BlackRock Investment Institute | APRIL 2019

Putting economic cycles in context

The interactive tool below lets you select charts based on a range of metrics across US economic cycles since 1953. Instead of plotting each cycle on the same time axis, we stretch or shrink each cycle so that it is aligned along key points in the business cycle. What stands out? This looks like a completely normal cycle and is tracking the previous two cycles closely.

How it works

Each cycle is fixed at its peak, trough and the point at which potential output is achieved – showing how economic slack is created and absorbed based on both the output gap (growth relative to potential) and NAIRU (the rate of employment at which wage growth is steady). The output gap and NAIRU are further explained in the button below. The interactive allows users to view the cycles based on their progress in closing either the output gap or NAIRU, as estimated by the US Congressional Budget Office. Each dot on a line depicts a calendar quarter.

BlackRock Investment Institute and US Bureau of Economic Analysis, November 2018.
Notes: This chart shows the level of real US GDP compared against other cycles since 1953, excluding the short 1980-81 one. Each line begins at 100 with the peak of the previous business cycle, as determined by the NBER. We fix different economic cycles at key points to align each based on their peaks, troughs and the point when potential output is reached. This allows us to compare cycles of varying lengths. The cycles above vary from 11 to 42 quarters. Potential output is reached when the economy is operating at full capacity, having used up all the slack created by the previous downturn. We use CBO measures of the output gap (the difference between actual and potential output) and the unemployment rate gap. Each dot on a line represents a calendar-year quarter.