2023 OASDI Trustees Report

B. ECONOMIC ASSUMPTIONS AND METHODS

The three alternative sets of economic assumptions are intended to provide a reasonable range for estimating the future financial status of the trust funds. The intermediate assumptions reflect the Trustees’ consensus expectation of moderate economic growth after completion of the recovery from the pandemic-induced recession and a period of slow growth in 2023, and their best estimates for other economic parameters. The low-cost assumptions represent a more optimistic outlook with a faster recovery to a higher level of economic output, stronger long-term economic growth, and relatively optimistic levels for other parameters. The high-cost assumptions represent a more pessimistic scenario with a recession in 2023, slower economic growth in the long term, and relatively pessimistic levels for other parameters.

Actual economic data were generally available through the third quarter of 2022 at the time the assumptions for this report were set. Those 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 almost 10 percent below the peak in the fourth quarter of 2019, expressed in constant 2012 dollars. GDP recovered rapidly, surpassing the fourth quarter 2019 peak in the first quarter of 2021. In the third quarter of 2022, GDP was about 4 percent above the previous peak.

Under the intermediate assumptions, the economy is estimated to be 1 percent above its sustainable trend level of output in the third quarter of 2022 and is then projected to grow slowly, reaching a level of almost 1 percent below the sustainable trend level at the end of 2023. Stronger growth is projected thereafter, with GDP reaching and stabilizing at the sustainable trend level in the first quarter of 2027. The sustainable trend level of GDP is assumed to be 3 percent lower at the end of 2025 and thereafter than was assumed for the intermediate assumptions in the 2022 report. Under the low-cost assumptions, the economy is projected to grow at a faster rate and return to a higher sustainable trend level of output in the first quarter of 2026. Under the high-cost assumptions, the sustainable trend level is assumed to be lower, and GDP was significantly above it in 2022; GDP is projected to fall to 2.5 percent below that lower sustainable trend level in the fourth quarter of 2023 and then to recover fully by the fourth quarter of 2027. Complete economic cycles have little effect on the long-range estimates of financial status of the trust funds, so the assumptions do not include cycles beyond the short-range period (2023 through 2032).

The key economic assumptions underlying the three sets of projections of the future financial status of the OASI and DI Trust Funds are discussed in the remainder of this section.

1. Productivity Assumptions

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 increase in total-economy productivity averaged 2.64, 1.06, 1.39, 1.84, 2.15, and 1.09 percent, respectively. For the period from 1969 to 2019, covering those last six complete economic cycles, the annual increase in total-economy productivity averaged 1.57 percent.

The assumed ultimate annual increase in total-economy productivity is 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 2022 report.

The average annual rate of change in total-economy productivity from 2019 (the end of the last complete economic cycle) to 2022 is estimated to be 1.52 percent. For the intermediate assumptions, the annual rate of change in productivity is assumed to be 0.18 percent for 2023, 1.11 percent for 2024, averages 1.47 percent for 2025 through 2028, and reaches its ultimate value of 1.63 percent for 2029 and thereafter. For the low-cost assumptions, the annual rate of change in productivity is 0.87 percent for 2023, averages 2.00 percent for 2024 through 2027, and reaches its ultimate value of 1.93 percent for 2028 and thereafter. For the high-cost assumptions, the assumed recession lowers the annual rate of change in productivity to ‑1.71 percent for 2023. The growth rate rebounds to an average of 1.49 percent for 2024 through 2027, averages 1.28 percent for 2028 through 2030, and stabilizes at its ultimate value of 1.33 percent for 2031 and thereafter. The combined effect of data revisions, new data for 2022, and less optimistic near-term projections lowered the average productivity growth rate from 2019 to 2032 from 1.67 percent in the 2022 report to 1.40 percent for this report under the intermediate assumptions.

2. Price Inflation Assumptions

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 increase 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 increase in the GDP deflator averaged 5.04, 7.54, 4.61, 2.08, 2.52, and 1.62 percent for the respective economic cycles. For the period from 1969 to 2019, covering the last six complete economic cycles, the annual increase 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 1.35 percent for the GDP deflator. During the subsequent recovery, aggregate demand increased while supply was constrained, leading to a 2021 growth rate of 5.26 percent for the CPI and 4.49 percent for the GDP deflator and an estimated 2022 growth rate of 8.51 percent for the CPI and 7.03 percent for the GDP deflator.

The assumed ultimate annual increase in the CPI is 3.00, 2.40, and 1.80 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These values are unchanged from the 2022 report.

For the intermediate assumptions, the annual rate of change in the CPI is 4.00 percent for 2023, 2.53 percent for 2024, and reaches the ultimate growth rate of 2.40 percent for 2025 and thereafter. For the low-cost assumptions, the annual rate of change in the CPI is 3.90 percent for 2023, 3.02 percent for 2024, and reaches its ultimate growth rate of 3.00 percent for 2025 and thereafter. For the high-cost assumptions, the annual rate of change in the CPI is 4.56 percent for 2023, 2.92 percent for 2024, 1.86 percent for 2025, and reaches its ultimate growth rate of 1.80 percent for 2026 and thereafter.

The annual increase in the GDP deflator differs from the annual increase in the CPI because the two indices are constructed using different computational methods and coverage (the set of goods and services used in the measurement). The difference between the rate of change in the CPI and the rate of change in the GDP deflator is called the price differential in this report. For the period including 1969 through 2019, covering the last six complete economic cycles, the average annual price differential was 0.46 percentage point. For 2020, the annual price differential was -0.13 percentage point, for 2021 it was 0.77 percentage point, and for 2022 it is estimated to be 1.49 percentage points.

The fluctuations in the price differential for 2020-22 primarily reflect a decline and subsequent increase in oil prices, as well as price increases concentrated in consumer goods categories during the economic recovery. Changes in oil prices affect the CPI much more than the GDP deflator because oil comprises a much larger share of U.S. consumption than of U.S. production. Oil prices are assumed to grow at a relatively stable rate in the future. For the intermediate assumptions, the price differential is 0.11 percentage point for 2023, 0.36 percentage point for 2024, and 0.35 percentage point for 2025 and later.

The assumed ultimate price differential is 0.25, 0.35, and 0.45 percentage point for the low-cost, intermediate, and high-cost alternative, respectively. Varying the ultimate projected price differential across alternatives recognizes the historical variation in this measure. Accordingly, the assumed ultimate annual increase in the GDP deflator is 2.75 (3.00 less 0.25), 2.05 (2.40 less 0.35), and 1.35 (1.80 less 0.45) percent for the low-cost, intermediate, and high-cost alternative, respectively. The ultimate price differentials for the three alternatives are unchanged from the 2022 report.

3. Average Earnings Assumptions

The size of the taxable payroll—the main source of the OASDI program’s income—for each year depends primarily on the nominal earnings in OASDI covered employment, which is the product of covered employment⁵ for the year and average covered earnings for the year. Average covered earnings also affects the future level of average benefits. In addition, the average reported annual wage in the U.S. economy determines the national average wage index (AWI). Under the automatic adjustment provisions in the law, the growth in the AWI affects the contribution and benefit base, certain parameters used in the OASDI benefit formula, and certain other program parameters.⁶

The projected growth rate in average annual covered earnings and in the AWI are derived from the projected growth rate in average U.S. earnings. Average U.S. earnings is defined as the ratio of the sum of total U.S. wages and net proprietors’ income to the sum of average weekly U.S. civilian employment and Armed Forces. The growth rate in average U.S. earnings for any period is equal to the combined growth rates for total U.S. economy productivity, average hours worked per week, the ratio of earnings to total labor compensation (which includes fringe benefits), the ratio of total labor compensation to GDP, and the GDP deflator.

The average annual change in average hours worked per week was ‑0.20 percent over the last six complete economic cycles covering the period from 1969 to 2019. The annual change in average hours worked averaged ‑0.87, -0.53, ‑0.09, 0.11, ‑0.47, and -0.05 percent over the economic cycles 1969-73, 1973-79, 1979-90, 1990‑2001, 2001‑07, and 2007-19, respectively. From 2019 to 2022, the first three years after the peak of the last complete cycle, the average annual change in average hours worked per week is estimated to be a decrease of 0.03 percent.

The assumed ultimate annual rate of change for average hours worked per week is 0.05, ‑0.05, and -0.15 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These values are unchanged from the 2022 report.

The average annual change in the ratio of earnings to total labor compensation was -0.14 percent from 1969 to 2019. Data from BEA indicate that the most significant component of this change was the relative increase in the cost of employer-sponsored group health insurance (ESGHI) for wage workers, followed by the increase in employer contributions to social insurance (as statutory payroll tax rates increased between 1970 and 1990), and, to a lesser extent, an increase in employer contributions to retirement plans. Assuming that the level of total employee compensation is not affected by the amount of non-wage compensation, such as ESGHI, any increase or decrease in the cost of non-wage compensation leads to a commensurate decrease or increase in wages. Projections of future ratios of earnings to total labor compensation follow this principle.

The average annual rate of change in the ratio of wages to employee compensation was -0.17 percent from 1969 to 2019. The average annual rate of change in this ratio increased sharply to 0.40 percent for the period 2019 to 2022 due to the unusual effects of the pandemic-induced recession. The average annual rate from 2022 to 2032 is assumed to be about 0.02, -0.08, and ‑0.13 percent for the low-cost, intermediate, and high-cost assumptions, respectively. For the last 65 years of the long-range period, from 2032 to 2097, the average rate is assumed to be about 0.00, ‑0.10, and ‑0.20 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These average rates are slightly higher (i.e., less negative) than those assumed for the 2022 report. Under the intermediate assumptions, the ratio of wages to employee compensation declines from 0.824 for 2022 to 0.767 for 2097.

Because earnings and compensation are the same for self-employed workers, the ratio of earnings to total labor compensation includes self-employment income both in the numerator and in the denominator. As a result, the rate of change in the ratio of earnings to total labor compensation (which, under the intermediate assumptions, averages -0.08 percent from 2032 to 2097) is slightly higher (i.e., less negative) than the rate of change in the ratio of wages to employee compensation.

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. This ratio increased to 0.628 for 2020, declined to 0.613 for 2021, and is estimated to decrease to 0.605 for 2022. It is then projected to gradually rise to reach 0.628 by 2032 under the intermediate assumptions. For years after 2032, the relative sizes of different sectors of the economy are assumed to remain about constant,⁷ and therefore the ratio of total labor compensation to GDP remains at about the 2032 level for each set of assumptions.

For the intermediate assumptions, the projected average annual growth rate in average nominal U.S. earnings from 2022 to 2032 is 3.95 percent. The projected average annual growth rate from 2032 to 2097 is 3.58 percent, which reflects the assumed ultimate annual growth rates of 1.63 percent for productivity, ‑0.05 percent for average hours worked, 2.05 percent for the GDP deflator, and ‑0.08 percent for the ratio of earnings to total labor compensation. Over the same period, the projected average annual growth rate in average nominal U.S. earnings is 4.79 percent for the low-cost assumptions and 2.37 percent for the high-cost assumptions.

The average annual wage in OASDI covered employment (often referred to as the “average covered wage”) is defined as the total wages and salaries paid in OASDI covered employment during the year, divided by the number of workers who worked in OASDI covered employment at any time during the year. Over long periods, the average annual growth rate in the average covered wage is expected to be very close to the average annual growth rate in average U.S. earnings. The estimated annual rate of change in the average covered wage is 4.79 percent for 2022 under the intermediate assumptions. From 2022 to 2032, the annual rate of change in the average covered wage averages 5.37, 3.99, and 2.97 percent for the low-cost, intermediate, and high-cost assumptions, respectively. The projected average annual growth rate in the average covered wage from 2032 to 2097 is 4.79, 3.56, and 2.35 percent for the low-cost, intermediate, and high-cost assumptions, respectively.

4. Assumed Real Wage Growth

For the period from 1969 to 2019, covering the last six complete economic cycles, the annual real (i.e., inflation-adjusted) growth rate in the average covered wage averaged 0.77 percent, the result of averages of 0.98, 0.03, 0.45, 1.43, 0.80, and 0.76 percent over the economic cycles 1969-73, 1973-79, 1979-90, 1990-2001, 2001‑07, and 2007-19, respectively.⁸

For the period 2032 to 2097, the projected average annual real wage growth rate in OASDI covered employment is 1.74, 1.14, and 0.54 percent for the low-cost, intermediate, and high-cost assumptions, respectively. The average annual real wage growth rates are slightly higher than those in the 2022 report.⁹

The real wage increased 1.52 percent for 2020, a year which included the pandemic-induced recession and the beginning of the recovery. It then increased 3.89 percent for 2021, during the continuing rapid recovery from the recession, and is estimated to decrease 3.43 percent for 2022 under the intermediate assumptions, primarily due to the high inflation rate. For the intermediate assumptions, the annual real wage growth rate is projected to be 0.15 percent in 2023, increase to 1.20 percent in 2024, average 1.64 percent for 2025 through 2027, average 1.57 percent for 2028 through 2031, and average 1.14 percent from 2032 to 2097. For the low-cost assumptions, the annual real wage growth rate is 0.79 percent for 2023, averages 2.77 percent for 2024 through 2026, and gradually declines to its long-term average of 1.74 percent from 2032 to 2097. For the high-cost assumptions, the real wage growth rate is -2.58 percent for 2023 and 0.70 percent for 2024. It then averages 1.67 percent for 2025 through 2027, and gradually reaches its long-term average of 0.54 percent from 2032 to 2097.

Table V.B1.—Principal Economic Assumptions 

Calendar year			Annual percentage changea in—
			Productivity  (Total U.S. economy)	GDP price index	Average hours worked per week	Earnings as a percent of total labor compensation	Average annual wage in covered employment		Consumer price index
							Nominal	Real
Historical data:
	5-year periods:
		1960 to 1965	3.23	1.36	0.19	-0.18	3.22	1.95	1.24
		1965 to 1970	2.04	4.02	-.66	-.30	5.84	1.55	4.23
		1970 to 1975	2.07	6.61	-.87	-.49	6.58	-.17	6.76
		1975 to 1980	.94	7.21	-.16	-.33	8.88	-.02	8.91
		1980 to 1985	1.71	5.24	.03	-.36	6.52	1.24	5.22
		1985 to 1990	1.33	3.14	-.06	-.20	4.79	.93	3.83
		1990 to 1995	1.30	2.45	.34	-.11	3.54	.49	3.03
		1995 to 2000	2.31	1.67	.15	.28	5.31	2.81	2.43
		2000 to 2005	2.63	2.32	-.79	-.38	2.69	.19	2.49
		2005 to 2010	1.88	1.91	-.51	-.03	2.51	.21	2.30
		2010 to 2015	.35	1.71	.45	.16	2.93	1.30	1.61
		2015 to 2020	1.58	1.69	-.16	.10	2.95	1.23	1.70
	Economic cycles:b
		1969 to 1973	2.64	5.04	-.87	-.34	5.94	.98	4.91
		1973 to 1979	1.06	7.54	-.53	-.43	8.58	.03	8.54
		1979 to 1990	1.39	4.61	-.09	-.29	5.78	.46	5.30
		1990 to 2001	1.84	2.08	.11	.05	4.19	1.42	2.73
		2001 to 2007	2.15	2.52	-.47	-.18	3.45	.80	2.63
		2007 to 2019	1.09	1.62	-.05	.04	2.50	.76	1.73
		2019 to 2022 c	1.52	4.26	-.03	.33	5.60	.61	4.95
	Single years:
		2012	.34	1.88	.13	.47	3.33	1.20	2.10
		2013	.52	1.77	.33	-.33	1.23	-.14	1.37
		2014	.31	1.86	.36	.27	3.60	2.07	1.50
		2015	.61	.96	.41	.05	3.38	3.81	-.41
		2016	.45	1.00	-.50	.10	1.29	.31	.98
		2017	1.04	1.93	-.05	.14	3.47	1.32	2.13
		2018	1.03	2.41	.32	-.10	3.65	1.08	2.55
		2019	1.32	1.78	-.15	.19	3.62	1.92	1.66
		2020	4.11	1.35	-.43	.17	2.76	1.52	1.21
		2021	1.49	4.49	1.11	.48	9.36	3.89	5.26
		2022 c	-.99	7.03	-.77	.34	4.79	-3.43	8.51
Intermediate:
		2023	.18	3.89	.30	-.16	4.15	.15	4.00
		2024	1.11	2.17	-.04	-.13	3.76	1.20	2.53
		2025	1.40	2.05	-.04	-.04	4.06	1.62	2.40
		2026	1.44	2.05	-.03	d	4.10	1.66	2.40
		2027	1.47	2.05	-.04	d	4.08	1.64	2.40
		2028	1.56	2.05	-.05	-.03	4.01	1.57	2.40
		2029	1.63	2.05	-.05	-.05	4.03	1.60	2.40
		2030	1.63	2.05	-.05	-.07	4.01	1.57	2.40
		2031	1.63	2.05	-.05	-.07	3.98	1.54	2.40
		2032	1.63	2.05	-.05	-.07	3.76	1.33	2.40
		2032 to 2097	1.63	2.05	-.05	-.08	3.56	1.14	2.40
Low-cost:
		2023	.87	3.86	.36	-.14	4.73	.79	3.90
		2024	1.95	2.79	.07	-.11	5.82	2.71	3.02
		2025	2.16	2.75	.09	-.01	6.17	3.08	3.00
		2026	1.96	2.75	.06	.03	5.61	2.53	3.00
		2027	1.94	2.75	.05	.04	5.34	2.27	3.00
		2028	1.93	2.75	.05	.02	5.29	2.22	3.00
		2029	1.93	2.75	.05	.01	5.26	2.20	3.00
		2030	1.93	2.75	.05	d	5.25	2.19	3.00
		2031	1.93	2.75	.05	.01	5.24	2.18	3.00
		2032	1.93	2.75	.05	.01	5.04	1.98	3.00
		2032 to 2097	1.93	2.75	.05	d	4.79	1.74	3.00
High-cost:
		2023	-1.71	4.16	.20	-.16	1.86	-2.58	4.56
		2024	1.53	2.28	-.12	-.13	3.63	.70	2.92
		2025	1.50	1.41	-.12	-.06	3.71	1.81	1.86
		2026	1.41	1.35	-.14	-.04	3.44	1.61	1.80
		2027	1.51	1.35	-.15	-.05	3.43	1.60	1.80
		2028	1.28	1.35	-.15	-.09	2.92	1.10	1.80
		2029	1.26	1.35	-.15	-.11	2.74	.92	1.80
		2030	1.30	1.35	-.15	-.14	2.72	.91	1.80
		2031	1.33	1.35	-.15	-.14	2.72	.90	1.80
		2032	1.33	1.35	-.15	-.16	2.50	.69	1.80
		2032 to 2097	1.33	1.35	-.15	-.17	2.35	.54	1.80

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a

For rows with a single year listed, the value is the annual percentage change from the prior year. For rows with a range of years listed, the value is the compound average annual percentage change.

b

Economic cycles are shown from peak to peak, except for the last cycle, which is not yet complete.

c

Estimated values for 2022 vary slightly by alternative and are shown for the intermediate assumptions.

d

Greater than -0.005 and less than 0.005 percent.

5. Labor Force, Employment, and Unemployment Projections

Employment is a fundamental component of economic output (GDP), taxable payroll, and the determination of OASDI benefit eligibility and benefit levels. U.S. employment is projected in two components: the size of the labor force (those employed or seeking employment) and the unemployment rate (the proportion of those in the labor force who are not employed). Table V.B2 provides the historical and projected rates of change in employment, which follow from the rates of change in the labor force, adjusted for the varying unemployment rates from year to year.

The model used by the Office of the Chief Actuary projects the civilian labor force by age, sex, marital status, and presence of children. Projections of the labor force participation rates reflect changes in disability prevalence, educational attainment, marriage patterns, the average level of Social Security retirement benefits, the state of the economy, and life expectancy.

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 2022, during the current (incomplete) economic cycle, labor force growth averaged 0.2 percent per year, which combines the fall in the labor force during the pandemic-induced recession of 2020 and the growth in the labor force in 2021-22. Going forward, labor force growth is projected to be 0.8 percent in 2023, rising to 1.2 percent in 2024, and then converging to the long-term trend of about 0.4 percent per year by 2032. The long-term growth rate in the labor force 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 0.7 percent per year from 2022 to 2032 and 0.4 percent per year from 2032 to 2097.

Labor force participation rates are projected with a model that uses demographic and economic assumptions specific to each alternative. More optimistic economic assumptions in the low-cost alternative are consistent with higher labor force participation rates, while demographic assumptions in the low-cost alternative (such as slower improvement in longevity) are consistent with lower labor force participation rates. These economic and demographic influences have largely offsetting effects. Therefore, the projected labor force participation rates do not vary substantially across alternatives.

Historically, labor force participation rates reflect trends in demographics and pensions. Between the mid‑1960s and the mid‑1980s, labor force participation rates at ages 55 and over declined for men but were fairly stable for women. During this period, the baby-boom generation reached working age and more women entered the labor force. This increasing supply of labor allowed employers to offer attractive early retirement options. Between the mid‑1980s and the mid‑1990s, participation rates at ages 55 and over roughly stabilized for men and increased for women. Since the mid‑1990s, however, participation rates for both sexes at ages 55 and over have generally risen.

Many economic and demographic factors, including longevity, disability prevalence, the business cycle, incentives for retirement in Social Security and private pensions, education, and marriage patterns, will influence future labor force participation rates. The Office of the Chief Actuary models some of these factors explicitly. To model the effects of other factors related to increases in life expectancy, projected participation rates are adjusted upward for mid-career and older ages to reflect projected increases in life expectancy. For the intermediate projections, this adjustment increases the total labor force by 3.0 percent for 2097.

For men and boys age 16 and over, the projected age-adjusted labor force participation rate¹⁰ for 2097 is 72.8, 72.6, and 72.1 percent for the low-cost, intermediate, and high-cost assumptions, respectively. For women and girls age 16 and over, the projected age-adjusted labor force participation rate for 2097 is 62.3, 61.9, and 61.7 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These age-adjusted labor force participation rates for 2097 are higher under all three alternatives than the age-adjusted rates for 2021 of 70.3 percent for men and boys and 58.8 percent for women and girls (based on actual age-specific rates published by the Bureau of Labor Statistics), primarily due to the Trustees’ projected increases in life expectancy, as well as the rise in educational attainment for women.

The total civilian unemployment rates are presented in table V.B2. For years through 2032, the table presents total civilian rates without adjustment for the changing age-sex distribution of the population. For years after 2032, 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 total civilian unemployment rate reflects the projected levels of unemployment for various age-sex groups of the population. Each group’s unemployment rate gradually approaches an assumed stable value within the first ten years of the projection period for all alternatives, and thus the total age-sex-adjusted civilian unemployment rate reaches its ultimate assumed value within the first ten years of the projection period.

The assumed ultimate age-sex-adjusted unemployment rate is 3.5, 4.5, and 5.5 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These values are unchanged from the 2022 report. The Trustees assume that, as economic growth slows temporarily due to anti-inflationary measures, the unemployment rate will increase from 3.7 percent for 2022 to 4.7 percent in 2024, and then gradually decline to reach the assumed 4.5 percent for 2027 under the intermediate assumptions. Under the low-cost assumptions, the unemployment rate is projected to rise to 3.8 percent in 2023 and 2024 before declining to the ultimate unemployment rate of 3.5 percent in 2026. Under the high-cost assumptions, due to the assumed economic recession, the unemployment rate increases further to 6.3 percent in 2024, with the age-sex-adjusted rate then gradually decreasing to the ultimate unemployment rate of 5.5 percent in 2027.¹¹

6. Gross Domestic Product Projections

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,¹² 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 -2.8 percent for 2020, 5.9 percent for 2021, and is estimated to be 1.9 percent for 2022 under the intermediate assumptions.

For the intermediate assumptions, the average annual growth in real GDP is 1.9 percent from 2022 to 2032, combining the average growth rates of 1.37 percent for productivity, 0.58 percent for total employment, and ‑0.01 percent for average hours worked. The projected average annual growth in real GDP of 1.9 percent from 2022 to 2032 is approximately equal to the underlying sustainable trend rate, but it is slightly slower for 2023 through 2024 and slightly faster for 2025 through 2027. After 2032, the annual growth in real GDP follows the sustainable trend rate and averages 2.0 percent, which combines the projected ultimate annual growth rate of 1.63 percent for productivity, average annual growth rate of 0.40 percent for total employment, and the ultimate annual growth rate of ‑0.05 percent for average hours worked per week. The projected growth rate of real GDP is lower than the past average growth rate mainly because the working-age population is expected to grow more slowly than in the past.

For the low-cost assumptions, the annual growth in real GDP averages 2.9 percent from 2022 to 2032 and 2.7 percent from 2032 to 2097. For the high-cost assumptions, the annual growth in real GDP averages 1.2 percent from 2022 to 2032 and 1.2 percent from 2032 to 2097.

7. Interest Rates

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.

To develop a reasonable range of assumed ultimate future real interest rates for the three alternatives, the Office of the Chief Actuary examined historical experience for the last six complete economic cycles. For the period from 1969 to 2019, the real interest rate averaged 2.4 percent per year. The real interest rate averaged 1.6, -1.0, 5.1, 4.1, 2.0, and 0.8 percent per year over the economic cycles 1969-73, 1973-79, 1979-90, 1990-2001, 2001-07, and 2007-19, respectively. The assumed ultimate real interest rate is 2.8 percent, 2.3 percent, and 1.8 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These rates are unchanged from the 2022 report.

The average annual nominal interest rate was approximately 1.4 percent for securities newly issuable in 2021, implying an effective annual yield of 1.4 percent for securities held one year. The CPI rose from 2021 to 2022 by approximately 8.5 percent. The annual real interest rate for 2022 was therefore -6.6 percent (1.014/1.085 = 0.935 = 1 − 0.0656). From 2022 to 2032, projected nominal interest rates depend on changes in the economic cycle and in the CPI. When combined with the ultimate CPI assumptions of 3.0, 2.4, and 1.8 percent, the assumed ultimate real interest rates produce an ultimate nominal interest rate of 5.8 percent for the low-cost assumptions, 4.7 percent for the intermediate assumptions, and 3.6 percent for the high-cost assumptions. These nominal rates for newly issued trust fund securities reach their ultimate levels by 2032.

Table V.B2.—Additional Economic Factors 

Calendar year			Average annual unemployment rate a	Annual percentage changeb in—				Average annual interest rate
				Labor force c	Total employment d	Real GDP e		Nominal f	Real g
Historical data:
	5-year periods:
		1960 to 1965	5.5	1.3	1.6	5.1		4.0	2.5
		1965 to 1970	3.9	2.2	2.1	3.5		5.9	1.0
		1970 to 1975	6.1	2.5	1.5	2.7		6.7	h
		1975 to 1980	6.8	2.7	2.9	3.7		8.5	-.9
		1980 to 1985	8.3	1.5	1.5	3.3		12.1	6.9
		1985 to 1990	5.9	1.7	2.0	3.3		8.5	5.1
		1990 to 1995	6.6	1.0	.9	2.6		7.0	4.3
		1995 to 2000	4.6	1.5	1.8	4.3		6.2	3.9
		2000 to 2005	5.4	.9	.7	2.6		4.6	2.4
		2005 to 2010	6.8	.6	-.4	1.0		3.8	1.8
		2010 to 2015	7.2	.4	1.3	2.1		2.0	.5
		2015 to 2020	5.0	.5	-.2	1.3		2.0	.5
	Economic cycles: i
		1969 to 1973	5.3	2.6	1.8	3.6		6.5	1.6
		1973 to 1979	6.8	2.7	2.4	3.0		7.7	-1.0
		1979 to 1990	7.1	1.7	1.7	3.0		10.3	5.1
		1990 to 2001	5.5	1.2	1.2	3.2		6.5	4.1
		2001 to 2007	5.3	1.1	1.1	2.8		4.5	2.0
		2007 to 2019	6.4	.5	.6	1.7		2.4	.8
		2019 to 2022 j	5.7	.2	.1	1.6		1.8	-3.3
	Single years:
		2012	8.1	.9	1.8	2.3		1.5	.3
		2013	7.4	.3	1.0	1.8		1.9	.1
		2014	6.2	.3	1.6	2.3		2.3	.4
		2015	5.3	.8	1.7	2.7		2.0	2.7
		2016	4.9	1.3	1.7	1.7		1.8	1.0
		2017	4.4	.7	1.2	2.2		2.3	-.3
		2018	3.9	1.1	1.6	2.9		2.9	-.2
		2019	3.7	.9	1.1	2.3		2.2	1.2
		2020	8.1	-1.7	-6.2	-2.8		1.0	1.0
		2021	5.4	.3	3.2	5.9		1.4	-4.1
		2022 j	3.7	1.9	3.7	1.9		3.0	-6.6
Intermediate:
		2023	4.3	.8	.2	.7		3.5	-1.0
		2024	4.7	1.2	.7	1.8		3.5	1.0
		2025	4.6	1.0	1.0	2.4		3.6	1.1
		2026	4.6	.8	.9	2.3		3.7	1.2
		2027	4.5	.7	.8	2.2		3.9	1.3
		2028	4.5	.5	.5	2.0		4.2	1.5
		2029	4.4	.4	.4	2.0		4.4	1.8
		2030	4.4	.4	.4	2.0		4.6	2.0
		2031	4.4	.4	.4	2.0		4.6	2.2
		2032	4.4	.4	.4	2.0		4.7	2.2
		2035	4.5	.4	.4	2.0		4.7	2.3
		2040	4.5	.3	.3	1.9		4.7	2.3
		2045	4.5	.3	.3	1.9		4.7	2.3
		2050	4.5	.4	.4	2.0		4.7	2.3
		2055	4.5	.4	.4	2.0		4.7	2.3
		2060	4.5	.4	.4	2.0		4.7	2.3
		2065	4.5	.4	.4	2.0		4.7	2.3
		2070	4.5	.3	.3	1.9		4.7	2.3
		2075	4.5	.4	.4	1.9		4.7	2.3
		2080	4.5	.4	.4	2.0		4.7	2.3
		2085	4.5	.5	.5	2.1		4.7	2.3
		2090	4.5	.5	.5	2.1		4.7	2.3
		2095	4.5	.5	.5	2.1		4.7	2.3
		2100	4.5	.4	.4	2.0		4.7	2.3
Low-cost:
		2023	3.8	1.1	1.0	2.2		4.2	-.9
		2024	3.8	1.5	1.5	3.5		4.4	1.2
		2025	3.6	1.4	1.6	3.9		4.8	1.4
		2026	3.5	.9	1.0	3.0		5.1	1.8
		2027	3.5	.8	.8	2.8		5.5	2.1
		2028	3.5	.7	.7	2.7		5.5	2.5
		2029	3.5	.6	.6	2.6		5.5	2.5
		2030	3.5	.6	.6	2.6		5.5	2.5
		2031	3.5	.6	.6	2.6		5.7	2.5
		2032	3.5	.6	.6	2.5		5.8	2.7
		2035	3.5	.6	.6	2.6		5.8	2.8
		2040	3.5	.5	.5	2.5		5.8	2.8
		2045	3.5	.6	.6	2.6		5.8	2.8
		2050	3.5	.7	.7	2.7		5.8	2.8
		2055	3.5	.7	.7	2.7		5.8	2.8
		2060	3.5	.7	.7	2.7		5.8	2.8
		2065	3.5	.6	.6	2.6		5.8	2.8
		2070	3.5	.6	.6	2.6		5.8	2.8
		2075	3.5	.7	.7	2.7		5.8	2.8
		2080	3.5	.7	.7	2.7		5.8	2.8
		2085	3.5	.8	.8	2.8		5.8	2.8
		2090	3.5	.8	.8	2.8		5.8	2.8
		2095	3.5	.7	.7	2.7		5.8	2.8
		2100	3.5	.7	.7	2.7		5.8	2.8
High-cost:
		2023	4.9	0.6	-0.7	-2.2		3.4	-1.5
		2024	6.3	.8	-.6	.8		2.9	.5
		2025	6.0	.8	1.1	2.5		2.8	1.0
		2026	5.7	.7	1.0	2.3		3.0	1.0
		2027	5.5	.5	.7	2.1		3.2	1.2
		2028	5.4	.3	.4	1.5		3.2	1.4
		2029	5.4	.3	.3	1.4		3.3	1.4
		2030	5.4	.2	.2	1.4		3.4	1.5
		2031	5.4	.2	.2	1.4		3.5	1.6
		2032	5.4	.2	.2	1.4		3.6	1.7
		2035	5.5	.2	.2	1.4		3.6	1.8
		2040	5.5	.2	.2	1.3		3.6	1.8
		2045	5.5	h	h	1.2		3.6	1.8
		2050	5.5	h	h	1.2		3.6	1.8
		2055	5.5	h	h	1.2		3.6	1.8
		2060	5.5	h	h	1.2		3.6	1.8
		2065	5.5	h	h	1.1		3.6	1.8
		2070	5.5	-.1	-.1	1.1		3.6	1.8
		2075	5.5	-.1	-.1	1.1		3.6	1.8
		2080	5.5	-.1	-.1	1.1		3.6	1.8
		2085	5.5	-.1	-.1	1.1		3.6	1.8
		2090	5.5	h	h	1.1		3.6	1.8
		2095	5.5	h	h	1.2		3.6	1.8
		2100	5.5	h	h	1.1		3.6	1.8

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a

The Office of the Chief Actuary adjusts the civilian unemployment rates for 2033 and later to the age-sex distribution of the civilian labor force in 2011. For years through 2032, the values are the total rates without adjustment for the changing age-sex distribution.

b

For rows with a single year listed, the value is the annual percentage change from the prior year. For rows with a range of years listed, the value is the compounded average annual percentage change.

c

The U.S. civilian labor force.

d

Total U.S. military and civilian employment.

e

The value of the total output of goods and services in 2012 dollars.

f

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.

g

The realized or expected annual real yield for each year on securities issuable in the prior year.

h

Greater than -0.05 and less than 0.05 percent.

i

Economic cycles are shown from peak to peak, except for the last cycle, which is not yet complete.

j

Estimated values for 2022 vary slightly by alternative and are shown for the intermediate assumptions.

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1

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 www.nber.org/news/business-cycle-dating-committee-announcement-june-8-2020.

2

Historical levels of real GDP are from the National Income and Product Accounts (NIPA) produced by the Bureau of Economic Analysis (BEA). Historical total hours worked are provided by the Bureau of Labor Statistics (BLS) and cover all U.S. Armed Forces and civilian employment.

3

These assumptions for total-economy productivity are consistent with ultimate annual increases in private nonfarm business productivity of 2.36, 2.00, and 1.63 percent. Private nonfarm business productivity excludes the farm, government, nonprofit institution, and private household sectors.

4

BLS produces a series called the Consumer Price Index Research Series Using Current Methods (CPI‑U‑RS) that approximates the measured rate of inflation since 1978 had the method currently used been in effect since then. BLS does not revise the CPI values published in earlier years, for which different methods were used. These CPI published values are shown in table V.B1. The Trustees use an adjusted CPI series based on the CPI-U-RS when setting the ultimate price inflation assumption because it provides a time series that is consistent with the current method for computing the CPI.

5

Covered employment for a year is defined as the total number of persons who have any OASDI covered earnings (that is, earnings subject to the OASDI payroll tax) at any time during that year. See section V.C.2 for a more detailed discussion of covered employment.

6

See section V.C.1 for a discussion of the AWI and the parameters indexed to it.

7

The sole exception is employment in the U.S. Armed Forces, which has declined in size over the last 40 years and is assumed to remain at its 2020 level throughout the 75-year projection period.

8

In previous Trustees Reports, the real increase in the average covered wage was expressed in the form of a real wage differential — the annual percentage change in the average wage in OASDI covered employment minus the annual percentage change in the CPI.

9

In the 2022 report, the projected average real wage differential was 1.77, 1.15, and 0.53 percentage points for the low-cost, intermediate, and high-cost assumptions, respectively. The corresponding average real growth rate was 1.72, 1.12, and 0.52 percent for the low-cost, intermediate, and high-cost assumptions, respectively.

10

The Office of the Chief Actuary adjusts the labor force participation rates to the 2011 age distribution of the civilian noninstitutional U.S. population.

11

The assumed ultimate unemployment rates are age-sex-adjusted rates. For the intermediate assumptions, the age-sex-adjusted unemployment rate in 2027 through 2032 is 4.5, while the unadjusted rate is 4.4 for 2029 through 2032, as shown in table V.B2. For the high-cost assumptions, the age-sex-adjusted unemployment rate in 2027 through 2032 is 5.5 percent, while the unadjusted rate is 5.4 percent for 2028 through 2032.

12

Average weekly total employment is the sum of average weekly U.S. civilian employment, which can be expressed as a product of the total civilian labor force and the complement of the unemployment rate, and U.S. Armed Forces.