The longest ever expansion in US economic growth

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The election campaign for the November 2020 US presidential election was launched by President Trump in June.

It’s the economy stupid!‘ – the slogan forged by Bill Clinton’s campaign strategist in 1992 has since lost none of its pertinence.

  • The economic environment can decide elections
  • Fears of a recession are already in play
  • When will a cycle that has seen a 10-year US economic expansion end?

On 20 September 2010, the National Bureau of Economic Research (NBER) officially declared that the recession had ended more than a year earlier, in June 2009, marking the start of the current period of expansion. Given that all indications suggest that the US economy continued to grow this summer after annualised 2.0% GDP growth in the second quarter of 2019, the current groeth spell is now the longest in US history. At the same time, it is also one of the least dynamic, with an average growth rate of around 2%.

Exhibit 1: Long and lean – the longest period of US economic expansion in history, but certainly not the strongest

Exhibit 1: Long and lean - the longest period of US economic expansion in history but certainly not the strongest

Markets ripe for shocks?

At a press conference in 2015, when she was Chair of the Federal Reserve, Janet Yellen said she did not believe that ‘economic cycles die of old age.’ The statement gave rise to an article published by the San Francisco Fed confirming this claim.

In other words, a recession does not occur spontaneously, but is the result of a shock, either external (e.g. an oil shock), internal (an overinvestment crisis) or as a result of an economic policy error.

Recent events suggest that times seem conducive to shocks. This is, in any case, the assumption that financial market developments seem to reflect in recent weeks. Investors’ jitters about the economic outlook have led them to fall back on assets traditionally regarded as safe havens (e.g. government bonds, precious metals). This behaviour led to market movements generally considered to be recessionary signals (inversion of yield curves in particular[1]). These signals, in turn, maintain market concerns.

What could undermine the economic expansion?

However, unless uncertainties about the trade conflict are exacerbated, it is hard to imagine a sharp weakening in consumption and domestic demand-driven activity. Strong labour market conditions are supporting household confidence and private spending (up by 3.0% in 2018 and 3.6% annualised in the first half of 2019).

Many indicators of labour market health are now close to their highest in the last 25 years. The unemployment rate rose slightly in June and July (to 3.7%), but this reflects the return of the discouraged unemployed. Businesses have confirmed their intention to hire and their difficulty in filling vacancies, while the ratio of the number of unemployed per job created has been less than 1 since March 2018.

No obvious clouds on the horizon

In this environment, it looks unlikely that an endogenous shock would plunge the US economy into recession in the next few months, particularly as financial conditions have become easier recently.

There is of course no certainty that other events, either negative (e.g. greater protectionism, monetary policy errors) or positive (an increase in productivity), will not come into play.

[1] Also read Debunking the yield curve as a ‘super-forecaster’ of recessions


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Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients.

Nathalie Benatia

Macroeconomic Content Manager

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