August 5, 2010

The Social Security trustees painted a considerably more dismal picture of the near-term economic situation in the 2010 trustees report than in their 2009 report. At that point, they did not fully appreciate the severity of the economic downturn. The 2009 report projected that the unemployment rate would average 8.2 percent for 2009 and 8.8 percent for the current year. It projected that the unemployment rate would fall below 6.0 percent by 2014. The actual unemployment rate for 2009 was 9.3 percent. The new report projects that the unemployment rate in 2010 will average 10.0 percent and that unemployment will not fall below 6.0 percent until 2016.

The new report is also markedly more pessimistic in its near-term wage growth assumptions. The 2009 report assumed a real wage differential of 1.8 percent in 2009, 2010, and 2011. (The real wage differential is a calculation for average annual wages, so it has both an hours and wage component.) The new report revised downward the previously reported decline of 1.0 percent in 2008 to a sharper 2.1 percent fall in real wages. It shows real wages unchanged for 2009, but starting to catch up with a 3.1 percent rise in 2010, a 2.2 percent increase in 2011, and a 2.4 percent rise in 2012.


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