The U.S. economy is about to enter the third year of an economic expansion that began in May 2020, according to the National Bureau of Economic Research’s Business Cycle Dating Committee. A review of employment, production, income and sales measures show that the economy continues to grow, although inflation has become a serious monetary problem.
Founded in 1920, the NBER is a nonpartisan, nonprofit organization recognized within the economics profession as an arbiter of the business cycle. The committee “did not conclude that the economy has returned to normal functioning,” a 2021 statement said. On the contrary, “economic activity is generally below normal in the early stages of an expansion, and sometimes it stays so long in the expansion.”
Popular media often define recession as two consecutive quarters of negative GDP. The measure was negative for the first two quarters of 2020, around the brief two-month recession identified by the NBER as occurring earlier this year. But for observers who prefer GDP, the latest reading shows six consecutive quarters of growth since 3Q-2020. Growth is synonymous with expansion.
The NBER uses a wider range of measurements. Arkansas is in the region covered by the Federal Reserve Bank of St. Louis. A review of these measures on the St. Louis Fed website shows economic expansion, not contraction.
The St. Louis Fed public site is easy to use. Measures can be examined by typing these terms into the search function: “all employees, total non-farm”, “industrial production: total index”, “real personal income excluding transfers”, “real sales of manufacturing and commercial industries” .
The results show the expansion of key measures. First, non-farm payroll employment has increased by 15.9% since the end of the recession in April 2020. Second, industrial production has increased by 24.2% over the same period. Third, real personal income less transfer payments increased by 9.8%. Finally, real sales in the manufacturing and trade industries increased by 25%.
For perma-bears, bad economic news is always on the horizon. This fallacy in human reasoning is amplified when the business cycle is viewed through a partisan lens. Booms and busts are non-partisan events. The NBER timeline dates back to the mid-19th century and shows both economic events occurring under both major parties.
The state of the economy today does not mean it will remain the same tomorrow. The US economy is dynamic, not static.
“What is an economic cycle? asked Victor Zarnowitz of the University of Chicago in a 1991 NBER article. “Business cycles have varied greatly over the past 200 years in length, spread, and size,” he observed. . “At the same time, they are distinguished by their recurrence, persistence and ubiquity.”
At three years, the length of the current expansion is longer than more than a third of the expansions in the NBER timeline. Yet, at a future date, it too will end.
Editor’s note: Greg Kaza is Executive Director of the Arkansas Political Foundationa nonprofit economic think tank founded in 1995 in Little Rock.