[R]eal GDP is finally back to its pre-recession peak, and it’s taken us an historically very long time to get here. The figure … shows the number of quarters it has taken in the past for real GDP growth to regain its prior peak before the recession knocked it down (the top date on the x-axis is the quarter that GDP regained the peak; the bottom date is the prior peak). The average is 5.2 quarters…this go round, it took 15. That, my friends, is a long slog.
The story of the recovery remains mostly unchanged. Relative to previous recoveries, growth has been quite slow; the economy is struggling to maintain trend growth and making essentially no progress closing the output gap. Unsurprisingly, unemployment has not fallen by very much. The hope must be that having survived a difficult summer, firms and households will begin to regain their confidence, and that policymakers will do more to support growth and less to court disaster.
[2.5 percent] is slower than virtually every recovery in the last near fifty years but is not that far behind the last recovery.
Seeing as how plenty of economists were grumbling about a double-dip recession not too long ago, even modest growth counts as cheering news. But 2.5 percent growth won’t bring us back to full employment anytime soon. So how much growth do we actually need Short answer: A lot more.
Yes, there are still somethings to be worried about. And many economists were right to point out that at 2.5% it would be a long time before the unemployment rate gets back to pre-recession levels. And I mean a long, long time. A recent analysis from the Atlanta Fed shows that at 2.5% growth, we still wouldn't be close to full employment a decade from now. But here's my problem with analysis like that. Economies don't tend to stay in one place. If the recovery is back, growth will probably accelerate. If it's not, growth will slow, and Washington will eventually have to do something.