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Wednesday, October 3, 2018

Great Recession vs. Great Depression: The GDP Growth Rate Is Finally Speeding Up!

Two months ago, we lamented on how the economic recovery of the Great Recession had become officially much slower than that of the Great Depression. Last week, the Bureau of Economic Analysis released an advance estimate of the GDP growth rate for the second quarter of 2018.  The good news? It's finally at 4.2%, a rate not seen since the third quarter of 2014.

On a Nominal GDP Per Capita basis, the economic recovery of the Great Recession is still way ahead of the Great Depression. The dip in nominal GDP per capita was really shallow - less than 3 percentage points. The drop in GDP per capita during the Great Depression was a catastrophic 47%.

At this point in the economic recovery, some eleven years after the Great Recession started, we are almost 30% better than where we were. Whereas during the Great Depression, nominal GDP per capita remained almost 10% below the depression's inception.

In terms of real GDP per capita, people were made whole only on 2013 of the Great Recession. Five years later, we are only 9% better than where we were in 2013.  During the Great Depression, people were only made whole, in terms of Real GDP Per Capita, only on year 10 of the Great Depression. But the recovery accelerated even faster. Just one year later, people were 8% better. That trend will accelerate in year 12 - by then, they will be almost 18% better than they were just one year earlier. Now where will we be one year from now? We don't know. So far, we are faring better than people of  the Great Depression, but just barely.