Economist: This Is The Weakest Post-Financial Crisis Recovery Since the 1880s
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This post originally appeared on the AEI Ideas Blog.
People are looking for answers to why the economy is growing so slowly. Is the answer that economic growth is normally weak following deep recessions and financial crises?
The bars show the growth rate in the first four quarters following all previous American recessions that are associated with financial crises, as identified by Bordo and Haubrich. The upper line shows the average growth rate in all those recoveries. The lower line shows the growth rate in the four quarters following the 2007-2009 recession. It is very clear that recessions with financial crises are normally followed by much more rapid recoveries than this current recovery. The current recovery not only started out weak, averaging 2.5% in the first year, it got weaker over time, declining to only 1.3% in the second quarter of this year.
Growth was nearly 4 times stronger on average in the past recoveries. The only recovery in this list in which growth was as weak as this one followed the 1990-91 recession, but that was from a very shallow recession with output declining only 1.1%, so growth did not need to get very high to catch up.
My own analysis looked at economic recoveries of all sorts and examined both GDP and employment. And by those measures, this may be the weakest recovery in U.S. history.
James Pethokoukis is the Money & Politics columnist-blogger for the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews. Pethokoukis has written for many publications including USNews & World Report, The New York Times, The Weekly Standard, Commentary, USA Today, and Investor's Business Daily.