2001-07: Weakest Post WW2 Recovery on Record

Floyd Norris’ column in Saturday’s NYT hits upon one of our favorite themes: That the 2001-07 recovery was one of, if not the, weakest recovery from a recession:

The view of this recovery as an unusually weak one can also be seen in all four economic indicators that make up the index of coincident indicators, a way that the health of the economy is measured. Three of them are adjusted for inflation — industrial production, personal income, and manufacturing and trade sales — while the fourth is the growth in the number of nonagricultural jobs.

All of those are measured from the official beginning of a recovery to the official end, which in some cases can be well before a particular indicator turns up.

The postrecession trends in employment show particular signs of having changed. Before the recovery that began in 1991, the number of jobs always hit bottom at about the time the recession ended. But it took 14 months after the 1990-’91 recession officially ended for the number of jobs to rise the level when the recession ended. After the 2001 economic low, it took 28 months for the number of jobs to match the end-of-recession total.

All  this and a ginormous chart, too:


Shallow Recessions, Shallow Recoveries
NYT, August 29, 2008

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  1. DL commented on Aug 30

    More fodder for the Democrats.

  2. Diogenes commented on Aug 30

    So now, what we’re really seeing is the play-out of the 2000 recession that was forestalled by the fed lowering real interest rates into negative territory?

    Maybe the best approach is just dealing with the pain up front.

  3. GB commented on Aug 30

    DL, I agree those tax cuts and easy money weren’t the right decision, maybe going through a painful couple of years while we had higher taxes on the wealthy to get us to renewable energies and resources instead of being forced into it like we are now. I always felt like it was a sham the way housing rocketed up when we just had a recession. Now it’s time for consequences of a free money decade. I hope obama makes the apollo space program of renewalbe energy programs for the USA.

  4. Michael Fowke commented on Aug 30

    There will not be a recession this time. We’ve all got to stay positive. It seems some people get off on predicting doom.

  5. bdg123 commented on Aug 30

    Weakest recovery since records were kept in the mid 20’s.

  6. Jeff M. commented on Aug 30

    Big shocker there. Go to most any average American around the country and they could have told you this. We don’t need government statistics or fake pumped up GDP numbers to tell us the economy hasn’t been so good for anyone not in the top 1-5% in this country from 2000-2007. This “recovery” was simply a mirage borne out of easy greenbacks via cheap credit, tax cuts (actually borrowing against future revenues) for the wealthy, and equity extractions from homes, not via an increase in incomes or wealth. Until incomes rise with productivity for the rank and file, this will likely continue until the next bubble is created.

  7. a guy called john commented on Aug 30

    and this with the largest expansion of government in, what, the last 40 years? 60 years?

    heck of a job, georgey.

  8. TempusFugit commented on Aug 30

    The Great Moderation lives!!

  9. Mark commented on Aug 30

    I would have been very surprised if the recovery *wasn’t* weak. When you measure from a point that is unsustainably high, you shouldn’t expect growth to be strong afterwards.

  10. DL commented on Aug 30

    GB @ 1:06:28 PM
    I’m O.K. with higher marginal tax rates on the top 1% of earners PROVIDED that there are no “spillover” effects to others who are not directly targeted by the high taxes.
    However, I am not convinced that the adverse effects of those taxes can in fact be confined to the top 1%.

  11. Steve W commented on Aug 30

    Sorry…just had to point out one important thing…prior to the current Bush Administration…the weakest economy occurred under who’s watch? So, I guess Clinton is happy now that his economy can’t be labeled the “Slowest Growth Economy”…Congrats!!! It made it to the “2nd Slowest Growth Economy”. The trap is set…will teh Clintonistas insist that these statistics are bogus???

  12. TDM commented on Aug 30

    How about adding columns for oil price and supply for each recovery. This is the only ‘recovery’ where we didn’t ‘recover’ any oil.

  13. Tom commented on Aug 30

    An additional column for corporate profits needs to be added to get the full picture.

  14. zell commented on Aug 30

    Look at the overall trend- an economy that is weakening. We are structurally dependent on increasing debt and stymied by increasing competition. We are like the drunk who makes it to detox- deleveraging but never will enter rehab so the cycle repeats, but with the body increasingly deteriorated. Lower long term rates indicates teh world is ready to stand us another round.

  15. Flic commented on Aug 30

    The people saying we are not headed for a recession are in fact correct. We actually never emerged from the recession that started 7+ years ago. Not sure why anyone thinks that the credit/debt-induced mania we witnessed was “growth”.

    Oh yeah…rigged numbers and lies…I forgot.

  16. VJ commented on Aug 30


    So now, what we’re really seeing is the play-out of the 2000 recession…

    There was no 2000 recession.



    I’m O.K. with higher marginal tax rates on the top 1% of earners PROVIDED that there are no ‘spillover’ effects to others who are not directly targeted by the high taxes. However, I am not convinced that the adverse effects of those taxes can in fact be confined to the top 1%.

    The Clinton administration accomplished it. Top 1.2%.

    It’s not, as they say, rocket science.



    So, I guess Clinton is happy now that his economy can’t be labeled the ‘Slowest Growth Economy’…Congrats!!! It made it to the ‘2nd Slowest Growth Economy’


    The chart is from trough to peak in each economic cycle.

    By administration, third fastest GDP:

    #1 – Lyndon Johnson > 5.43%
    #2 – John Kennedy > 4.93%
    #3 – Bill Clinton > 3.58%

    (BTW, all were when tax rates on the wealthy were among the highest).

  17. DeDude commented on Aug 30

    This all makes perfect sense. Consumption is 70% of the GDP. So when the real income of the consumer class increases the GDP will increase. That is why democrats are so good at growing the economy; they are ideologically disposed to give money to the poor (concumer class). The republicans hate giving money to the poor and give it to the rich (investor class) instead (and as a result create all kinds of bubbles but not much growth). The fantasy that the rich would stick their money into new factories when there are no consumers to purchase the product is (and has always been) just a fantasy. Why would they risk their money on a dream of “if we produce it the costumers will come” when they can get double digit gains in a real estate or comodeties investment. The latest econimic “expansion” has been particularly problematic because a lot of the consumption and associated GDP growth was not real. It was created by loans taken by consumers and government. All that fake GDP has to be payed back, so don’t look for the new expansion be that great even if it is created the right way (by taxing the rich and giving the poor a brake).

  18. ben commented on Aug 30

    All that fake GDP has to be payed back, so don’t look for the new expansion be that great even if it is created the right way (by taxing the rich and giving the poor a brake).

    Yes this is the “right” way to grow the economy.


  19. J Bone commented on Aug 31

    The interesting pattern to me is that the peaks trend progressively smaller. It seems like the Fed is reducing the variability in growth. To see that big picture, the graph would have to show the recessions and the long-term average as well. A control chart with limits would be very informative.

  20. DeDude commented on Aug 31

    Ben, I am less than overwhelmed by the force of your arguments. You must be one of those “right” people :-).

  21. ben commented on Aug 31


    what argument did I make other than that you made a foolish comment? If by “right” you mean someone that favors lower taxes and less govt spending then yes, that is exactly who I am.

    Higher taxes on the rich will solve absolutely nothing. Remember that Clinton got it right but not ONLY because of higher taxes, he was also fiscally responsible with SPENDING, of course this is a concept most Americans cannot understand, hence the negative savings rate we’ve had for several years now.

    1. You need to couple the higher taxes with lower, or at least some sort of control on govt spending but you shouldn’t hold your breath for that, and it doesn’t sound like Obama, who you clearly support, can do both. Make no mistake, McCain won’t do it either, he’s an economic moron ( I think he even said “I know nothing about the economy”)

    2. People that currently find themselves in the top 2% of all earners will find a way to hide the income, the govt isn’t going to get it.

    this would be especially true of biz owners who can use corps to lower tax bracket, if you think it doesn’t apply to the executive that has a w-2 you are also wrong. Many companies are already changing executive pay packages to include accelerated payouts on options, non-qual executive deferred comp plans that can descriminate enrollment, etc. in order to help lower the overall tax burden.

    I’m all for Joe working class to have less taxes taken from his/her paycheck but I DO NOT agree with the hate the rich approach. The tax burden on the rich is already unreal.


    I’m also a little confused by your argument, the current tax laws decreased more than just the top marginal brackets from the Clinton Era. Take for example a married couple that can only take the standard deduction that has income of $125k, they would have paid $23,426.50 under Bill vs. $19,462.50 in 2008. Last time I checked that was an increase and exactly the type of spillover DL is talking about.

    according to a recent study by the tax foundation a married couple earning a household income of 50k paid 21% LESS in taxes under Bush compared with Clinton.

    by contrast, “rich” single tax payers paid only 10% less under Bush compared with Clinton. this is the tax cut for the wealthy the media and Dems love to talk about.

    Keep pushing for those higher taxes, and you’ll find that your taxes are higher as well, regardless of your income.

  22. ben commented on Sep 1

    I just want to add one thing to my post above to make sure you understand I’m not trying to bash obama,

    McCain’s genious tax plan includes tax on your health insurance as ordinary income, this would really hurt a lot of people. it will induce bracket creep, or what DL calls spillover and drive up the marginal rates of millions who are middle class.

  23. DeDude commented on Sep 1


    Well now at least I understand what your underlying rationale is for the suggestion that my comment was “foolish”, although I disagree with it.

    I am totally with you on the idea that government should stop spending money on things that are not to the benefit for our society. However, for political resons it seems just about impossible to stop most of it; and we have to deal with the reality we are in, not the one we wish we were in. I have seen pleanty of neo-con-artist website with draconian dreams of reduction in government spending, but nobody has given me realistic examples of how to cut hundreds of billions from annual government spending without creating problems or transferring the cost to the individual instead (and that is a transfer ?tax? not a cut). The only notable exception is the war in Iraq. But since that is being conducted on the government credit card, stopping it would not balance the budget, but just bring the annual increase in national debt down from a trillion to half a trillion. We would still need serious tax increases just to stop the completely immoral and irresponsible process of transferring the cost of our government to our children and grandchildren.

    So realistically there is no way around an increase in taxation and it is a no-brainer to me that this increase should be focussed on the rich. To grow our economy we need to give more money to the consumer class. To stop destructive speculative bubbles, we need to take some of all that play money away from the rich. So tax the rich and give the poor a break that is the only realistic way to pay for what has been done without bringing the economy to a halt.

    I do not hate the rich I just think they should pay bigtime for the priviledge of living in a country where they have the ability to become rich and live extreamely comfortable lives. I am fully aware that many of them think that someone else should pay (more) for that priviledge and that the only thing government should pay for is the things that protect them (justice system, military), whereas the things that protect the poor (nutrition, health and education programs) should be cut. I also know that many of the rich will try to avoid paying more taxes either by legal or even illegal measures. But that does not mean that we should do nothing. What we should do is to make the legal tax evasion illegal and then crack down on it with very serious enforcement and punishment. Their tax burden on the rich is currently minimal compared to what it is in the Scandinavian countries, so they should stop whining and start paying back.

  24. ben commented on Sep 1

    Ah, DeDude,

    You again miss the point man. So I’m supposed to buy that for political reasons and since politicians in Washington just can’t control the wasteful spending(like most Americans), which by the way is in the hundreds of billions even excluding the Iraq war, we should just raise the taxes on those rich folk.

    Well, lets look at whether or not the rich pay their “fair share” these stats come from the IRS, statistics of Income:

    1. The top 1% of taxpayers, who earn above $388,806 paid 40% of all income taxes in 2006, the highest in at least 40 years.

    2. The top 10% in income, those earning more than $108,904 paid 71%.

    3. The idea that the tax cuts were some sort of giveaway to the rich is a figment of your imagination. Taxes paid by millionaire housholds more than doubled to $274 billion in 06 from $136 billion in 03. No pres has ever piled more money from the rich than George W. Bush.

    You and Obama want to cut taxes for those at the bottom. Well that might be a little hard to do because Americans with an income below the median paid a record low 2.9% of all income taxes in 2006 while the top 50% paid 97.1%. perhaps half the country should pay all the taxes to support the other half?

    You might argue rich people pay more because they make more money. that is true, the top 1% earned 22% of all reported income, but they also paid a share of taxes not far from double their share of income. The tax code is already steeply progressive.

    Your indication that the govt. should take away the “legal tax evasion” methods such as incorporation that the rich use is unreal but typical of the rhetoric I hear on this all the time. Tell this to someone like John Edwards who was able to use his s corp to avoid tax on plenty of the money he raked in from his class action lawsuits. i do not at all fault him for that. These sort of things aren’t coming out of the tax code and anyway don’t penalize people for using the tax code to their advantage. You say that the rich have the ability to live in a country where they can become rich so they should pay for it. SO DOES EVERYONE ELSE THAT LIVES HERE! the bottom line is most people would rather not do the work, those who make less chose the job they are in, don’t tell me they don’t have the opportunity that others do, there are so many countless stories that prove this wrong, most are just no willing to make the sacrifice, people making the kind of money in the top 1% in general work their ass off.

    Yours is a spending solution (To grow our economy we need to give more money to the consumer class) yes wealth redistribution is the answer! as if this would stop bubbles, quick spend all this money we give you, as if the “consumer class” had nothing do to with the real estate mess that we are in right now, none of those folks bought a house and lied about income and assets or took some dumbass mortgage that adjusted upward and now can’t be paid. it was all predatory lending.

    I’m telling you what Obama wants to do could be a recipe for disaster. the last time tax rates were as high as the Senator wants – Carter years- the rich paid only 19% of all income taxes, half of the 40% share they pay today. Why? Because they worked less, earned less, or found ways to shelter income. If you really want to soak the rich the way to do so is with low tax rates.

    Taxing our way out of a recession is not going to work.

    I think Obama has some really great ideas but he’s racking up the bills quicker than the money will come in.

    finally, spare me the arguments about Scandinavian taxes. if you want to move to a socialist state by all means go. it’s not an apples to apples comparison because of what is built into the tax payments.

  25. DeDude commented on Sep 1

    All I suggest that you and any other decent human being have to buy into, is that we must increase the taxes so they cover the expenses of our government. If you can come out with specifics for half a trillion in cuts on our annual budget I am willing to talk about them, but this non-specific “lets cut government” BS is not serious. I agree our income tax system is progregressive. I also note that our payroll taxes and consumption taxes are not. If you want to talk taxation you should include the whole tax burden not just taxes that are progressive. The fact that the rich has become so much richer than before naturally also leaves them with more of the income tax burden and the explosion in the number of millionaires during Bush may have left millionaires paying a lot more taxes even while their taxrates have not increased. Your examples are stright out of the right wing nut websites and selected specifically to support the whining rich in their claims that they are unfairly taxed.

    The idea that all the poor people just need to work harder then they too can become millionaires is just not correct. For every one person that succeeds in that endevour, there are 99 who do not. Making it takes a lot of smarts, good health, and a lot of luck and those who are out of that just won’t become millionaires no matter how hard they work.

    Most of the rest of what you are writing is just straw-men and classic neo-con-artist “putting words in the opponents mouth” tactics and that is quite frankly not worth responding to. I have gotten used to a much higher level of debate here at this site but I guess there is always the odd man out. No restating your wrong postulates does not make them right.

    I am aware that the Scandinavian countries do provide more services for their citizens. But the point is that those countries put a lot more taxers on their rich and that has not stopped them from working. As a matter of fact I have not seen any valid documentation of the postulate that higher taxes make rich people work less. If it makes them more likely to try to hide income from taxation then we are just back to making legal tax evasions (loopholes) illegal and extreamely harsh punishment for those criminal rich who break the tax laws.

  26. Francois commented on Sep 2

    “More fodder for the Democrats.”

    Correction: More fodder for all of us who care about the People, as in everyone in this country, not only a select few.

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