Table of Contents

  • This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The draft report was discussed at a meeting of the Economic and Development Review Committee on 2 & 3 June 2020, with participation of representatives of the United States authorities. The Secretariat’s draft report was prepared for the Committee by Douglas Sutherland and Mikkel Hermansen under the supervision of Patrick Lenain. Damien Azzopardi provided statistical assistance and Stephanie Henry provided editorial support. The Survey benefitted from contributions by Sebastian Benz, Fozan Fareed , Fernando Galindo-Rueda and Alexander Jaax. Support from the government of United States is gratefully acknowledged. The previous Economic Survey of the USA was issued in June 2018.

  • The coronavirus pandemic has hit the economy hard. Lockdown orders forced many businesses to shut down and activity dropped sharply (Figure 1). Large numbers of people became unemployed or dropped out of the labour market, unwinding a large part of the 10-year progress made to restore full employment. The downturn hit at a time when the economy was performing well, with wages gaining momentum, businesses generating large earnings, and banks posting healthy capital buffers.

  • The longest expansion on record came to a juddering halt with the worldwide spread of the coronavirus. The containment measures introduced have contributed to the economy suffering one of the largest shocks outside wartime and leading to extremely high unemployment. A rapid and substantial policy response has aimed to shield households and businesses from the worst of this shock. As the economy re-emerges from the shutdown pressures on public finances will be intensified, but policy support should remain available while the economy is operating well below capacity. Sanitary measures remaining in place until the coronavirus is eliminated will weaken an already sluggish productivity growth and population ageing will continue constraining the available labour supply. The government should therefore continue to focus on structural reforms liberalising productive forces, especially by removing regulatory barriers that stand in the way of boosting productivity. Helping Americans go back into employment and acquire the skills needed to take advantage of new job opportunities will also support the return of the high levels of prosperity American’s have enjoyed in the past.

  • The U.S. population is becoming increasingly urban and has gradually shifted to the south and west. Policy restrictions have played a role in preventing dynamic areas expanding, and when they do expand it can be through low-density housing sprawl. Land use restrictions and a sluggish housing supply as well as difficulties in making timely and co-ordinated supply of infrastructure have hindered workers benefiting from new opportunities including through moving. Policies can address these issues by targeting housing affordability, help families move and invest in infrastructure to improve accessibility and connectivity.

  • Occupational licensing and non-competition agreements are two important types of labour market regulation in the United States, both covering around one fifth of all workers. While some regulation is needed to protect safety and ensure quality of services, it also creates entry barriers and reduces competition with important costs for job mobility, earnings and productivity growth. Employment opportunities for low-skilled workers and disadvantaged groups tend to be particularly affected by these barriers. The States are mainly responsible for labour market regulation and the variation across States is similar to the variation in the European Union. Harmonising requirements and scaling back occupational licensing as well as restricting the use of non-competition covenants could help to circumvent the secular decline in dynamism. However, attempts to reform often face stiff opposition from associations of professionals. The federal government has limited influence, but can in some cases help by shifting the burden from workers to meet regulatory requirements onto States and employers to show that high and differing regulatory standards are needed.