U.S. GDP Growth by Year Compared to Business Cycle

See for Yourself Why the Economy Is Better Than You Think

When the U.S. is growing at a healthy rate, it generates enough great jobs for everyone. Photo: Vincent Hazat/Getty Images

Definition: The U.S. GDP growth rate is the percent change in the gross domestic product from one quarter to the next. It is the most closely watched indicator because it measures the nation's economic growth

GDP includes all goods and services produced in the United States, regardless of whether it's made by a U.S. citizen or company or a foreigner. If it's made within the U.S. borders, it's counted as U.S. production.

GDP does not include goods and services produced by U.S. citizens or companies if they are located overseas. Therefore, a Toyota truck made in the United States would be counted, whereas a GM truck manufactured in Canada would not.

The U.S. Bureau of Economic Analysis provides the U.S. growth rate for each quarter. It provides three estimates based on survey data. It's the best statistic to compare U.S. output year-over-year.

To report GDP, the BEA uses the sales value of the goods and services produced. But prices can increase, resulting in inflation. To make sure GDP growth excludes inflation, the BEA takes out the impact of price changes. That's called real GDP.

Is the U.S. Growth Rate Healthy?

In 2016, the U.S. economy grew at a 1.9 percent rate. That's just below the ideal GDP growth rate of between 2 - 3 percent. The housing market is robust all across the country. Home prices are rising steadily, making homeowners feel wealthier and optimistic.

Unemployment has fallen below 5 percent, well within the natural rate of unemployment.  For updated quarterly reports, read Current GDP Statistics.

Many people complain that it's not fast enough. That's because there are so many people who are still unemployed. Growth needs to be at least 3 percent to create the jobs they need.

 But you don't want growth to be too fast. That will create a bubble, which then leads to a recession when it bursts. 

The U.S. economy faces several headwinds. First is Washington's attempt to reduce government spending, itself a component of GDP. Second, high structural unemployment means older workers will not resume pre-recession levels of spending. These personal consumption expenditures contribute nearly 70 percent of GDP.

The Federal Reserve has ended its program of quantitative easing and raised the Fed funds rate. That should result in higher interest rates, making loans and mortgages more expensive, and slow GDP growth. The Fed will slowly raise rates as the core inflation rate approaches its 2 percent target inflation rate and unemployment remains below its 6.5 percent target.

The strong dollar is hurting exports and growth in emerging market countries.   For the most recent GDP growth forecasts by year, see U.S. Economic Outlook

GDP Growth History Compared to Business Cycle

If you look at U.S. GDP growth history, you'll see how this works. The GDP growth rate will correlate with each stage of the business cycle. The four phases are:

  1. Expansion - GDP growth is positive and growing.
  1. Peak - The month where the business cycle transitions from expansion to contraction.
  2. Contraction - GDP growth weakens.
  3. Trough - The month where the business cycle transitions from contraction to expansion.

The table below compares annual growth with the unemployment rate (as of December of that year), the rate of inflation (percent change year-over-year) and the phase of the business cycle. Also, efforts to stimulate the economy or ward off inflation are noted, whether by the Federal Reserve or by elected officials. 

U.S. Annual GDP Growth Compared to Business Cycle Phases

YearU.S. GDP GrowthUnemployment Rate (December)Inflation (December Year-over-Year)Business Cycle Phase
1929NA3.2%0.6%Aug peak. Oct market crash.
1933-1.3%24.9%0.8%New Deal. Mar trough.
19375.1%14.3%2.9%May peak. 
1938-3.3%19%-2.8%Jun trough.


Dust Bowl drought ended.

194117.7%9.9%9.9%Expansion. U.S. entered WWII.
19448.0%1.2%2.3%Bretton-Woods Agreement
1945-1.0%1.9%2.2%Feb peak. Recession until Oct trough.
1946-11.6%3.9%18.1%Expansion despite fed cuts.
1947-1.1%3.9%8.8%Marshall Plan and Truman Doctrine. Cold War.
19484.1%4%3.0%Nov peak.
1949-0.5%6.6%-2.1%Oct trough. Fair Deal. NATO. 
19508.7%4.3%5.9%Expansion. Korean War.
19534.7%4.5%0.7%Korean War ended. July peak.
1954-0.6%5%-0.7%May trough. Dow rose to 1929 level.
19572.1%5.2%2.9%Aug peak.
1958-0.7%6.2%1.8%April trough.
19596.9%5.3%1.7%Fed raised rates.
19602.6%6.6%1.4%April peak. Fed lowered rates.
19612.6%6%0.7%JFK increased spending. Feb trough. 
19626.1%5.5%1.3%Cuban Missile Crisis.
19634.4%5.5%1.6%LBJ increased spending. Fed raised rate.
19645.8%5%1.0%Fed raised rate to 3.85%.
19656.5%4%1.9%Vietnam War. Fed raised rate to 4.32%.
19666.6%3.8%3.5%Expansion. Fed raised rate to 5.76%.
19672.7%3.8%3.0%Expansion. Inflation at 3%.
19684.9%3.4%4.7%Expansion. Fed raised rate to 6%.
19693.1%3.5%6.2%Nixon Fed raised rate to 9.19%. Dec peak.
19700.2%6.1%5.6%Nov trough. Fed lowered rate to 4.9%.
19713.3%6%3.3%Expansion. Fed lowered rate to 3.5%, then raised it to 5%. August wage-price controls.
19735.6%4.9%8.7%Vietnam War ended.  Gold standard ended in Aug. Inflation tripled. Fed doubled rate. Nov peak.
1974-0.5%7.2%12.3%Stagflation. Watergate. Fed raised rate to 13%.
1975-0.2%8.2%6.9%Mar trough. Fed lowered rate to 7.5%.
19765.4%7.8%4.9%Expansion. Fed lowered rate to 4.75%.
19774.6%6.4%6.7%Expansion. Carter became President. Inflation at 6.7%.
19785.6%6%9.0%Expansion. Fed raised rate to 10%.
19793.2%6%13.3%Expansion. Fed raised then lowered rates. 
1980-0.2%7.2%12.5%Jan peak. Fed raised rate to 20% by March, lowered it to 8% by June. July trough. Fed raised rate to 20% by December.
19812.6%8.5%8.9%Reagan became President. Fed raised rate to 20% in January, lowered it to 16% in April, raised it to 20% in May. Expansion peaked in July. Fed lowered rate to 12% by year end.
1982-1.9%10.8%3.8%Nov trough. The Garn-St. Germain Depository Institutions Act was passed to fight recession. Fed lowered rate to 8.5%.
19834.6%8.3%3.8%Reagan increased military spending.
19863.5%6.6%1.1%Reagan cut taxes.
19873.5%5.7%4.4% Black Monday stock market crash in October.
19884.2%5.3%4.4%Expansion. Fed raised rate to 9.75%.
19893.7%5.4%4.6%S&L Crisis
19901.9%6.3%6.1%Jul peak.
1991-0.1%7.3%3.1%Mar trough.
19923.6%7.4%2.9%Expansion. Fed lowered rate to 3%.
19952.7%5.6%2.5%Expansion. Fed raised rate to 5.5%.
19963.8%5.4%3.3%Expansion. Lowered rate to 5.25%.
19974.5%4.7%1.7%Expansion. Raised to 5.5%.
19984.5%4.4%1.6%Expansion. LTCM crisis.
20011.0%5.7%1.6%Mar peak. 9/11. Nov trough.
20032.8%5.7%1.9%Expansion. JGTRRA.
20071.8%5.0%4.1%Dec peak.
2008-0.3%7.3%0.1%Contraction. Financial Crisis.
2009-2.8%9.9%2.7%June trough.
20102.5%9.3%1.5%Obamacare. Dodd-Frank.
20152.6%5.0%0.7%Strong dollar. Low oil prices. Fed raised rate.

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