Although the Great Recession is long over, the ensuing recovery continues. The recession, which technically lasted from December 2007 through June 2009, was the period in which economic output in the United States shrank (a 4.7-percent drop in real Gross Domestic Product (GDP) from peak to trough). From that point, the economy has been expanding at an annualized clip of approximately 2.1 percent per year, with recent reports reflecting a slowing in this key metric.
One indication of the nation’s relative economic progress is to compare its current GDP with its “potential GDP.” Potential GDP is an estimate of what the U.S. economy is expected to produce over the longer run. During recessions, the economy tends to dip below potential GDP; and, during most recovery cycles, the nation expands at a faster-than-average clip as the economy strives to “catch up.” This recovery, however, is different. Three years post-recession, U.S. GDP remains 5.8 percent below its potential level, with actual GDP of $13.7 trillion below potential GDP of $14.5 trillion.
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