How Long Can the Economic Recovery Last? - 8/20/15
The U.S. economic recovery, now in its seventy fourth month, is set to continue. There have been longer periods of consistent growth in America’s economic history, but not many. Therefore, it might be reasonable to start wondering when the next downturn will arrive. According to Moody’s Analytics, the current economic expansion still has a few more birthdays to celebrate.
According to Moody’s, concerns that the expansion’s age signals that it many soon end are misplaced. Expansions typically expire because the economy overheats, operating at low levels of unemployment that lead to significant wage and price pressures. In an effort to cool the economy, the Federal Reserve aggressively raises interest rates, and poof goes the recovery.
But despite currently strong job growth that has been steadily absorbing the underemployed, there remains slack in the labor market. What economists define as full employment is still about a year away according to Moody’s, which implies that the economy won’t even begin the process of overheating until then. The Federal Reserve hasn’t even begun to raise interest rates to date. Long story short, we remain in the mid-cycle phase of the recovery.