Harvard study: Hey, this economic recovery's not so bad, relatively speaking

The study, presented over the weekend at the annual meetings of the American Economic Association, rejects comparisons with regular postwar American recoveries, as other economists have made, and instead examines 100 major, or “systemic,” financial crises that have occurred over the last two centuries, in the United States and abroad.

It found that relative to previous American financial crises, the current economy is doing substantially better. Across nine major financial crises in the United States, the average peak-to-trough decline in inflation-adjusted per-capita gross domestic product is about 9 percent, and it has taken an average of 6.7 years to recover to the precrisis peak. During the years after crises, five of the nine episodes also had a “double-dip” downturn.

By contrast, the recent American subprime crisis beginning in 2007 had “only” a 5 percent drop in per capita output, and took “only” six years to get back to the precrisis peak. And so far, at least, there has been no second downward turn.

Employment and other measurements currently remain well below their precrisis peaks, but it is difficult to compare those numbers to past crises because the historical data for those categories is not as reliable, Ms. Reinhart said.