Publisher Council on Foreign Relations
Release Date May 21, 2013
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 in the second half of 2012 but remain 7 percent lower than they were at the start of the recovery. Household debt also remains below its June 2009 level, although it rose in the fourth quarter of 2012. The federal budget deficit is larger than in any other post–World War II era recovery, but it is shrinking rapidly, from over 8 percent of gross domestic product (GDP) in March 2012 to less than 6 percent of GDP in March 2013.
- 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-five months after the start of the economic recovery, GDP is only 8 percent higher than it was when the recovery officially began.
- In the average post–World War II recovery, GDP is 16 percent higher at this point.
- The Federal Housing Finance Agency's all-transactions home price index, which is used in the accompanying graph, showed two consecutive increases in the third and fourth quarters of 2012.
- However, the index remains 7 percent below its June 2009 level.
- Soft home prices have been central to the weakness of the recovery.
- Household debt increased in the fourth quarter of 2012, but remains 3 percent below its June 2009 level.
- 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.
- Job losses continued throughout the first eight months of the recovery.
- Payrolls have increased for the past thirty-one consecutive months, adding 5.5 million jobs to the economy.
- However, there are still 2.6 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 is now 1.3 percent higher than it was at the start of the recovery.
- The federal deficit was much larger at the start of this recovery than it was in any other post–World War II era recovery.
- The deficit remains higher than in any other recovery in the post–World War II era, but it is declining rapidly.
- The deficit has declined from over 9 percent of GDP at the start of the recovery to less than 6 percent of GDP as of March.
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