Worst economic crisis since the Great Depression

Economic Policy Institute

Worst economic crisis since the Great Depression? By a long shot.

by Josh Bivens

Voters' anxiety over the state of the economy will surely be a key theme in President Obama's State of the Union address. This anxiety is warranted. The chart below compares the growth of gross domestic product (GDP) since the beginning of the current recession in 2008 to previous recessions. GDP is the broadest measure of economic performance, tracking the market value of all goods and services produced in the United States. The most recent recession is notable not just for the severity of economic contraction but also the length of decline. As the figure shows, in the nine previous recessions on record, by seven quarters after the official start of the recession the economy had actually grown by an average of 4% compared to its pre-recession peak.

However, seven quarters after the current recession began, the economy remains 3.2% smaller than its pre-recession peak. This is true even though the third quarter of 2009 saw the first positive growth in GDP in a year. Despite the GDP uptick in the most recent quarter, the current recession remains the worst performer on record this long after a business cycle peak. The economy failed to recover its pre-recession peak after seven quarters only once before, following the 1973 recession.

For more comparisons of the economy’s performance in terms of GDP, jobs, or other measures, visit EPI's Economy Track, which will be updated to incorporate new GDP data released on January 29.