A Not-So-Great Great Recession

The Great Recession was not as bad as we thought, and the recovery since then has been a little better than we thought.

That’s one of the implications of the Commerce Department’s extensive gross domestic product revisions released on Wednesday.

The department released revisions going all the way back to 1929, partly reflecting changes in methodology for how the gross domestic product and its components are calculated. For example, there’s now a new category of investment, called “intellectual property products,” which covers research and development; entertainment, literary, and artistic originals; and software.

As a result of all these changes, economic growth since 1929 has actually been a wee bit stronger than previously calculated: the average annual growth rate of inflation-adjusted growth was 3.3 percent, which is 0.1 percentage point higher than in the previously published estimates.

That’s the long-term picture. The Great Recession (which lasted from the fourth quarter of 2007 to the second quarter of 2009) also looks less formidable, at least in output terms. In the latest measures, inflation-adjusted growth decreased at an annual rate of 2.9 percent during that time, instead of the previously reported 3.2 percent. And the cumulative peak-to-trough contraction in the economy was 4.3 percent, rather than 4.7 percent.

Source: Commerce Department.

Likewise the recovery has looked slightly less lackluster than originally estimated. From the second quarter of 2009 to the first quarter of 2013, gross domestic product increased at a 2.2 percent annual rate; in the previously published estimates, it increased 2.1 percent.

For more on the statistical whiplash that major output revisions can cause, see a 2011 article from my colleague Binyamin Appelbaum.