U.S. Real GDP Growth Rate by Year Compared to Inflation and Unemployment

What Really Influenced U.S. Growth Through History

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The U.S. GDP growth rate is the percentage change in gross domestic product from one year to the next. The growth rate history is the best indicator of a nation's economic growth over time. It’s used to determine the effectiveness of economic policies. Voters may even use it to decide on the performance of a president or members of Congress.

Comparing GDP Growth by Year

When comparing growth by year, it's also helpful to look at the unemployment rate by year and inflation rate by year. That tells you where you are in the business cycle. Negative growth signals the contraction phase. A recession and high unemployment are likely to follow. High growth must occur before unemployment recedes. That begins the expansion phase. 

For example, there was lots of expansion between 2010 and 2020. The Fed raised interest rates and the stock market hit new highs. However, then the U.S. hit a recession in February 2020. This led to high unemployment rates and a large contraction with negative GDP. As the U.S. recovered, inflation began to rise. These three factors of economic health are all intertwined.

Is Fast GDP Growth Good for the Economy?

Faster growth isn't always better growth. It must be sustainable. Economists often agree that the ideal GDP growth rate is between 2% and 3%. Growth needs to be at 3% to maintain a natural rate of unemployment. But you don't want growth to be too fast. That will create a bubble, which then leads to a recession when it bursts. 

GDP Growth Throughout History

The biggest annual drop in GDP growth in U.S. history occurred in 1932. The economy contracted -12.9% during the worst year of the Great Depression. The worst deflation occurred that same year. Prices fell 10.3%. And by 1933, the unemployment rate was the highest in history at 24.9%.

Record GDP growth or contraction, unemployment rates, and inflation usually occur during recessions or the contraction phase of the business cycle.

The worst inflation in modern times was right after World War II. Prices rose 18.1% in 1946. That happened during the expansion phase of the business cycle.

GDP Growth, Inflation, and Unemployment by Year

The table below shows how GDP, inflation, and unemployment rates have changed each year since 1929. GDP is the annual rate and inflation is for December of that year and is the year-over-year rate. The unemployment rate is as of December that year. Unemployment rates for the years 1929 through 1947 were calculated from a different BLS source as current BLS data only goes back to 1948. You'll also find notes for events that happened each year, or which phase of the business cycle the economy was in at that year.

Year Annual GDP Growth Inflation (December, YOY) Unemployment Rate (December) Business Cycle and Notable Events
1929 N/A 0.6% 3.2% August peak and October market crash
1930 -8.5% -6.4% 8.7% Contraction
1931 -6.4% -9.3% 15.9% Contraction
1932 -12.9% -10.3% 23.6% Contraction
1933 -1.2% 0.8% 24.9% New Deal and March trough
1934 10.8% 1.5% 21.7% Expansion
1935 8.9% 3.0% 20.1% Expansion
1936 12.9% 1.4% 16.9% Expansion 
1937 5.1% 2.9% 14.3% May peak
1938 -3.3% -2.8% 19.0% June trough
1939 8.0% 0% 17.2% Expansion and Dust Bowl ended
1940 8.8% 0.7% 14.6% Expansion
1941 17.7% 9.9% 9.9% Expansion and WWII
1942 18.9% 9.0% 4.7% Expansion
1943 17.0% 3.0% 1.9% Expansion
1944 8.0% 2.3% 1.2% Bretton Woods
1945 -1.0% 2.2% 1.9% February peak, recession, October trough
1946 -11.6% 18.1% 3.9% Expansion and Fed cuts
1947 -1.1% 8.8% 3.6% Marshall Plan and Cold War
1948 4.1% 3.0% 4.0% November peak
1949 -0.6% -2.1% 6.6% October trough and NATO
1950 8.7% 5.9% 4.3% Expansion and Korean War
1951 8.0% 6.0% 3.1% Expansion
1952 4.1% 0.8% 2.7% Expansion
1953 4.7% 0.7% 4.5% Korean War ended and July peak
1954 -0.6% -0.7% 5.0% May trough, Dow at 1929 level
1955 7.1% 0.4% 4.2% Expansion
1956 2.1% 3.0% 4.2% Expansion
1957 2.1% 2.9% 5.2% August peak
1958 -0.7% 1.8% 6.2% April trough
1959 6.9% 1.7% 5.3% Fed raised rates
1960 2.6% 1.4% 6.6% April peak and Fed cut
1961 2.6% 0.7% 6.0% JFK spending and February trough
1962 6.1% 1.3% 5.5% Cuban Missile Crisis
1963 4.4% 1.6% 5.5% LBJ spending, Fed raised rates
1964 5.8% 1.0% 5.0% Fed raised rate
1965 6.5% 1.9% 4.0% Vietnam War, Fed raised rates
1966 6.6% 3.5% 3.8% Expansion, Fed raised rates
1967 2.7% 3.0% 3.8% Expansion
1968 4.9% 4.7% 3.4% Fed raised rates
1969 3.1% 6.2% 3.5% Nixon, Fed raised rates, December peak
1970 0.2% 5.6% 6.1% November trough, Fed cut rates
1971 3.3% 3.3% 6.0% Expansion and wage-price controls
1972 5.3% 3.4% 5.2% Expansion
1973 5.6% 8.7% 4.9% Vietnam War and gold standard ended, November peak.
1974 -0.5% 12.3% 7.2% Stagflation, Watergate, Fed raised rates
1975 -0.2% 6.9% 8.2% March trough, Fed cut rates
1976 5.4% 4.9% 7.8% Expansion, Fed cut rates
1977 4.6% 6.7% 6.4% Carter took office
1978 5.5% 9.0% 6.0% Fed raised rates
1979 3.2% 13.3% 6.0% Fed raised then lowered rate
1980 -0.3% 12.5% 7.2% Januart peak, Fed raised rates, July trough
1981 2.5% 8.9% 8.5% Reagan, Expansion peaked in July
1982 -1.8% 3.8% 10.8% November trough, Fed cut rates
1983 4.6% 3.8% 8.3% Reagan spent on defense
1984 7.2% 3.9% 7.3% Expansion
1985 4.2% 3.8% 7.0% Expansion
1986 3.5% 1.1% 6.6% Tax cuts
1987 3.5% 4.4% 5.7% Black Monday
1988 4.2% 4.4% 5.3% Expansion, Fed raised rates
1989 3.7% 4.6% 5.4% S&L Crisis
1990 1.9% 6.1% 6.3% July peak
1991 -0.1% 3.1% 7.3% March trough
1992 3.5% 2.9% 7.4% Expansion, Fed cut rates
1993 2.8% 2.7% 6.5% Expansion
1994 4.0% 2.7% 5.5% Expansion 
1995 2.7% 2.5% 5.6% Fed raised rates
1996 3.8% 3.3% 5.4% Fed cut rate
1997 4.4% 1.7% 4.7% Fed raised rates
1998 4.5% 1.6% 4.4% LTCM crisis
1999 4.8% 2.7% 4.0% Expansion
2000 4.1% 3.4% 3.9% Expansion
2001 1.0% 1.6% 5.7% March peak, 9/11, and November trough
2002 1.7% 2.4% 6.0% Expansion
2003 2.8% 1.9% 5.7% JGTRRA
2004 3.9% 3.3% 5.4% Expansion
2005 3.5% 3.4% 4.9% Expansion
2006 2.8% 2.5% 4.4% Expansion
2007 2.0% 4.1% 5.0% December peak
2008 0.1% 0.1% 7.3% Contraction and Financial Crisis
2009 -2.6% 2.7% 9.9% June trough
2010 2.7% 1.5% 9.3% Obamacare and Dodd-Frank
2011 1.5% 3.0% 8.5% Expansion
2012 2.3% 1.7% 7.9% Expansion
2013 1.8% 1.5% 6.7% Expansion
2014 2.3% 0.8% 5.6% Expansion
2015 2.7% 0.7% 5.0% Strong dollar, low oil prices, Fed raised rates steadily
2016 1.7% 2.1% 4.7% Presidential race
2017 2.3% 2.1% 4.1% Weakening dollar boosted growth
2018 2.9% 1.9% 3.9% Trump tax plan boosted growth
2019 2.3% 2.3% 3.6% Goldilocks economy
2020 -3.4% 1.4% 6.7% February peak before recession
2021 5.7% 7.0% 3.9% Recovery, resettling after new strains of coronavirus

Frequently Asked Questions (FAQs)

Why is GDP a good measure of economic growth?

In general, a steadily growing GDP is a good indicator of the health of a country's economy. When GDP is growing, companies are producing more, which allows them to hire more people. These additional jobs keep more money flowing through the economy, thus improving the overall economic outlook. Likewise, a GDP that's growing too quickly or too slowly—or even contracting—can indicate other economic problems.

Why does inflation increase with GDP growth?

The relationship between GDP growth and inflation is one that has long vexed economists. There isn't a consensus about how much growth the economy can handle before it results in inflation, but most economists agree that, at some point, growth can accelerate too quickly, resulting in runaway inflation. That's why the Federal Reserve uses interest rates to slow down growth when it gets too aggressive.

How does unemployment affect GDP?

Although there are exceptions, economists generally accept Okun's Law, which states that a quickly rising GDP will lead to a drop in unemployment, a major decline in GDP will result in an increase in unemployment, and a relatively stable GDP will result in little change to the unemployment rate.

Article Sources

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  2. National Bureau of Economic Research. "Business Cycle Dating Committee Announcement July 19, 2021."

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  4. Bureau of Labor Statistics. “Consumer Price Index Database, All Urban Consumers.” Select “U.S. City Average, All items,” Retrieve Data, Select “More Formatting Options,” Select “12-Month Percent Change."

  5. Stanford University. "The Facts of Economic Growth," Page 3.

  6. Bureau of Labor Statistics. "Top Picks," Select “Unemployment Rate,” Retrieve Data, ”Select 1929-2020,” Select “Go.”

  7. Bureau of Labor Statistics. "Labor Force, Employment, and Unemployment, 1929-39: Estimating Methods." Page 2, Table 1.

  8. International Monetary Fund. "Gross Domestic Product: An Economy’s All."

  9. Federal Reserve Bank of Cleveland. "Why Does the Fed Care About Inflation?"

  10. Federal Reserve Bank of Atlanta. "GDP Growth, the Unemployment Rate, and Okun’s Law."