Early 1980s Recession - Recovery

Recovery

The mid-term Congressional elections proved to be the low point of the Reagan presidency.

According to Keynesian economists, a combination of deficit spending and the lowering of interest rates slowly led to economic recovery. However, conservatives insist that the significantly lower tax rates caused the recovery. From a high of 10.8% in December 1982, unemployment gradually improved until it fell to 7.2% on Election Day in 1984. Nearly two million people left the unemployment rolls. Inflation fell from 10.3% in 1981 to 3.2% in 1983. Corporate earnings rose by 29% in the July–September quarter of 1983, compared with the same period in 1982. Some of the most dramatic improvements came in industries hardest hit by the recession, such as paper and forest products, rubber, airlines, and the auto industry.

By November 1984, voter anger at the recession evaporated and Reagan's re-election was not in doubt. Reagan was subsequently re-elected by a landslide electoral and popular vote margin in the 1984 presidential election. Immediately after the election, Dave Stockman, Reagan's OMB manager admitted that the coming deficits were much higher than the projections released during the campaign.

As for the United Kingdom, economic growth was re-established by the end of 1982, although the era of mass unemployment was far from over. By the summer of 1984, unemployment had hit a new record of 3,300,000 (although the depression of the early 1930s had seen a higher percentage of the workforce unemployed) and it remained above the 3,000,000 mark until the spring of 1987, when the Lawson Boom – so named as it was the consequence of tax cuts by chancellor Nigel Lawson – sparked an economic boom that saw unemployment fall dramatically. By early 1988, it was below 2,500,000. By early 1989, it fell below 2,000,000, and by the end of 1989 just over 1,600,000 were unemployed – almost half the figure of three years earlier. Other incentives which aided the British economic recovery after the early 1980s recession included the introduction of Enterprise Zones, on deindustrialised land where traditional industries were replaced by new industries as well as commercial developments – with businesses being given tax breaks and exemption from rates for a certain period of time, as an incentive to set up base in these areas.