How fast can the economy recover from a recession? A faster recovery would look like a V-shaped bounce. A slower recovery would look like a “swoosh.” The path depends on the economic sectors and time series data you look at. Here are some FRED Blog examples that study past episodes.

Slow recoveries:

• Mortgage, credit card, and commercial real estate delinquency rates were slow to decline after the 2007-2009 recession.
• The unemployment rate decreased relatively fast prior to the Great Recession but not so afterward.

Fast recoveries:

• Manufacturing activity has recovered fast after recessions –although employment in manufacturing has not.
• Financial stress quickly decreased after the Great Recession was over

What about the headline economic indicator, gross domestic product? The speed of the recovery of GDP depends on factors such as the immediate cause of the recession, the depth and length of the economic contraction, and global events occurring during the recovery.

In the hope that, even in these extraordinary times, history can teach us a lesson, we look at the FRED graph above. It shows recoveries since GDP data have been available:

• the slowest, from the Great Recession of 2007-2009
• the fastest, from the 1937-1938 recession
• and three “goldilocks” recoveries: after the 1981-1982, 1990-1991, and 2001 recessions.

The zero “date” represents the year each recession started. For all recessions except the one in 2001 (purple line), the path dips below 100 a year later, which represents a contraction in overall economic activity. For all recessions except the Great Recession (teal line), two years later real GDP is already higher than pre-recession levels. You can read more about tracking recoveries here.

How this graph was created: From a previous blog post: Search FRED for “annual real gross domestic product” and select the series with the ID “GDPCA.” Add the same series to the graph four more times. Next, change the units to “Index (Scale value to 100 for chosen date)” and use the expanded menu to select the date to which you’d like to index each series. From the U.S. recession menu, select these dates for the five series: 1937-05-01; 1981-07-01; 1990-07-01; 2001-03-01; and 2007-12-01, the start dates of the Great Depression’s second recession, early 80s recession, early 90s recession, early 2000s recession, and Great Recession (according to the NBER), respectively.
For each series, check the “Display integer periods” box. The x-axis will show integers as time periods instead of dates. The base period is shown as 0: Negative numbers represent periods (years, in this case) before the base period, and positive numbers represent periods after the base period. Change the start integer to 0, so the graph begins at the start of each recession. Change the end integer to 7, so the graph ends 7 years after each recession started. Finally, to use the same graph style shown here, select the circle option under “Mark Type.”

Suggested by Diego Mendez-Carbajo.

Sure, FRED has data related to several economic downturns and recovery periods. But it can be tough to accurately and clearly compare these different periods unless we do a little extra work. This graph uses a relatively more complicated FRED feature—integer periods—to uncomplicate the comparison of GDP growth after three economic downturns.

The graph shows GDP growth in the first 10 years after the Great Depression (blue line), in the first 10 years after the early 80’s recession (red line), and in the first 6 years since the Great Recession (green line). GDP is indexed to 100 in the year each downturn ended, shown on the x-axis as period 0, where all the lines begin. This makes the comparison more accurate and easier to follow.

As the graph clearly shows, GDP bounced back with gusto after the Great Depression and also ramped up moderately after the early 80’s recession. So far, we have only 6 years of GDP data since the previous recession, so we don’t know yet if the current recovery will catch up with past recoveries.

How this graph was created: For all three data series, search FRED for “annual real gross domestic product,” select the series with the ID “GDPCA,” change the units to “Index,” and use the expanded menu to select the date to index each series to. From the recession trough menu, select dates for the three series: March 1, 1933; November 1, 1982; and June 1, 2009, which are the end dates of the Great Depression, early 80’s recession, and Great Recession (according to the NBER), respectively.

For each series, check the “Display integer periods” box. The x-axis will show integers as time periods instead of dates. The base period is shown as 0: Negative numbers represent periods (years, in this case) before the base period, and positive numbers represent periods after the base period. Change the start integer to 0, so the graph begins at the end of each recession. Change the end integer to 10, so the graph ends 10 years after each recession.

Finally, to use the same graph style shown here, select the circle option under “Mark Type” and width 3 under “Mark Width.”

Suggested by Keith Taylor.