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 economic situation and policies of the United States were reviewed by the Committee on 14 May 2012. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 4 June 2012.The Secretariat’s draft report was prepared for the Committee by David Carey, Wendy Dunn, Oliver Denk, Robert Hagemann, Christopher Hill and Brian Kahin, with statistical assistance from Valery Dugain and Jérôme Brezillon, under the supervision of Patrick Lenain.The previous Survey of the United States was issued in September 2010.

Economic policy should continue to sustain the recovery and address financial weaknesses and longer term fiscal sustainability. Monetary policy should continue to support the recovery. Legislative decisions are required to avoid the fiscal cliff in 2013 due to the scheduled expiration of tax cuts and automatic spending cuts, while further reducing the federal budget deficit at a gradual pace so as to put the federal debt-GDP ratio on a downward path and restore fiscal sustainability. The United States has been active in its efforts to reduce the risk of financial crises, thanks notably to the Dodd-Frank Act, which should be fully implemented. In addition, the Federal Reserve and other US agencies with financial responsibilities are engaged with regulators from other countries to find ways to address the vulnerabilities exposed by the crisis. Banking institutions should be encouraged to maintain high levels of equity capital, and efforts to develop improved analytical tools and information systems to monitor risks to the financial system should be continued.

Monetary policy should continue to support the recovery. Current legislation should be amended to avoid a sharp fiscal contraction in 2013, which would derail the recovery. Rather, fiscal consolidation should occur at a gradual pace, and should be implemented as part of a commitment to a medium-term framework to restore fiscal sustainability.

The economic recovery in the United States has gained momentum. Consumption spending has accelerated from its weak pace through most of 2011, and business investment has continued to record solid gains. Residential investment, meanwhile, has shown some signs of a sustained recovery. In the labour market, the pace of employment growth has risen early this year, and initial claims for unemployment insurance have dropped close to the levels observed prior to the recession (). Although still high, the unemployment rate has fallen nearly 2 percentage points from its peak in 2009.

Although job creation has improved, the effects of the recession on the labour market remain severe. Unemployment duration is still extremely high, and many have withdrawn from the labour market altogether. Because the weakness is largely cyclical in nature, policy makers should place a high priority on supporting aggregate demand in the short term. Even so, policies are needed to help individuals return to work, as there is a risk that high long-term unemployment and weak labour market participation could evolve into structural problems. Greater emphasis should be put on activation measures that help individuals search for jobs more effectively or find adequate training programmes. In the longer run, education and training are key to raising the skills and wages of the workforce. In this regard, educational reforms are needed to increase student achievement at all levels. High-quality vocational training can also be used to advance the skills of high-school graduates. College completion rates could be improved by reducing financial and other barriers to education, and enhancing the community college system would be a cost-effective way to provide more individuals with an affordable way to obtain tertiary education. Disability insurance reforms are needed to reduce dependency on these programmes and encourage participation in the workforce.

The US innovation system has many strengths, including world class research universities and firms that thrive in innovation-intensive sectors. However, fissures have begun to appear, notably in the areas of human capital development, the patent system and manufacturing activity, while public investments in R&D and research universities are at risk of being curtailed by budget cuts. Revitalizing the dynamism of innovation has become a priority for US policymakers. To this end, it is important that federal and state governments sustain financial support for knowledge creation. The US workforce’s skills will need to be upgraded, especially in STEM fields, and measures taken to provide more favourable framework conditions for developing advanced manufacturing in the United States. While the recent patent reform is a big step in the right direction, patent reform needs to be taken further by ensuring that the legal standards for granting injunctive relief and damages awards for patent infringement reflect realistic business practices and the relative contributions of patented components of complex technologies.