue an open investment climate to attract businesses to build, develop and expand their companies across the nation.

To read our full report, click here.

Austan Goolsbee is the Chairman of the Council of Economic Advisers.

While the private sector has added more than 2.1 million jobs over the past 15 months, the unemployment rate is unacceptably high and faster growth is needed to replace the jobs lost in the downturn. The initiatives put in place by this Administration – such as the payroll tax cut and business incentives for investment – have contributed to solid employment growth overall this year, but this report is a reminder of the challenges that remain.  We are focused on promoting exports, reducing regulatory burdens and making the investments in education, research and development, and infrastructure that will grow our economy and create jobs.  We will continue to work with Congress to responsibly reduce the deficit and live within our means.

Overall payroll employment rose by 54,000 in May. Solid employment increases occurred in professional and business services (+44,000) and education and health services (+34,000). Sectors with employment declines included local government (-28,000), retail trade (-8,500), and manufacturing (-5,000). Despite the decline this month, manufacturing has added 238,000 jobs since the beginning of 2010, the best period of manufacturing job growth in over a decade.

The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision.  Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.

Austan Goolsbee is Chairman of the Council of Economic Advisers

Despite headwinds from high energy prices and disruptions from the disaster in Japan, the last three months of private job gains have been the strongest in five years.While the solid pace of employment growth in recent months is encouraging, faster growth is needed to replace the jobs lost in the downturn. We are seeing signs that the initiatives put in place by this Administration – such as the payroll tax cut and business incentives for investment – are creating the conditions for companies to add new jobs and foster the industries of the future. We will continue to work with Congress to find ways to reduce spending, so that we can live within our means without neglecting the investments in education, infrastructure, and clean energy that will strengthen our economy.

In addition to the increases last month, payroll survey estimates of private sector job growth for February (now +261,000) and March (now +231,000) were revised up. Overall payroll employment rose by 244,000 in April, well above market expectations. Payroll employment grew in almost every sector. Solid employment increases occurred in retail trade (+57,100), professional and business services (+51,000), education and health services (+49,000), leisure and hospitality (+46,000), and manufacturing (+29,000). Manufacturing has added 244,000 jobs in the last 14 months, the best period of manufacturing job growth in 13 years. State and local government experienced a decline of 22,000; this sector has shed 289,000 jobs in the past 14 months, mostly in local government.

The unemployment reading in April showed a partial reversal of the 1.0 percentage point decline over the previous four months. Employment measured in the household survey dipped in April and the labor force participation rate was unchanged. The unemployment rate data derive from a separate household survey.  The payroll and household surveys can differ on a monthly basis; the household survey is more volatile, but the two surveys typically show similar long-run trends in employment.

The overall trajectory of the economy has improved dramatically over the past two years, but there will surely be bumps in the road ahead.  The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision.  Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.

Austan Goolsbee is Chairman of the Council of Economic Advisers

Some key components of GDP continued to expand in the first quarter. Consumer spending rose 2.7 percent at an annual rate, boosted by a 2.9 percent increase in real disposable income that was due in part to the cut in payroll taxes. Equipment and software investment increased 11.6 percent. Spending components that subtracted from GDP included construction of nonresidential structures (-21.7 percent), federal spending (-7.9 percent), and state and local government spending (-3.3 percent). On the production side, goods production rose at a 9.3 percent, roughly consistent with the previously-reported 9.1 percent increase in manufacturing industrial production.  

These data indicate that the measures put in place by this Administration – such as the payroll tax cut and business incentives for investment – are helping to foster growth.   We will continue to work with Congress to find ways to reduce spending, so that we can live within our means and focus on the investments that are most likely to help grow our economy and create jobs – investments in education, infrastructure, and clean energy.

Austan Goolsbee is Chairman of the Council of Economic Advisers

This initiative is a top priority for President Obama. Entrepreneurship is a key ingredient to economic growth. Startups all across the country play a crucial role in job creation, since these companies generate the lion’s share of net new jobs.  Startups are also responsible for developing breakthroughs in industries such as information technology, biotechnology, and clean energy that will allow the United States to compete and win in the global economy.

The Obama Administration is doing its part to create the right environment for high-growth entrepreneurship. We are reducing taxes, streamlining and eliminating burdensome regulations, increasing access to capital, expanding opportunities for high-quality mentorship and entrepreneurial education, and speeding up the commercialization of federally funded research.

Here are some highlights of our progress to date:

• We have eliminated capital gains taxes on qualified small business investments made in 2011 and the President has called to make this incentive permanent.
• We’re focused on removing barriers to entrepreneurship, especially federal regulations or rules that do more harm than good.  We’re in the middle of a national tour to listen to entrepreneurs, and identify where we can cut red tape to make it easier to start and grow a business.  And we urge you to submit your own ideas for reducing barriers.
• The U.S. Small Business Administration (SBA) has made an open call for investment managers and limited partners to take advantage of its new Impact Investment Initiative, which will deploy $1 billion in capital to match private sector investments in small companies focused on emerging sectors or underserved markets.
• As part of the Joining Forces initiative launched by First Lady Michelle Obama and Dr. Jill Biden to mobilize support for military families, SCORE has created the new Veteran Fast Launch Initiative that will accelerate high-growth startups founded by veterans and their families.  The new program leverages SCORE’s national network of 13,500 volunteer mentors and trainers, the SBA’s Veterans Business Outreach Centers (VBOC), and a package of services, scholarships and free software provided by major corporate partners.  Veteran Fast Launch will support 16,000 military veterans and their families and help launch 3,000 new businesses during the first year.
• In an effort to ensure the best return on our nation’s $148 billion annual investment in federal R&D, the Department of Energy just launched an initiative called "America's Next Top Energy Innovator" that cuts upfront patent licensing costs and challenges entrepreneurs to commercialize technologies from our national laboratories. 
• We’re identifying more ways to ensure that entrepreneurs can access the capital they need to grow and create jobs.  Led by Secretary Geithner, the Treasury Department recently convened an Access to Capital Conference bringing together policymakers, entrepreneurs, investors, and academics to figure out how both the public and private sectors can unlock access to capital at each stage of growth for a small company.
• Senior Administration officials are expanding outreach to entrepreneurs and investors on how the President’s policies and priorities are unleashing new market opportunities for entrepreneurs, including in education technology.

However, we know that the private sector, not the government, is the most important driver of entrepreneurial activity. That is why the President issued a call to action to the private sector to dramatically accelerate the success of America’s high-growth entrepreneurs.  Today a range of companies and nonprofits are answering that call to action, mobilized by the Startup America Partnership, an alliance of mentors, advisors, funders, major corporations and service providers.

• The Startup America Partnership is announcing new commitments that will deliver over $400 million of value to U.S. entrepreneurs, through core services from over a dozen companies including American Express, Google, HP, Intuit, and Microsoft.  This is on top of the first round of major private-sector commitments announced by the Partnership when it launched less than 90 days ago.  Clearly chairman Steve Case, CEO Scott Case (no relation), founding board member Carl Schramm and the rest of the Partnership team have been busy.

In his State of the Union address, the President reminded us that “America was born to win the future.”  The President believes that entrepreneurs will be architects of that future and central to America’s ability to compete and prosper in the 21^st century.

We are still in the startup phase of Startup America, but we are already seeing big results.  Both the Obama Administration and the private sector are doing what it takes to answer the President’s call to action – enhancing the ability of entrepreneurs across the country to develop new ideas and create new jobs.  Stay tuned for more news from the White House and the Startup America Partnership, as these campaigns continue to forge ahead.

Austan Goolsbee is Chairman of the Council of Economic Advisers

As long as millions of people are looking for jobs, there is still considerable work to do to replace the jobs lost in the downturn. Nonetheless, the steep decline in the jobless rate and the solid employment growth in recent months are encouraging. The last two months of private job gains have been the strongest in five years. We are seeing signs that the initiatives put in place by this Administration – such as the payroll tax cut and business incentives for investment – are creating the conditions for sustained growth and job creation.   We will continue to work with Congress to find ways to reduce spending, so that we can live within our means and focus on the investments that are most likely to help grow our economy and create jobs - investments in education, infrastructure, and clean energy.

In addition to the increases last month, the estimates of private sector job growth for January (now +94,000) and February (now +240,000) were revised up significantly. Overall payroll employment rose by 216,000 in March. Payroll employment grew in almost every sector. Solid employment increases occurred in professional and business services (+78,000), education and health services (+45,000), leisure and hospitality (+37,000), wholesale and retail trade (+31,800), and manufacturing (+17,000). Local government experienced a decline of 15,000, and has shed jobs in 16 of the past 17 months.

The overall trajectory of the economy has improved dramatically over the past two years, but there will surely be bumps in the road ahead.  The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision.  Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.

Austan Goolsbee is Chairman of the Council of Economic Advisers

Though unemployment remains elevated, we are seeing signs that the initiatives put in place by this Administration – such as the payroll tax cut and business tax incentives for investment – are creating the conditions for sustained growth and job creation. The steep decline in the unemployment rate and the overall trend of economic data in recent months has been encouraging, but there is still considerable work to do to replace the jobs lost in the downturn. We will continue to work with Congress to find ways to reduce spending, but not at the expense of derailing progress in the job market, making the investments we need to educate our workers, investing in science, and building the infrastructure our companies need to succeed. 

In addition to the increases last month, the estimates of private sector job growth for December (now +167,000) and January (now +68,000) were revised up. Overall payroll employment rose by 192,000 last month. The sectors with the largest payroll employment growth were professional and business services (+47,000), education and health services (+40,000), manufacturing (+33,000), and construction (+33,000). State and local government experienced a large decline (-30,000), and has shed jobs in 14 of the past 16 months.

The overall trajectory of the economy has improved dramatically over the past two years, but there will surely be bumps in the road ahead.  The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision.  Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report. 

Austan Goolsbee is Chairman of the Council of Economic Advisers

We heard from small business owners and entrepreneurs around the country.  On Tuesday, during a special live discussion at the Winning the Future Forum on Small Business in Cleveland, I addressed some of the questions and concerns you submitted, and President Obama even dropped by to take a few of your questions as well.

You can see the full video of the discussion, President Obama’s answers to your questions and his closing remarks at the Forum in this video gallery:

A team of folks here at the White House helped me comb through all of the comments you’ve submitted, and here’s a summary of what we heard from you on each of the questions I posed last week.

Entrepreneurship

Entrepreneurship is important in driving innovation and growth. When you first had a new idea for a business how did you convert that idea into a growing business?

Not surprisingly, many of you told me about the key role access to capital plays.  Some folks had stories of success when a little seed money helped them get their business off the ground.  Others were frustrated at how difficult it can be to secure capital in these tough economic times.

Many of you also told me about the importance of having mentors and other support networks to help entrepreneurs succeed.  Larry from Alabama said:

Of all the available options, I believe business incubators could be the best answer that would enable people of all capabilities to explore their dreams. And, perhaps the most effective way to make that a reality, all over the country, is government and universities partnering in offering business incubators.

Larry, I agree with you, and providing expanded educational opportunities and mentorship programs for entrepreneurs is one of the goals of the new Startup America initiative that President Obama announced a few weeks ago. Startup America brings together an alliance of the country’s most innovative entrepreneurs, corporations, universities, foundations, and other leaders, along with a wide range of federal agencies with the goal of dramatically increasing the prevalence and success of America’s entrepreneurs. 

Access to Capital

The President has focused on increasing access to capital and tax breaks for small businesses. What role does access to capital play in your small business, and how can the government help small businesses ensure they can access the financing they need to grow.

Many of you told me that access to capital just doesn’t exist for your small business, and you’re frustrated with all of the hoops you have to jump through to get a loan.  James from Texas said:

With the virtual death of local banking, it is next to impossible today to get bank loans for anything other than fixed assets. For working capital or speculative funding, entrepreneurs must look to saved capital, family, friends, or possibly a first customer. Traditional financing sources only help the more traditional forms of business. Innovators must look elsewhere.

The President actually addressed James’s concern during our session on Tuesday.  It’s no secret that over the last two years, the credit crunch has made it tough for small businesses to get the capital they need to grow and create jobs.  President Obama has been focusing on addressing these shortfalls since he took office.  From the Recovery Act in February 2009 to the Small Business Jobs Act in September 2010, his Administration has fought for tax cuts for small businesses and new mechanisms to help small and growing businesses access the capital they need.

And last year, President Obama announced the Small Business Lending Fund a new program which authorized a maximum of $30 billion to support small business lending. The fund targets community and small banks that lend the most to small businesses and it offers incentives for banks to increase small business lending.

Workforce Development

As different industries in our economy grow, the workforce must adjust. How can government and business work together to better prepare the next generation workforce for the jobs of the future?

We heard from a lot of folks that improving education at the K-12 level will help prepare today’s students for the jobs of tomorrow.  But we also heard loud and clear that we can’t forget about the folks in the workforce right now who may need some retraining or new skills to compete for 21^st century jobs. Michael from Indiana said:

Workers who need new skills and training are often unable to pay for the courses.  They have families they must support.  They need more grants and scholarships, rather than loans.

Community colleges can be a great place for folks who’ve been in the workplace for awhile to get the new skills they need to compete for today’s jobs at an affordable price. Starting this year, the Department of Labor is making $500 million available for competition each year over a three year period to help community colleges and other eligible institutions develop, offer, or improve education and career training programs suitable for workers who are eligible for Trade Adjustment Assistance.

The Administration also launched a program called Skills for America’s Future that brings together businesses, nonprofits, and schools to train Americans for the jobs of a new century. This initiative is designed to have businesses and community colleges work together to match the work in the classroom with the needs of the boardroom.

Exports

Promoting U.S. exports is an effective way to grow businesses and create jobs. What obstacles does your business face in exporting goods and services to foreign markets?

Many of you told us that tariffs on American goods in foreign markets make it difficult for you to compete abroad.  Others cited high shipping costs as a barrier to increasing exports.  We also heard from many people breaking into the export business is sometimes just too confusing for small businesses. Roy from California said:

The export business acumen of the typical US businessman needs to be improved.  Every manufacturing plant that I visit could export or export more.  It is an investment of time and energy but all will see the return on this investment. 

The Department of Commerce is working to do just that – help U.S. small businesses navigate the waters of exporting and increasing sales to new global markets through the U.S. Commercial Service.  The Commercial Service helps exporters target the right markets for their products, provides counseling and information to navigate the export process, connects businesses with partners and prospects and advocates for U.S. companies to level the playing field for international procurement.

Clean Energy

In the President’s State of the Union he emphasized that an investment in clean energy technology will strengthen our security, protect our planet, and create new jobs. How can your business benefit from opportunities in this growing industry?

We heard from a lot of small business owners would like to go green in their businesses by using more clean energy sources, but were worried about rising energy costs.  Shannon from Pennsylvania said:

Create grants and no-interest loans to small businesses if they use green energy; help them to get solar panels, energy efficient appliances and vehicles etc.  Give them tax breaks for the same.  Make it easier and cheaper to use clean/green energy…Grow the economy and save the planet at once.

I agree.  It should be easier for small businesses to take advantage of clean energy resources, but for many small businesses retrofitting their operations to take advantage of clean energy is still too costly.  That’s why the Small Business Administration is working to encourage existing lenders to take advantage of recently increased loan size limits to promote new energy efficiency retrofit loans for small businesses.

The overall trend of economic data in recent months has been encouraging, as initiatives put in place by this Administration are taking hold, but there is still considerable work to do. Today, the Administration puts forward our comprehensive innovation agenda, which details our efforts to accelerate American leadership in educating our workers, investing in science, and building the infrastructure our companies need to succeed.  Innovation will be a key driver of the economy as we strengthen America’s position as home to the world’s best new businesses and industries, and the best jobs.

In addition to the increases last month, the estimates of private sector job growth for November (now +128,000) and December (now +139,000) were revised up. These revisions, along with the annual payroll survey revisions, show that private sector employment has now grown for eleven consecutive months.

Overall payroll employment rose by 36,000 last month. Among the sectors with the largest payroll employment growth were manufacturing (+49,000), retail and wholesale trade (+36,700), and professional and business services (+31,000). Transportation and warehousing (-38,000), construction (-32,000), finance (-10,000), and local government (-10,000) were among the sectors that subtracted from the total. Severe weather in some parts of the country may have impacted employment and hours in some industries.

The 0.4 percentage point decline in the unemployment rate to 9.0 percent in January was accounted for by a large increase in employment as measured by the household survey (which is separate from the payroll survey). The labor force participation rate was unchanged.

The overall trajectory of the economy has improved dramatically over the past two years, but there will surely be bumps in the road ahead.  The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision.  Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.

Austan Goolsbee is Chairman of the Council of Economic Advisers

Some key components of GDP continued to expand in the fourth quarter, including exports (8.5 percent), consumer spending (4.4 percent), equipment and software investment (5.8 percent), and residential spending (3.4 percent). Government spending fell 0.6 percent. Consumption and net exports made the largest positive contributions to growth this quarter, while the decline in inventory investment subtracted substantially from GDP growth.

The overall trend of economic data over the past several months has been encouraging. The measures we worked with Congress to pass last month that continue tax cuts for the middle class and extend unemployment insurance are important for strengthening the recovery in 2011 and putting more money in the pockets of American families. The incentives for business investment will further boost the economy. The Administration will continue to focus on actions that the President has recommended to increase growth and job creation, such as providing incentives to encourage businesses to invest and hire here at home, investing in education and infrastructure, and promoting exports abroad.

The overall trend of economic data over the past several months has been encouraging, due in large part to the initiatives passed by this Administration, but we still have a ways to go. The measures we worked with Congress to pass last month that continue tax cuts for the middle class and extensions to unemployment insurance are vital to sustaining the recovery. The Administration will also continue to focus on actions that the President has recommended to increase growth and job creation, such as providing incentives to encourage businesses to invest and hire here at home, investing in education and infrastructure, and promoting exports abroad.

In addition to the increases last month, the estimates of private sector job growth for October (now 193,000) and November (now 79,000) were revised up. Including today’s revisions, private sector employers have added an average of 128,000 jobs per month in the 4th quarter, the highest quarterly average in almost four years.

Overall payroll employment rose by 103,000 last month. Among the sectors with the largest payroll employment growth were leisure and hospitality (+47,000), education and health services (+44,000), temporary help services (+15,900), and manufacturing (+10,000).  Local government (-20,000) and construction (-16,000) were among the sectors that subtracted from the total.

Even though the unemployment rate fell sharply in December, it is still unacceptably high and we need robust employment growth in order to recover from the deep job losses that began over two years ago.  The overall trajectory of the economy has improved dramatically since then, but there will surely continue to be bumps in the road ahead.  The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision.  Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.

Austan Goolsbee is Chairman of the Council of Economic Advisers

While the overall trend of economic data over the past two months has been encouraging, today’s numbers underscore the importance of extending expiring tax cuts for the middle class and unemployment insurance for those Americans who have lost their jobs.  Failure to do this would jeopardize hundreds of thousands of additional jobs, and leave millions of Americans, who are out of work through no fault of their own, on their own.

In addition to the increase in November, the estimates of private sector job growth for September (now 112,000) and October (now 160,000) were revised up. Since last December, the economy has added 1.2 million private sector jobs. So far this quarter, including today’s revisions, private sector employers have added an average of 105,000 jobs per month.

Overall payroll employment rose by 39,000 last month. Among the sectors with the largest payroll employment growth were education and health services (+30,000) and temporary help services (+39,500).  Retail trade (-28,100), manufacturing (-13,000), state and local government jobs (-13,000), and construction (-5,000) were among the sectors that subtracted from the total.

An unemployment rate of 9.8 percent is unacceptably high and we need to achieve robust employment growth in order to recover from the deep job losses that began over two years ago.  Although the overall trajectory of the economy has improved dramatically over the past year, there will surely continue to be bumps in the road ahead such as this.  The monthly employment and unemployment numbers are volatile and employment estimates are subject to substantial revision.  Therefore, as the Administration always stresses, it is important not to read too much into any one monthly report.

It is essential that we take the additional targeted actions that the President has recommended to increase growth and job creation, such as extending tax cuts for the middle class, investing in our infrastructure, providing tax incentives to encourage businesses to invest and hire here at home, and promoting exports abroad.

Austan Goolsbee is Chairman of the Council of Economic Advisers

In addition to the increase in October, the estimates of private sector job growth for August and September were revised up by a total of 93,000. Since last December, private sector employment has risen by 1.1 million. Over the last quarter, including today’s revisions, private sector employers added an average of 122,000 jobs per month.

Overall payroll employment rose by 151,000 last month. Among the sectors with the largest payroll employment growth were education and health services (+53,000), temporary help services (+34,900), and retail trade (+27,900). Anticipated layoffs of 5,000 temporary Census jobs and a drop of 7,000 state and local government jobs subtracted from the total.

Given the volatility in monthly employment and unemployment data, it is important not to read too much into any one monthly report.

We continue to remain focused on our efforts to encourage robust economic growth that will also bring strong employment growth. It is essential that we take the additional targeted actions that the President has recommended to further stimulate growth and job creation, such as extending tax cuts for the middle class, investing in our infrastructure, providing tax incentives to encourage businesses to invest here at home, and promoting exports abroad.

Austan Goolsbee is Chairman of the Council of Economic Advisers

Some key components of GDP continued to expand in the third quarter.  Consumer expenditures on goods and services rose at an annual rate of 2.6 percent, up slightly from the second quarter.  Fixed investment (nonresidential structures, equipment and software, and housing investments) grew at an annual rate of 0.8 percent.  Business investment in equipment and software increased by 12 percent, the fourth consecutive quarter of solid growth, indicating continued expansion of investments by private firms.  Inventory investment contributed 1.4 percentage points to GDP growth, slightly less than the average in the last four quarters.   Residential investment, however, declined.
 
Given the depth and severity of the recession, considerable work remains before our economy is fully recovered.  Therefore, it is essential that we take the additional targeted actions that the President has recommended to further stimulate growth and job creation, such as extending tax cuts for the middle class, investing in our infrastructure, providing tax incentives to encourage businesses to invest here at home, and promoting exports abroad.

Austan Goolsbee is the Chairman of the President’s Council of Economic Advisers

In addition to the increase in September, the estimates of private sector job growth for July and August were revised up by a total of 36,000. Since last December, private sector employment has risen by 863,000. Over the last quarter of this year, including today’s results, private sector employers added an average of 91,000 jobs per month.

Despite the rise in private sector employment, overall payroll employment fell by 95,000 last month.  In addition to the anticipated layoffs of 77,000 temporary Census jobs, state and local government also experienced a drop in employment of 83,000.

Payroll employment growth varied across sectors with solid increases in leisure and hospitality, education and health services, and temporary help services. The sector with the largest decline was local government, where payrolls declined by 76,000.  Construction employment declined, but is essentially unchanged since March, and manufacturing employment fell slightly after seven consecutive increases.

In the household survey, employment rose by 141,000 and unemployment fell by 93,000.  About 400,000 fewer people were unemployed last month compared to a year ago.  However, the decline in unemployment last month was not large enough to impact the unemployment rate, which remained unchanged at 9.6% due to an increase in the labor force.  In addition, the number of workers who have been unemployed 27 weeks or longer declined, from 6.25 million to 6.12 million.

Given the volatility in the monthly employment and unemployment data, it is important not to read too much into any one monthly report.  Rather, we must remain focused on our efforts to encourage robust economic growth that will also bring strong employment growth.  The President continues to work with his economic team and looks forward to working with Congress when they return to identify measures to speed the recovery.

Austan Goolsbee is the Chairman of the Council of Economic Advisers

• Read the report (pdf).
• Letter to the President from Chairman Paul Volcker (pdf).

The PERAB report fulfills the specific mandate they were given: to discuss the pros and cons of a spectrum of reform ideas relating to tax simplification, improving compliance with existing tax laws, and reforming the corporate tax system.  They were also instructed not to consider policies that would raise taxes on families making less than $250,000.

The report is meant to be informative rather than prescriptive. Its intention is to aid discussion about the wide variety of tax reform ideas in these areas. The PERAB was not tasked with providing its own policy recommendations for the Administration and, of course, given the independence of the PERAB as a group of outside advisers, it is not a reflection of administration ideas under consideration. The final report approved today is an informative and important almanac of options for tax reform.

The report will also be submitted to the bipartisan National Commission on Fiscal Responsibility and Reform as they continue to consider ways to address our nation’s middle and long-term fiscal challenges and to achieve fiscal sustainability.

The Tax Reform Subcommittee of the PERAB received more than 600 serious submissions of tax reform ideas from the public both in person and in writing or electronically during their deliberations. They considered as many of these suggestions as possible.

The tax reform subcommittee is one of seven subcommittees of the PERAB, including subcommittees on Jobs, Growth, and Investment; Financial Markets and Regulation; Retirement and Savings; Housing and Mortgage Policy; Energy, the Economy, and Technology and Education and Training.

Austan Goolsbee is the staff director and chief economist on the President's Economic Recovery Advisory Board

The PERAB will vote on presenting formal advice and recommendations to the President through the following memos:

• Infrastructure Investment and the Creation of a National Infrastructure Bank (pdf)
• Home Retrofits for American Jobs, Efficiency and Economic Growth (pdf)

Also, the PERAB has launched a new website.  Our hope is to keep visitors informed on the PERAB's meetings and analysis as they advise the President.  One of the major duties of the PERAB is to ensure the President has independent, nonpartisan information, analysis, and advice.  The PERAB will solicit information and ideas from all sectors to promote the growth of the economy, establish a stable and sound financial and banking system, and create jobs.  The site gives some insight into areas the PERAB is focusing on and provides opportunities to give PERAB feedback and input on economic recovery ideas.  You will also be able to find up-to-date news on PERAB meetings and announcements.

We hope that you will use this site and share it with others.  We want you to come back and visit us often.

Austan Goolsbee is the staff director and chief economist on the President's Economic Recovery Advisory Board

Statement from PERAB Chairman Paul Volcker on Tax Task Force

The tax subcommittee of the PERAB was scheduled to release its report on December 4th. But we have received more than 500 submissions of serious tax reform ideas from the public both in person and on our website and we had to cut them off to meet the original deadline.

I want us to review as many suggestions as possible and to have sufficient time to fully consider the hundreds of suggestions that have come in already. I have asked the Administration to extend our deadline and to reopen the website for submissions so that we can hear the widest possible range of ideas.

We still have the same specific mandate: to discuss the pros and cons of a spectrum of reform ideas relating to tax simplification, enforcement of existing tax laws and reform the corporate tax system without considering policies that would raise taxes on families making less than $250,000.

The PERAB is not tasked with providing its own policy recommendations for the Administration and the final report will be an almanac of options from a broad range of viewpoints.

We will be reopening the web submission form and extending the deadline for any suggestions in keeping with our mandate (suggestions may also be submitted via email) and will be scheduling more public meetings over the coming weeks. We expect to report back to the Administration after the holidays.

The core retail spending--the stuff that tends to give a steadier picture and not fluctuate around a lot--rose for the third straight month.  And if you compared the core sales in October 2009 to October last year, it was the first year-over-year increase in 8 months.  In fact, the three-month gain ending in October was the strongest since June 2008. 

This string of gains means that consumer spending is on track to post another gain in the fourth quarter of the year.  From mid 2007 to mid 2009, we had measly growth or outright declines in consumer spending so this is a welcome sign of the beginnings of recovery.

One last thing worth noting in this retail sales report is the fact that consumer spending on motor vehicles posted a big increase.  The report last month showed a decline in sales as the Cash-for-Clunkers program ended.  Some critics argued that the perceived recovery of the economy was only a temporary blip due to people shifting their car purchases forward and sales now would be lower for an extended period.  These data suggest that didn't happen.  They confirm what the private industry sales data already documented. The sales of motor vehicles in October are up to an annual rate that actually exceeds the rate in the eight months before cash-for-clunkers began. 

The President's focus is on recovery and getting people back to work.  Turning the economy around is the necessary first step for job creation.  This report suggests the recovery effort may be picking up steam.

Austan Goolsbee is a member of the Council of Economic Advisers

• Tax code simplification
• Enforcement
• Corporate tax reform