- US Economy
What Really Influenced U.S. Growth Through History
ByKimberly Amadeo
Updated on March 7, 2022
Reviewed by
Erika Rasure
:max_bytes(150000):strip_icc()/CSP_ER9-ErikaR.-5942904ef41f4814a94dd1a5c1c03f32.jpg "U.S. Real GDP Growth Rate by Year, Compared to Inflation and Unemployment (1)")
Reviewed byErika Rasure
Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.
learn about our financial review board
Fact checked by
Daniel Rathburn
:max_bytes(150000):strip_icc()/DanielRathburn-a16946b87e45469aaae5b4998db2397a.jpeg "U.S. Real GDP Growth Rate by Year, Compared to Inflation and Unemployment (2)")
Fact checked byDaniel Rathburn
Daniel Rathburn is an associate editor at The Balance. He has over three years of experience working in print and digital media as a fact-checker and editor. Daniel holds a bachelor's degree in English and political science from Michigan State University.
In This Article
View All
In This Article
- Comparing GDP Growth by Year
- Is Fast GDP Growth Good for the Economy?
- GDP Growth Throughout History
- GDP, Inflation, and Unemployment by Year
- Frequently Asked Questions (FAQs)
:max_bytes(150000):strip_icc()/realgdpcomparedtoinflationandunemployment-60118e58e8ca4ec8b0b5dac6591afae8.jpg "U.S. Real GDP Growth Rate by Year, Compared to Inflation and Unemployment (3)")
The U.S.GDP growth rateis the percentage change in gross domestic productfrom one year to the next. The growth rate history is the bestindicatorof a nation'seconomic growthover 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 yearandinflation rate by year. That tells you where you are in thebusiness cycle. Negative growth signals thecontractionphase. Arecessionand high unemployment are likely to follow. High growth must occur before unemployment recedes. That begins theexpansionphase.
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 thattheideal GDP growth rateis between 2% and 3%. Growth needs to be at 3% to maintain anatural rate of unemployment. But you don't want growth to be too fast. That will create abubble, 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%.
Note
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.
Was this page helpful?
Thanks for your feedback!
Tell us why!
Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
S&P Global. "Dow Jones Industrial Average."
National Bureau of Economic Research. "Business Cycle Dating Committee Announcement July 19, 2021."
Bureau of Economic Analysis. “National Income and Product Accounts Tables: Table 1.1.1 GDP Growth.” Select "Modify," select "Annual," select "1930 A" as "First Year."
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."
Stanford University. "The Facts of Economic Growth," Page 3.
Bureau of Labor Statistics. "Top Picks," Select “Unemployment Rate,” Retrieve Data, ”Select 1929-2020,” Select “Go.”
Bureau of Labor Statistics. "Labor Force, Employment, and Unemployment, 1929-39: Estimating Methods." Page 2, Table 1.
International Monetary Fund. "Gross Domestic Product: An Economy’s All."
Federal Reserve Bank of Cleveland. "Why Does the Fed Care About Inflation?"
Federal Reserve Bank of Atlanta. "GDP Growth, the Unemployment Rate, and Okun’s Law."
Part Of
Understanding GDP
- What Is Gross Domestic Product (GDP)?1 of 9
- Components of GDP Explained2 of 9
- U.S. GDP by Year, Compared to Recessions and Events3 of 9
- Real GDP, How to Calculate It, Comparison to Nominal4 of 9
- What Is GDP Per Capita?5 of 9
- Real GDP Per Capita, How to Calculate It, and Data Since 19476 of 9
- What Is the U.S. GDP Growth Rate?7 of 9
- What Is Economic Growth?8 of 9
- U.S. Real GDP Growth Rate by Year Compared to Inflation and Unemployment9 of 9
Newsletter Sign Up
Newsletter Sign Up
By clicking “Accept All Cookies”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts.
