The current U.S. economic expansion that began in 2009 will celebrate its 10th anniversary in June. The following month, it will become the longest period of sustained U.S. growth on record, according to the National Bureau of Economic Research.
The length of the current growth spate is raising questions among some market-watchers about just how much further it can go on, and whether the U.S. is due for a recession. My colleague Steve Matthews asked Federal Reserve Chairman Jerome Powell that very question. Powell seemed unconcerned, saying he saw the U.S. “on a good path for this year,” citing healthy growth, a strong labor market and low inflation.
The topic also came up when former Fed Chairman Ben Bernanke and former U.S. Treasury Secretaries Hank Paulson and Timothy Geithner appeared on CNN’s “Fareed Zakaria GPS” on Sunday. Geithner said the foundations of the current period “are more stable than is true for many past expansions,” adding that it “could go on.”
There’s good reason to share Powell’s and Geithner’s calm. When observing the current expansion solely in terms of duration, it does seem as if it’s running long. When comparing current growth to that of previous expansions, an imminent recession no longer seems inevitable.
The first is that the length of expansions, with few exceptions, has increased dramatically over the past seven decades. The second is that real annualized GDP growth has gradually declined over the same time. With each successive expansion, in other words, it’s taking the economy longer to produce the same amount of total growth.
So while the current expansion will soon be the longest on record, it ranks fifth in total growth among the 11 expansions since 1950. At its current annualized growth rate, it would take another six years to match the total growth attained during the 10-year expansion from March 1991 to March 2001 and another nine years to match that of the period from February 1961 to December 1969. By those lights, the duration of the current expansion seems less worrisome.
- Bloomberg Opinion