US Real GDP Growth Rate by Year Compared to Inflation and Unemployment
What Really Influenced U.S. Growth Through History
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.
Year | Growth | Unemployment | Inflation | Business Cycle |
1929 | NA | 3.2% | 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 |
1934 | 10.8% | 21.7% | 1.5% | Expansion |
1935 | 8.9% | 20.1% | 3.0% | Expansion |
1936 | 12.9% | 16.9% | 1.4% | Expansion |
1937 | 5.1% | 14.3% | 2.9% | May peak |
1938 | -3.3% | 19% | -2.8% | June trough |
1939 | 8.0% | 17.2% | 0.0% | Expansion and Dust Bowl ended |
1940 | 8.8% | 14.6% | 0.7% | |
1941 | 17.7% | 9.9% | 9.9% | Expansion and WWII |
1942 | 18.9% | 4.7% | 9.0% | Expansion |
1943 | 17.0% | 1.9% | 3.0% | Expansion |
1944 | 8.0% | 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 |
1948 | 4.1% | 4% | 3.0% | Nov. peak |
1949 | -0.6% | 6.6% | -2.1% | Oct. trough and NATO |
1950 | 8.7% | 4.3% | 5.9% | Expansion and Korean War |
1951 | 8.0% | 3.1% | 6.0% | Expansion |
1952 | 4.1% | 2.7% | 0.8% | Expansion |
1953 | 4.7% | 4.5% | 0.7% | War ended and July peak |
1954 | -0.6% | 5% | -0.7% | May trough, Dow at 1929 level |
1955 | 7.1% | 4.2% | 0.4% | Expansion |
1956 | 2.1% | 4.2% | 3.0% | Expansion |
1957 | 2.1% | 5.2% | 2.9% | Aug peak |
1958 | -0.7% | 6.2% | 1.8% | April trough |
1959 | 6.9% | 5.3% | 1.7% | Fed raised rates |
1960 | 2.6% | 6.6% | 1.4% | April peak and Fed cut |
1961 | 2.6% | 6% | 0.7% | JFK spending and Feb. trough |
1962 | 6.1% | 5.5% | 1.3% | Cuban Missile Crisis |
1963 | 4.4% | 5.5% | 1.6% | LBJ spending, Fed raised rate |
1964 | 5.8% | 5% | 1.0% | Fed raised rate |
1965 | 6.5% | 4% | 1.9% | Vietnam War, Fed raised rate |
1966 | 6.6% | 3.8% | 3.5% | Expansion, Fed raised rate |
1967 | 2.7% | 3.8% | 3.0% | Expansion |
1968 | 4.9% | 3.4% | 4.7% | Fed raised rate |
1969 | 3.1% | 3.5% | 6.2% | Nixon, Fed raised rate, Dec. peak |
1970 | 0.2% | 6.1% | 5.6% | Nov. trough, Fed cut rate |
1971 | 3.3% | 6% | 3.3% | Expansion and Wage-price controls |
1972 | 5.3% | 5.2% | 3.4% | Expansion |
1973 | 5.6% | 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 |
1976 | 5.4% | 7.8% | 4.9% | Expansion, Fed cut rate |
1977 | 4.6% | 6.4% | 6.7% | Carter |
1978 | 5.5% | 6% | 9.0% | Fed raised rate |
1979 | 3.2% | 6% | 13.3% | Fed raised then lowered rate |
1980 | -0.3% | 7.2% | 12.5% | Jan. peak, Fed raised rate, July trough |
1981 | 2.5% | 8.5% | 8.9% | Reagan, Expansion peaked in July |
1982 | -1.8% | 10.8% | 3.8% | Nov. trough, Fed cut rate |
1983 | 4.6% | 8.3% | 3.8% | Reagan spent on defense |
1984 | 7.2% | 7.3% | 3.9% | Expansion |
1985 | 4.2% | 7% | 3.8% | Expansion |
1986 | 3.5% | 6.6% | 1.1% | Reagan cut taxes |
1987 | 3.5% | 5.7% | 4.4% | Black Monday |
1988 | 4.2% | 5.3% | 4.4% | Expansion, Fed raised rate |
1989 | 3.7% | 5.4% | 4.6% | S&L Crisis |
1990 | 1.9% | 6.3% | 6.1% | July peak |
1991 | -0.1% | 7.3% | 3.1% | March trough |
1992 | 3.5% | 7.4% | 2.9% | Expansion, Fed cut rate |
1993 | 2.8% | 6.5% | 2.7% | Expansion |
1994 | 4.0% | 5.5% | 2.7% | Expansion |
1995 | 2.7% | 5.6% | 2.5% | Fed raised rate |
1996 | 3.8% | 5.4% | 3.3% | Fed cut rate |
1997 | 4.4% | 4.7% | 1.7% | Fed raised rate |
1998 | 4.5% | 4.4% | 1.6% | LTCM crisis |
1999 | 4.8% | 4.0% | 2.7% | Expansion |
2000 | 4.1% | 3.9% | 3.4% | Expansion |
2001 | 1.0% | 5.7% | 1.6% | March peak, 9/11, and Nov. trough |
2002 | 1.7% | 6.0% | 2.4% | Expansion |
2003 | 2.9% | 5.7% | 1.9% | JGTRRA |
2004 | 3.8% | 5.4% | 3.3% | Expansion |
2005 | 3.5% | 4.9% | 3.4% | Expansion |
2006 | 2.7% | 4.4% | 2.5% | Expansion |
2007 | 1.8% | 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 |
2010 | 2.6% | 9.3% | 1.5% | Obamacare and Dodd-Frank |
2011 | 1.6% | 8.5% | 3.0% | Expansion |
2012 | 2.2% | 7.8% | 1.7% | Expansion |
2013 | 1.8% | 6.7% | 1.5% | Expansion |
2014 | 2.5% | 5.6% | 0.8% | Expansion |
2015 | 2.9% | 5.0% | 0.7% | Strong dollar, low oil prices, Fed raised rates steadily |
2016 | 1.6% | 4.7% | 2.1% | |
2017 | 2.4% | 4.1% | 2.1% | Weakening dollar boosted growth |
2018 | 2.9% | 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.