The American economy is dynamic. It runs in cycles. When economic activity and hiring are increasing, we call that an expansion. When economic activity and hiring are decreasing, we call that a recession. This phenomenon of economic cycles is part of the fabric of American life.
Recessions are short and painful. Since 1950, the United States has recorded ten. On average, they lasted 11 months. The longest recession in the last 65 years was our most recent downturn that began in January 2008 and lasted 18 months.
Fortunately, expansions last a lot longer. Since 1950, the United States has recorded 11 expansion periods. The average length of these expansions is 61 months. As you can see, some expansions can last for a long time. The longest was 120 months from April 1991 to March 2001.
Notice how our current expansion began 61 months ago, exactly the length of the average expansionary cycle. Does this mean that we are close to the end of this recovery? Clearly that is not the case.
Employment is expanding, spending is increasing, car sales are robust and wages are starting to grow again. Single-family home construction is the one part of the economy that has been slow to recover. As the number of new homes under construction increases, this will be another engine of economic growth in the coming years.
Nobody can predict future economic activity with any precision, but this economy feels like it still has a lot of room to run. Car sales are expected to be strong again in 2015. If home building picks up at all, that will add more fuel to the fire.
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