For the first time ever,
or at least since
official tallying began,
the U.S.
economy has started and
ended an entire decade
without entering
a recession.
That means this economic
expansion is now older
than the i-Pad Instagram and
the Tesla Model S
From the end of 2009 to
the end of 2019, the U.S.
economy has added more
than 20 million jobs.
We have launched an economic
boom, the likes of
which we have
never seen before.
It's been the longest
economic expansion in the
country's history taking place
in a decade marked
by the memory of the
Great Recession and by
unprecedented access to
information about the
state of the economy.
Both consumers have been
more cautious and
businesses have also become
more cautious, simply
out of fear that
we might experience something
similar to what we
saw 10 years ago.
But just because it's
the longest expansion
doesn't necessarily mean
it's the strongest.
Overall economic growth over
the past decade has
been slower compared
to previous booms.
And not everyone is
reaping the benefits.
Today in America, you
got three people owning
more wealth than the
bottom half of America.
So how did the U.S.
get through this historic
decade? And will it last?
The simplest explanation for
how the U.S.
economy has avoided a
recession during this
decade is that it was
coming from a very low
point at the end
of the last decade.
As some economists
have put it:
The deeper the hole, the
longer it takes to climb
out. None of us
anticipated the full
ramifications and extent
of the crisis.
The economic picture from 2007
to 2009 was so
gloomy it's called
the Great Recession.
Many experts define a
recession as two
consecutive quarters of
negative GDP growth.
GDP or gross domestic product
is one metric to
gauge the overall health
of the economy.
In the U.S., a
nonprofit organization called the
National Bureau of Economic
Research, or NBER,
decides if the economy
has entered a recession.
The NBER takes into account
GDP and a wider range
of measures like
income, employment, industrial
production and
wholesale-retail sales.
U.S. government agencies
like the Treasury
Department and the Federal
Reserve go by the
NBER's definition of
a recession.
The most recent recession,
according to NBER's
definition, was the
Great Recession.
From 2007 to 2009.
U.S. GDP fell 4.3
percent. The unemployment rate
doubled from 5
percent to 10 percent.
And house prices and
stock markets crashed.
People were hit essentially
both in terms of
losing their jobs and a
lot of people were also
hit very significant in
terms of losing their
homes and home prices going
down and the stock
market going down. The
only other time the
economy was in
worse shape?
During the Great Depression
in the 1930s.
A stock market crash and
a series of banking
panics put an end to
the economic boom of the
Roaring 20s. Millions of
Americans lost their
jobs and livelihoods as
the downturn lasted an
entire decade.
In the Great Depression
of the 1930s,
unemployment peaked at
almost 25 percent.
There were booms and busts
and every decade after
World War Two. But one
notable thing started to
happen. Economic expansions
lasted longer.
The period from the
mid-1980s to 2007 became
known as the
Great Moderation.
Prices remain stable, and
while there were
occasional dips on the
whole, the economy chugged
along. One reason for this
is that officials at
the Federal Reserve got
more effective at
responding to changes in
the economy and because
inflation was steady.
Policymakers could act aggressively
when the next
crisis came along.
When the Great Recession
hit, policymakers in DC
took unprecedented steps to
try to get the
economy back on track.
Their actions resulted in
trillions of dollars of
economic stimulus.
A very important reason
why the U.S.
had had such a long
and very protracted expansion
is that U.S.
fiscal policy and monetary
policy, meaning the
Federal Reserve and politicians,
were much more
quick out of the box
in terms of supporting the
economy. In 2008,
Congress authorized the
Treasury Department to
invest hundreds of
billions of dollars to
try to revitalize the
country's ailing financial and
auto sectors as
part of the Troubled
Asset Relief Program,
otherwise known as TARP.
A year later in 2009,
President Obama signed the
American Recovery and
Reinvestment Act.
The law pumped hundreds
of billions of dollars
into areas like infrastructure
and clean energy.
The biggest stimulus effort
was underway in
another part of Washington
at the Federal
Reserve. By the end of
2008, the central bank had
already lowered its key
interest rate to
essentially zero. So it
undertook an unusual
effort called quantitative
easing, or QE.
David Wilcox worked at
the Federal Reserve Board
during the crisis in the
Division of Research and
Statistics. The Fed was able
to come in and
purchase about 4 trillion
dollars worth of
securities, drive up their
price and therefore
bring down the interest
rate at which businesses
were able to borrow.
Households were able to
take out a mortgage.
Do you think that that
those QE efforts helped
the economy recover and get
to the point where it
is today? There is no
question in my mind and
there's no question in
any of the academic
literature that absent those
steps, you would
have had an implosion of
the economy, the likes
of which we hadn't
seen since the 1930s.
The Fed has kept
borrowing rates low throughout
the decade, gradually raising them
at the end of
2015 through 2018 and
then quickly cutting again
in 2019 to try to fend
off any instability in the
economy. This past decade
has been characterized
by very low interest
rates and generally fiscal
stimulus. That means
lower taxes, higher
government spending. In
December 2017, President
Trump signed into law the
Tax Cuts and Jobs Act,
which slashed corporate tax
rates for American
companies. The effect was a
boost to GDP at the
start of 2018.
Regulation rollbacks by
the Trump administration
have also cut down
some costs for businesses.
There's no denying the
American economy is in
better shape at the end
of this decade than the
last. As of December 2019,
it expanded for a
record 126 straight months
while the unemployment
rate was near its lowest
level in 50 years.
Even though the last 10
years brought the longest
expansion ever in the US,
it hasn't exactly been
an economic boom
by historical standards.
Many Americans still feel
left behind and this
decade has been marked as
much by the growing
economy as
increasing inequality.
There are pockets of
the country and important
groups of individuals,
communities, families,
households who still are
not enjoying anything
that they would describe
as economic prosperity.
GDP growth during this
recovery has been slower
than in previous
economic expansions.
Some investors point to
mini recessions over the
past 10 years where GDP
growth has just barely
exceeded 0 percent.
We've had a number of
mini cycles within this
expansion, but generally speaking,
if you look at
GDP over the last 10 years,
it has really, and it
looks just amazing, been 2
percent for a very,
very long time. So it
has been relatively flat.
The memory of the
financial crisis has made
consumers and businesses
more cautious about
spending money and more
attuned to the next
recession. Unlike in
previous decades, the
Internet has given consumers
access to the latest
news and economic
indicators, potentially making
them hyper aware of any
changes in the economy.
I think because there was
so many things that we
all missed in the
financial crisis, both before
and when he was going on.
In terms of the speed of
the slowdown, I do think
that both the press and
consumers and the Federal
Reserve and us in
financial markets are basically
much more alert to
what's going on.
That caution has meant
there aren't imbalances in
the financial system which
has helped the
recovery go on
for longer.
Typically, expansions end
because they overheat.
What I mean by that
is the economy is rip-
roaring, booming.
You know, you see
a lot of construction,
overbuilding. You see a
lot of borrowing, high
leverage. You see a
lot of speculation in
markets. But in this
expansion, we never really
got going. We don't
have that overbuilding
problem. We don't have
over-leverage in general.
But some of the
steps policymakers took during
the crisis have only
made inequality worse.
One glaring blemish is the
gap between the haves
and the have nots. Look
no further than the stock
market. U.S. markets are
near record highs, but
many Americans have missed out
on the bull run.
By one estimate, the
wealthiest 10 percent of
Americans own more than 80
percent of the stock
market's wealth. As the
stock market rises, you
know that this benefits that
the top 20 percent
and really the top 10
percent and really the top
1 percent and really the
top one tenth of 1
percent. So the wealth
distribution is gotten
much more skewed. The
other thing that's happened
is homeownership rates
have declined.
Homeownership was key to
the wealth of
middle-income Americans.
That obviously got creamed
in the financial
crisis and the
housing bust.
And so homeownership rate
today is meaningfully
lower than it was when
it peaked ten, fifteen
years ago. And that
means that middle-income
Americans just haven't been
able to build wealth.
Economists like to say
expansions don't die of
old age, meaning there's no
time limit for how
long a period of
growth can happen.
But there are still warning
signals that could be
pointing to the
next recession.
Record low interest rates
have fueled record high
debt levels. Some economists
and investors fear
U.S. public debt, which
totals more than 23
trillion dollars, is the
next ticking time bomb.
That debt is only set to
go up in the next
decades as America's
population gets older.
And if interest rates go
up, it will be even
harder for the government
to pay off.
A lot of discussions
whether the expansion can
continue or not is all
about: Are we vulnerable
in the expansion because of
student debt being so
high? Are we vulnerable
in the expansion because
of corporate debt
being so high?
Political and trade uncertainty
are also creating
unease about the future health
of the economy as
the U.S. enters
a new decade.
The trade war that could
really screw things up.
Businesses are very
nervous, particularly larger
business with
multinational operations.
Others look to technical
indicators like the
yield curve, which has
been flashing recession
signals. We know there will
be a next recession.
We just don't know
when it will be.
We don't know whether it
will be six months from
now, a year from now
or three years from now.
We haven't seen the
last economic recession in
U.S. history. But maybe as
the chairman of the
Fed has said, there can't
be a bust when there
hasn't been a boom
in the first place.
What we've seen is three
of the four longest
business cycles in U.S.
recorded history have
been quite recent.
So we're seeing that. And
if you look at today's,
look at today's economy,
there's nothing that's
really booming that would
that would want to
bust, in other words.
It's a pretty sustainable
picture.
