By some measures the U.S. economy is doing well, with unemployment at an 18-year low and second-quarter economic growth rising at its fastest clip in more than a dozen years. But that doesn’t mean Americans have fully recovered from the 2008 financial crisis.
The housing crash and ensuing recession cost the average person a total of $70,000 in lifetime income, the Federal Reserve Bank of San Francisco estimates in a new study. The crash also stunted the size of the economy as measured by the nation’s inflation-adjusted gross domestic product — the total value of goods and services produced in a given year — and it’s doubtful the country will ever regain the ground lost, the researchers conclude.
“The size of the U.S. economy, as measured by GDP adjusted for inflation, is well below the level implied by the growth rates that prevailed before the financial crisis and Great Recession a decade ago,” the researchers wrote, adding that policymakers are “rightfully worried” that economic activity might not revert to its trend before the crisis.
Without the massive financial shocks that came in 2007 and 2008, the economy likely would have resembled would happened after the far milder 1991 recession, when GDP fell by just 1.5 percent before bouncing back a few years later, Regis Barnichon, a San Francisco Fed research adviser, and his co-authors, both economists, found.
Other signs also show the scars left by the Great Recession, which started in December 2007 as the collapse in housing prices threatened to sink some of the country’s largest financial firms. For example, millennials today carry far more debt than Baby Boomers did at their age, data show. The median household income also is the same as it was in the 1970s in inflation-adjusted terms.
Wage growth also remains muted, although that trend long predates the financial crisis. Accounting for inflation, average hourly earnings have fallen in 2018, labor data show.
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