US Real GDP Growth Rate by Year Compared to Inflation and Unemployment

What Really Influenced U.S. Growth Through History

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••• Photo: Vincent Hazat/Getty Images

The U.S. GDP growth rate is the percentage change in the 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 use it to decide on the performance of a president or members of Congress.

Comparing Growth by Year 

You should also compare growth by year to the unemployment rate by year and inflation by year.

That tells you where you are in the business cycle. Negative growth signals the contraction phase. A recession and high unemployment follow. High growth must occur before unemployment recedes. That begins the expansion phase. 

Faster Isn't Always Better

Faster growth isn't always better growth. It must be sustainable. Economists 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. 

The Effect in History 

The biggest drop in 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%. The highest jobless rate of 24.9% occurred in 1933.

All those records occurred during the contraction phase of the business cycle.

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

The chart below shows efforts to stimulate the economy or ward off inflation, whether by the Federal Reserve or by elected officials. 

YearGrowthUnemploymentInflationBusiness Cycle
1929NA3.2%0.6%Aug peak and Oct. market crash
1930-8.5%8.7%-6.4%Contraction
1931-6.4%15.9%-9.3%Contraction
1932-12.9%23.6%-10.3%Contraction
1933-1.2%24.9%0.8%New Deal and March trough
193410.8%21.7%1.5%Expansion
19358.9%20.1%3.0%Expansion
193612.9%16.9%1.4%Expansion
19375.1%14.3%2.9%May peak
1938-3.3%19%-2.8%June trough
19398.0%17.2%0.0%

Expansion and Dust Bowl ended

19408.8%14.6%0.7%
194117.7%9.9%9.9%Expansion and WWII
194218.9%4.7%9.0%Expansion
194317.0%1.9%3.0%Expansion
19448.0%1.2%2.3%Bretton-Woods
1945-1.0%1.9%2.2%Feb. peak, recession, Oct. trough
1946-11.6%3.9%18.1%Expansion and Fed cuts
1947-1.1%3.9%8.8%Marshall Plan and Cold War
19484.1%4%3.0%Nov. peak
1949-0.6%6.6%-2.1%Oct. trough and NATO
19508.7%4.3%5.9%Expansion and Korean War
19518.0%3.1%6.0%Expansion
19524.1%2.7%0.8%Expansion
19534.7%4.5%0.7%War ended and July peak
1954-0.6%5%-0.7%May trough, Dow at 1929 level
19557.1%4.2%0.4%Expansion
19562.1%4.2%3.0%Expansion
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 and Fed cut
19612.6%6%0.7%JFK spending and Feb. trough
19626.1%5.5%1.3%Cuban Missile Crisis
19634.4%5.5%1.6%LBJ spending, Fed raised rate
19645.8%5%1.0%Fed raised rate
19656.5%4%1.9%Vietnam War, Fed raised rate
19666.6%3.8%3.5%Expansion, Fed raised rate
19672.7%3.8%3.0%Expansion
19684.9%3.4%4.7%Fed raised rate
19693.1%3.5%6.2%Nixon, Fed raised rate, Dec. peak
19700.2%6.1%5.6%Nov. trough, Fed cut rate
19713.3%6%3.3%Expansion and Wage-price controls
19725.3%5.2%3.4%Expansion
19735.6%4.9%8.7%Vietnam War and gold standard ended, Nov. peak.
1974-0.5%7.2%12.3%Stagflation, Watergate, Fed raised rate
1975-0.2%8.2%6.9%March trough, Fed cut rate
19765.4%7.8%4.9%Expansion, Fed cut rate
19774.6%6.4%6.7%Carter
19785.5%6%9.0%Fed raised rate
19793.2%6%13.3%Fed raised then lowered rate
1980-0.3%7.2%12.5%Jan. peak, Fed raised rate, July trough
19812.5%8.5%8.9%Reagan, Expansion peaked in July
1982-1.8%10.8%3.8%Nov. trough, Fed cut rate
19834.6%8.3%3.8%Reagan spent on defense
19847.2%7.3%3.9%Expansion
19854.2%7%3.8%Expansion
19863.5%6.6%1.1%Reagan cut taxes
19873.5%5.7%4.4%Black Monday
19884.2%5.3%4.4%Expansion, Fed raised rate
19893.7%5.4%4.6%S&L Crisis
19901.9%6.3%6.1%July peak
1991-0.1%7.3%3.1%March trough
19923.5%7.4%2.9%Expansion, Fed cut rate
19932.8%6.5%2.7%Expansion
19944.0%5.5%2.7%Expansion
19952.7%5.6%2.5%Fed raised rate
19963.8%5.4%3.3%Fed cut rate
19974.4%4.7%1.7%Fed raised rate
19984.5%4.4%1.6%LTCM crisis
19994.8%4.0%2.7%Expansion
20004.1%3.9%3.4%Expansion
20011.0%5.7%1.6%March peak, 9/11, and Nov. trough
20021.7%6.0%2.4%Expansion
20032.9%5.7%1.9%JGTRRA
20043.8%5.4%3.3%Expansion
20053.5%4.9%3.4%Expansion
20062.7%4.4%2.5%Expansion
20071.8%5.0%4.1%Dec peak
2008-0.1%7.3%0.1%Contraction and Financial Crisis.
2009-2.5%9.9%2.7%June trough
20102.6%9.3%1.5%Obamacare and Dodd-Frank
20111.6%8.5%3.0%Expansion
20122.2%7.8%1.7%Expansion
20131.8%6.7%1.5%Expansion
20142.5%5.6%0.8%Expansion
20152.9%5.0%0.7%Strong dollar, low oil prices, Fed raised rates steadily
20161.6%4.7%2.1%
20172.4%4.1%2.1%Weakening dollar boosted growth
20182.9%3.9%1.9%Trump tax plan boosted growth

Note: GDP growth is for the year. The unemployment rate is as of December of that year. The inflation rate is the year-over-year rate as of December of that year.