Real GDP Per Capita And the Year-Over-Year Change

This morning we learned that the Advance Estimate for Q1 real GDP came in at 2.2%, a decline from the 3.0% final reading for Q4 2011. The latest data does not significantly change the long term view of real per-capita GDP, but it did slightly reduce the recession warning implicit in the latest real GDP year-over-year percent change, now at 2.08%, an increase over the Q4 YoY 1.61%, which was an improvement over the 1.46% YoY of Q3 2011.

My monthly updates on GDP and its revisions feature column charts illustrating real GDP. These have the advantage of highlighting the patterns of change and the correlation between negative GDP and recessions.

Real GDP Per-Capita Growth
 
For a better understanding of the historical context, here is a chart of real GDP per-capita growth since 1960. For this analysis I've chained in current dollars for the inflation adjustment. The per-capita calculation is based on the mid-month population estimates by the Bureau of Economic Analysis, which date from 1959 (hence my 1960 starting date for this chart, even though quarterly GDP has is available since 1947). The population data series is available in the FRED series POPTHM. I used quarterly population averages for the per-capita divisor. Recessions are highlighted in gray. The logarithmic vertical axis ensures that the highlighted contractions have the same relative scale.

The real per-capita series gives us a better understanding of the depth and duration of GDP contractions. As we can see, since our 1960 starting point, the recession that began in December 2007 is associated with a deeper trough than previous contractions, which perhaps justifies its nickname as the Great Recession. In fact, at this point, 17 quarters beyond the 2007 GDP peak, real GDP per capita is still 2.11% the all-time high, which is somewhere between the troughs that followed the recession in the early 1990s.

Here is a more revealing snapshot of real GDP per capita percent of the most recent peak across time, with recessions highlighted. The underlying calculation is to show peaks at 100% on the left axis. The callout shows the percent off as of the current GDP per capita.

Year-Over-Year (YoY) GDP Percent Change and Current Recession Risk
 
Economists vary widely in their opinions about the present-day recession risk. The official call on recessions, of course, is the domain of the National Bureau of Economic Analysis, which makes the determination on recession start and end dates several months — sometimes more than a year — after the fact.
 
The next chart shows the YoY change in real GDP from the earliest quarterly data in 1947. I've again highlighted recessions. The red dots show the YoY real GDP for the quarter before the recession began. The blue dot shows the latest YoY real GDP. Note: Unlike the previous chart, this one does not include a per-capita adjustment.

As the chart illustrates, the latest YoY real GDP, at 2.08% is up from last quarter's 1.61%. At 2.08% the YoY number is below the level at the onset of all the recessions since quarterly GDP was first calculated — with two exceptions: The eight-month recession that started in 1957 and the six-month recession that began in 1980. However, there have been some quarters with a YoY GDP well below the current level when a recession did not immediately follow: The third quarter of 1956 (YoY = 0.76%) and Q1 of 2003 (YoY = 1.50%). Also in Q1 2007 the YoY dropped to 1.24%, but the recession that followed began three quarters later in December 2007.

I'll update these charts on May 31, when the Second Estimate is released.