Longest US Economic Expansion, But Not The Strongest

As I reported at the end of Tuesday’s Forecasts & Trends, our current economic recovery is the longest in US history. The National Bureau of Economic Research (NBER) – the arbiter of when economic recoveries begin and end – reported last week that we are now in the longest economic recovery on record. July marks the 121st month of the current recovery, surpassing the previous longest of 120 months from March 1991 to March 2001.

The NBER says the current economic recovery began in June 2009, following the Great Recession and financial crisis of late 2007 to early 2009 — when stocks lost over 50% of their value as measured by the S&P 500 Index. It was the worst economic downturn since the Great Depression.

While we should be elated that this is the longest economic recovery in US history, we should also be aware that this is NOT the strongest expansion by a longshot, as measured by real Gross Domestic Product growth. According to the NBER, the economic expansions of the 1960s, the 1980s, and the 1990s were all stronger than the current recovery in terms of GDP growth.

U.S. Real Gross Domestic Product

(Click on image to enlarge)

Source: Federal Reserve Bank of St. Louis, Commerce Department (shaded areas represent recessions)

The NBER says that the current economic expansion (again, beginning in June 2009) has seen total real GDP growth of only 24.5% through the end of May. That compares to growth of 51.7% in the 1960s expansion and 42.4% in the 1990s recovery. Even if this expansion lasts another year or two, it would not equal those earlier achievements.

The question is, why? To get a sense of why this expansion has been so weak, we must think back to the dire situation preceding June 2009. Policymakers in most of the advanced world had thrown everything they had at the meltdown of the world financial system and the stomach-churning downturn in many formerly prosperous economies.

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