What A Real Recovery Looks Like
It would be instructive then to outline what a real recovery would look like. The 1983-84 recovery provides a real good example. Like the current recovery it was preceded by a deep recession, but the recovery had a very different character. Between the fourth quarter of 1982 and the fourth quarter of 1984 we saw the following:
The GDP volume rose by 13.7% (6.6% at an annual rate)
terms of trade adjusted GDP rose by 14.5% (7% at an annual rate and real disposable income excluding transfer payments rose by 12.5% (6.1% at an annual rate).
Real national income rose by 16.2% (7.8% at an annual rate) reflecting a gain in real corporate profits by 49.3% (22.2% at annual rate), and an increase real labor income (aka "compensation of employees") by 11.6% (5.7% at an annual rate)
The latest number reflected both an increase in the number of jobs by 7.3 million or 8.3% (which given the size of the current labor force would be more than 10 million new jobs in just 2 years) and an increase in real average weekly earnings by 2.6%. Note that almost all of these new jobs were in the private sector and that private sector employment rose as much as 10% in 2 years. As result, the unemployment rate dropped from 10.8% in December 1982 to 7.3% in December 1984 despite a significant increase in the size of the labor force.
And despite the fact that there were net tax cuts, real federal tax revenues rose by 5.9%.
(As a technical note, I deflated all the above numbers except volume GDP and of course the employment and unemployment numbers with the gross domestic purchases deflator to make the real numbers comparable)
Now that's a real recovery. Before we can start talking about a recovery worth mentioning we should see numbers which are, if not quite as strong as during the extremely robust 1983-84 boom (matching that is pretty tough), but at least as consistently showing positive growth.