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Economist: This is the weakest post-financial crisis recovery since the 1880s

Image Credit: John Taylor

Economist John Taylor:

People are looking for answers to why the economy is growing so slowly. Is the answer that economic growth is normally weak following deep recessions and financial crises?

The bars show the growth rate in the first four quarters following all previous American recessions that are associated with financial crises, as identified by Bordo and Haubrich. The upper line shows the average growth rate in all those recoveries. The lower line shows the growth rate in the four quarters following the 2007-2009 recession. It is very clear that recessions with financial crises are normally followed by much more rapid recoveries than this current recovery. The current recovery not only started out weak, averaging 2.5% in the first year, it got weaker over time, declining to only 1.3% in the second quarter of this year.

Growth was nearly 4 times stronger on average in the past recoveries. The only recovery in this list in which growth was as weak as this one followed the 1990-91 recession, but that was from a very shallow recession with output declining only 1.1%, so growth did not need to get very high to catch up.

My own analysis looked at economic recoveries of all sorts and examined both GDP and employment. And by those measures, this may be the weakest recovery in U.S. history.

4 thoughts on “Economist: This is the weakest post-financial crisis recovery since the 1880s

  1. “ITS DIFFERENT THIS TIME.”

    This time there was no real recovery in spite of a big GDP plunge. Normally the recovery’s right side of the “V” mirrors the steepness of the plunging left side. And that also goes for several financial train wrecks so nicely documented by Stanford’s John Taylor going all the way back over 100 years that are featured in the highlighted foot notes. Taylor’s analysis convincingly disproves the liberals often sighted theory (excuse) that rebounds from a financial crisis are very difficult; thereby causing them to conclude back in 2009 that ITS DIFFERENT THIS TIME. Their analysis of 2009 was severely flawed in many areas.

    Check Taylor’s graphs out, I was going to try to post them right here. The difference in this plunge was not that it was financial, the difference was in the way we responded with stifling fiscal and regulatory polices that blocked a recovery that is now close to stalling.

    ITS DIFFERENT THIS TIME only because the stumblebums engineering this “recovery” screwed-up. And its starts with their multiplier that Taylor contends was not the 1.5x as peddled, but probably less than 0.5X if you include transfer payments.

  2. Hm, it appears that several of the major financial crises have occurred on the Fed’s watch. Seems they are failing in their job.

  3. There have been only two recessionary periods that were characterized by major government interventions that created major uncertainties for businesses — now and during the 1930s. I don’t think this is just a coincidence.

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