How Long Can the US Economy Continue To Grow?

Is 79 months of economic growth in the US remarkable? Sustainable? The start of a new trend? Or has it already ended? GAI Senior Economist Steven McDonald, CVA joins us as a guest blogger to weigh in.

The average length of business cycle expansions since the end of WWII is 60 months, or exactly five years. So at 6.5 years, the current US economic recovery has passed the average growth period of the past 70 years. In fact, this recovery now ranks as the fourth longest business cycle expansion in post-WWII history. Unfortunately, based on seven decades of experience, the one thing we can count on is that this 12th round of economic growth will end, at some point.

This recovery now ranks as the fourth longest business cycle expansion in post-WWII history.

The most identifiable and comparable fact of each economic expansion and contraction is the amount of time the economy expands or the amount of time it needs to dig itself out of a hole. But comparison of time alone does not address the context of the quality and quantity of economic growth, or what might have been the contributing cause of why each of the previous 11 expansions ended. Today, the current business cycle expansion ranks behind only the economic cycles of 1982-91 (92 months), 1961-70 (106 months), and 1991-2001 (120 months). When we consider the economic forces behind these top three periods of expansion—supply-side economic policies (1982-91), “war-on-poverty” (1961-70), and consumer driven “irrational exuberance” (1991-2001)—keeping the economy growing might just be remarkable if it has not already peaked.

Why? The average rate of growth in industrial production through 2014 was 70% higher than average growth during every other expansion; the pace of growth in total private employment through the end of 2014 was 11% higher than every other expansion; and today, more than 13.3M total non-farm jobs have been added, recovering 4.5M more jobs than were lost in the last recession. But industrial production has stalled: out of 11 months in 2015, the US economy recorded seven periods of decline, and it appears that industrial production will end 2015 only slightly better than the summer of 2014. And average monthly job growth today is no better than an average expansion. On top of that, consumers appear to remain less than optimistic, even very depressed.

The Great Recession (2008-09) has had a significant impact on distribution of wealth, income equity, and consumer perceptions of economic certainty and financial stability. As a result, how we feel about our economic future today is clearly well below the sentiment of consumers during our three longest periods of growth, and it does not appear to be improving any time soon. Without a confident consumer, it is unlikely we will make a strong run for the third longest expansion since WWII. Although fourth place is not a terrible outcome from where we were, all things considered.

For more information on economic research, analysis, and strategizing, contact Senior Economist Steven McDonald at 407.423.8398.

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