9%

Difference in 

growth after 

3 years

real gdp 

(Before and after recessions since WWII)

12 10 8 6 4 2 Trough 2 4 6 8 10 12

Average Cycle

Current Cycle

Quarters Before Trough Quarters After Trough

-10

-5

0

5

10

15

20

What explains the difference in growth of real GDP between the current cycle and the average cycle?

Percentage difference relative to the trough 

The average cycle, or the pattern of economic growth before and after the end (or trough) of a recession, is the average for cycles since 1945 (except those followed 

by another recession within 3 years). The current cycle is from the 2nd quarter of 2006 to the 2nd quarter of 2012, with the trough in the 2nd quarter of 2009. 

2/3 is from slower growth in the productive 

capacity of the economy (potential GDP) 1/3 is from slower growth of output (real GDP) 

relative to the productive capacity of the economy

-10

-15

-5

0

5

10

15

12 10 8 6 4 2

Quarters Before Trough Quarters After Trough

Trough

2/3

of the 

9 percentagepoint difference 

between the 

average cycle 

and the current 

cycle

Average Cycle

Current Cycle

potential gdp

Why has potential GDP grown more slowly?

2 4 6 8 10 12

In part reflecting In part reflecting 

long-standing trends, 

efficiency in producing 

goods and services grew 

more slowly in the 

current recovery than it 

did in past recoveries. 

(That level of efficiency, 

or potential “total factor 

productivity,” is the 

average real output per 

unit of input from labor 

and capital services 

combined, adjusted for 

variations caused by the 

business cycle.)

The flow of services 

available from capital 

assets—such as equipment, 

structures, inventories, 

and land—grew more 

slowly in the current 

recovery, because net 

investment (relative to the 

existing stock of those 

assets) was much lower 

during this recession than 

in others and because of 

long-standing trends in 

potential employment 

and productivity.

long-standing trends, 

the potential number

of employed workers 

(the number of employed 

workers adjusted for 

variations caused by the 

business cycle) grew half 

as quickly between 2009 

and 2012 as it did during 

eight previous recoveries, 

because of slower growth 

in the population of 

working-age people 

and other factors.

Total Factor 

Employment TFP Productivity

Capital 

Services

Shares indicate the contribution to the slowed pace of 

growth of potential GDP since the end of the recession.

More than

1/3

About

1/5

More than

1/3

-1% Slow growth in 

tax revenues and

federal grants

A decline in

defense purchases

Overbuilding during the

housing boom; weak

household formation

Loss of wealth; a bigger decline in 

the share of national income going 

to workers; weak confidence 

Rebound from unusually weak investment 

in capital during the recession

Slow growth in the United States; 

strong growth in emerging markets

State and Local 

Governments’ 

Purchases

Federal 

Government’s 

Purchases

Residential 

Investment

Consumer 

Spending

Business 

Investment

Net Exports

-3/4%

-3/4%

-3/4%

+1/4%

+1/2%

-10

-15

-5

0

5

10

15

12 10 8 6 4 2 2

Quarters Before Trough

4 6 8 10 12

Quarters After Trough

Trough

Current Cycle Average Cycle

How have the components of real GDP differed

from their usual pattern relative to potential GDP?

Numbers show how much each component of GDP affected the growth of the 

ratio of real GDP to potential GDP compared with the average for previous recoveries.

real gdp as a 

1/3

of the 

9 percentagepoint difference 

between the 

average cycle 

and the current 

cycle

percentage of potential gdp

The U.S. economy has grown slowly since the deep recession in 2008 

and 2009. In the three years following the recession, the cumulative 

growth of the nation’s output—real (inflation-adjusted) gross domestic 

product (GDP)—was nearly 9 percentage points below the average seen 

in previous economic recoveries since the end of World War II, or less 

than half the average growth during those other recoveries. 

slow recovery

What Accounts for the Slow Growth of 

the Economy After the Recent Recession?

Prepared by: Maureen Costantino and Jonathan Schwabish

Contacts: Mark Lasky and Charles Whalen, Macroeconomic Analysis Division

Published: November 2012

Source: Congressional Budget Office

For details, see What Accounts for the Slow Growth of the Economy After the Recession? (www.cbo.gov/publication/43712)