Economic expansion just hit longest ever record



  • One unusual aspect of what is now America’s longest period of expansion – 121 months in July – is its slow pace.
  • This is at least in part the result of the depth of the Great Recession and the amount of wealth and jobs it destroyed.
  • Another notable point is how uneven this expansion has been, in terms of who has benefited the most and to which regions of America those benefits have gone.

At the start of July, the current US economic expansion crosses an invisible line: at 121 months, it’s officially the longest growing period in US history. From now on, we are in uncharted territory.

One of the things that made the current expansion the longest on record is its slow and gradual nature. Average annual GDP growth – a broad measure of a country’s total economic output – has been lower in this expansion than in the previous three.

One of the reasons for this is the large number of people who lost their jobs during the Great Recession, which meant that employment took much longer to decline than it took for a typical recovery. And the jobs created by this expansion are not the same as those destroyed by the recession. Today, nearly 5 million more people work in the retail and hospitality industries for less than 10 years ago, while the manufacturing and construction industries have created just over a million jobs each.

This recovery has also been uneven. The recession was indiscriminate in the elimination of wealth across the country, but that wealth has not grown at the same rate. Instead, a few households at the top have seen dramatic growth in their assets.

“The wealth gains during this expansion have not been distributed evenly. Indeed, looking at the median family net worth over the past 30 years, we see that the typical American family is poorer than before. the crisis, “Deutsche Bank analysts recently wrote in a note. . “Median real household net worth fell sharply during the recession to levels of the early 1990s and has not recovered since.”

A slowdown in growth

The geography of growth reflects this inequality. For a handful of superstar cities – New York, Los Angeles, Dallas and Miami – the growth has been spectacular, while small towns and rural areas are pretty much where they were before the crash.

“You are seeing slowing economic growth,” John Lettieri, CEO of the Economic Innovation Group, told CBS MoneyWatch previously. “Where the jobs and businesses came back doesn’t very closely match where they were lost.”

Entrepreneurship think tank EIG sounds the alarm on what it sees as a problem geographic disparity. Between 2007 and 2016, his research shows that 90% of the 3.7 million jobs created in America went to the richest 20% of zip codes.

Between 2007 and 2016, the country as a whole created about 53,000 net new businesses, according to Census Bureau data. But only five counties together added even more during that time – roughly 55,000 businesses. The winners: Brooklyn and Queens of New York; Los Angeles; Miami-Dade, Florida; and Harris County, Texas, which contains Houston.

“Something is killing an extension”

As the recovery continues, it is normal for economic growth to gradually slow down as more people find work and jobs become increasingly difficult to fill. Last month’s hiring figures – albeit rather gloomy – offer a glimpse of this trend. Already this year, companies have hired an average of 164,000 people per month, down sharply from 223,000 last year.

“Expansions don’t age or die. Something kills an expansion,” Robert Frick, chief economist for the Navy Federal Credit Union, told CBS MoneyWatch recently.

That killer could very well be the American trade wars. As President Donald Trump reached agreement for resume talks with its main trade rival, China, at this week’s G20 summit, Mexico and now India remain potential sore spots. The Federal Reserve has basically promised to cut interest rates if the tariffs imposed so far have a noticeable impact on growth. But with rates already historically low, that many will not be enough. The Fed’s current target rate, between 2.25% and 2.5%, is the lowest it has been at the peak of an economic expansion.

This could explain why more than two-thirds of corporate finance executives see an economic slowdown before the end of next year. According to John Graham, professor of finance at Duke University: “For the first time in a decade, no region of the world seems to have a strong enough economic base to be the engine that pulls the global economy up.”



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