US economy: developments since the 2008/2009 recession
US economic recovery from the 2008/2009 recession has been steady as annual GDP growth averaged 2.2% between 2010 and 2013. Unemployment has been falling but the proportion of working age adults in employment remains low by historical standards. Interest rates are near 0% and the Federal Reserve has bought $4 trillion in assets to try and boost the economy. Large budget deficits have seen fiscal policy become a key political battleground, although the deficit has fallen in recent years.
Sometimes referred to as the Great Recession, the 2008/2009 decline in GDP of 4.2% was the largest since World War II. The recovery has been unexceptional but steady, with annual growth averaging 2.2% between 2010 and 2013. GDP in Q3 2014 was 8.1% above its pre-recession peak. The IMF forecasts GDP growth of 2.2% in 2014 and 3.1% in 2015.
The unemployment rate rose sharply during the recession, from around 4.5% to 10% in early 2010. After stabilising, it began to fall in late 2011 and was 5.6% in December 2014. Despite a large increase in jobs created since early 2010, the proportion of working age adults in employment is still well below what it was before to the recession due to population growth.
With interest rates at near-0%, the Federal Reserve has also been buying large quantities of assets in recent years in order to keep long-term interest rates down. As the result of a strengthening economy the Fed ended it asset-buying programme, or QE3, in October 2014. Economists expect interest rates to start being raised in mid-2015.
The financial crisis and fiscal stimulus resulted in very large budget deficits, peaking at over 13% of GDP in 2009 (IMF data). Deficits have remained high since then, but some tax rises, spending cuts, as well as the recovering economy, have seen the deficit fall to 5.8% in 2013.