Not only do data indicate that actualU.S. GDP is running about 12 points below where it would have beenhad the crisis not occurred, but that GDP isn't likely to recoverto that extent. (Photo: Shutterstock)

It's been 10 years since the financial crisis and GreatRecession, and while politicians tout a low unemployment rate and ahumming economy, plenty of people would disagree with theirassertion that recovery has spread its mantle over the country.

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So does an economic letter from the Federal Reserve Bank of San Francisco, whichpoints out that not only is the economy “significantly smaller thanit should be based on its pre-crisis growth trend,” butAmericans—all of them—lost $70,000 in present-value lifetime incomethanks to the financial crisis.

The size of the “large losses in the economy's productivecapacity following the financial crisis,” says the letter,“suggests that the level of output is unlikely to revert to itspre-crisis trend level.” And that loss of productive capacitytranslates to that $70,000 loss.

Of course the wealthiest among the population might not evennotice such a loss, but the rest do — particularly for thosestruggling to survive on depleted retirement savings they wereunable to replenish, or for those still attempting to build upaccounts so that they can retire at some point.

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It's not just the U.S. suffering from the lingering effects ofthe crash/recession. The letter says that while “[t]he size of theU.S. economy, as measured by GDP adjusted for inflation, is wellbelow the level implied by the growth rates that prevailed beforethe financial crisis and Great Recession a decade ago,” the U.K.and European economies are also trailing where they would havebeen, had the financial crisis and Great Recession notintervened.

The report cites a 2017 study that examined a panel of countriesin the Organization for Economic Cooperation and Development andfound “that gross domestic product is typically about 9 percentagepoints lower five years after an extreme financial crisis.”

Not only do data indicate that actual U.S. GDP is running about12 points below where it would have been had the crisis notoccurred, but that GDP isn't likely to recover to that extent.

There's an asymmetric relationship, the letter says, between thedamage done by an adverse financial shock to a thriving economy andthe potential for a restoration of health to an economy inrecession by the presence of favorable financial conditions. Inother words, a healthy economy will fall farther when shocked thana poor one can rise when presented with growth conditions.

And because the losses incurred in the wake of a financial shock“are very persistent,” the report says, “they can have dramaticeffects on societal welfare and important implications forpolicy.”

It's important, therefore, that research and policy shouldaddress the question of how to prevent or contain future financialcrises.

Just ask any $70,000-poorer American.