Over at Economix, Catherine Rampell writes a piece entitled: Is This Really the Worst Economic Recovery Since the Depression? And she puts up this chart.
Her conclusions are mixed:
Economists often assert that we are in the worst recovery since the Great Depression. Are we?
Not technically, but it’s still unusually bad.
Certainly the economy is in an abysmal state, and we still have about five million fewer jobs than we had when the recession began in December 2007. But the level of economic activity is so low chiefly because the recession itself was so severe; indeed, on many economic indicators, the Great Recession was the deepest (and longest) downturn since the Great Depression.
Technically, though, economists use the word “recovery” (or “expansion”) to refer to the state of the economy after a recession ends. So judging the “recovery” would mean looking at how much the economy has improved since it reached that very deep trough in June 2009, or 38 months ago.
I calculated the percentage change, from business cycle trough to business cycle peak, for a handful of economic indicators in all the previous postwar recessions, and compared those to the track record for the current recovery.
This isn’t an entirely fair comparison, of course, since (hopefully) the economy has not yet peaked and will continue to expand.
Even so, on almost every measure I looked at, there was at least one previous (completed) recovery that performed worse.
Two things: First, why compare just the “recovery”? As we´ll see this may be very misleading. Much more useful to look at the complete cycle (“Peak to Peak”). Second, why go into the “components of spending” detail. That just obfuscates the macro analysis. Look at NGDP (and RGDP).
That´s what I did. The panel selects a few of the post-war cycles. It is clear that what makes the present cycle unique is not the “sluggishness” of the recovery, although that´s true, but the “depth” of the hole into which spending (NGDP) fell from “peak to trough”. Since the charts are in log scale, the vertical distance is a measure of proportional change and no other cycle shows anything that could resemble the spending drop in the present cycle. The “sluggishness” is the result of spending taking two years to regain its previous peak level, also something “unique” to the present cycle.
Scott Sumner has this “companion piece”:
Given that other theories like “policy uncertainty” also require wage stickiness, I’m not really sure what’s gained from moving away from demand-side models. Bernanke experimented with a historically slow recovery in AD (i.e. NGDP), and he got a historically slow recovery. What else would you expect?