The legacy of the Great Recession — in charts
on February 22nd, 2012 at 8:00 am
The United States went through its longest, and by most measures worst economic recession since the Great Depression between December 2007 and June 2009. This chartbook will document the course of the economy following that recession against the background of how deep a hole the recession created – and how much deeper that hole would have been without the financial stabilization and fiscal stimulus policies enacted in late 2008 and early 2009.
Part I: Recovery Began in June 2009
The Economy Has Been Growing, Since Mid-2009
Economic activity as measured by real (inflation-adjusted) gross domestic product (GDP) was contracting sharply when policymakers enacted the financial stabilization bill (TARP) and the American Recovery and Reinvestment Act. The economy has been growing for ten straight quarters, but the pace of recovery has been modest.
Private Payroll Employment Has Been Growing Since Early 2010
The pace of monthly job losses slowed dramatically soon after President Obama and Congress enacted the Recovery Act in February 2009. The trend in job growth in 2010 was obscured by the rapid ramp-up and subsequent decline in government hiring for the 2010 Census (which is now over), but private employers added almost 3.7 million jobs to their payrolls in the last 23 months, an average of about 160,000 jobs a month. Private employers added 257,000 jobs to their payrolls in January, while continuing losses in local government employment, led to a total payroll employment gain of 243,000 jobs.
Part II: The Recession Put the Economy in a Deep Hole
GDP Fell Far Below What the Economy Was Capable of Producing
In the fourth quarter of 2011, the demand for goods and services (actual GDP) was about $895 billion (5.5 percent) less than what the economy was capable of supplying (potential GDP). This large output gap, which is manifested in a high rate of unemployment and substantial idle productive capacity among businesses, is the legacy of the Great Recession. Congressional Budget Office projections show the gap closing slowly over the next several years as actual GDP grows only moderately faster than potential GDP.
GDP grew at a 2.8 percent annual rate in the fourth quarter. A period of growth of 4 percent or better would be needed to propel the economy back toward full employment more rapidly.
(In its January 2012 Budget and Economic Outlook, the Congressional Budget Office introduced new estimates and projections of potential GDP that are lower than the agency’s previous estimates.)
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