The Great Recession has a big birthday coming up today. It should be the least joyous fifth birthday ever recorded.
It was five years ago in December that the recession began, according to the arbiters of these things at the National Bureau of Economic Research’s Business Cycle Dating Committee. The George W. Bush administration and Congress enacted a cute little $152 billion stimulus plan to try to fight it.
And remember the Bear Stearns bailout? That was in March 2008, when our little recession was three months old. We thought $30 billion was a lot of money then.
By his first birthday, though, our little recession had gone from being an adorable little imp to a pusillanimous, fire-breathing demon. That fourth quarter of 2008, the U.S. economy shrank at an 8.9 percent annual rate. Many economists had viewed a collapse like that as unfathomable. (The postwar record had been a 6.4 percent rate of decline, in 1982.)
And yet here we are. Five years, $800 billion in fiscal stimulus, a $700 billion bank bailout and $2 trillion and counting of quantitative easing by the Fed later, those days are an increasingly distant memory.
Still, a new number out this week shows why we’re still talking about the after-effects of this recession on its fifth birthday. In the July-through-September quarter, the U.S. economy grew at a 2.7 percent annual rate, the Commerce Department said Thursday — better than the 2 percent growth rate earlier estimated.
That may seem like good news, but some of the details are disconcerting.
A big reason for the upward revision was that businesses built up their inventories more than had been estimated. That suggests it is a one-time gain; if anything, that may point to weaker growth in the future, as firms try to let their inventories run down.
Federal government spending was a big part of the improvement, rising at a 9.5 percent annual rate (with particularly strong gains in defense spending). But that is sure not to be sustained; the most likely outcome of negotiations over the “fiscal cliff” is that federal spending will be a drag on the economy in the years ahead.
The United States can’t manage to get any sustained growth much above 2 percent. Unemployment is 7.9 percent, and at the rate of growth we’re managing, there’s little reason to expect it to come down much anytime soon. Over the past five years, the population has risen and businesses have become ever more productive. Yet real economic output is only 2 percent above what it was in the fourth quarter of 2007.