There may be some people who are nervous about our near-term economic future. While it is true that the economy continues to churn out new employment opportunities, rising home prices, and more output, the recovery is now in its eighth year.
As indicated by writer Josh Zumbrun, since World War II, the average period of economy growth has lasted slightly less than six years. The longest period of growth on record, between March of nineteen ninety one and March of two thousand and one, was ten years. The question becomes, could the current economic expansion die of old age?
A recent piece of research from the Federal Reserve Bank of San Francisco concludes that economic expansions do not die of old age, which means that a mature expansion like the current one is no likelier to enter a recession over the next year than a young expansion.
In conducting its research, the San Francisco Fed uses the same statistical techniques that are used to study human mortality. For instance, at age sixty, there is slightly more than a one percent chance of dying over the next year. By age one hundred, the chance is thirty five percent. The San Francisco Fed has determined that this pattern does not hold for recoveries – the chance of near-term recession does not grow with time.
