Our Expansion is Actually Getting Longish in the Tooth

March 22nd, 2014 at 11:01 am

As Josh Barro reminded us the other day, most Americans—57%–still think the economy is in recession.  It’s not, as per the official scorekeepers.  The National Bureau of Economic Research Business Cycle Dating Committee (sounds like a lonely heart club for nerds) tells us that the recession officially ended in June 2009.  And at least in GDP terms, which ain’t nothin’, the US economy has been growing since then.  In fact, if you take a gander at the second panel in this set of figures from Floyd Norris today, you’ll see US real GDP growth solidly outpacing other advanced economies.

So the current expansion is 57 months old.  Now consider this: the average length of post-war expansions in 58 months.  That doesn’t mean a recession is necessary around the corner.  I’d judge that probability to be very low right now (and the standard deviation of the 11 expansions that form this average is 35 months, so a lot of variation around that mean).  But it does mean that the current expansion is getting on in years relative to all the others since the mid-40s.  Moreover, its age in months happens to correspond exactly to the percent of people who think it’s not an expansion at all (that’s 57, if you’re keeping track).

Barro stresses the unequal distribution of the growth that has occurred to explain the disconnect; I summarize that information here, showing real GDP up 11% over the expansion, real profits and the S&P equity index up 50 and 80 percent, respectively, while real median household income is actually down in real terms.  We both stress inadequate policy responses.

I don’t have the data at hand to learn how unusual it is that almost five years into an expansion, this large a share of people think we’re still in recession—perhaps an enterprising commenter can take a look.  I suspect it’s somewhat of an outlier, though with jobless recoveries and high levels of inequality the norm these days, it may not be that out-of-the-ordinary.

What I can tell you is that this notion of a business cycle/expansion is becoming considerably less meaningful, given the divergent ways in which the expansion is unfolding.



Source: NBER; data refer to months of expansions since 1945.

Print Friendly, PDF & Email

5 comments in reply to "Our Expansion is Actually Getting Longish in the Tooth"

  1. Min says:

    We may not be in a recession, but we are in a depression, as Brad DeLong says. The trouble is, hardly anybody in authority will admit it. Then they might have to do something about it.

  2. Robert Buttons says:

    We may be in an expansion, but it doesn’t feel that way. So either the idea of expansion is wrong or sentiment is wrong.

    1. True positive expansion, False negative sentiment: This model suggests our expansion is asymmetric, with a small group receiving all the benefits. For example, if QE was being lavished on the 1%.
    2. False positive expansion, True negative sentiment: This model suggests the real GDP data is wrong, which is a real possibility if the CPI is flawed. (Which I believe it is)

  3. floydd says:

    As to “a large share of people still feel we’re still in a recession”. Floydd is old enough to know the feeling now is almost identical to the Regan recovery. In fact on that subject, it appears to me Obama is nearly identical to RR, including rhetoric, cheerleading and so on. Obama’s use of the Regan template will probably have the same result. Hope you all enjoy privatized SS, Medicare, education,bridges, roads, water…….

    • Jim says:

      Your joking , right? Reagan & Obama are no longer in the same world & their policies are similarly apart. Cheer-leading? Just like Obama, Reagan had complete access to the microphone. The difference being when Reagan had problems with congress, he took them to the American people to help him resolve. Obama has shown no such resolve. Reagan spoke to the people, Obama speaks at them. Reagan clearly realized that this is a democracy, flawed or not & he took responsibility as president. Obama behaves as if this is a kingdom & fault is to be found everywhere else. “Yes WE can” meant something clearly different to these men. Obama is our president. He is our leader. He needs to rally the American people towards some end. His tenure as two term president is getting longish in the tooth. Best he start now.

  4. Tom in MN says:

    If a shock comes in the next year or two the Fed Funds rate will still be too low for the FOMC to have any conventional way to fight it. I suspect that they won’t even be able to stabilize rates high enough long term to offset even a minor downturn if they stick to their 2% inflation ceiling.

    So we better hope the next downturn is a long way off.