WASHINGTON — The recession that ended three years ago this summer has been followed by the feeblest economic recovery since the Great Depression.
An Associated Press analysis compared nine economic recoveries since the end of World War II that lasted at least three years.
Here is a closer look at how the comeback from the Great Recession, which began in December 2007 and ended in June 2009, stacks up with the others:
America’s gross domestic product – the broadest measure of economic output – grew 6.8 percent from the April-June quarter of 2009 through the same quarter this year, the slowest in the first three years of a postwar recovery. GDP grew an average of 15.5 percent in the first three years of the eight other comebacks analyzed.
Investment in housing, which grew an average of nearly 34 percent this far into previous postwar recoveries, is up just 8 percent since the April-June quarter of 2009.
That’s because the overbuilding of the mid-2000s left a glut of houses. Prices fell and remain depressed. The housing market has yet to return to anything close to full health even as mortgage rates have hit record lows.
Government spending and investment at the federal, state and local levels was 4.5 percent lower in the second quarter than three years earlier.
Three years into previous postwar recoveries, government spending had risen an average 12.5 percent.
This time, state and local governments have been slashing spending – and jobs. And since passing President Obama’s $862 billion stimulus package in 2009, a divided Congress has been reluctant to try to help the economy with federal spending programs. Trying to contain the $11.1 trillion federal debt has been a higher priority.
Since June 2009, governments at all levels have slashed 642,000 jobs, the only time government employment has fallen in the three years after a recession. This long after the 1973-74 recession, by contrast, governments had added more than 1 million jobs.
Consumer spending has grown just 6.5 percent since the recession ended. In the first three years of previous recoveries, spending rose an average of 14 percent.
It’s no mystery why consumers are being frugal. Falling home prices have slashed home equity 49 percent, from $13.2 trillion in 2005 to $6.7 trillion early this year. Others are paying down debt or saving more. Household debt peaked at 126 percent of after-tax income in mid-2007 and has fallen to 107 percent, according to Haver Analytics.
The savings rate has risen from 1.1 percent of after-tax income in 2005 to 4.4 percent in June. Consumers have cut credit card debt by 14 percent – to $865 billion – since it peaked at over $1 trillion in December 2007.
“We were in a period in which we borrowed too much,” says Carl Weinberg, chief economist at High Frequency Economics. “We are now deleveraging. That’s a process that slows us down.”
The jobs hole
The economy shed a staggering 8.8 million jobs during and shortly after the recession. Since employment hit bottom, the economy has created just over 4 million jobs, replacing 46 percent of the lost jobs, by far the worst performance since World War II.
During the 1981-82 recession, the U.S. lost 2.8 million jobs. In the three years and one month after that recession ended, the economy added 9.8 million – replacing the 2.8 million and adding 7 million more.
Never before have so many Americans been unemployed for so long three years into a recovery. Nearly 5.2 million have been out of work for six months or more. The long-term unemployed account for 41 percent of the jobless; the highest mark in the other recoveries was 22 percent.
Employers don’t have to be generous in a weak job market because most workers don’t have anywhere to go. As a result, pay raises haven’t kept up with even modest levels of inflation. Earnings for production and nonsupervisory workers – a category that covers about 80 percent of the private, nonfarm workforce – have risen just over 6.2 percent since June 2009.
Consumer prices have risen nearly 7.2 percent. Adjusted for inflation, wages have fallen 0.8 percent.
In the previous five recoveries – the records go back only to 1964 – real wages had gone up an average 1.5 percent at this point.
As weak as this recovery is, it’s nothing like what the U.S. went through in the 1930s. The Great Depression actually included two severe recessions separated by a recovery that lasted from March 1933 until May 1937.
Calculations by economist Robert Coen, professor emeritus at Northwestern University, suggest that things were far bleaker then: unemployment remained well above 10 percent – and usually above 15 percent – throughout the 1930s.
Only the approach and outbreak of World War II – the ultimate government stimulus program – restored the economy to full health.