Terrible Recovery

June 25, 2014

A month ago, we compared the recovery from the Great Recession to the recovery after every recession since 1950. It looked pretty bad.

Real GDP growth for 2014q1 was revised downward today to -3.0% on an annualized basis. Yes, our reading of Table 1.1.3 of NIPA shows -3.0%, not -2.9%.

Here is real GDP indexed to the quarter before each recession for all 10 recessions since 1950, taking into account this morning’s revision. Notice the significant bend downward in the last quarter for the 2007-2009 recession (solid red line). It makes the recent recovery look even  worse relative to previous recoveries.


Just a terrible recovery. Terrible.


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10 Responses to Terrible Recovery

  1. rakesh on June 25, 2014 at 3:50 pmi

    no surprise. Using the bludgeon of monetary policy,like water, lets money flow to the easiest path( financial assets)the rapier of fiscal policy is far more effective in getting to the desired end point.

    • ReturnFreeRisk on June 26, 2014 at 10:36 ami

      I have been beating the drum of more fiscal policy – projects (not new transfers) and debt writedowns. But there seem to be a LARGE number of economists that worshipt the Fed strategy is not only necessary but sufficient. And so that is what we get. If there is no appetite for fiscal action among the democrats, it is hard for me to fault the republicans.

  2. ReturnFreeRisk on June 26, 2014 at 7:39 ami

    Welcome to the Bernnake/Yellen recovery. They ignore the real problem – debt. And they keep pushing productivity destroying incentives in asset speculation, explicitly. Welcome.

  3. Manfred on June 26, 2014 at 9:11 ami

    If it is really so terrible as you claim (after so much fiscal and monetary stimuli thrown at economy), maybe, just maybe, you should rethink your old fashioned Keynesian stance, and switch to a more supply side way of thinking. A good start would be to take a look at Edward Prescott and Lee Ohanian’s article in the Wall Street Journal today (Thursday, June 26).

    • Gridlock on June 27, 2014 at 1:51 pmi

      The problem with your theory is that there has been relatively LITTLE fiscal stimulus of the old-fashioned Keynesian type. Aside from a rather smallish ARRA stimulus package way back in 2009-2010, the federal government aided by tea party types has been slashing expenditures at the absolutely WRONG time. And you cannot look only at transfer stabilizers like unemployment insurance. Look at FRED site for federal expenditures over the last decade and you will see the dropoff.

  4. Dave Cohen on June 26, 2014 at 12:39 pmi

    In so far as the quarters before the “Great” recession began were overblown GDP-wise by the Housing Bubble and the “wealth effect” over-consumption it created, it seems that using the term “recovery” is misleading.

    The term “recovery” is bound up in the usual Business Cycle jargon of the NBER, but the data you show (and lots of other data) indicate strongly that the traditional cyclic view is incorrect.

    Now that we’ve entered the 19th year of the Bubble Era — by my own reckoning, because the tech/stock bubble of the 1990s started in 1995 — perhaps we need a new vocabulary to describe what’s going on.

    It appears that the “recovery” sans bubbles is in fact merely a continuation of what began in 2000/2001 — slow, inconsistent growth due to lack of demand. And this demand shortfall is strongly related to household debt, loss of manufacturing (good paying) jobs, income/wealth inequality and other social factors, as you guys already know.

    A British economist Cameron Hepburn said “Economics today, all over the world, is taught as if the last 30 years didn’t happen.”

    Damn right.

    – Dave

  5. Şant on June 26, 2014 at 11:43 pmi

    Would be nice if to see how the stock market has performed during each instance.

  6. theyenguy on June 27, 2014 at 11:42 ami

    The Global ZIRP monetary policies of the world central banks have not provided economic recovery, as they were not designed for such, rather they birthed the investor, and investment gain, as the centerpiece of economic activity, as can be concluded by your analysis.

    Global ZIRP began in 2008 with Paulson’s Gift, and Ben Bernanke’s QE1, where the worst of investments, that is Distressed Investments, such as those traded by Fidelity Mutual Fund, FAGIX, were traded out for money good US Treasuries.

    The final phase of Global ZIRP, is known as peak finance, and has produced a stupendous moral hazard based peak wealth, which has come via the three economic dynamos of creditism, corporatism, and globalism, providing support for investing characterized by

    1) Purchase of High Yielding Debt, JNK, LWC, EU, EMB, HYD, EMLC, EMCD, BABS, HYXU, PZA

    2) Purchase of Pursuit of Yield Investments, DBU, XLU, DRW, FNIO, REM, REZ, KBWY, SEA, AMJ, DTN,

    3) Pursuit of Nation Investment in the Solid Seven Nations, SCIN, INP, EPHE, ENZL, EWA, EDEN, EWP, as well as Speculative Five Nations TUR, THD, ARGT, GAF, EWZ,.

    4) Purchase of Energy Production and Energy Service Investments XOP and IEZ.

    5) Purchase of Defensive Equities, IPW, OIH, KIE, PAGG, KXI, XLU, IHF, IYR

    6) Purchase of Global Growth and Trade Investments, TAN, SOXX, PJP, FONE, IBB, QTEC, COPX, XTN, FXR.

    7) Safehaven investing in Popular Notes And Bonds, SHY, EU, TLT, EDV, FLOT, LQD, LWC, PICB, BWX, MBB.

    Please consider that the June 5, 2014 Mario Draghi ECB Mandate for ZIRP and Targeted LTRO, together with the June 21, 2014, Mario Draghi ECB Press Announcement, address secular stagnation, defined as low growth, low employment, low inflation, and the threat of economic deflation; and serve as the EU Economic Manifest, that is the Charter Call and Club, for Eurozone regional governance, and have birthed the debt serf, and debt servitude, as the centerpiece of economic activity.

  7. Ann Arnold on June 27, 2014 at 12:20 pmi

    Useless comparison.

    The recessions since 1950 have either been

    (1) business cycle – suppliers got over-enthusiastic and over-produced for the level of demand and inventories piled up and things went south (economic version of a getting a cold)


    (2) outside economic shocks – the enormous leap in gasoline prices in the 1970s (economic version of a very virulent flu)


    (3) induced and deliberately created recession – the early 1980s when interest rates were jacked sky high to slow inflation (back in the days when workers actually got wage increases to keep up with inflation (economic version of putting the patient in a coma)

    2007 was a global financial crisis – only around the 5th or 6th in the past 200 years and the ONLY one since 1929 happened. A global financial crisis is more akin to the bubonic plague – a disaster of enormous proportions.

    Recovering from a regional financial crisis takes normally 8-10 years post-1950. And a global?? We have no idea since the last one was in 1929 and finally ended due to the enormous government spending on WWII.

    You can NOT compare any recession since 1940 to 2007. It is comparing totally different things!

  8. Up the down escalator on June 28, 2014 at 12:27 pmi

    I note that one can clearly compare the daylight between the recent trend and the 1990 recession; and even if you start after the extra slump in 07-09, the trends diverge more and more as time goes on. So we had a severe contraction plus a crap expansion.

    The supply side post above is nonsense – Keynesian economics dictated a much larger stimulus, and one that actually went to consumers as opposed to millionaires on Wall Street. Any 1st year economics student can go calculate what was necessary. The problem is that Keynesian models were NOT followed, and all the money went to the top – as someone pointed out debt relief to the average consumer would help but wasn’t done. We have been and still are demand constrained. And so the zombies shamble on.