Addressing how the economy has performed since the recession ended and the expansion began in November 2001, the Center on Budget and Policy Priorities (CBPP), a liberal-oriented think tank, has analyzed how several important macroeconomic variables (GDP, consumption, business investment, nonfarm employment, household net worth, wages and salaries and corporate profits) have fared during the current expansion relative to their performance in previous postwar economic recoveries. Whether measured from the March 2001 peak of the previous business cycle or from the November 2001 trough of the latest recession, the current expansion in many respects has not been as vigorous as its nine postwar predecessors, according to the CBPP analysis.
Measured throughout the 18 quarters that have followed the November 2001 trough, the real (i.e., inflation-adjusted) growth rate of GDP in the current recovery has averaged 3.1 percent per year. That compares to an annual GDP growth rate of 4.2 percent that prevailed on average during the 18 quarters that followed the beginning of each of the nine previous postwar recoveries. Worth noting is the fact that several of the nine previous expansions had reverted into another recession during the 18-quarter period following the initial trough; and the deteriorating numbers from the follow-on recessions are included in the postwar averages. (In the following data, average annual real growth rates during the previous nine postwar recoveries appear in parentheses.)
During the Bush expansion, consumption has increased by an annual average of 3.1 percent (compared to 4 percent); business investment has increased by an annual average of 3.2 percent (compared to 5.8 percent); wages and salaries have increased by 2 percent per year (compared to 3.6 percent); household net worth has increased by 3.3 percent per year (compared to 4 percent); and nonfarm employment, including the projected revision that will add 810,000 jobs to the latest total, has increased by 0.9 percent per year (compared to 2.4 percent). Only corporate profits, which have increased by 13.7 percent per year during the Bush expansion, have grown at a faster rate than the average rate (7.5 percent) for previous postwar expansions.
Let's now look at how some important economic variables have performed during only the last three years. The Dow Jones Industrial Average, which stood at 9,500 in September 2003 (after falling below 8,000 from its January 2000 level of 11,700), recently passed the 12,000 mark for the first time ever. The broader-based S&P 500-stock index has increased by more than one-third since September 2003. In both cases, very strong growth in profits underlies the rallies. During the three years that ended in June, GDP expanded at an average annual rate of 3.7 percent; and business investment increased by 6.6 percent per year. Since June 2003, nominal total household net worth increased by more than $12.5 trillion, reaching $53.3 trillion in June 2006 and reflecting an average real growth rate of 5.9 percent during the previous three years. Nonfarm employment has increased by more than 6.5 million jobs over the past three years, representing an annual growth rate of more than 1.6 percent.
Meanwhile, declining gasoline prices (the average price per gallon has fallen more than 80 cents since early August) have caused the inflation rate (CPI-W) to decelerate to 1.7 percent during the last 12 months. This decelerating inflation rate has combined with an accelerating growth rate in nominal wages to generate a 2.2 percent increase in average real wages during the last 12 months. That jump represents the biggest 12-month increase since January 2002. Moreover, as the White House Council of Economic Advisers noted, the recent 2.2 percent increase in real wages "was much faster than the 1990s (0.3 percent per year) or even during the second half of the 1990s (1.2 percent per year)."
http://washingtontimes.com/op-ed/20061021-104523-2415r.htm
