An earlier version of the chart above was featured on CD in November and it generated a lot of interest and 133 comments, so I'm providing an update here based on employment and real GDP data through 2011. More than any single chart, I think this one really helps to accurately capture graphically the current state of the U.S. economy, although Scott Grannis has another GDP graph that also helps us understand today's economic situation.
1. Measured by real output (GDP), the U.S. economy has made a complete recovery from the 2007-2009 recession. Real output in Q4 of 2011 was higher than the 2007 Q4 level when the recession started by 0.72%.
2. While real output has completely recovered to above pre-recession levels, U.S. civilian employment at 140.56 million is still 5.7 million jobs (and 3.9%) below the 2007 peak of 146.27 million jobs, and that translates into the ongoing and persistent "jobless recovery."
3. The recovery of real output to historical highs with 3.9% fewer employees has also translated into record-level corporate profits, which are now 40% above pre-recession levels.
4. The recovery of both output and profits to above 2007 levels with 5.7 million fewer workers could explain the sluggish job growth that will probably continue for several more years. If companies can produce more output now than in 2007 with fewer workers and record profits, where's the incentive to hire more workers?
The Great Recession stimulated huge productivity and efficiency gains as companies shed marginal workers and learned how to do "more with less (fewer workers)." The surge in productivity over the last few years may be unprecedented in recent history and may be responsible for a "structural shift" in the U.S. economy that will have long-lasting effects, e.g. an extended period of time with a jobless rate above 7%.