Putting Our Record Breaking Economic Expansion In Perspective

Putting Our Record Breaking Economic Expansion In Perspective

Now that July has ended, the US is officially experiencing its longest economic expansion in history. The previous record was the economic expansion from March 1991 to March 2001. As we bask in the glow of breaking a record, it always helps to put record-breaking accomplishments into perspective. Let us examine this expansion from three perspectives: 1) how this 10-year expansion compares to the last 10-year expansion, 2) to the last 4 four expansions (since 1980), and 3) how this expansion compares to the average expansion since 1960 (as far back as some of the economic data goes). I will provide comparison against Gross Domestic Product (GDP), jobs growth and the major components of GDP — personal spending, business spending and government spending. All data (except jobs) is examined on a “real” basis, meaning after inflation. With this understanding, and to avoid the repetitive use of the word “real”, the remaining discussion will forego putting “real” in front of each of the components being examined.

GDP

Although this expansion is the longest in history, it is one of the slowest growing expansions since 1960. GDP grew 1.3% per year slower than the last 10-year expansion. To give perspective, that means that we added $2.6 trillion less in economic growth compared to if we had grown at the same rate as the last 10-year expansion. From a longer-term perspective, this expansion has been the second slowest since 1960.

Expansion Annualized Growth Rate
Current expansion 2.3%
Last 10-year expansions 3.6%
Average for last 4 expansions 3.5%
Average expansion since 1960 3.5%

 

 Jobs

Based on non-farm payrolls data from the Bureau of Labor Statistics (BLS), the US has added 3.9 million fewer jobs during the current expansion than the last 10-year expansion. The current expansion ties for 5th out of the 7 economic expansions.

Expansion Annualized Growth Rate
Current expansion 1.4%
Last 10-year expansion 2.0%
Average for last 4 expansions 1.8%
Average expansion since 1960 2.2%

 

 

Real Personal Income

Since the population grew over time, both real income and spending will be evaluated on a per capita basis (per person) to remove the effect of population growth. Real per capita disposable personal income has risen 1% per year slower than the last 10-year expansion and ranks 5th out of the 7 expansions.

 

Expansion Annualized Growth Rate
Current expansion 2.6%
Last 10-year expansion 3.6%
Average for last 4 expansions 2.8%
Average expansion since 1960 3.0%

 

Personal Spending

As you might imagine, if people saw their income rise at a slower pace than the last 10-year expansion then they had less money to purchase goods and services. Per capita personal spending for this expansion currently grew at 60% of the pace of the last 10-year expansion and ranks 6th out of the 7 expansions. Since personal spending accounted for 69% of GDP during this expansion this helps explain why GDP is slower in this expansion.

Expansion Annualized Growth Rate
Current expansion 2.4%
Last 10-year expansion 4.0%
Average for last 4 expansions 3.5%
Average expansion since 1960 3.5%

 

Business Spending

Business spending grew at a far faster rate during this expansion than consumer spending. Unfortunately, business spending is the smallest contributor to GDP growth among the 3 major categories. Business spending showed the same pattern as consumer spending when compared against the last 10-year expansion, but actually matches the annualized growth rate for the past 4 expansions and all 7 expansions.

Expansion Annualized Growth Rate
Current expansion 6.2%
Last 10-year expansion 7.3%
Average for last 4 expansions 6.2%
Average expansion since 1960 6.2%

 

Government Spending

Government spending showed no growth during this expansion. Government spending was $3.3 trillion as of 6/30/2009 and was still $3.3 trillion as of 6/30/19. This was due to the reduction in spending that occurred because of the budget and debt ceiling battle in early stages of this expansion. Government spending fell by $283 billion from the 3rd quarter of 2010 through the 1st quarter of 2014 and has taken the remainder of this expansion to regain the ground lost. As a result, government was slower than the last 10-year expansion and ranks last among the 7 expansions.

Expansion Annualized Growth Rate
Current expansion 0%
Last 10-year expansion 1.2%
Average for last 4 expansions 1.6%
Average expansion since 1960 2.0%

 

Conclusions

As the data shows, from a purely quantitative perspective, this expansion is the longest in history, but lags in all of the underlying categories compared to the other expansions. Whether it lags or exceeds based on qualitative judgement falls to each reader to determine. Any qualitative judgement on this expansion is unique to each person’s experience with, and participation in, the expansion. For those whose expectations were met or exceeded for this expansion it may rank as one of the best ever, especially if you owned stocks or real estate. For those whose expectations were not met, they may be very dissatisfied and may be seeking change via the political route. Perhaps that explains why discontent and populism have risen during this expansion.

 

Washington Trust Bank believes that the information used in this study was obtained from reliable sources, but we do not guarantee its accuracy. Any opinions stated in this blog post represent the view of the author and do not necessarily represent the views of Washington Trust Bank senior management. Neither the information nor any opinion expressed constitutes a solicitation for business or a recommendation of the purchase or sale of securities or commodities.

About The Author

Steve Scranton is the Chief Investment Officer and Economist for Washington Trust Bank and is a CFA charter holder with over 30 years of investment experience with equities, tax-exempt and taxable fixed income securities. Steve actively participates on committees within the bank to help design strategies and policies related to client and bank owned investments. Steve also serves as the economist for the Bank and has been a featured speaker for both client and professional organization events throughout the Northwest.