Recessions happen when the economy slows down. Recoveries happen when the economy speeds up.

I showed this graph before, comparing the Great Recession and aftermath (red) to the 1990-91 recession and aftermath (gray):

Graph #1: Comparison of Recessions with the 1990-91 Recession in Slow Motion

Imagine: The red line and the X and Y axis are printed on a pane of glass. The gray line, showing data beginning in January 1990, is drawn on a rubber sheet. The glass rests atop the rubber sheet.

I have stretched out the rubber sheet to two and a half times its original width, to make what happens with the gray take 2½ times as long to happen. I went over all that in the earlier post; I won't repeat it here.

What I see on this graph is that the red and the stretched-out gray lines peak together sometime in the middle of 2006, and then decline together until some time in 2012. Call it a six-year decline.

Really, the gray decline took 2½ times less. The 1990-91 recession was smaller and shorter and less severe than the Great Recession. Stretching out the shorter recession allows us to compare its path to that of the longer and more severe Great Recession.

What I'm looking at on this graph is two lines that peak together in mid-2006 and run downhill together for six years. But they don't exactly run downhill "together". The red one goes downhill faster than the gray, because the Great Recession was more severe than the 1990-91 recession.

After the six-year decline, both lines change. The red runs uphill; the gray runs flat. The red line bottoms out in 2012 and ends in 2018, so we have another six-year period here.

During the six years of decline, the red went downhill faster than the gray. During the second six years, the red went up faster than the gray. There was more recovery going on with the red line -- again, because the Great Recession had been more severe.

The graph shows that after the 1990-91 recession, average hourly earnings growth clung to the 2.5% level for six years. In real time, it was about two and a half years, from mid-1992 to the start of 1995.

When we think of the 1990s now, we remember "the new economy" and the "tech boom" and the "high productivity" of the latter 1990s. The early 1990s were not so memorable. The early years were not so great. And if we stretch out those years on the rubber sheet, we have a benchmark: six years during which hourly earnings growth refused to improve.

Seen in the context of that benchmark, the red line runs uphill. The red runs up, and then down, then up and down again, and then up again before the data ends in April of 2018. But each high point of the red reaches the benchmark level. And each new low of the red line is not as low as the one before. The red runs uphill, and then it ends.

What will happen next? That is the question, isn't it.


I took the recent data on Graph #1 and made it dull red, but it looks brown to me. Then I eyeballed in trend lines, bright red to get your attention.

Graph #2: Same, with Markup

Notice that the trend lines show the "V-shaped" recovery everybody was talking about, ten years back. Ironic, isn't it? We actually got that V. Nobody knew. Because our economy... has been moving... in slow motion... for so many years.

It bottomed out in 2012. Things have been getting better since then, despite appearances. And now, at the end of the dull red data, our options are open. Recovery from the Great Recession has caught up with the recovery from the 1990-91 recession -- and caught up at just the point when the economy of the 1990s started to get memorably good.

If this comparison of the two recessions is credible, we should not be surprised to find that the next six years turn out to be very good ones for this economy of ours. No one any longer believes it possible that the economy might be "good" again. I say it is more than possible: It is likely.

If we continue the bright red trend line uphill into the future, it aligns well with the gray data, as the dotted red line shows. But that gray data is on the rubber sheet, stretched out to make things happen slowly. In real time, the gray recovery was much more rapid. And as the graph suggests, our economy is again ready to enter the recovery phase. In the recovery phase, by definition, the pace of economic activity picks up.

Recessions happen when the economy slows down. Recoveries happen when the economy speeds up. In other words: Don't expect things to stay in slow motion. Almost everyone predicts economic growth to remain in the neighborhood of 2% annual. I expect four percent.

Don't expect things to stay in slow motion.

Graph #3: Same, with Optimistic Estimate of Average Hourly Earnings Growth

I took the second graph and added in blue the increase in Average Hourly Earnings from the 2.5% level. The blue increase is the same as the gray increase, but at a "real time" pace. If and when people abandon their reticence and get down to business, hourly earnings could easily improve at that rapid pace.

I'm not such an optimist. The dotted line shows a midway path between the real-time pace and the rubber-sheet pace. This path is certainly possible, and would still be an improvement over what everyone seems to expect. But I will not be at all surprised if things turn out as the blue line shows.

By the way, the red line on the first graph ends in April 2018. The red line ends at the gray line. The dull red line on Graph #3 ends one month later, in May. The dull red crosses the gray and continues rising at a rapid pace, a pace apparently as rapid as the early months of the blue increase.

A pace apparently as rapid as the early months of the blue increase: A good start.

And it's about time.