The Economic 'Recovery' In Historical Context

How does the current 'recovery', which according to the NBER officially began in June 2009, compare to those of the past? The Council on Foreign Relations updates its recovery chartbook and succinctly notes that "the current recovery remains an outlier among post-war recoveries along several dimensions." Consumers remain reluctant to take on new debt and the stock of debt is lower than it was when the recovery officially began. The global economic slowdown is beginning to manifest itself in world trade. After staging the strongest recovery of the post–World War II era, growth in world trade has begun to decelerate.


Real GDP

  • Real GDP is growing, but less rapidly than in any other postwar recovery.
  • Thirty-six months after the start of the economic recovery, GDP is only 6.7 percent higher than it was when the recovery officially began.
  • As of the second quarter of this year, real GDP is 1.7 percent above its pre-crisis peak, having first surpassed this peak in the fourth quarter of 2011.


Nominal Housing Prices

  • Although housing starts have recently recovered, nominal home prices have yet to follow.
  • Soft home prices have been central to the weakness of the recovery. Prices have continued to fall even after the recession officially ended.
  • The continued weakness of nominal home prices is a postwar anomaly.


Household Deleveraging

  • In every previous postwar recovery, the stock of household debt has risen as the recovery has begun.
  • In the current recovery, the collapse in home prices has severely damaged household balance sheets. As a result, consumers have avoided taking on new debt.
  • The result is weak consumer demand and a slow recovery.


Nonfarm Payrolls

  • The relative weakness of this recovery is obvious in the labor market.
  • Job losses continued throughout the first eight months of the recovery.
  • Payrolls have increased for the past twenty-two consecutive months, but there are still five million fewer Americans on nonfarm payrolls than there were at the start of 2008.


Industrial Production

  • Because of the depth of the recent recession, one might expect stronger-than-average improvement in industrial production.
  • Despite the predicted snapback, the increase in industrial production during this recovery has been fairly typical of postwar recoveries.


Industrial Capacity

  • Capacity in manufacturing, mining, and electric and gas utilities usually grows steadily from the start of a recovery; however, during the current recovery, investment was initially so slow that capacity declined.
  • Since the start of last year, this trend has reversed itself and industrial capacity has been steadily rising.


World Trade

  • The pace of growth in world trade has slowed in recent months as global economic growth has decelerated.
  • World trade volume initially recovered more quickly than in any other post–World War II recovery; however, this reflected the depth of the fall during the recession.


Federal Deficit

  • The federal deficit was much larger at the start of this recovery than it was in any other postwar recovery.
  • Although the deficit as a percent of GDP has shrunk slightly, its level creates significant challenges for policymakers and the economy.

Source: Council of Foreign Relations