A report on Great Recession and Economy of the United States

World map showing real GDP growth rates for 2009; countries in brown were in a recession.

New York City, the financial center of the United States

A bank run at a branch of the Northern Rock bank in Brighton, England, on September 14, 2007, amid speculation of problems, prior to its 2008 nationalisation.

Washburn and Moen Manufacturing Company in Worcester, Massachusetts, 1876

U.S. residential and non-residential investment fell relative to GDP during the crisis

Oil wells at Los Angeles, California, 1905

U.S. households and financial businesses significantly increased borrowing (leverage) in the years leading up to the crisis

Consolidated B-24 Liberators at the Consolidated-Vultee Plant, Fort Worth, Texas, 1943

US household debt relative to disposable income and GDP.

McDonald's restaurant in Mount Pleasant, Iowa

U.S. Changes in Household Debt as a percentage of GDP for 1989–2016. Homeowners paying down debt for 2009–2012 was a headwind to the recovery. Economist Carmen Reinhart explained that this behavior tends to slow recoveries from financial crises relative to typical recessions.

President Donald Trump with key automobile industry leaders, 2017

Housing price appreciation in selected countries, 2002–2008

United States real quarterly GDP (annualized)

Securitization markets were impaired during the crisis.

U.S. cumulative real (inflation-adjusted) GDP growth by US president (from Reagan to Obama).

Several major U.S. economic variables had recovered from the 2007–2009 Subprime mortgage crisis and Great Recession by the 2013–2014 time period.

Number of Businesses by Type (US Census Bureau 2019)

U.S. Real GDP – Contributions to Percent Change by Component 2007–2009

Public Debt to GDP Ratio for Selected European Countries – 2008 to 2011. Source Data: Eurostat

Job growth by US president, measured as cumulative percentage change from month after inauguration to end of term.

Relationship between fiscal tightening (austerity) in Eurozone countries with their GDP growth rate, 2008–2012

Panel chart illustrates nine key economic variables measured annually in 2014–2017. The years 2014–2016 were during President Obama's second term, while 2017 was during President Trump's term. Refer to citations on detail page.

Slovenian anarchist anti-fascist protest due to the great recession.

US Census Bureau (Number of Employees per Business)

Sydney's financial district at night. Throughout the Great Recession, the Australian economy remained resilient and stable.

The anti-austerity movement in Spain, May 2011

U.S. real median household income (1984–2018)

Federal Reserve Holdings of Treasury and Mortgage-Backed Securities

U.S. share of income (pre-tax and after-tax) earned by top 1% households in 1979, 2007, and 2015 (CBO data). The first date (1979) reflects the more egalitarian pre-1980 period, 2007 was the peak inequality of the post-1980 period, and the 2015 number reflects the Obama tax increases on the top 1% along with residual effects of the Great Recession.

Bank bailouts in the United Kingdom and in the United States in proportion to their GDPs.

U.S. family pre-tax income and net worth distribution for 2013 and 2016, from the Federal Reserve Survey of Consumer Finances.

Number in Poverty and Poverty Rate: 1959 to 2016. United States.

Wealth inequality in the United States increased from 1989 to 2013.

U.S. health insurance coverage by source in 2016. CBO estimated ACA/Obamacare was responsible for 23 million persons covered via exchanges and Medicaid expansion.

Chart showing life expectancy at birth and health care spending per capita for OECD countries as of 2013. The U.S. is an outlier, with much higher spending but below average life expectancy.

Bar chart comparing healthcare costs as percentage of GDP across OECD countries

U.S. uninsured number (millions) and rate (%), including historical data through 2016 and two CBO forecasts (2016/Obama policy and 2018/Trump policy) through 2026. Two key reasons for more uninsured under President Trump include: 1) Eliminating the individual mandate to have health insurance; and 2) Stopping cost sharing reduction payments.

Survival rate of U.S. start-ups, 1977–2012. Source: U.S. Census Bureau, Business Dynamic Statistics, Published by Gallup, reproduced in UNESCO Science Report: towards 2030, Figure 5.7, p. 143

The Interstate Highway System extends 46876 mi.

The Port of Houston, one of the largest ports in the United States.

Countries by natural gas proven reserves (2014). The U.S. holds the world's fourth largest natural gas reserves.

Protectionist measures since 2008 by country.

The Federal Reserve is the central banking system of the United States

Number of countries having a banking crisis in each year since 1800. This is based on This Time is Different: Eight Centuries of Financial Folly which covers only seventy countries. The general upward trend might be attributed to many factors. One of these is a gradual increase in the percent of people who receive money for their labor. The dramatic feature of this graph is the virtual absence of banking crises during the period of the Bretton Woods agreement, 1945 to 1971. This analysis is similar to Figure 10.1 in Reinhart and Rogoff (2009). For more details see the help file for "bankingCrises" in the Ecdat package available from the Comprehensive R Archive Network (CRAN).

CBO: U.S. Federal spending and revenue components for fiscal year 2020. Major expenditure categories are healthcare, Social Security, and defense; income and payroll taxes are the primary revenue sources.

Congressional Budget Office (CBO) baseline scenario comparisons: June 2017 (essentially the deficit trajectory that President Trump inherited from President Obama), April 2018 (which reflects Trump's tax cuts and spending bills), and April 2018 alternate scenario (which assumes extension of the Trump tax cuts, among other current policy extensions).

Boeing CEO Dennis Muilenburg at the 787-10 Dreamliner rollout ceremony

Restaurants and shops in Chinatown, Philadelphia

Percent of U.S. economy from State-owned Enterprises or GSEs

Tennessee in 1897. The U.S. was a leader in the adoption of electric lighting

Steve Jobs and Bill Gates are two of the best-known American entrepreneurs.

Quarterly U.S. venture capital investments, 1995–2017

Gross domestic expenditure on R&D in the U.S. as a percentage of GDP, 2002–2013. Other countries are given for comparison. Source: UNESCO Science Report: towards 2030

World shares of GDP, research spending, researchers and scientific publications, 2009 and 2013. Source: UNESCO Science Report: towards 2030, Figure 1.7

US research and development budget by government agency, 1994–2014. Source: UNESCO Science Report: towards 2030, Figure 5.4, based on data from American Association for the Advancement of Science

Science and engineering in the U.S. by state. Source: UNESCO Science Report: towards 2030, Figure 5.6, based on data from American Association for the Advancement of Science

High-tech exports from the U.S. as a percentage of the world share, 2008–2013. Source: UNESCO Science Report: towards 2030, Figure 5.10, based on Comtrade database

A typical Walmart discount department store (location: Laredo, Texas).

The New York Stock Exchange is the largest stock exchange in the world.

United States historical inflation rate, 1666–2019.

Contributions to Percent Change in Real GDP (1930–1946), source Bureau of Economic Analysis

Contributions to Percent Change in Real GDP (1947–1973), source Bureau of Economic Analysis

Contributions to Percent Change in Real GDP (1974–1990), source Bureau of Economic Analysis

Contributions to Percent Change in Real GDP (1991–2008), source Bureau of Economic Analysis

Real GDP per capita in the United States

Historical growth of the U.S. economy from 1961–2015

US Gross Private Domestic Investment and Corporate Profits After Tax as shares of Gross Domestic Product

The Percentage of the U.S. working age population employed, 1995–2012.

Official U.S. unemployment rate, 1950–2005

United States mean duration of unemployment 1948–2010.

All employees, private industries, by branches

U.S. manufacturing industry's share of nominal GDP

U.S. Change in real income versus selected goods and services v1

Mean Quintile Household Income (1967-2015)<ref>{{cite web |url=https://fas.org/sgp/crs/misc/R44705.pdf |title=The U.S. Income Distribution: Trends and Issues |website= |archive-url= |archive-date= |access-date=5 March 2022}}</ref>

U.S. real median household income, 1967-2014<ref name="hbs.edu">{{cite web |url=http://www.hbs.edu/competitiveness/Documents/problems-unsolved-and-a-nation-divided.pdf |title=Problems Unsolved and A Nation Divided |website= |archive-url= |archive-date= |access-date=5 March 2022}}</ref>

Real family income indexed to 1973, across the distribution 1947-2014<ref name="hbs.edu" />

Real compensation per hour in the U.S. (1947–2021).

Historical graph of real wages in the U.S. from 1964 to 2005.

Median Real Wages by Educational Attainment.png<ref>{{cite web |url=https://fas.org/sgp/crs/misc/R45090.pdf |title=Real Wage Trends, 1979 to 2019 |website= |archive-url= |archive-date= |access-date=5 March 2022}}</ref>

Productivity and real median family income growth, 1947–2009.

Gini Coefficient for Household Income (1967–2007), source United States Chamber of Commerce

U.S. Income Shares of Top 1% and 0.1% 1913–2013

Life expectancy vs healthcare spending of rich OECD countries.<ref name=life>Link between health spending and life expectancy: US is an outlier. May 26, 2017. By Max Roser at Our World in Data. Click the sources tab under the chart for info on the countries, healthcare expenditures, and data sources. See the later version of the chart here.</ref><ref name=Kenworthy2011>{{cite web|last= Kenworthy|first= Lane|date= July 10, 2011|title= America's inefficient health-care system: another look|publisher= Consider the Evidence (blog)|url= http://lanekenworthy.net/2011/07/10/americas-inefficient-health-care-system-another-look/ |access-date=September 11, 2012}}</ref>

International Comparison{{nbs}}Healthcare spending as % GDP

Average tariff rates for selected countries (1913–2007)

Average tariff rates on manufactured products

U.S. trade balance and trade policy (1895–2015)

$U.S. federal effective tax rates by income percentile and component as projected for 2014 by the Tax Policy Center.<ref>{{cite web|title=Effective tax rates: income, payroll, corporate and estate taxes combined|url=http://pgpf.org/Chart-Archive/0102_tax-rates|publisher=Peter G. Peterson Foundation|access-date=November 3, 2013|date=July 1, 2013}}</ref><ref>{{cite web|title=T13-0174 – Average Effective Federal Tax Rates by Filing Status; by Expanded Cash Income Percentile, 2014|url=http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3933|publisher=Tax Policy Center|access-date=November 3, 2013|date=July 25, 2013|archive-url=https://web.archive.org/web/20141211105316/http://www.taxpolicycenter.org/numbers/displayatab.cfm?DocID=3933|archive-date=December 11, 2014|url-status=dead|df=mdy-all}}</ref>$

CBO estimates of historical effective federal tax rates broken down by income level.<ref name = "CBO 2010">{{cite web|url=http://cbo.gov/publication/44604|title=The Distribution of Household Income and Federal Taxes, 2010|publisher=The US Congressional Budget Office (CBO)|date=December 4, 2013|access-date=August 13, 2014}}</ref>

Federal, state, and local government spending as a % of GDP history

A pie chart showing global military expenditures by country for 2019, in US${{nbs}}billions, according to SIPRI.

$Assets of the United States as a fraction of GDP 1960–2008$

$Liabilities of the United States as a fraction of GDP 1960–2009$

Development of U.S. federal government debt ceiling from 1990 to January 2012.<ref>{{cite web|url=https://obamawhitehouse.archives.gov/omb/budget/historicals|title=Table 7.3 – Statutory Limits on Federal Debt: 1940–Current|publisher= Office of Management and Budget|access-date=December 25, 2013}}</ref>

U.S. public net debt and the total public debt

The U.S. economy experienced a serious economic downturn during the Great Recession, defined as lasting from December 2007 to June 2009.

- Economy of the United States

2) The U.S. economy was being driven by a housing bubble. When it burst, private residential investment (i.e., housing construction) fell by over four percent of GDP. Consumption enabled by bubble-generated housing wealth also slowed. This created a gap in annual demand (GDP) of nearly $1 trillion. The U.S. government was unwilling to make up for this private sector shortfall.

- Great Recession

4 related topics with Alpha

Dorothea Lange's Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, age 32, a mother of seven children, in Nipomo, California, March 1936.

Great Depression

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Severe worldwide economic depression between 1929 and 1939 that began after a major fall in stock prices in the United States.

The unemployment rate in the U.S. during 1910–60, with the years of the Great Depression (1929–39) highlighted

The Dow Jones Industrial Average, 1928–1930

Money supply decreased considerably between Black Tuesday and the Bank Holiday in March 1933 when there were massive bank runs across the United States.

Crowd gathering at the intersection of Wall Street and Broad Street after the 1929 crash

The Great Depression in the U.S. from a monetary view. Real gross domestic product in 1996-Dollar (blue), price index (red), money supply M2 (green) and number of banks (grey). All data adjusted to 1929 = 100%.

Crowd at New York's American Union Bank during a bank run early in the Great Depression

Crowds outside the Bank of United States in New York after its failure in 1931

Power farming displaces tenants from the land in the western dry cotton area. Childress County, Texas, 1938

The Depression in international perspective

The overall course of the Depression in the United States, as reflected in per-capita GDP (average income per person) shown in constant year 2000 dollars, plus some of the key events of the period. Dotted red line = long-term trend 1920–1970.

A female factory worker in 1942, Fort Worth, Texas. Women entered the workforce as men were drafted into the armed forces.

An impoverished American family living in a shanty, 1936

Unemployed men march in Toronto, Ontario, Canada.

Benito Mussolini giving a speech at the Fiat Lingotto factory in Turin, 1932

Unemployed people in front of a workhouse in London, 1930

Unemployed men standing in line outside a depression soup kitchen in Chicago 1931.

Burning shacks on the Anacostia flats, Washington, D.C. put up by the Bonus Army (World War I veterans) after the marchers with their wives and children were driven out by the regular Army by order of President Hoover, 1932

Buried machinery in a barn lot; South Dakota, May 1936. The Dust Bowl on the Great Plains coincided with the Great Depression.

CCC workers constructing drainage culvert, 1933. Over 3 million unemployed young men were taken out of the cities and placed into 2,600+ work camps managed by the CCC.

The WPA employed 2–3 million at unskilled labor.

Black Friday, May 9, 1873, Vienna Stock Exchange. The Panic of 1873 and Long Depression followed.

By comparison, worldwide GDP fell by less than 1% from 2008 to 2009 during the Great Recession.

The decline in the U.S. economy was the factor that pulled down most other countries at first; then, internal weaknesses or strengths in each country made conditions worse or better.

John Maynard Keynes

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English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

King's College, Cambridge. Keynes's grandmother wrote to him saying that, since he was born in Cambridge, people will expect him to be clever.

Keynes's colleague, David Lloyd George. Keynes was initially wary of the "Welsh Wizard," preferring his rival Asquith, but was impressed with Lloyd George at Versailles; this did not prevent Keynes from painting a scathing picture of the then-prime minister in The Economic Consequences of the Peace.

The Great Depression and its periods of worldwide economic hardship formed the backdrop against which the Keynesian Revolution took place. This image is Migrant Mother, taken by photographer Dorothea Lange in March 1936.

Keynes (right) and the US representative Harry Dexter White at the inaugural meeting of the International Monetary Fund's Board of Governors in Savannah, Georgia in 1946

Prime Minister Clement Attlee with King George VI after Attlee won the 1945 election

Neo-Keynesian IS–LM model is used to analyse the effect of demand shocks on the economy

The economist Manmohan Singh, the then prime minister of India, spoke strongly in favour of Keynesian fiscal stimulus at the 2008 G-20 Washington summit.

Friedrich Hayek, one of Keynes's most prominent critics

Painter Duncan Grant (left) with Keynes in 1912

46 Gordon Square, where Keynes often stayed while in London. Following his marriage, Keynes took out an extended lease on Tilton House, a farm in the countryside near Brighton, which became the couple's main home when not in the capital.

Keynes's influence started to wane in the 1970s, partly as a result of the stagflation that plagued the Anglo-American economies during that decade, and partly because of criticism of Keynesian policies by Milton Friedman and other monetarists, who disputed the ability of government to favourably regulate the business cycle with fiscal policy.

Although many economists, such as George Akerlof, Paul Krugman, Robert Shiller, and Joseph Stiglitz, supported Keynesian stimulus, others did not believe higher government spending would help the United States economy recover from the Great Recession.

Unemployment

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People above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the reference period.

US unemployment rate, 1990—2022. The increase in unemployment during recessions (shaded) is called cyclical unemployment.

Short-Run Phillips Curve before and after Expansionary Policy, with Long-Run Phillips Curve (NAIRU). Note, however, that the unemployment rate is an inaccurate predictor of inflation in the long term.

Okun's Law interprets unemployment as a function of the rate of growth in GDP.

The Beveridge curve of 2004 job vacancy and unemployment rate (from the US Bureau of Labor Statistics)

Karl Marx, Theorien über den Mehrwert, 1956

Unemployment in Europe (2020) according to Worldbank

Unemployment rates from 2000–2019 for United States and Japan and European Union

Unemployment rate in the US by county in 2008

U1–U6 since 1950, as reported by the Bureau of Labor Statistics

A government unemployment office with job listings, West Berlin, West Germany, 1982

Migrant Mother, photograph by Dorothea Lange, 1936

Demonstration against unemployment in Kerala, South India, India on 27 January 2004

Unemployment rate in Germany in 2003 by states

In the Shapiro–Stiglitz model of efficiency wages, workers are paid at a level that dissuades shirking. That prevents wages from dropping to market clearing levels.

Supply-side economics proposes that lower taxes lead to employment growth. Historical state data from the United States shows a heterogeneous result.

Tax decreases on high income earners (top 10%) are not correlated with employment growth, but tax decreases on lower-income earners (bottom 90%) are correlated with employment growth.

Unemployed men outside a soup kitchen in Depression-era Chicago, Illinois, United States, 1931

The Depression of 1873–79: New York City police violently attacking unemployed workers in Tompkins Square Park, Manhattan, New York City 1874

WPA poster promoting the benefits of employment

Unemployment rate of Japan. Red line is G7 average. 15-24 age (thin line) is Youth unemployment.

US labor force participation rate from 1948 to 2021, by gender.
Male participation
Total labor force participation
Female participation

A historic shift began around the end of the Great Recession as women began leaving the labor force in the United States and other developed countries.

The increasing US trade deficit with China cost 2.4 million American jobs between 2001–2008, according to a study by the Economic Policy Institute (EPI).

Fig. 1: Robert Shiller's plot of U.S. home prices, population, building costs, and bond yields, from Irrational Exuberance, 2nd ed. Shiller shows that inflation-adjusted U.S. home prices increased 0.4% per year from 1890 to 2004 and 0.7% per year from 1940 to 2004, whereas U.S. census data from 1940 to 2004 shows that the self-assessed value increased 2% per year.

2000s United States housing bubble

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Real estate bubble affecting over half of the U.S. states.

A graph showing the median and average sales prices of new homes sold in the United States between 1963 and 2010.

Inflation-adjusted housing prices in the United States by state, 1998–2006.

Bank run on the U.K.'s Northern Rock Bank by customers queuing to withdraw savings in a panic related to the U.S. subprime crisis.

The impact of booming home valuations on the U.S. economy since the 2001–2002 recession was an important factor in the recovery, because a large component of consumer spending was fueled by the related refinancing boom, which allowed people to both reduce their monthly mortgage payments with lower interest rates and withdraw equity from their homes as their value increased.

Because of these remarks, as well as his encouragement of the use of adjustable-rate mortgages, Greenspan has been criticized for his role in the rise of the housing bubble and the subsequent problems in the mortgage industry that triggered the economic crisis of 2008.