So How’s That Recovery Doing, Anyway?
It’s time to take stock of how the US economy has recovered from the recession of 2001. Unfortunately, the scorecard is not good; the current recovery is the weakest recovery from a recession in recent history.
Why do I say that? Consider the following graphs. Each one shows the progress of a key economic variable in the quarters following a recession. In each graph, quarter 1 is the trough of the recession, counted as the last quarter of negative GDP growth.
The first graph illustrates that GDP, the broadest measure of economic health, has recovered only modestly since the end of the recession in late 2001. The recovery in GDP in 1992-94 was similarly slow, but all other recoveries were significantly stronger by this measure.
The second graph illustrates the state of the labor market. Clearly this recovery has been terrible for workers, even compared to the sluggish recovery of 1992-94.
The last graph shows industrial production. By that measure this recovery has lagged all previous recoveries, as well.
What’s going on? Why is this recovery so pathetic compared to previous recoveries? There are several possibilities for the poor performance of the US economy in 2002, 2003, and 2004. Perhaps businesses and individuals have been paralyzed by the fear of terrorism for the last 3 years. Perhaps the 18 month struggle in Iraq is influencing the economy somehow. But to be honest, I’m sceptical that either of these concerns make a significant difference in the daily decisions of individuals and businesses about whether, what, and how much to buy.
What’s a more likely candidate? Simple: poor economic management by the Bush administration.
Somehow all previous administration were able to do a better job shepherding the economy through economic difficulties. In a later post I’ll discuss exactly what some of the specific wrong turns were that the Bush administration took regarding economic policy. But the graphs above describe the performance of the Bush administration’s economic team. The recession wasn’t their fault. But the lackluster recovery is.