The current US economic expansion, now the longest on record, has been called the most unloved in history. And therein lies its staying power, according to economist Ed Yardeni.
His point is that the expansion’s 10-year run, reached this month, has been so underwhelming that the speculation-driven froth and willy-nilly debt increases that usually accompany an ascent are missing here.
Yardeni, the president of Yardeni Research and a long-time Wall Street economist, has been saying for years that this growth spell will last through 2019 and likely beyond. As he wrote in a recent research note: “Our basic thesis has been ‘no boom, no bust.’”
“The Trauma of 2018 was extremely… traumatic,” he observed. “The widespread fear that it could happen again anytime soon has kept a lid on speculative excesses. So there hasn’t been a boom to set the stage for a bust.”
And how. The current expansion, while the longest, has been the weakest postwar recovery, the National Bureau of Economic Research finds. The run’s average annual growth rate is a mere 2.3%
And any surges turn out to be temporary. In this year’s first quarter, the rate was 3.1%, which was down from the 4% pace seen in 2018’s second period, likely fueled by the federal tax cut. A survey of economists from The Wall Street Journal finds meh projections ahead, with 2.1% in the second quarter. The average estimates for the third and fourth periods this year and next year’s first are uninspiring: 1.7%, 1.4%, and 1.2%.
Worries abound these days, chiefly on the China-America trade war front, where there’s some optimism over renewed talks although progress has been fitful. Still, consumer spending remains brisk, up 3.7% yearly, and unemployment is at a near-decade low of 3.7%. Plus, employers added a better-than-expected 224,000 jobs in June, an improvement over May’s disappointing results. At the same time, surveys of industrial activity have shown declines.
With nerves still jittery from the financial crisis and Great Recession during the last decade, recession prognostications have been rife for some time. And in Yardeni’s view, as perverse as this may sound, that very pessimism has blocked the advent of another downturn.
To Yardeni, “the next recession has been the most widely anticipated of all time. That might explain why it hasn’t happened so far.”