Fed Fail

Picture of a Slog by Jared Bernstein

–In fact, 2.5% is considered the trend growth rate in the economy—about the average over a cycle.  The problem is we’re coming off of such a deep recession, we need a bunch of quarters that do much better than average.  In other words, we need a “V”-shaped recovery; we’re getting more of an “L.”

–real GDP is finally back to its pre-recession peak, and it’s taken us an historically very long time to get here.  The figure (hat tip, BH) shows the number of quarters it has taken in the past for real GDP growth to regain its prior peak before the recession knocked it down (the top date on the x-axis is the quarter that GDP regained the peak; the bottom date is the prior peak).  The average is 5.2 quarters…this go round, it took 15.   That, my friends, is a long slog.

In comments, Bernstein writes that during the Great Depression it took seven years - 1929-1936 - to reach the pre-depression peak.

Was the Fed aiming for 15 quarters until we returned to pre-recession peak?