The Lacklustre Recovery Comes to Life

Written by Richard Hokenson 

There have been numerous reports to the effect that the economic recovery that followed the financial crisis has been the weakest post-war expansion (see Chart 1). As of the fourth quarter of last year, cumulative growth in real per capita GDP is only 18.5% above the recession trough of the second quarter of 1990. Although some have argued that slow and steady means that the current recovery has more room to run, our interest was in trying to understand why the 3 previous long cycles came to an end and what that might mean for the current expansion (see Chart 2). We were struck by the appearance that the 3 previous long expansions seemed to run out of steam at the end, visually confirming the statement that recoveries end with a whimper not a bang.

The next three sets of charts examine the end of those long expansions – the top panel is the cumulative change in real per capita GDP in the last 10 quarters prior to the next recession (the titles refer to the trough quarter that preceded the recovery).

The bottom panel displays the year-ago percent change in cumulative per capita real GDP, confirming the deceleration as the recovery came to an end. The current recovery is very different – the year-ago percent change in real per capita is accelerating (see Charts 9 and 10)! This appears to confirm a recent McKinsey study that suggests that the U.S. economy is in or on the verge of an acceleration in productivity. it is a sentiment that we share.


This update was researched and written by Richard Hokenson, as of February 23 2018