Assessing the Expansion: Middle-Aged and Still Going
Overview
Periods of economic boom and bust have been a fixture in academia. Many credit Arthur Burns and Wesley Mitchell for formulizing our present day construct of the business cycle in their 1946 book, Measuring Business Cycles. In most teachings, the economy is neatly categorized into trough and peak, expansion and contraction. The dates of such periods are set by The National Bureau of Economic Research (NBER), a non-profit, independent institution. The NBER defines expansion as the period between trough and peak when “economic activity rises substantially, spreads across the economy and usually lasts for several years.”
The word “cycle” is often misinterpreted, as it implies that expansions and recessions follow an organized, timely path. In reality, a confluence of factors causes the lengths of cycles to vary. For example, how can the current macroeconomic backdrop be juxtaposed with the period following the “first global financial crisis” of 1857 — a time before the existence of the Federal Reserve or ratification of the 16th amendment?
The current expansion, which is 62 months old, can be parsed into early-, mid-, or late-stage. With most indicators currently pointing to a mid-, rather than late-stage expansion, we believe the economic expansion is more likely to last a while longer.