U.S. Outlook for 2011.

• Author: Witte, Willard E.

Over the past three years, the U.S. economy has been a model of diabolical consistency. During 2008 and the first half of 2009, it produced the worst recession since the Great Depression. During the time since, it has produced the worst recovery since World War II.

As can be seen in Figure 1, the Great Recession (as it is being called) began at the end of 2007. The Business Cycle Dating Committee of the National Bureau of Economic Research recently proclaimed that it ended in June 2009. This dating means that the recession lasted 18 months, the longest since World War II. At its low point (the cycle trough), output in the economy had fallen to 4.1 percent below its pre-recession peak, the largest decline since World War II. As shown in Table 1, this output decline is well above twice the average for previous recessions. Adding insult to injury, the "recovery" has been lackluster at best. Over the five quarters since the economy hit bottom total growth has been only 3.6 percent. After more than a year, output is still below its peak, with performance less than half that following previous downturns.

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TABLE 1: Impact of Recession on Output and Employment Output Private Sector Employment Peak-to-Trough Five Peak-to-Trough Five Quarters Decline Quarters Decline After Trough After Trough Average of 9 -1.6% 7.9% -2.9% 3.8% Post-War Recessions 2007-2009 -4.1% 3.6% -6.1% -0.5% Recession Source: Bureau of Economic Analysis and Bureau of Labor Statistics The employment picture, shown in Figure 2, is even more grim. At the official end of the recession, the private sector had a job loss of 6.5 percent (over 7 million). Following the patterns of the 1990 and 2001 recessions (but unlike earlier recessions), employment continued to decline after the recovery began, with 8.4 million jobs lost between December 2007 and December 2009. During the next 10 months the private sector added about 1.1 million jobs, but this still left employment in negative territory for the first five quarters of the recovery, as opposed to the substantial gains experienced in earlier recessions.

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And, if all this wasn't enough, the recovery seems to have lost momentum. After accelerating to growth averaging an annual rate of 4.4 percent in the last quarter of 2009 and the first quarter of 2010, growth over the next two quarters fell off to an average of only 2.1 percent. Private sector job creation reached a relatively healthy 241,000 in...