The U.S. economy is setting a record this month for achieving the longest period of growth in its history. The economy has been growing for 121 months, breaking the previous streak from the 1990s. This doesn’t surprise me. Everything about this recovery has been unusual, so the fact that it is unusually long is par for the course.
However, the reason this recovery has run so long is because the hole we had to climb out of was so deep. It’s called the Great Recession, as opposed to the recession of 2008-2009, for a reason.
– It lasted 19 months
– It’s regarded by some as the second worst downturn of all time
– The unemployment rate reached 10%
– Real GDP fell 4.3%
– There was a global financial crisis
In trucking, it took over 10 years for freight volumes to reach their pre-recession levels. For commercial vehicles, the drop in Class 8 truck production from peak month to trough was 80% and 81% for trailers. Our industry is one of the most cyclical in the entire economy and suffered greatly from the downturn.
Some analysts are downplaying the length of the recovery because of the weakness of the growth rate over time. The average annual GDP growth rate during this expansion is a paltry 2.3%, which puts it dead last on the list of economic expansions since 2019 (the next lowest is 2.7%, in the 1990s). I believe the substandard performance is mostly the result of the severity of the crash.
Imagine a cyclist is zooming down the road, hits a bump and crashes her bike. As a result, she sprains her knee. How long before she is biking again? After some rest and pain medication, she is back riding at half-speed in a few weeks. In a couple months, she is back at full speed, as if nothing ever happened. (Sounds like the 2001 recession).
But then another cyclist is gliding through traffic and gets hits by a huge SUV. He ends up in intensive care with serious injuries, including several broken bones. His recovery is excruciating slow, with minor incremental progress. He moves out of intensive care to the hospital and eventually back home. The bones heal and physical therapy begins. Maybe he gets back on the bike in a year, struggling to pedal slowly. Because he is a dedicated cyclist, he eventually makes it back to full speed, but it takes years.
Those pessimistic analysts forget just how devastating the Great Recession was. If you were one of the 10% unemployed, searching for work in one of the worst job markets ever, you don’t forget.
From the optimists, there is much political debate about who gets credit for the record recovery. In my view, the Obama administration did a great job climbing out of the economic pit. It got everything stabilized and held tight reins on the economy, so it would not fall back into the hole. However, at some point you could stop climbing and start running. Unfortunately, it’s difficult to transition from climbing to running. It takes different skills and policies, and they remained stuck in one gear.
The Trump administration comes in and can clearly see we should now be running and not climbing any more. They put some track shoes on the economy, gave it a push, and shazam! So, the Obama Administration primed the pump for several years, and the Trump people pumped away. See there is enough credit to go around. Can’t we all get along?
Nothing lasts forever, not even the longest economic recovery in history. The last two recessions occurred as a result of shocks, bubble bursts if you will, in dot-com and housing. There are no bubbles visible now, but you never really see the SUV coming at you until it’s too late, right?
Yes, there are plenty of dark clouds headed our way. The economy is slowing after hitting a peak. GDP is expected to dip to around 1.5% in Q2. Will it continue to descend, or will it stabilize? It would help immensely if trade deals with China, Mexico, and Canada get finalized soon. This would provide a momentary boost to the economy, enough push that I don’t anticipate any serious economic problems until late in 2020.
I don’t expect economists to celebrate this milestone, because economists don’t celebrate much at all. But for the rest of us, let’s party! We had to go through the misery of the Great Recession, we deserve to celebrate this 10-year anniversary (plus a month) of its passing. Raise your glass! Shoot off some fireworks! Here’s to 121 months of economic growth!