7/29/2019 CBO Infographic - What Accounts for the Slow Growth of the Economy After the Recession?

1/1

9%Difference in

growth after

3 years

real gdp(Before and after recessions since WWII)

12 10 8 6 4 2 Trough 2 4 6 8 10 12

Average Cycle

Current Cycle

Quarters Before Trough Quarters After Trough

-10

-5

0

5

10

15

20

What explains the difference in growth of real GDP between the current cycle and the average cycle?

Percentage difference relative to the trough

The average cycle, or the pattern of economic growth before and after the end (or trough) of a recession, is the average for cycles since 1945 (except those followedby another recession within 3 years). The current cycle is from the 2nd quarter of 2006 to the 2nd quarter of 2012, with the trough in the 2nd quarter of 2009.

2/3is from slower growth in the productive

capacity of the economy (potential GDP) 1/3is from slower growth of output (real GDP)

relative to the productive capacity of the economy

2 10 8 6 4 2

Quarters Before Trough Quarters After Trough

Trough

2/3of the

9 percentage-point differencebetween theaverage cycleand the currentcycle

Average Cycle

Current Cycle

potential gdp

Why has potential GDP grown more slowly?

2 1210864

In part reflecting In part reflectinglong-standing trends,

efficiency in producinggoods and services grew

more slowly in thecurrent recovery than it

did in past recoveries.(That level of efficiency,

or potential total factorproductivity, is the

average real output perunit of input from labor

and capital servicescombined, adjusted for

variations caused by thebusiness cycle.)

The flow of servicesavailable from capital

assetssuch as equipment,structures, inventories,

and landgrew moreslowly in the currentrecovery, because net

investment (relative to theexisting stock of thoseassets) was much lower

during this recession thanin others and because oflong-standing trends inpotential employment

and productivity.

-standing trends,potential numbermployed workersnumber of employed

kers adjusted forations caused by theness cycle) grew halfuickly between 20092012 as it did duringt previous recoveries,use of slower growthe population of

king-age peopleother factors.

Total FactorProductivityTFPEmployment

CapitalServices

Shares indicate the contribution to the slowed pace ofgrowth of potential GDP since the end of the recession.

More than

1/3

About

1/5

More than

1/3

-1% Slow growth intax revenues andfederal grants

A decline indefense purchases

Overbuilding during thehousing boom; weakhousehold formation

Loss of wealth; a bigger decline inthe share of national income goingto workers; weak confidence

Rebound from unusually weak investmentin capital during the recession

Slow growth in the United States;strong growth in emerging markets

State and LocalGovernmentsPurchases

Federal

GovernmentsPurchases

Residential

Investment

ConsumerSpending

BusinessInvestment

Net Exports

-3/4%

-3/4%

-3/4%

+1/4%

+1/2%

-10

-15

-5

0

5

10

15

12 10 8 6 4 2 2

Quarters Before Trough

1210864

Quarters After Trough

Trough

Average CycleCurrent Cycle

How have the components of real GDP differedfrom their usual pattern relative to potential GDP?

Numbers show how much each component of GDP affected the growth of theratio of real GDP to potential GDP compared with the average for previous recoveries.

real gdp as a

1/3of the9 percentage-point differencebetween theaverage cycleand the currentcycle

percentage of potential gdp

The U.S. economy has grown slowly since the deep recession in 200and 2009. In the three years following the recession, the cumulativ

growth of the nations outputreal (inflation-adjusted) gross domestiproduct (GDP)was nearly 9 percentage points below the average see

in previous economic recoveries since the end of World War II, or lesthan half the average growth during those other recoveries

low recoverylow recovery

hat Accounts for the Slow Growth ofe Economy After the Recent Recession?

red by: Maureen Costantino and Jonathan Schwabish

cts: Mark Lasky and Charles Whalen, Macroeconomic Analysis Division

hed: November 2012Source: Congressional Budget Of

For details, see What Accounts for the Slow Growth of the Economy After the Recession?(www.cbo.gov/publication/437