In this diary, I quote the word recovery since many dont actually feel this is a recovery and many probably didnt in 1981 or 1983 either.
What I am trying to do is look at what happened in those "recoveries" from severe recessions and how they compared to today's and what might be different between the recoveries of then and now.
Both the 1981 and 1983 recoveries were very robust as you will see below and showed the kind of growth that we cant get anymore in this country for several reasons.
The 1981 recovery actually started in the fourth quarter of 1980, when real GDP grew at annual rate of 7.4% after shrinking by 8% and .7% in the second and third quarters respectively.
Here is some data from this recovery:
Real GDP Growth Unemployment Rate Federal Funds Rate
Q1 1980 1.2% 6.3% 17.2%
Q2 1980 -8.1% 7.6% 9.47%
Q3 1980 -.7% 7.5% 10.9%
Q4 1980 7.4% 7.2% 18.9%
Q1 1981 8.1% 7.4% 14.7%
Q2 1981 -3.1% 7.5% 19.1%
Q3 1981 4.8% 7.6% 15.87%
Q4 1981 -5% 8.5% 12.37%
This was a classic double dip. The fed had rates way too high at the start of the year and lowered them at mid year which sparked a short lived recovery in the latter part of the year and into early 1981. Then, the fed started raising rates sharply at the end of 1980 which made sure that this recovery would be killed in its infancy.
The 1983 recovery actually started in the final quarter of 1982:
Real GDP Growth Unemployment Rate Federal Funds Rate
Q1 1982 -6.56% 9% 14.68%
Q2 1982 2.2% 9.6% 14.15%
Q3 1982 -1.5% 10.1% 10.31%
Q4 1982 .35% 10.8% 8.95%
Q1 1983 4.9% 10.3% 8.77%
Q2 1983 9% 10.1% 8.98%
Q3 1983 7.9% 9.2% 9.45%
Q4 1983 8.2% 8.3% 9.47%
What we saw here was the continued effects of the fed raising rates and their effect on economic growth. The economy absolutely exploded with growth once the fed got rates down to the sub 9% level from around 15%. These recessions and recoveries were clearly the result of lowering and raising interest rates.
Now lets look at the 2010 recovery, which actually started in mid 2009:
Real GDP Growth Unemployment Rate Federal Funds Rate
Q1 2009 -5% 8.6% .18%
Q2 2009 -.7% 9.5% .21%
Q3 2009 1.6% 9.8% .15%
Q4 2009 4.9% 10% .12%
Q1 2010 3.7% 9.7% .16%
Q2 2010 2.4% 9.5% .18%
The difference between this recession/recovery and the ones in 1981 and 1983 is both the speed of GDP growth coming out of the recession and fed policy. This time, fed policy and interest rates appear to be having almost no effect on economic growth the way they did in these other two periods. What this tells me is that this isnt just a cyclical recession and the fed wont be able to drastically cut interest rates to get a surge in economic growth the way they did in 1981 and 1983.