Folly with fellow Harvard University
economist Carmen Reinhart, has argued
that after the kind of deep financial crisis
that fundamentally caused the Great
Recession, it takes an average of four
and a half years to return to precrisis per
capita GDP and employment.
In the four years it took for real GDP
to surpass its prerecession level, the U.S.
population grew considerably faster than
the economy ( 4.1% versus 1.2%), so per
capita GDP has been slower to recover
(see Figure 3).
Five years into the recovery, per capita
GDP was still shy of its prerecession
level: $49,311 in 2007 versus $49,226
in 2012, or $85 less per person. Early
BEA estimates for GDP in the first half
of 2013 suggest that per capita GDP
may have finally exceeded its precrisis
level—five and a half years after the crisis
started, and a full year later than Rogoff
Real GDP has recovered. And so has
per capita GDP. What about employment?
There is still much terrain to traverse
before the U.S. recovers all of the jobs
lost during the Great Recession (see
U.S. nonfarm employment peaked at
138 million payroll jobs when the recession started. In early 2008, employers started cutting about 80,000 jobs
per month. By summer, those numbers
swelled to more than 200,000 per
month. By September—when Lehman
Brothers collapsed and the banking
crisis consumed Wall Street, Pennsylvania Avenue, and Main Street—those
cuts more than doubled, only to double
again within months. The most extreme
job losses occurred in March 2009, with
830,000 cuts in that month alone. The
volume gradually tapered off until the
end of 2009. But sustained hiring didn’t
resume until March 2010, well after the
recession ended. Within a two-year span
(that felt like an eternity), more than 8. 7
million jobs disappeared.
2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
U.S. Real GDP Per Capita (in Chained 2009 U.S. Dollars)
Source: U. S. Bureau of Economic Analysis
Figure 3: Per Capita GDP Peaked in 2007. With the U.S. Population Growing
Faster Than the Economy, Per Capita GDP Remained Below its Prerecession
Peak Through 2012.
Change in U.S. Employment From Start of Recessions*
Months From Start of Recession
*”Employment” is nonfarm payroll employment calculated by the U.S. Bureau of Labor Statistics. Mildest, median, and harshest lines
reflect the previous smallest, median, and largest declines as of each month; they do not reflect specific individual recessions.
Source: Federal Reserve Bank of Minneapolis; updated Aug. 2, 2013
45 50 55 60 65 70
Figure 4: The 2007–09 Great Recession Was Deeper Than the Previous 10 Recessions Since World War II—At Its Lowest Point, Employment Fell by 6.3%.
prerecession level until 2011—four years
after the Great Recession started, and
two and a half years after the recovery
began. Real GDP for 2011 exceeded the
2007 level by only 1.2%.
Crossing the prerecession threshold
in real GDP is an important milestone
in measuring economic recovery, but it
ignores changes in population. If a coun-
try’s population grows faster than its
GDP, its people become poorer.
Kenneth Rogoff, co-author of the
best-selling academic book This Time
Is Different: Eight Centuries of Financial