captioning performed by vitac and business economists have asked whether possible quirks and seasonal adjustment factors caused by the sharp decline in the economy at the end of 2008 and beginning of 2009 have skewed our economic indicators.

the newsletters, articles and commentaries that all you provide often spark a research agenda us for us at the council of economic advisers. for these reasons i'm delighted to carry on the tradition of having the cea chairman participate in the meetings. this is my second speech at nabe. some of you may recall in the fall of 2009 when was assistant secretary of technology at the treasury department, i spoke at the nabe meeting in st. louis about the need for better data to help us monitor trends in the economy, to help us make better business decisions and to help us to guide economic policy. this was a theme in this year's economic report of the president as well. each chapter contained a box, we called it a data lodge box, on our statistical indicators, how

they have improved, where we need to improve them and steps that the government and the private sector can take to improve our economic indicators. in some respects, the situation has improved since 2009 when i last spoke at nabe and in others we've learned that it was worse than we thought. let me highlight an important example where the data were less accurate than we appreciated at the time. back when i spoke to nabe in october 2009, the latest estimate was that gdp had contracted at an annual rate of 5.4% in the fourth quarter of 2008. this was already revised down 1.6 percentage point from the initial estimate of minus 3.8% announced earlier in the year. but last summer we learned from the annual revisions that the economy was an

even faster annual rate of 8.9% in the fourth quarter of 2008. this was the largest downward revision the quarterly gdp growth in over 60 years. although we knew things were bad, data indicate just how close we were to falling off the edge of a cliff when the obama administration took office in january 2009. the economic crisis that struck in the months before president obama took office caused more americans to lose their jobs than at any time since the great depression. initial claims for unemployment insurance rose to over 600,000 a week and the job opening and tu indicated a plunge in hiring.

there were many causes that began in the end of 2007. i taught a course in the period while i was back at princeton called "the great recession, causes, consequences and remedies. in the first session i showed a slide that listed 20 factors that economists have identified as causes of the financial crisis. these included stagnation inmil in equality, which caused them to borrow to maintain consumption, regulatory gaps, an uneven regulation of the financial system that allowed risks to build up in the shadow banking system, easy credit and weak underwriting standards that led to an unsustainable bubble in housing and other markets, lack of transparency and the list went on and on.

while economists will debate for a long time which of the potential causes was more or less central to the crisis, there can be limb the u.s. economy did not perform well earlier in the 2000s. even before the recession struck at the end of 2007, the job market was signaling severe problems. for example, the period from the end of -- the period from the end of the 2001 recession t 200 recovery on record in which the employment to population rate fell. we lost 3.7 million manufacturing jobs in the year before the recession started. and the middle class has been struggling for decades. in 1970 half of all households had incomes within 50% of the

median household. by 2010 that share was down to 42%. now, these problems didn't happen overnight, but the recession made them much, much worse. it will take more than a few years to meet the challenges that have been building for more than a few decades. but we are making progress in meeting those challenges. i'd like to use the rest of my time to discuss progress in the recovery to date and while we still have a long way to go, there are reasons to be cautiously optimistic about the economy going forward. my theme is that the unique nature of the financial crisis and recession that followed have made the pace of the recovery uneven, but with the essential help of policy actions that the obama administration has taken, the economy is making a

transition to more sustainable footing. the job market in particular is healing from the deep wounds inflicted by the financial crisis. although there is a long way to go before the labor market full accumulating evidence should lend confidence to the view that the economy is on the mend. i say this in full recognition of the fact that there a long way to go to address the severe economic brewing for a long time and then boiled over in the great recession. there are still far too many americans out of work or underemployed. that's why the president has put forward a number of proposals to create jobs and speed the recovery. this includes support for state and local governments to retain teachers and first responders,

investment in infrastructure and help for more homeowners to refinance their mortgages. families across the country are still struggling to make ends meet while currently dealing with high gasoline prices. and the president will continue effort to expand clean energy sources and domestic energy production. the economists charles kindleberger and more recently carmen reinhart and ken rogueoff argue recessions associated with financial crisis are typically deeper than normal down turns and recovery takes longer. it's evidence of hough valuable

financial services are to the economy and the impact disrupting these services has on businesses and households. it's also a result of the painful adjustment that occurs when families work off the excess leverage of companies in financial crisis in the first place. it is against this backdrop that one should look at the progress that has been made in the current recovery. i like to use the analogy of a tug of war in describing the current recovery. on the one side we have the forces of the financial disruption and deleveraging that kindleberger, reinhart and rogueoff have described. on the other side we have the natural tendency for the u.s. economy to return to trend after a recession, even after the great depression. as in a bigger drop tends to lead to a bigger rebound because theretilized re back to work. a tug of war betw

whate and newton's third law of economics. in the past couple of years afteho crisis, most importantly sovereign debt problems and banking problems in europe have reduced risk appetite and slowed our recovery. the congress's raising the deb didn't help matters either. yet in spite of these head winds, we've had ten consecutive quarters of economic growth. on the whole, the pace of real gdp growth so far during this recovery has been as was the case at similar stages of the past two recoveries. if we look just at the private sector, the recovery has ban bit faster than was the case in the

recovery from the 2001 recession. the sectors which are lagging behind the most in this recovery are those that are most directly connected to the financial crisis and which are still impaired by the lingering effects of the financial crisis. most notably residential investment is recovering more slowly than it has in previous recoveries, and home prices have been soft in many parts of the country. this is a direct result of the overbuilding that took place during the boom s. but the housing market shows signs of stabilizing. thanks in part to government policies that have helped eillions of families to modify mortgage at historically low interest rates. most importantly because new

home construction has been wsos close to the point where we have worked off the excess home construction during the bubble years. demographic factors should lead housing demand to pick up in the near future in many regions of the country. indeed it is significant that w consecutive quarters of positive resideiaover five years. homes are now more affordable than they have been in years, and the interest rates could encourage potential buyers to get off the sidelines and enter the housing market while affordability i even moderate growth in residential construction and home sales will boost jobs and

gdp compared to the job losses we've seen in construction in recent years. consumption has also a slower pace of recovery compared to other recoveries. this is a need for many households to repair tlf balanc unsustainable rate in the previous decade. if we disaggregate consumption, durable goods is growing almost as strongly as the average recovery but growth in goods consumption has been notely retrained. consumption purposes includes leisure purposes like in travel, memberships in clubs, sportsnts more discretionary like car

repair, dry cleaning and laundry consumer spending on services account for almost half of gdp and even more, even a larger share of jobs in the u.s. economy. consumers have put off a large number of d the drag in housing values and in consumption spending has in turn severely constrained and cut state and local government revenues in many areas. state and local governments are dependent on sales taxes and property taxes. the hit to revenues has in turn caused state and local governments to cut back on spending and this is the final component of gdp that is lagging behind compared to past recoveries. despite these head winds, the

recovery in the private economy is stronger than it was in the last recession and almost as strong as it was in the early 1990s. over the ten quarters following the end of the recession, the private components of gdp have grown at an average annualized rate of 3.4%. in the recovery from the 2001 recession, the growth rate was a half a point lower at 2.9% over the first ten quarters. government spending in gross investment on the other hand have declined over the past year, whereas in previous recoveries they were still growing or declining at a much slower pace at this point. business investment and exports have been supporting growth. the corporate sector came from the recession in relatively

healthy shape, as evidenced by robust profits and strong corporate balance sheets. let me next turn to employment. when we look at employment, we see similar patterns across sectors as we see for economic growth. and on the whole, we are covering about in line or stronger than the past two recoveries and again the areas of weakness are those related to the financial crisis. private sector job growth began eight months after the end of the most recent recession and that's earlier than it began after the previous two recessions. private sector jobs have now grown for 24 consecutive monts.s

in the corresponding 24 months in the early 1990s recovery, 3.2 million private sector jobs were added and in the corresponding period of the recovery from the 2001 recession, only 1.2 million jobs were added. yeg -- job gross has increased by 1.3 million jobs. that's the most in any six-month period in nearly six years. the job growth has been broad based rather than just focused in a small number of industries recently. and this job growth has included manufacturing, which has added more jobs than in the past two recoveries. indeed after losing 3.4 million jobs in the most recent recovery

and another 2 million during the recession in the current recovery the manufacturing sector has added 429,000 jobs. the sectors of the economy that have been slower to recover have seen slower job growth. parallel to the situation in state and local governments we've seen state and local government employment as a particular area of weakness. since the recovery officially began in 2009, we have lost nearly 600,000 state and local government jobs. that's a large number of these teacher jobs. nonetheless, job losses in state and local governments have begun to moderate in recent months. as jay mentioned, i served as

chief economist at the u.s. labor department in the mid 1990s. i remember scrutinizing the jobs report every month. it is noteworthy that private sector job growth is tracking rather closely to the path that it was on in the early 1990s recovery. indeed one could argue that the job market is on a path similar to that in the mid 1990s when slow and steady job gains eventually led to a healthy job market. the main difference now is that the problems from earlier in the 2000s have given the job market a much deeper hole to dig out of. but we are headed in the right direction despite the many challenges that the economy faces. some have questioned whether the job growth in this recovery is sustainable. just six months ago when i started on my current job predictions of a double-dip recession were common.

those odds have greatly diminished. in the 2012 economic report of the president, the council of economic advisers predicted that 2 million jobs would be added to the economy in 2012. if this forecast proves to be correct, we would have the strongest job growth in six years. although my crystal ball is no clearer than anyone else's, i think some economists have been too quick to dismiss recent job growth as a statistical fluke. just a you few months ago, many commentators were arguing the strong job growth reported in 2011, was an aberration due to a jump in partial delivery jobs caused by the proliferation of

internet shopping during the holiday season. these fear faded when january and february showed stronger jobs growth and revisions to december's data erased the surge in the courier and messenger industry. the evidence suggests that the recent job gains have been more robust than would be suggested if they were merely a result of favorable weather. for example, if we look at reasons of the u.s. with more temperate climates, the job in

the uninsurance claims and rate of job growth were about as strong or stronger than they were in the nation as a whole. for example, the western and gulf coast states have had the strongest rate of job growth from the third quarter of 2011 to january 2012, the most recent month with state data. have arg inaccurate seasonal adjonenble for the drop in unemployment and acceleration in job growth. though it is always difficult to disentangle seasonal from cyclical factors, i'm skeptical thatsonafactors are skewing our key statistics in a major way. the bureau of labor statistics does a more sophisticated job seasonally adjusting employment data at the industry level and

scanning for outliers than most people realize. if we do something really simple like use the implied monthly seasonal factors for say the unemployment rate from 2007, from before the deep plunge in the economy, if we use those seasonal factors to adjust the unemployment rate over the last six months, the unemployment rate is found to drop b slightly more than what is shown in the official data, which suggests that a change in seasonal factors are not responsible for the drop in the unploumt rate in recent months. putting aside seasonal and weather fact ooshs the evidence suggests the, tension of the payroll cut and other steps taken to support the economy are helping the job market to gradually heal.

the recession and nesses were caught in the credit crunch, employment, provide a fuller picture of how the u.s. doing and the b.e.d. data also provide

improvement. the national account should be more accurate as the data accumulate to allow enough time for seasonal adjustment and further validation. equally importantly the private sector is moving rapidly to expand the types of economic data available. everyone probably already knows that google trends provide as great tool for economic analysis. as we highlight in the economic source of the president, sources look linked in have the potential to provide realtime information on the types of jobs that are in high and loaf demand. when linked in information on the fastest growing occupations, i have admit to nther were such titles as social media

kna that's quite telling because a lot of job growth takes place in industries and occupations that are new, that are statistical measures are lagging behind measuring. but there's much more that can be done. consider the unemployment insurance data. initial claims provide the most informative and timely high frequency data we have, but the u.i. data have provided essentially decades. shouldn't it be possible to extract more information about job losses by industry, occupation, education or demographic group from the u.i. claims? we know u.i. claims are down to their lowest level in four years. wouldn't it be nice to know

which sectors have seen more of a decline than others or whether the job declinement rate is better for older or young are workers and how it's changed. i want to reiterate the u.s. economy is on the end after suffering deep wounds. the obama administration is continuing to address problems that were a long time in the making and we are committed to continuing to do so. after ten consecutive quarters of gdp growth and increasing job growth, the recovery appears to be durable. and this durability has persisted in spite of adverse shocks of varying magnituding from the h1n1 epidemic, natural

disasters in asia, and then contentious congressional debt limit debate a year ago and most recently higher gas prices caused by geopolitical concerns. i have to say after reading that last it's about time that we had some good weather to prove that not all shocks are negative. sustaining the recovery in the short run is critical for having the wherewithal to further address our long-run problems of a declining middle class and an unsustainable federal budget. the extension of the 2 percentage point payroll tax cut

and extension of uninsurance benefits, which president obama called for jobs act should support demand for the economy in the current year and provide a buffer against the rise in gasoline prices. as the president has said, he wants us all to create an economy that is built to last the president has made clear his goal to rebuild a stronger foundation for the u.s. economy based on a revival of american manufacturing and the development of a wide a sources. in his state of the union address, the president outlined the clear agenda to achieve these goals, including a lower corporate tax rateat manufactur more competitive, investment in