On Friday, July 27, 2012, the Bureau of Economic Analysis revised its estimates of U.S. inflation-adjusted GDP going back to the first quarter of 2009. Our animated chart below shows what changed:
The quick takeaways:
- The U.S. economy performed better than previously reported in 2009, as the December 2007 recession bottomed and began turning around.
- The economic recovery following the bottoming of the recession has been far weaker than the previously reported data indicated.
- We really don't know what to make of the GDP data recorded in 2011-Q4 onward, where the reported data is really characterized by its relative lack of adjustment in the BEA's July 27, 2012 revision. It would be really odd that after the rather large adjustments of 2009 through 2011-Q3 that the BEA would suddenly master the determination of GDP for just these most recent quarters.
Taking the bigger picture into account, given the typical 6-to-8 month lag in time from when macroeconomic policies are implemented to when they begin having a measurable effect upon the economy, it would appear that the policies implemented by the U.S. government and Federal Reserve in 2008 were more effective in arresting the decline of U.S. GDP and initiating the economic recovery in the second quarter of 2009 than the data previously suggested.
Meanwhile, the revised GDP data suggests that policies implemented by the U.S. government in and after 2009 would appear to have been largely ineffective in promoting a more robust economic recovery, as they failed build on the energy it took to arrest the decline and to begin the recovery in the first place.
We wonder when the policy makers of 2009 and afterward first recognized that their policies weren't working the way they believed they would. And perhaps a better question is why didn't they adapt those policies once they did?