Tuesday, October 5, 2010
Ezra Klein points to some wonderful graphs by Neil Irwin. Irwin's interactive graphs show, much more clearly, what I was trying to get at back in this post. Basically, there's a huge gap between the pre-recession trend and actual GDP growth. It's going to be difficult, if not impossible, to get back to full employment if we continue this anemic growth. A robust recovery generally sees GDP growth above the pre-recession average, which enables GDP to return to trend quickly. That hasn't happened this time; in fact, we're seeing GDP growth below pre-recession average, which is creating a huge gap between our potential output and actual output.