The Long Road Back from Financial Crises

Writing in the New York Times's Economix blog, Catherine Rampell reviews a paper presented two years ago from Carmen Reinhart and Kenneth Rogoff, documenting the road to recovery that followed twelve different financial crises from the American Great Depression to the Argentinian crash in 2001. What they found should have shed doubt on the optimistic projections of rapid recovery in 2009 and 2010 and reminds us that recovery remains far from certain, even as most have written off disappointing GDP growth numbers from the first quarter as the results of transitory factors like excessive snowstorms.

The chart above shows that for unemployment -- a lagging indicator to be sure, but one with profoundly important impacts on people's everyday lives -- the aftermath of financial crises increases unemployment by an average of 7% over an average of 4.8 years. By those metrics at least, America's Great Recession could have been far worse.

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