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Publisher Council on Foreign Relations
Release Date February 20, 2013
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How does the current recovery, which, according to the National Bureau of Economic Research, officially started in June 2009, compare to those of the past? The following charts provide a series of answers, plotting current indicators (in red) against the average of all prior post–World War II recoveries (in blue). The x-axis shows the number of months since the end of the recession. The dotted lines are composites of prior recoveries representing the weakest and strongest experiences of the past. This recovery chart book replaces the cycle chart book, which plotted the downturn as well as the recovery. Those interested in the previous presentation can view it here.
The economic expansion following the 2008 recession has been the weakest of the post–World War II era and remains an outlier among postwar recoveries along several dimensions. House prices rose slightly from the second to the third quarter of 2012 but remain 8 percent lower than they were at the start of the recovery. Households continue to reduce debt. The federal budget deficit is much wider than during any other post–World War II economic recovery, but the Congressional Budget Office projects it will shrink to 5.3 percent of gross domestic product (GDP) if the sequester goes into effect at the beginning of March.
- The current recovery was initially stronger than the recovery from the 1980 recession, which was interrupted by another recession in 1981.
- However, at this point, the current expansion is the weakest in the post–World War II era.
- Forty-two months after the start of the economic recovery, GDP is only 7.5 percent higher than it was when the recovery officially began.
- The FHFA's all-transactions home price index, which is used in the accompanying graph, showed an increase in home prices between the second and third quarters of 2012.
- However, the index remains 8 percent below its June 2009 level.
- Soft home prices have been central to the weakness of the recovery.
- 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.
- 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-eight consecutive months, but there are still 3.2 million fewer Americans on nonfarm payrolls than there were at the start of 2008.
- 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.
- 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 2011, this trend has reversed itself and industrial capacity has steadily risen.
- Capacity has nearly returned to the level at which it began the recovery.
- 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, it continues to pose significant challenges to policymakers and the economy.
- If the sequester is enacted, the Congressional Budget Office expects the federal budget deficit to shrink from 7 percent of GDP in 2012 to 5.3 percent this year.
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