Slow growth in the U.S. economy has been one of the most consistent topics of conversation since the end of the Great Recession (2007-2009). In fact, the U.S. economy has realized real GDP growth of less than 3% for a record eleven straight years! One of the flaws that we find with many slow growth discussions is that they make the implicit assumption that this recovery should be “normal”. We doubt that any American would categorize the Great Recession as normal. Why would we then expect a normal recovery? Severe economic events do not end when economic growth turns positive but instead live on in the minds of those who suffered. We were reminded of this by the below chart from FRED posted on Twitter by Urban Carmel (@ukarlewitz) author of The Fat Pitch blog.
Source: https://twitter.com/ukarlewitz/status/837322146883878912
In the aftermath of the Great Recession households are rebuilding their balance sheets (increasing savings and reducing debt), reversing a 40 year tailwind to the U.S. Economy. Certainly there are other factors at play but the goal of this post isn’t to explain why growth is slow. Instead, the purpose of this post is to illustrate that we are in a unique economic environment which bears little resemblance to the “normal” recoveries of the past. Slow growth isn’t necessarily a symptom of some larger problem nor does it damn us to slow growth for all of eternity. Will the U.S. economy ever return to a real growth rate in excess of 3%? We don’t know the answer but wouldn’t be inclined to bet against it. Only the future will tell.
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