2018 OASDI Trustees Report

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B. ECONOMIC ASSUMPTIONS AND METHODS
The three alternative sets of economic assumptions provide a reasonable range for estimating the financial status of the trust funds. The intermediate assumptions reflect the Trustees’ consensus expectation of sustained moderate economic growth and their best estimate for other economic parameters. The low-cost assumptions represent a more optimistic outlook: a faster recovery, stronger long-term economic growth, and relatively optimistic levels for other parameters. The high-cost assumptions represent a more pessimistic scenario: weaker economic growth in the near term, interrupted by a recession, slower long-term economic growth, and relatively pessimistic levels for other parameters.
Actual economic data were available through the third quarter of 2017 at the time the assumptions for this report were set. The data indicated that economic activity peaked in the fourth quarter of 20071 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 fully return to its sustainable trend level of output in 2025 under the intermediate assumptions, three years later than in last year’s report, although it is projected to be within 1 percent of the sustainable trend level by 2019. Under the low-cost assumptions, the economy is projected to return to its sustainable trend level of output by 2022, a year later than in last year’s report. Under the high-cost assumptions, the estimated sustainable trend is lower, and the economy has already returned to the sustainable trend. However, due to the assumed recession, GDP is projected to drop to 2.5 percent below the trend level in the second half of 2019, and the subsequent recovery is assumed to return GDP to the sustainable trend in 2027. Complete economic cycles have little effect on the long-range estimates of financial status, so the assumptions do not include cycles beyond the short-range period (2018 through 2027).
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 five complete economic cycles (1966-73, 1973-79, 1979-89, 1989-2000, and 2000-07, measured peak to peak), the annual increases in total-economy productivity averaged 2.28, 1.08, 1.41, 1.79 and 2.12 percent, respectively. For the 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 2017 report.
The average annual rate of change in total-economy productivity from 2007 (the end of the last complete economic cycle) to 2017 is estimated to be 1.00 percent. For the intermediate assumptions, the annual change in productivity is 1.72 percent for 2018, 1.71 percent for 2019, and rises to 1.73 percent for 2021, before declining to its ultimate value of 1.68 percent by 2025. For the low-cost assumptions, the annual change in productivity is 2.27 percent for 2018, then increases to 2.50 percent for 2019, and gradually approaches its ultimate value of 1.98 percent for 2024 and thereafter. For the high-cost assumptions, the annual change in productivity is 1.29 percent for 2018, 0.19 percent for 2019 due to the assumed recession, rebounds to 1.65 percent for 2020, declines to 1.26 percent for 2021, and then averages 1.44 for 2022 through 2027, before reaching its ultimate value of 1.38 percent after 2027.
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.
The annual increases in the CPI averaged 4.61, 8.54, 5.31, 2.96, and 2.65 percent over the economic cycles 1966-73, 1973-79, 1979-89, 1989‑2000, and 2000-07, respectively. The annual increases in the GDP deflator averaged 4.60, 7.52, 4.68, 2.20, and 2.50 percent for the respective economic cycles. For the period from 1966 to 2007, covering the last five complete economic cycles, the annual increases in the CPI and GDP deflator averaged 4.56 and 4.03 percent, respectively. The estimated average annual change from 2007 (the end of the last complete economic cycle) to 2017 is 1.66 percent for the CPI and 1.54 percent for the GDP deflator.
The assumed ultimate annual increases in the CPI are 3.2, 2.6, and 2.0 percent for the low-cost, intermediate, and high-cost assumptions, respectively.4 These assumptions are unchanged from the 2017 report. For a given rate of growth in average real earnings, a higher price inflation rate results in faster nominal earnings and revenue growth immediately, while the resulting added growth in benefit levels occurs with a delay, causing an overall improvement in the actuarial balance. Similarly, a lower price inflation rate causes an overall decline in the actuarial balance.
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 Personal Consumption Expenditures (PCE) price index,5 the Trustees lowered the assumed ultimate annual rate of increase in the CPI for the intermediate assumptions from 4.0 percent for the 1996 report to 2.8 percent for the 2004 through 2013 reports, to 2.7 percent for the 2014 and 2015 reports, and to 2.6 percent for the 2016 through 2018 reports.
For the intermediate assumptions, the annual change in the CPI is 2.23 percent for 2018, 2.50 percent for 2019, and reaches the ultimate growth rate of 2.60 percent for 2020 and later. For the low-cost assumptions, the annual change in the CPI is 2.72 percent for 2018, increases to 3.26 percent for 2019, declines to 3.22 percent in 2020, and reaches its ultimate annual growth rate of 3.20 percent for 2021 and later. For the high-cost assumptions, the annual rate of change in the CPI is 1.64 percent for 2018, decreases to 1.49 percent for 2019, rises to 1.92 percent in 2020, and reaches its ultimate annual change of 2.00 percent for 2021 and later.
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 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 1966 through 2007, covering the last five complete economic cycles, the average annual price differential was 0.54 percentage point. From 2007 (the end of the last complete economic cycle) to 2017, the average annual price differential is estimated to be 0.13 percentage point.
The assumed ultimate price differentials are 0.3, 0.4, and 0.5 percentage point for the low-cost, intermediate, and high-cost alternatives, respectively. Varying the ultimate projected price differential across alternatives recognizes the historical variation in this measure. Accordingly, the assumed ultimate annual increases in the GDP deflator are 2.9 (3.2 less 0.3), 2.2 (2.6 less 0.4), and 1.5 (2.0 less 0.5) percent for the low-cost, intermediate, and high-cost alternatives, respectively. The ultimate price differentials for the three alternatives are unchanged from the 2017 report.
The price differential was -0.24 percentage point for 2013, -0.29 for 2014, ‑1.49 for 2015, -0.30 in 2016, is estimated to be 0.32 in 2017, and is assumed to be 0.26 for 2018. The negative price differential for 2013 through 2016 primarily reflects a general decline in oil prices. Changes in oil prices affect the CPI much more than the GDP deflator because oil represents a much larger share of U.S. consumption than of U.S. production. For 2018 and later, oil prices are assumed to grow at a relatively stable rate. For the intermediate assumptions, the price differential is 0.44 percentage point for 2019 and 0.40 percentage point for 2020 and later.
3. Average Earnings Assumptions
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.
Projected growth rates in average covered earnings are derived from projections of the most inclusive measure, 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 total 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, the ratio of earnings to total compensation (which includes fringe benefits), the ratio of total compensation to GDP, and the GDP deflator.
The average annual change in average hours worked was -0.28 percent over the last five complete economic cycles covering the period from 1966 to 2007. The annual change in average hours worked averaged -0.72, -0.54, ‑0.03, 0.14, and ‑0.60 percent over the economic cycles 1966-73, 1973-79, 1979-89, 1989‑2000, and 2000‑07, respectively. From 2007 (the end of the last complete economic cycle) to 2017, the average annual change in average hours worked is estimated to be -0.07 percent.
The assumed ultimate annual rates of change for average hours worked are 0.05, ‑0.05, and -0.15 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These values are unchanged from the 2017 report.
The average annual change in the ratio of earnings to total compensation was ‑0.20 percent from 1966 to 2007. Most of this decrease was due to the relative increase in the cost of employer-sponsored group health insurance for wage workers. Assuming that the level of total employee compensation is not affected by the amount of employer-sponsored group health insurance, any increase or decrease in the cost of employer-sponsored group health insurance leads to a commensurate decrease or increase in other components of employee compensation, including wages. Projections of future ratios of earnings to total compensation follow this principle. The Trustees assume that the total amount of future employer-sponsored group health insurance premiums will increase more slowly than in the past due to provisions of the Affordable Care Act of 2010, as described in the 2010 report. Data from the Bureau of Economic Analysis (BEA) indicate that the other significant component of non-wage employee compensation is employer contributions to retirement plans. This component is assumed to grow faster than employee compensation in the future as life expectancy and potential time in retirement increase.
The average annual rates of change in the ratio of wages to employee compensation from 2027 to 2092 are about 0.02, ‑0.08, and ‑0.18 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These assumed rates are the same as those assumed for the 2017 report. Under the intermediate assumptions, the ratio of wages to employee compensation declines from 0.810 for 2017 to 0.767 for 2092. The assumed ultimate annual rate of this decline is 0.08 percent, the same as assumed for last year’s report, compared with 0.07 percent for the 2016 report, 0.09 percent for the 2015 report, 0.13 percent for the 2014 report, and 0.20 percent for the 2009 report, prior to enactment of the Affordable Care Act of 2010. The ratio of earnings to compensation includes self-employment income both in the numerator and in the denominator. As a result, the rate of decline in earnings to compensation (which, under the intermediate assumptions, averages 0.06 percent from 2027 to 2092) is less than the rate of decline in wages to employee compensation.
The ratio of total 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 five economic cycles from 1966 to 2007, this ratio has averaged 0.627. The ratio declined from 0.648 for 2001 to 0.601 in 2010, increased to 0.610 in 2012, and is 0.608 in 2016. This ratio is assumed to rise as the economy recovers, reaching a level of 0.631 for 2027. For years after 2027, relative sizes of different sectors of the economy are assumed to remain about constant,6 and therefore the ratio of total compensation to GDP remains at about the 2027 level for each set of assumptions.
The projected average annual growth rate in average nominal U.S. earnings from 2027 to 2092 is about 3.80 percent for the intermediate assumptions. This growth rate reflects the average annual growth rate of approximately ‑0.06 percent for the ratio of earnings to total compensation, and also reflects the assumed ultimate annual growth rates of 1.68 percent for productivity, ‑0.05 percent for average hours worked, and 2.20 percent for the GDP deflator. Similarly, the projected average annual growth rates in average nominal U.S. earnings are 5.01 percent for the low-cost assumptions and 2.59 percent for the high-cost assumptions.
Over long periods, the average annual growth rate in the average wage in OASDI covered employment (henceforth the “average covered wage”) is expected to be very close to the average annual growth rate in average U.S. earnings. The projected average annual growth rates in the average covered wage from 2027 to 2092 are 5.02, 3.80, and 2.58 percent for the low-cost, intermediate, and high-cost assumptions, respectively. The estimated annual rate of change in the average covered wage is 2.88 percent for 2017. For the intermediate assumptions, as the economy continues to recover, the annual rate of change in the average covered wage averages 4.27 percent from 2017 to 2027. Thereafter, the average annual rate of change in the average covered wage is 3.80 percent.
4. Assumed Real-Wage Differential
The real increase in the average covered wage has traditionally been expressed in the form of a real-wage differential — the annual percentage change in the average covered wage minus the annual percentage change in the CPI. For the period from 1966 to 2007, covering the last five complete economic cycles, the real-wage differential averaged 0.88 percentage point, the result of averages of 1.43, 0.04, 0.48, 1.55, and 0.58 percentage points over the economic cycles 1966-73, 1973-79, 1979-89, 1989-2000, and 2000‑07, respectively.
For the years 2028‑92, the projected average annual real-wage differentials for OASDI covered employment are 1.82, 1.20, and 0.58 percentage points for the low-cost, intermediate, and high-cost assumptions, respectively. The rounded average annual real-wage differentials are unchanged from the 2017 report.
The estimated real-wage differential averaged 0.54 percentage point for 2008 through 2017 (the years since the peak of the last complete economic cycle). The real-wage differential decreased from 3.88 percentage points in 2015 to 0.00 percentage points in 2016, a decline that reflects higher inflation and slower growth in GDP and productivity. For the intermediate assumptions, the wage differential is projected to rise from 0.75 in 2017 to 1.95 in 2020 before gradually declining to its long-run average of 1.20 percentage points for 2028 through 2092. For the low-cost assumptions, the real-wage differential is 2.14 percentage points for 2018, increases to 3.08 percentage points in 2020, and gradually declines to its long-run average of 1.82 percentage points for 2028 through 2092. For the high-cost assumptions, the real-wage differential is 1.36 percentage points for 2018, drops to -1.14 percentage points in 2019 due to the assumed recession, and rises to 1.51 percentage points in 2022 before gradually declining to its long-run average of 0.58 percentage point for 2028 through 2092.
 
Annual percentage changea in—
Real-
wage
differ-
ential b
2017 e
d
d
d
d

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
For rows with a single year listed, the value is the annual percentage change in the average annual wage in covered employment less the annual percentage change in the Consumer Price Index. For rows with a range of years listed, the value is the average of annual values of the real wage differential, beginning with the year following the first year of the range. Values are rounded after all computations.

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

d
Greater than -0.005 and less than 0.005.

e
Historical data are not available for the full year. Estimated values vary slightly by alternative and are shown for the intermediate assumptions.

5. Labor Force and Unemployment Projections
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, the average level of Social Security retirement benefits, the state of the economy, and the change in life expectancy. The projections also include a “cohort effect,” which reflects an upward trend in female participation rates across cohorts born through 1948.
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 is expected to follow from a substantial slowing of growth in the working age population in the future — 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 0.9 percent per year from 2017 to 2027 and 0.5 percent per year over the remainder of the 75‑year projection period.
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 50 and over declined for males but were fairly stable for females. 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 older roughly stabilized for males and increased for females. Since the mid‑1990s, however, participation rates for both sexes at ages 50 and over have generally risen.
Many economic and demographic factors, including longevity, health, 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 2.8 percent for 2092.
For men age 16 and over, the projected age-adjusted labor force participation rates7 for 2092 are 73.1, 73.2, and 73.1 percent for the low-cost, intermediate, and high-cost assumptions, respectively. The low-cost assumptions result in a larger working-age population and a larger labor force when compared to the intermediate assumptions, but a slightly lower labor force participation rate for men. This occurs because the low-cost assumptions include shorter life expectancies and relatively higher numbers of never-married individuals in the population. Shorter life expectancies tend to reduce work at older ages, while labor force participation rates tend to be lower for never-married men and higher for never-married women compared to their married counterparts.8 For women age 16 and over, the projected age-adjusted labor force participation rates for 2092 are 62.0, 61.4, and 60.5 percent for the low-cost, intermediate, and high-cost assumptions, respectively.
The age-adjusted rates for 2092 are higher under all three alternatives than the age-adjusted rates for 2016 of 70.5 percent for men and 58.0 percent for women (based on actual age-specific rates published by the Bureau of Labor Statistics), primarily due to the Trustees’ projected increases in life expectancy. In the first ten years of the projection period, the assumed labor force participation rates 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 total civilian unemployment rates are presented in table  V.B2. For years through 2027, the table presents total civilian rates without adjustment for the changing age-sex distribution of the population. For years after 2027, 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 is projected in relation to changes in the economic cycle, as measured by the ratio of actual to potential GDP.9 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 assumed ultimate age-sex-adjusted unemployment rates are 4.5, 5.5, and 6.5 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These values are unchanged from the 2017 report. Improvements in labor market conditions will eventually draw more nonparticipants back into the labor force and unemployment rate will increase from an estimated 4.4 percent for 2017 to the assumed 5.5 percent for 2021 under the intermediate assumptions. Under the low-cost assumptions, the ultimate unemployment rate is reached in 2020.10 Under the high-cost assumptions, the ultimate unemployment rate is reached in 2026.
6. Gross Domestic Product Projections
The value of real GDP equals the product of three components: (1) average weekly total employment,11 (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 percent for total employment, 1.7 percent for productivity, and ‑0.3 percent for average hours worked. The real GDP for 2016 was 12.4 percent above the 2007 level. The estimated real GDP growth from 2016 to 2017 is 2.2 percent.
For the intermediate assumptions, the average annual growth in real GDP is 2.4 percent from 2017 to 2027, the approximate sum of component growth rates of 0.7 percent for total employment, 1.7 percent for productivity, and ‑0.02 percent for average hours worked. The projected average annual growth in real GDP of 2.4 percent for this period is approximately 0.2 percentage point higher than the underlying sustainable trend rate. This growth of 0.2 percentage point above trend reflects a relatively rapid increase in employment and total economy productivity, and a relatively slow decline in average hours worked, as the economy recovers. After 2027, the assumptions do not explicitly reflect economic cycles. The projected annual growth rate in real GDP combines the projected growth rates for total employment, total U.S. economy productivity, and average hours worked. After 2027, the annual growth in real GDP averages 2.1 percent, based on the projected average annual growth rate of 0.5 percent for total employment and the assumed ultimate growth rates of 1.7 percent for productivity and ‑0.05 percent for average hours worked. The projected growth rate of real GDP is slower 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 3.2 percent over the decade ending in 2027. The relatively fast growth is due mostly to high assumed rates of growth for employment and worker productivity. For the high-cost assumptions, the annual growth in real GDP averages 1.6 percent for the decade ending in 2027.
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 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.
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 five complete economic cycles. For the period from 1966 to 2007, the real interest rate averaged 2.8 percent per year. The real interest rates averaged 1.3, -1.0, 5.2, 4.0, and 2.2 percent per year over the economic cycles 1966-73, 1973-79, 1979-89, 1989-2000, and 2000-07, respectively. The assumed ultimate real interest rates are 3.2 percent, 2.7 percent, and 2.2 percent for the low-cost, intermediate, and high-cost assumptions, respectively. These rates are the same as in the 2017 report.
The actual average annual nominal interest rate was approximately 1.8 percent for 2016, which means that securities newly issued in 2016 would yield 1.8 percent if held one year. Estimated average prices rose from 2016 to 2017 by approximately 2.1 percent. The annual real interest rate for 2017 is -0.3 percent, the approximate difference between the nominal interest rate and the rate of price increase. For the 10-year short-range projection period, projected nominal interest rates depend on changes in the economic cycle and in the CPI. When combined with the ultimate CPI assumptions of 3.2, 2.6, and 2.0 percent, the assumed ultimate real interest rates produce ultimate nominal interest rates of 6.4 percent for the low-cost assumptions, 5.3 percent for the intermediate assumptions, and 4.2 percent for the high-cost assumptions. These nominal rates for newly issued trust fund securities reach their ultimate levels by 2027, the end of the short-range period.
Average annual
unemployment rate a
Annual percentage changeb in—
Labor
force c
Total
employment d
Real
GDP e
Nominal f
Real g
i
2017 j
h

a
The Office of the Chief Actuary adjusts the civilian unemployment rates for 2028 and later to the age-sex distribution of the civilian labor force in 2011. For years through 2027, 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 2009 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
Historical data are not available for the full year. Estimated values vary slightly by alternative and are shown for the intermediate assumptions.


1
See www.nber.org/cycles/cyclesmain.html.

2
Historical levels of real GDP are from the Bureau of Economic Analysis’ National Income and Product Accounts. Historical total hours worked are provided by the Bureau of Labor Statistics and cover all U.S. Armed Forces and civilian employment.

3
These assumptions are consistent with ultimate annual increases in private non-farm business productivity of 2.42, 2.06, and 1.69 percent. Compared to total-economy productivity, private non-farm business productivity is a more widely known concept that excludes the farm, government, non-profit institution, and private household sectors.

4
The Bureau of Labor Statistics (BLS) produces a series called the Consumer Price Index Research Series Using Current Methods (CPI-U-RS) that approximates the measured rate of inflation over the 1978-2017 period had the method currently used been in effect since 1978. 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
The Trustees’ assumed ultimate annual growth rate for the GDP deflator of 2.2 percent is based on an assumed 2.3 percent annual growth rate for the PCE price index. The Trustees’ assumption takes into account the Federal Open Market Committee (FOMC) target, as well as the potential for inflationary shocks during the 2027-2092 projection period.

6
However, employment in the uniformed military sector has declined in size over the last 40 years, and is assumed to remain at its 2017 level throughout the 75-year projection period.

7
The Office of the Chief Actuary adjusts the labor force participation rates to the 2011 age distribution of the civilian noninstitutional U.S. population.

8
The high-cost labor force participation rate is also lower than the intermediate because life expectancy has a non-linear effect on labor force participation rates in the Office of the Chief Actuary’s model.

9
Potential GDP is the level of GDP assuming the economy is operating at the underlying sustainable trend rate of growth.

10
The assumed ultimate unemployment rate is an age-sex-adjusted rate.

11
Total employment is the sum of the U.S. Armed Forces and total civilian employment, which depends on the total civilian labor force and unemployment rate.


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