Why this slow recovery is like no recovery

The Obama administration likes to blame the country’s weak economic performance on the Bush administration, Europe’s debt crisis, Japan’s tsunami and so on. President Obama’s advisers are now saying they learned only gradually that the economy was in even worse shape than they had imagined in 2009. But even if this is so, it gets the signals backwards: A bigger recession predicts a stronger recovery (as has to be true for the economy to return to its trend line).

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The pattern of strong recoveries following sharp downturns is clear when one examines the history of economic disasters. The worst depressions relate to wartime destruction, and the subsequent peacetime periods typically exhibit strong growth. Examples include the high post-World War II growth rates in Japan, Germany and much of Western Europe. …

However, the average GDP growth rate during the U.S. recovery since 2009 remains nearly 2% per year lower than would be expected, according to the Ursua study. That is, after factoring in the estimated impact of the typical housing bust, Mr. Ursua found that the U.S. growth rate since 2009 should have averaged a little over 4%, rather than the 2.4% we’ve experienced.

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