Hooray: July will be the longest economic expansion in US history. But boo: while the length is remarkable, the strength isn’t – in fact, it’s the worst performance in post-war history.
Previous expansions have fared much better than this one, according to the National Bureau of Economic Research. The average annual increase in gross domestic product (GDP) during the current expansion is 2.3%.
On July 1, the nation will register the longest period of economic growth on record, 10 years and in a row. It started in mid-2009, following the horrific Great Recession.
The current growth cycle of 121 months surpasses the previous longevity record holder, from the 1990s, of 120 months. This earlier period was fueled by a wave of technological improvements and spanned from March 1991 to March 2001, when the dotcom bubble burst.
The best periods of growth occurred between the late 1950s and early 1970s, when the post-war boom was at its strongest, with a GDP growth rate exceeding 5%.
Why has the current cycle’s growth rate been so slow? Republicans have blamed President Barack Obama’s tightening of regulations for hampering GDP expansion. During Obama’s second term, however, the pace accelerated, peaking at 2.9%. This matches last year’s performance under the Trump administration, which reduced regulation.
Perhaps the best explanation for the anemic growth is that the Great Recession shocked consumers and businesses so much that they took a while to come out of their funk — and still are to some degree.
In fact, the second most reckless expansion was that of the previous decade: from November 2001 to December 2007, fueled by the housing boom and the subprime mortgage debacle came to an end. The absence of inflation-adjusted revenue increases was felt then, a condition that persists today, which may act as a barrier to both expansions.
This expansion has had many bumps along the way, as a slide into recession seemed possible, even likely. At the start of the decade, the European sovereign debt crisis seemed like a fatal threat. The same was true for the oil crisis in 2014-15.
The all-time international champion of the length of the up cycle is Australia, whose economy has been expanding for 28 consecutive years. This owes much to its prodigious amounts of natural resources and a (relatively) stable customer base in growing China.
What future for the US economy? Periodic predictions of a recession in 2020 crop up. A May poll by the National Association of Business Economists found that 60% expect a recession next year. Whether things are that bad remains to be seen, but there is broad consensus that a slowdown in growth is ahead.
If President Donald Trump ends up imposing tariffs on the remaining $300 billion of Chinese imports into the United States (25% levies are already imposed on $200 billion), that wouldn’t help.
“The global growth landscape remains uneven and corporate earnings expectations are likely to continue to decline,” Bob Doll, chief equity analyst at Nuveen Asset Management, wrote in a research note this week. And he was the one who predicted earlier this year that this expansion would take the longest.
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Tags: economic expansion, GDP, Recession