This marks the 103rd month of US economic expansion. Is the country due a recession?by George Magnus / January 8, 2018 / Leave a comment
President Trump was busy last week, falling out with one-time confidant and adviser Steve Bannon, and failing to stop the publication of Michael Wolff’s new bestseller Fire and Fury. 2018 could be a long year for this unpopular president if investigations into obstruction of justice gain traction, while Democrats are salivating about electoral prospects in congressional elections in November. Last week, though, he still found time to boast that the Dow Jones surge through 25,000 and record levels reached in US equity markets were down to him, and his focus on “jobs, jobs, jobs” and “making America great again.”
For the moment, he can certainly crow about the US economy, even though the momentum that returned to economic growth during 2017 happened regardless of his Administration. Economic growth picked up to a little over 3 per cent per annum in the spring, and stayed there through the summer. By the end of last year, it might have edged towards 3.5-4 per cent, though we should note that the renewed widening US trade deficit late last year will act as a drag on reported GDP growth.
Jobs have continued to expand, but at a decelerating pace, as we should expect this late in the economic cycle. With the December jobs report last Friday showing that 148,000 positions were created, the economy created on average 171,000 jobs a month last year. This compares to 187,000 a month in 2016, and 226,000 a month in 2015. Unemployment at 4.1 per cent is probing new depths, and could easily drop a bit further. Now with tax cuts approved, mainly for companies and better off households, the economy could get some additional momentum for a while.
One of the things economists will be watching closely is how long this expansion might continue. January 2018 marks the 103rd month of expansion from the last trough in activity in June 2009. It’s inevitable now that this expansion will become the 2nd longest on record at least. In May 2018, it will have run for 107 months, beating by a month the expansion that lasted from February 1961 to December 1969. By June 2019, if the expansion continues that far, it will be 120 months old, equalling the longest ever from March 1991 to March 2001. But will…