At $13.27 trillion, real U.S. GDP in the second quarter had nearly reached its pre-recession level of $13.33 trillion hit in the last quarter of 2007. If third quarter growth (which will be announced next week) managed to exceed the rate of 1.6%, then GDP will reach a new high. Does this mean that the U.S. has recovered? It sure wouldn't feel like it: the economy is still a mess. Unemployment is very high, the real estate market remains a disaster, and pessimism plagues business prospects. To reveal why the rest of the U.S. economy hasn't caught up to GDP, it might help to consider GDP-per-capita.

This statistic, which considers economic output per person, provides a much different picture. By this metric, the U.S. economy is no where near approaching its pre-recession level of output:

gdp-per-capita 2011-q2.png

At $42,505, real GDP-per-capita is right around its level in the second quarter of 2005. This actually correlates surprisingly well to employment. Last month, the number of employed Americans finally exceeded 140 million again. That same threshold was broken in November 2004. This makes sense, since millions of unemployed Americans are unproductive and failing to contribute their full potential to economic growth.

This chart demonstrates a problem: the U.S. is not yet approaching its pre-recession level of output-per-person. There just isn't enough economic activity to bring the nation back to where it was in late 2007. Indeed, for the last few quarters, the curve appears to be flattening out. The growth that we are experiencing since the recovery began has been too weak to get us back at that level.

For the average American to feel that his or her economic situation is improving, GDP-per-capita would need to rise. If it doesn't, then this implies stagnation. When output per person rises, then the U.S. economy can provide more benefit to each American. If this metric declines, then the average person would be worse off. In practice, how that economic output is distributed also matters. But even in theory, if this metric is depressed, then the average American won't sense the economy improving.

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