Search This Blog

Wednesday, March 13, 2019

Great Recession vs. Great Depression: The GDP Growth Rate Has Finally Speed Up!

Last month, the Bureau of Economic Analysis released an initial estimate of the GDP growth rate for the fourth quarter of 2018.  The good news? Real GDP increased 2.9% in 2018, the highest annual growth rate it has been since the start of the Great Recession.

 The bad news? Growth seems to have peaked in the second quarter of 2018. From a high of 4.2% in Q2, growth slipped down to 3.1% in Q3 and to 2.6% in Q4.

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 more than 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.