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 (GDP) 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 overseas. Therefore, a Toyota truck made in the U.S. would be counted, whereas a GM truck manufactured in Canada would not.

The U.S. Bureau of Economic Analysis (BEA) 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. However, 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 2015, the U.S. economy grew at a 2.4% rate. That's well within the ideal GDP growth rate of between 2 - 3%. The housing market is recovering all across the country. Home prices are rising steadily, making homeowners feel wealthier and optimistic.

Unemployment has fallen to 5.0%, 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, and growth needs to be at least 3% to create the jobs they need.

 However, you don't want growth to be too fast because it will create a bubble, which then leads to another downturn. 

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% 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 slowing GDP growth. The Fed will slowly raise rates as the core inflation rate approaches its 2% target inflation rate and unemployment remains below 6.5%.

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. Peak - GDP growth is the fastest. Asset bubble.
  2. Contraction - GDP growth starts to slow.
  3. Trough - GDP growth is negative, signaling recession.
  4. Expansion - GDP growth is positive, and grows larger.

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%Economic expansion of the Roaring Twenties peaked in August. Stock market crash in October kicked off Great Depression.
1933-1.3%24.9%0.8%Contraction ended in March trough. Expansion began with New Deal.
19375.1%14.3%2.9%Expansion peaked in May. Economy started contracting, reigniting Depression.
1938-3.3%19%-2.8%Contraction until June trough. Expansion began.
19398.0%17.2%0.0%Expansion. Dust Bowl drought ended.
194117.7%9.9%9.9%Expansion. U.S. entered WWII.
19448.0%1.2%2.3%Expansion.Bretton-Woods Agreement. Dollar became global currency.
1945-1.0%1.9%2.2%Expansion ended in February peak. Truman became President in April when FDR passed. Dropped atomic bomb in August, ending WWII. Economy contracted until October trough.
1946-11.6%3.9%18.1%Expansion cycle began, despite a huge cutback in government spending, which lowered GDP growth for the year.
1947-1.1%3.9%8.8%Expansion continued in business sector, even though Federal government continued cutting back. Marshall Plan and Truman Doctrine. Cold War began.
19484.1%4%3.0%Expansion peaked in November. Contraction began.
1949-0.5%6.6%-2.1%Contraction until trough in October. Fair Deal. NATO established. Communists took over China.
19508.7%4.3%5.9%Expansion. Korean War began.
19534.7%4.5%0.7%Expansion until July peak. Contraction began. Eisenhower became President. Korean War ended.
1954-0.6%5%-0.7%Contraction until May trough. The Dow finally returned to its pre-Depression level.
19572.1%5.2%2.9%Expansion until August peak.
1958-0.7%6.2%1.8%Economy contracted until April trough. Expansion began.
19596.9%5.3%1.7%Expansion. Fed raised rate to 4%.
19602.6%6.6%1.4%Expansion ended with April peak. Fed lowered rate to 1.98%.
19612.6%6%0.7%JFK became President. Contraction until February trough. Bay of Pigs invasion in April.
19626.1%5.5%1.3%Expansion. Cuban Missile Crisis.
19634.4%5.5%1.6%Expansion. LBJ became President when JFK assassinated. Fed raised rate to 3.5%.
19645.8%5%1.0%Expansion. Fed raised rate to 3.85%.
19656.5%4%1.9%Expansion. U.S. entered 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 became President. ARPANET created. Man landed on the moon. Fed raised rate to 9.19%. Expansion until December peak.
19700.2%6.1%5.6%Contraction until November trough. Fed lowered rate to 4.9%.
19713.3%6%3.3%Expansion. Fed lowered rate to 3.5%, then raised it to 5%. Nixon imposed wage-price controls in August to stem inflation.
19735.6%4.9%8.7%Nixon withdrew U.S. from Vietnam in January, took dollar off gold standard in August, tripling inflation. Fed doubled rate to 11% in response. Expansion continued until November peak.
1974-0.5%7.2%12.3%Contraction and stagflation. Nixon resigned over Watergate in August, Ford became President. Fed raised rate to 13%.
1975-0.2%8.2%6.9%Contraction ended with March 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 rate to 15.5%, then lowered it to 12% confusing price-setters who kept prices high.
1980-0.2%7.2%12.5%Expansion peaked in January. Fed raised rate to 20% by March, lowered it to 8% by June. Contraction ended in July, so 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%Contraction ended with November 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%Expansion. Reagan increased military spending.
19863.5%6.6%1.1%Expansion. Reagan cut taxes.
19873.5%5.7%4.4%Expansion. 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%Expansion despite 1989 Savings and Loan Crisis. Fed lowered rate to 8.25%.
19901.9%6.3%6.1%Expansion hit peak in July, began contracting.
1991-0.1%7.3%3.1%Contraction until trough in March. Fed lowered rate to 4%.
19923.6%7.4%2.9%Expansion. Fed lowered rate to 3%.
20011.0%5.7%1.6%Expansion peaked in March, contracted until November trough.
20071.8%5.0%4.1%Expansion peaked in December.
2009-2.8%9.9%2.7%Contraction troughed in June, began expansion.
20152.6%5.0%0.7%Expansion continues despite a strong dollar and low oil prices.

Resources for Table

More History

Continue Reading...