Recovery Has Been Slow but Enduring

Bob Johnson: This week's chart is on GDP growth, the main measure of economic activity. Many surmise that this has been the worst recovery on record. Well, it is the slowest in terms of an economic growth rate at 2.3%. You can see on the chart that the long-term average is about 3.2%.

One thing that's less clear is that we are now less volatile than we've been in the past. If you look at the chart, you can see the peaks are very, very close together and they don't last long. Now granted, they were 6% to 8% growth rates, but they didn't last very long and were often followed by severe recessions. As you move more to the right side of the chart, you can notice that the growth rates are substantially less and less in each recovery; but also the recoveries have lasted a longer period of time, providing a greater sense of stability. And you can see that this recovery, subpar at 2.3% growth, has lasted quite long compared to the historical past.

One other point worth mentioning is that the last three recessions were all less severe than the one before. And we had thought we had maybe conquered the business cycle, and people levered up accordingly. Now with all that leverage, the 2008 recession turned out to be one of the worst since World War II, so certainly not a good state of affairs.

Looking ahead, I think this chart suggests that this [recovery] could be one of the slowest in terms of growth rates but one of the longest-lasting recoveries that we will see for some time.