The Commerce Department released it’s latest revision to 2nd quarter GDP yesterday, cutting it from an annual growth rate of 2.4% to just 1.6%. So I’ve revised my figures for real per capita GDP, both with and without stimulus spending. (It’s important to track the latter as an indication of what’s happening in the underlying economy, and what will happen when the stimulus spending ends.) Here’s the updated chart:
Strip away the stimulus spending, and real per capita GDP (GDP adjusted for population growth) fell at an annual rate of 3.8%. This is faster than the rate of decline during any quarter of the financial melt-down that took place from the 1st quarter of 2008 through the 3rd quarter of 2009. Real per capita GDP, with stimulus spending factored out, is now down by 8.7% from its peak in the 4th quarter of 2007. Over the last five years, dating back to the 3rd quarter of 2005, real per capita GDP with stimulus spending removed has risen in only five quarters out of twenty.
GDP declines during the Great Depression were much worse:
- 1930: – 8.6%
- 1931: – 6.4%
- 1932: – 13%
- 1933: – 1.3%
A decline of 3.8% (with stimulus spending factored out) doesn’t rise to these levels. But a decline of 8.7% from its peak 2-1/2 years ago does, although it’s happening at a slower pace. So it begs the question: is the U.S. trapped in a slow-motion version of the 1930s Great Depression? As the stimulus spending winds down by the end of this year, we’ll have a better idea. But given the huge decline in the housing market following the expiration of the tax credits, the soaring trade deficit, the slow-down in manufacturing and rising first-time jobless claims, it’s not looking good.