The lasting damage of the financial crisis

Persistent output losses

A decade after the last financial crisis and recession, the U.S. economy remains significantly smaller than it should be based on its pre-crisis growth trend. One possible reason lies in the large losses in the economy’s productive capacity following the financial crisis. The size of those losses suggests that the level of output is unlikely to revert to its pre-crisis trend level. This represents a lifetime present-value income loss of about $70,000 for every American.

The Financial Crisis at 10: Will We Ever Recover?
By: Regis Barnichon, Christian Matthes, and Alexander Ziegenbein – San Francisco Fed

Persistent employment losses

The central finding is that exposure to a severe local Great Recession caused working-age Americans to be substantially less likely to be employed at all in 2015, despite recovery in the local unemployment rate. This finding contrasts with the conventional view that a business cycle’s employment impacts cease once unemployment recovers. Instead, the Great Recession altered unemployment-constant (“trend”) employment.

Employment Hysteresis from the Great Recession
Author: Danny Yagan
From: UC Berkeley

Secular stagnation: a concept to explain away the failures

There are many lessons to be learned as we reflect on the 2008 crisis, but the most important is that the challenge was – and remains – political, not economic: there is nothing that inherently prevents our economy from being run in a way that ensures full employment and shared prosperity. Secular stagnation was just an excuse for flawed economic policies.
The Myth of Secular Stagnation
By: Joseph Stiglitz – Columbia University