The year 1991 found the US economy in a mild recession. In July 1990 the current expansion peaked, starting an economic contraction that lasted until March 1991. An economic recovery began during the second quarter of 1991.
The quarterly real GDP growth rates of 1991 were; QI – (-1.9%), QII – 2.3%, QIII - .9%, and QIV – 2.2%. The unemployment rate increased throughout 1991, beginning at 6.3% and ending at 7.2%. Increases in unemployment were caused in part by the recovering economy attracting discouraged workers back to the labor force. The 1991 inflation rate for both CPI based and GDP based was 3.1% and 3.4% respectively.
The 1991 real GDP annual growth rate of 3% was substantially higher than the 1990 rate of -.005 and about the same as the 1992, rate of 2.9%. Unemployment continued to increase from an average of 5.4% in 1990 to a 7.5% average in 1992. The inflation rate steadily decreased from 6.1% in 1990 to 2.9% in 1992 (CPI based).
Iraq's invasion of Kuwait in August of 1990 and the associated increase in oil prices contributed to the already downsizing U.S. economy. Oil prices subsided to pre-invasion levels by February 1991. In the last months of 1990 the Federal Reserve began easing the existing tight monetary policy, which was focused on inflationary control. Monetary policy was further eased in the early months of 1991. Lower short-term interest rates, decreasing inflation, substantial increases in the value of the dollar on foreign exchange markets and the successful military campaign in the Middle East all contributed to removing economic uncertainty that had depressed business and consumer sentiment.