Here is my definition of a recession:
- two or more consecutive quarters in which real GDP lower than real GDP in an earlier quarter, and
- the year-over-year change in real GDP is negative in at least one quarter.
The latest GDP estimates from the Bureau of Economic Analysis indicate that the recession continues. By my definition, it has now lasted 14 quarters: 2008Q1 through 2011Q2. Real GDP for 2011Q2 was $13,270.1 billion (annualized rate, chained 2005 dollars), which is lower than the pre-recession peak of $13,326.0, which was reached in 2007Q4. Average annual real growth over the 3.5 years from 2007Q4 to 2011Q2 was -0.12 percent.
If real growth had continued at the 2007Q4 rate of 2.2 percent, real GDP in 2011Q2 would have been about $14,381 billion. That is to say, the shortfall in real GDP, was about 8 percent. Even worse, if real growth had continued at the 1866-1907 rate of 4.3 percent, real GDP would now be about three times its present level. But that is another story, which is told at the preceding link and several of the links at the bottom of this post.
Returning to the main theme of this post, here is how real GDP has fared from 1947Q1 through 2011Q2 (recessions are denoted by vertical bars):
(I have excluded the recession that was in progress as of 1947Q1 for lack of quarterly GDP estimates before that quarter.)
Here is a closer look at the depth and duration of post-war recessions:
Finally, here are year-over-year changes in real GDP, from the first quarter of 1948 through the third quarter of 2010:
This graph, by the way, updates the one I used in “The Price of Government: More Evidence,” where I say:
You will notice two things about the graph. First, the economy is cyclical, thanks in part to the actions of government (e.g., the low-interest, housing-bubble recession). Second, economic growth has declined from an annual rate of around 4 percent to an annual rate of about 2 percent, because of government.
“Because of government” refers to the unrelenting assault on the private (real) economy, in the form of transfers from productive persons to unproductive ones, other government spending, and ever-growing regulatory restrictions.
The Price of Government
The Fed and Business Cycles
The Commandeered Economy
The Price of Government Redux
Ricardian Equivalence Reconsidered
The Real Burden of Government
Toward a Risk-Free Economy
The Rahn Curve at Work
The Illusion of Prosperity and Stability
Estimating the Rahn Curve: Or, How Government Inhibits Economic Growth
The Stagnation Thesis
America’s Financial Crisis Is Now
A Keynesian Fantasy Land
The Keynesian Fallacy and Regime Uncertainty