Statement of Douglas W. Elmendorf Director Policies for Increasing Economic Growth and Employment in the Short Term
"The United States has just suffered through the most severe recession since the 1930s.
The economy’s output is currently about 6 percent below CBO’s estimate of potential
gross domestic product (GDP)—the output the economy would produce if its resources were fully employed. At 9.7 percent, the unemployment rate is about twice what it was in December 2007. Since that time, employers shed about 8.4 million jobs. Moreover, if employment had grown during that period at the same rate at which it grew from 1990 to 2007, millions of additional jobs would have been added to the economy. All told, the recession has lowered employment by about 11 million
jobs relative to what it would otherwise be.

The good news is that the economy appears to be starting to recover. Real (inflationadjusted)
GDP grew during the second half of 2009, after having fallen 3.7 percent since the recession began in the fourth quarter of 2007. Severe economic downturns often sow the seeds of robust recoveries. During a slump in economic activity, consumers defer purchases, especially for housing and durable goods, and businesses postpone capital spending and try to cut inventories. Once demand in the economy picks up, the disparity between the desired and actual stocks of capital assets and consumer durable goods widens quickly, and spending by consumers and businesses can accelerate
rapidly. Although CBO expects that the current recovery will be spurred by that dynamic, in all likelihood the recovery will also be dampened by a number of factors. Those factors include the continuing fragility of some financial markets and institutions; declining support from fiscal and monetary policy; and limited increases in households’ spending because of slow income growth, lost wealth, and a large number of vacant houses..."