The longest US economic expansion – but also the weakest

"The United States is in the midst of an economic boom, the likes of which the world has never seen before." This was among the claims made by President Trump during his speech to the World Economic Forum on 21 January at Davos, Switzerland.

The current period of economic expansion is certainly long by comparison with earlier periods of growth. The graph below shows the behaviour of the US economy going into and coming out of recessions since 1954.

US economic recoveries since 1954 (pre-recession peak = 100)

^{Source: Refinitiv Datastream, Cazenove Capital} 

On average, recessions in this period caused US output to shrink by 3%. On average, it took less than a year from the economy’s low point to fully recover.

The downturn that followed the Great Financial Crisis of 2009 was different. It was far more severe, both in terms of depth and duration. US output contracted by 4% between 2007 and 2009. It took almost 2 years to get back to the previous peak in GDP. 

The expansion that started in 2009 has also been unusual. Previous expansions had an average life of six years; the current one has lasted for 11 years – and counting.   

A possible explanation for this is the fact that growth in the current phase of the cycle has been so slow. The US economy has grown at an annualised rate of just 2.0% from its low point in 2009 – compared to an average of 3.5% in the wake of previous recessions.  

Janet Mui, Cazenove Capital’s global economist, says: “The current expansion is already the longest on record and we do not expect it to end this year. Expansions typically come to an end when an economy overheats and the Federal Reserve is forced to cool activity down. The slow pace of growth we are currently seeing makes this intervention unlikely.”