The Three Stages of the Post-War Economy

Here’s a look at the growth of the U.S. GDP in real terms since 1947, but I’ve made one major change: I’ve divided the data series by a trend line growing at 3.2% per year.

Ten

Doing this shows the post-war economy in three distinct stages. In the early post-war period, from 1947 to 1966 (in green), the economy grew faster than 3.2% per year. Then, from 1966 to 2000 (in blue), the economy mostly kept pace with the 3.2% trend line. The final portion is since 2000 (in purple) as the economy has markedly lagged the 3.2% trend line.

Let me make it clear that I’m adding an artificial framework to this data. That criticism is accurate. Still, I believe I’m doing this in a fair way, and seen my way, the economy clearly outlines three different periods.

You can surely quibble with the precise turning points. I think some people may claim that the post-war extended until 1973. Either way, I don’t think these shifts are truly quite so abrupt, but the larger trend is obvious.

Why is this so?

I’ve left out an important variable, which is population growth. After WW2, the United States had a famous Baby Boom. In recent years, fertility rates have dropped although immigration has increased.

Adjusting for population, I wonder if we’ve seen a large drop-off at all.

But if we look at GDP growth per capita, I’m curious which age cohort ought to be used. Should we use the entire population, or would it be more appropriate to use those in the workforce? I’m not sure of the right answer. Perhaps the aging population doesn’t make our recent economic growth seem so poor.

Are we truly worse off, or are we just getting older? I don’t know the answer.

Posted by on June 20th, 2016 at 12:02 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.