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The economic history of the Carter Administration can be divided in two roughly equal periods. The first two years were a time of continuing recovery from the severe 1973–75 recession, which had left fixed investment at its lowest level since the 1970 recession and unemployment at 9%.[24] The second two years were marked by double-digit inflation, coupled with very high interest rates,[25] oil shortages, and slow economic growth.[26] The nation's economy grew by an average of 3.4% during the Carter Administration (at par with the historical average).[27] Each of these two-year periods, however, would differ dramatically.
The U.S. economy, which had grown by 5% in 1976, continued to grow at a similar pace during 1977 and 1978.[27] Unemployment declined from 7.5% in January 1977 to 5.6% by May 1979, with over 9 million net new jobs created during that interim,[28] and real median household income grew by 5% from 1976 to 1978.[29] The recovery in business investment in evidence during 1976 strengthened as well. Fixed private investment (machinery and construction) grew by 30% from 1976 to 1979, home sales and construction grew another one third by 1978, and industrial production, motor vehicle output and sales did so by nearly 15%; with the exception of new housing starts, which remained slightly below their 1972 peak, each of these benchmarks reached record levels in 1978 or 1979.[24]
The 1979 energy crisis ended this period of growth, however, and as both inflation and interest rates rose, economic growth, job creation, and consumer confidence declined sharply.[25] The relatively loose monetary policy adopted by Federal Reserve Board Chairman G. William Miller, had already contributed to somewhat higher inflation,[30] rising from 5.8% in 1976 to 7.7% in 1978. The sudden doubling of crude oil prices by OPEC, the world's leading oil exporting cartel,[31] forced inflation to double-digit levels, averaging 11.3% in 1979 and 13.5% in 1980.[24] The sudden shortage of gasoline as the 1979 summer vacation season began exacerbated the problem, and would come to symbolize the crisis among the public in general;[25] the acute shortage, originating in the shutdown of Amerada Hess refining facilities, led to a lawsuit against the company that year by the Federal Government.[32]
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