WASHINGTON (AP) – Innovative and efficient workers are important contributors to the economy’s good health, now and in the future, President Bush said Monday as he projected another year of solid economic growth.

To build upon U.S. worker productivity and keep the economy flourishing, Bush made a fresh pitch in his annual economic report to Congress for sharpening the country’s competitive edge. He also renewed his call to lawmakers to make his tax cuts permanent.

“Our economy’s fundamental strength comes from the ingenuity and hard work of our workers,” Bush wrote in the introduction to the report, which examines economic conditions as well as challenges. These include rising health care costs, the massive strain on federal resources that will come from the looming retirement of millions of baby boomers and bloated trade and budget deficits.

Looking back at last year, Bush marveled at the economy’s sturdiness after being jolted by the devastating Gulf Coast hurricanes and high energy prices. “The United States economy continues to demonstrate remarkable resilience, flexibility and growth,” he said.

Bush gave credit for that to “the hard work of America’s workers” as well as his own policies that cut taxes and aim to keep them low. The economy grew by 3.1 percent last year, as measured by gross domestic product from the fourth quarter of 2004 to the fourth quarter of 2005.

The president’s report projects that the economy will grow by a respectable 3.4 percent this year as measured from the fourth quarter of last year to the fourth quarter of this year. In 2007, the economy should log another solid year, growing by 3.3 percent, he said.

The unemployment rate, which averaged 5.1 percent in 2005, should dip to 5 percent this year and hold steady at that rate next year, according to the White House’s forecast.

Inflation, as measured by the Consumer Price Index, also should moderate this year. Consumers prices, which rose by 3.4 percent in 2005 – the most in five years- are expected to go up by no more than 2.4 percent this year and next year, the report said.

“The economy is projected to settle into a steady state in which GDP grows at its potential rate, the unemployment rate remains flat at a low level, and inflation remains moderate and stable,” according to the report.

AP-ES-02-13-06 1332EST