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U.S. GDP – 1980s Redux?
The Great Recession is now in our rear-view mirrors and with GDP growth of 5.7 in the fourth quarter, the recovery looks well underway. However, the surge in growth is unlike anything we have seen in a while. The recessions of the early 2000’s and 1990’s saw inconsistent growth after the recession ended. After the 2001 recession, growth peaked at 3.5% before falling back to 0.1% by 2002. The early 90’s recovery saw growth reach 4.5% before declining to a tepid 0.7% a year later.
However the 1980s recession may once again be our best guide for how the current recession may fare.
The recession ended in 1982 and by 1983, the U.S. economy was growing at extremely healthy rates. Between Q1 of 1983 and Q2 of 1984, average GDP growth was more than 7 percent. This is not to say the U.S. economy will replicate this pace of growth in the quarters ahead, but we have previously seen the rubber-band effect after deep recessions and there is no reason why it couldn’t happen again.