Actual economic data were available through the third quarter of 2014 at the time the Trustees set the assumptions for this report. The data indicated that economic activity peaked in December 2007^{1}with the level of gross domestic product (GDP) about 1 percent above the estimated long-term sustainable trend level. A severe recession followed, with a low point in the economic cycle reached in the second quarter of 2009 with GDP about 7 percent below the estimated sustainable trend level. The annual growth rate in real GDP has been positive in all years since then, but not as strong as in most past recoveries. The Trustees project that the economy will return to its sustainable trend level of output within the first 10 years of the projection period and remain on that trend thereafter. However, the speed of the return varies by alternative. The economy is projected to return to its sustainable trend level of output by 2022 for the intermediate assumptions, 2020 for the low-cost assumptions, and 2024 for the high-cost assumptions, about 1 year later than in last year’s report for each alternative. Complete cycles have little effect on the long-range estimates of financial status, so the assumptions do not include economic cycles beyond 10 years.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 in the growth of average earnings. Over the last five complete economic cycles (1966-73, 1973-79, 1979-89, 1989-2000, and 2000-07, measured peak to peak), the annual increases in total productivity averaged 2.27, 1.10, 1.38, 1.79 and 2.15 percent, respectively. For the 41-year period from 1966 to 2007, covering those last five complete economic cycles, the annual increase in total-economy productivity averaged 1.73 percent.The assumed ultimate annual increases in total-economy productivity are 1.98, 1.68, and 1.38 percent for the low-cost, intermediate, and high-cost assumptions, respectively.^{3}These rates of increase are unchanged from the 2014 report.Future changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI) will directly affect the OASDI program through the automatic cost-of-living benefit increases. Future changes in the GDP price index (GDP deflator) affect the nominal levels of GDP, wages, self-employment income, average earnings, and taxable payroll.The Federal Reserve Board’s monetary policy changed in the 1980s toward more vigilance in preventing high inflation. Consistent with the Board’s continued emphasis on containing inflation, as indicated by their current target for the GDP deflator,^{4}the Trustees lowered the assumed ultimate annual rate of increase in the CPI for the intermediate case from 4.0 percent for the 1996 report to 2.8 percent for the 2004 through 2013 reports, and to 2.7 percent for the 2014 and 2015 reports.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.4. Assumed Real-Wage Differential

Table V.B1.—Principal Economic Assumptions

The annual rate of growth in the size of the labor force decreased from an average of about 2.4 percent during the 1966-73 economic cycle and 2.7 percent during the 1973-79 cycle to 1.7 percent during the 1979-89 cycle, 1.3 percent during the 1989-2000 cycle, and 1.0 percent during the 2000-07 cycle. Further slowing of labor force growth will follow from a substantial slowing of growth in the working age population in the future — a consequence of the baby-boom generation approaching retirement and succeeding lower-birth-rate cohorts reaching working age. Under the intermediate assumptions, the labor force is projected to increase by an average of 1.0 percent per year from 2014 to 2024 and 0.5 percent per year over the remainder of the 75‑year projection period.For men age 16 and over, the projected age-adjusted labor force participation rate^{5}for 2089 is 73.5, 73.4, and 73.3 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 2089 are 61.6, 61.0, and 60.0 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These rates are higher than the actual age-adjusted 2013 levels published by the Bureau of Labor Statistics of 70.4 percent for men and 57.7 percent for women, primarily due to the assumed increase in life expectancy. In the first ten years, the assumed labor force participation rates also increase as the economic recovery draws more people into the labor force. Increasing disability prevalence rates offset these increases somewhat in the intermediate and high-cost assumptions, but a decrease in disability prevalence further contributes to increases in labor force participation in the low-cost assumptions.The unemployment rates presented in table V.B2 are in the most commonly cited form, the civilian rate. For years through 2024, the table presents total civilian rates without adjustment for the changing age-sex distribution of the population. For years after 2024, the table presents unemployment rates as 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 age-sex adjusted unemployment rate is about 0.1 percentage point lower than the unadjusted rate for 2025.The total civilian unemployment rate reflects the projected levels of unemployment for various age-sex groups of the population. Each group’s unemployment rate is projected in relation to changes in the economic cycle, as measured by the ratio of actual to potential GDP.^{6}For each alternative, the total civilian unemployment rate moves toward the ultimate assumed rate as the economy moves toward the long-range sustainable growth path.The value of real GDP equals the product of three components: (1) average weekly total employment,^{7}(2) productivity, and (3) average hours worked per week. Consequently, the growth rate in real GDP is approximately equal to the sum of the growth rates for total employment, productivity, and average hours worked. For the period from 1966 to 2007, which covers the last five complete economic cycles, the average growth rate in real GDP was 3.1 percent. This average growth rate approximately equals the sum of the average growth rates of 1.6, 1.7, and ‑0.3 percent for total employment, productivity, and average hours worked, respectively. As a result of the 2007-09 recession, the real GDP in 2013 was only 5.6 percent above the 2007 level. The estimated real GDP growth from 2013 to 2014 is 2.3 percent.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 generally compounded semiannually. 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

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

The Federal Open Market Committee (FOMC) targets a rate of 2 percent for the price index for Personal Consumption Expenditures, which is substantially the same as the GDP deflator. See

www.federalreserve.gov/newsevents/press/monetary/20150128a.htm.

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