Actual economic data were generally available through the end of 2021 at the time the assumptions for this report were set; some values for the fourth quarter of 2021 are preliminary estimates. The data indicate that economic activity reached a peak in the fourth quarter of 2019.^{1}The recession started in the first quarter of 2020 due to the precipitous decline in economic activity in March of 2020, continuing in April of 2020, leading to the gross domestic product (GDP) in the second quarter of 2020 being more than 10 percent below the peak in the fourth quarter of 2019, expressed in constant 2012 dollars. GDP recovered rapidly and in the fourth quarter of 2021 exceeded the fourth quarter 2019 peak by about 3 percent.Total U.S. economy productivity is defined as the ratio of real GDP to hours worked by all workers.^{2}The rate of change in total-economy productivity is a major determinant of the growth of average earnings. Over the last six complete economic cycles (1969-73, 1973-79, 1979-90, 1990-2001, 2001‑07, and 2007-19, measured peak to peak), the annual increases in total-economy productivity averaged 2.66, 1.07, 1.41, 1.85, 2.18, and 1.08 percent, respectively. For the period from 1969 to 2019, covering those last six complete economic cycles, the annual increase in total-economy productivity averaged 1.58 percent.The assumed ultimate annual increases in total-economy productivity are 1.93, 1.63, and 1.33 percent for the low-cost, intermediate, and high-cost assumptions, respectively.^{3}These rates of increase are unchanged from the 2021 report.Changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI) directly affect the OASDI program through the automatic cost-of-living benefit increases. Changes in the GDP price index (GDP deflator) affect the nominal levels of GDP, wages, self-employment income, average earnings, and taxable payroll. For a given real rate of growth in average earnings, a higher price inflation rate immediately results in a higher nominal rate of growth in both earnings and revenues, while the resulting added growth in nominal benefit levels occurs with a delay, causing an overall increase (improvement) in the actuarial balance. Similarly, a lower price inflation rate causes an overall decrease in the actuarial balance.The annual increases in the CPI averaged 4.91, 8.54, 5.30, 2.73, 2.63, and 1.73 percent over the economic cycles 1969-73, 1973-79, 1979-90, 1990‑2001, 2001-07, and 2007-19, respectively.^{4}The annual increases in the GDP deflator averaged 5.04, 7.54, 4.61, 2.08, 2.52, and 1.61 percent for the respective economic cycles. For the period from 1969 to 2019, covering the last six complete economic cycles, the annual increases in the CPI and the GDP deflator averaged 3.89 and 3.45 percent, respectively. The annual rate of change for 2020, which was affected by the recession, was 1.21 percent for the CPI and 1.30 percent for the GDP deflator. During the subsequent recovery, demand for goods increased while supply has been constrained, leading to 2021 growth rates of 5.26 percent for the CPI and 4.16 percent for the GDP deflator.The average level of nominal earnings in OASDI covered employment for each year has a direct effect on the size of the taxable payroll and on the future level of average benefits. In addition, under the automatic adjustment provisions in the law, growth in the average wage in the U.S. economy directly affects certain parameters used in the OASDI benefit formulas, as well as the contribution and benefit base, the exempt amounts under the retirement earnings test, the amount of earnings required for a quarter of coverage, and in certain circumstances, the automatic cost-of-living benefit increases.The ratio of total labor compensation (i.e., employee compensation and net proprietors’ income) to GDP varies over the economic cycle and with changes in the relative sizes of different sectors of the economy. Over the last six complete economic cycles from 1969 to 2019, this ratio has averaged 0.622. The ratio declined from a recent high of 0.649 for 2001 to 0.600 in 2010, increased to 0.610 in 2012, and averaged 0.611 for 2014 through 2019. This ratio increased to 0.633 for 2020 and 0.626 for 2021 and is assumed to reach 0.630 by 2031. For years after 2031, the relative sizes of different sectors of the economy are assumed to remain about constant,^{5}and therefore the ratio of total labor compensation to GDP remains at about the 2031 level for each set of assumptions.4. Assumed Real Wage Differential

Table V.B1.—Principal Economic Assumptions Economic cycles:^{c} d1.80 d.35 d4.17 d.95 d.98 d.47 d5.54 d.28

The annual rate of growth in the size of the labor force decreased from an average of about 2.6 percent during the 1969-73 economic cycle and 2.7 percent during the 1973-79 cycle to 1.7 percent during the 1979-90 cycle, 1.2 percent during the 1990-2001 cycle, 1.1 percent during the 2001‑07 cycle, and 0.5 percent during the 2007-19 cycle. From 2019 to 2021, during the current (incomplete) economic cycle, labor force growth averaged ‑0.7 percent per year, reflecting the shrinking of the labor force during the pandemic-induced recession of 2020 and its aftermath. Going forward, labor force growth is expected to remain subdued due to a slowing of growth in the working-age population — a consequence of the baby-boom generation reaching retirement ages and succeeding lower-birth-rate cohorts reaching working ages. Under the intermediate assumptions, the labor force is projected to increase by an average of 0.8 percent per year from 2021 to 2031 and 0.4 percent per year from 2031 to 2096.For men age 16 and over, the projected age-adjusted labor force participation rates^{6}for 2096 are 72.8, 72.5, and 71.9 percent for the low-cost, intermediate, and high-cost assumptions, respectively. For women age 16 and over, the projected age-adjusted labor force participation rates for 2096 are 62.5, 62.1, and 61.7 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These age-adjusted labor force participation rates for 2096 are higher under all three alternatives than the age-adjusted rates for 2020 of 70.1 percent for men and 58.6 percent for women (based on actual age-specific rates published by the Bureau of Labor Statistics), primarily due to the projected continued recovery from the latest recession and the Trustees’ projected increases in life expectancy.The total civilian unemployment rates are presented in table V.B2. For years through 2031, the table presents total civilian rates without adjustment for the changing age-sex distribution of the population. For years after 2031, the table presents age-sex-adjusted rates, using the age-sex distribution of the 2011 civilian labor force. Age-sex-adjusted rates allow for more meaningful comparisons across longer time periods.The assumed ultimate age-sex-adjusted unemployment rates are 3.5, 4.5, and 5.5 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These values are unchanged from the 2021 report. The Trustees assume that, as the economy continues to recover from the most recent recession, the unemployment rate will decrease from 5.4 percent for 2021 to the assumed 4.5 percent for 2026 under the intermediate assumptions. Under the low-cost assumptions, the ultimate unemployment rate is reached in 2023. Under the high-cost assumptions, the unemployment rate declines to 5.3 percent in 2022, then rises to 6.7 percent in 2023, and then gradually decreases to the ultimate unemployment rate in 2028.^{7}The value of real GDP is equal to the product of three components: (1) productivity (i.e., output per hour worked), (2) average weekly total employment,^{8}and (3) average hours worked per week, times 52. Consequently, the growth rate in real GDP is equal to the combined growth rates for productivity, total employment, and average hours worked. For the period from 1969 to 2019, which covers the last six complete economic cycles, the average annual growth in real GDP was 2.7 percent, combining average growth rates of 1.6 percent for productivity, 1.3 percent for total employment, and ‑0.2 percent for average hours worked (1.027 = 1.016 × 1.013 × 0.998). The real GDP growth rate was -3.4 percent for 2020 and is estimated to be 5.7 percent for 2021.Table V.B2 presents average annual nominal and real interest rates for newly issued trust fund securities. The nominal rate is the average of the nominal interest rates for special U.S. Government obligations issuable to the trust funds in each of the 12 months of the year. Interest for these securities is compounded semiannually, or at redemption if sooner. The real interest rate is defined as the annual yield rate for investments in these securities divided by the annual rate of growth in the CPI for the first year after issuance. The real rate shown for each year reflects the actual realized (historical) or expected (future) real yield on securities issuable in the prior year.

Table V.B2.—Additional Economic Factors j-.7 j-1.6 j1.0 j.3 j3.2 j5.7

The average of the nominal interest rates, compounded semiannually, for special public-debt obligations issuable to the trust funds in each of the 12 months of the year.

On a monthly basis, economic activity peaked in February 2020, but the decline in March was sharp enough that the output in the first quarter of 2020 was substantially below the output in the fourth quarter of 2019. See https://www.nber.org/news/business-cycle-dating-committee-announcement-june-8-2020.

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