The U.S. economy has officially entered the longest expansion in its history.
The nation’s gross domestic product has been growing for the last 121 consecutive months, the metric used to measure periods of sustained economic growth. That surpasses the 120-month expansion from 1991 to 2001.
The most recent expansion started in 2009, after the global financial crisis in 2008. The Great Recession was the worst U.S. economic downturn since the Great Depression in the 1920s and ’30s.
President Donald Trump regularly takes credit for the strong economy on his watch, although the expansion began under President Barack Obama and has continued on a relatively steady pace since 2009.
The Republican tax cuts and increased government spending last year did boost the nation’s gross domestic product. But those gains are now wearing off as spending slows, prices rise and Americans prepare for the personal income taxes to expire in 2025.
What has the expansion looked like?
The unemployment rate has dropped from a peak of 10 percent in October 2009 to 3.6 percent in May of this year.
Unlike past expansions, inflation has also remained below the Federal Reserve’s 2 percent target over most of the past decade. The major stock market indices have also quadrupled since the Great Recession.
But the current economic expansion has been slower than previous periods of economic growth. The economy has grown at an average rate of 2.3 percent per year since 2009. In comparison, the economy grew 3.6 percent per year during the 1990s.
The lackluster growth rate has sparked discussions of whether slower economic growth might be the “new normal.”
A combination of unskilled workers and an aging population has likely contributed to the lower growth rate. Around 10,000 baby boomers are retiring each day, and employers have struggled to replace those workers.
Who has benefitted?
The economic expansion has largely helped two groups of people. Those who were unemployed during the Great Recession, and the wealthiest Americans.
Twenty-one million jobs have been created since 2009, and many have gone to people who lost their jobs during the Great Recession.
On the other end of the economic spectrum, investors were able to borrow at extremely low interest rates and use the loans to create more wealth. Many people who already owned stocks before the recession were able to make back the money they lost in the downturn and then some.
But people who did not have investments were not able to benefit from the low interest rates. And despite the lengthy expansion, wages have only started rising substantially for the majority of the population in recent months.
Economists have debated why that is. Some point to companies prioritizing stock buybacks instead of investing in workers. Others point to low worker productivity and employers’ focus on increasing employee benefits rather than pay.
All those factors combined have contributed to a widening wealth gap.
“Things are better in the aggregate,” said Bradley Hardy, a labor economist at American University. “People are employed, and that employment comes with fringe benefits.”
But, Hardy said many Americans, even those in the middle-class, are still struggling financially.
A recent Federal Reserve survey found that 39 percent of Americans still did not think they could pay for an unexpected $400 expense. That’s a significant improvement from 2013, when 50 percent of Americans said they couldn’t afford the expense, but it remains high, especially for Americans who live in areas where wages have not kept up with rising housing costs.
Economists like to say that expansions do not die of old age. Australia, for example, has gone 27 years without a recession.
But some economists do see reasons to be worried, and most expect at least a mild recession to occur next year.
“We will see a reasonably good economy for most of this year, but the recent data has been shaky,” said Dan North, chief economist at Euler Hermes North America.
Hiring has slowed, and the yield curve has inverted, signaling investor fears for the near future. The yield curve, which measures the comparative rate of return on investments in government bonds, has long been seen as a predictor of recessions, and it could mean now that the Federal Reserve has already raised interest rates too much.
When the Federal Reserve raises rates too quickly, access to cash at low interest rates dries up. That can put a damper on economic investment and help spur a recession.
Trump has been a fierce critic of the Federal Reserve’s decision to raise rates, breaking from previous presidents who have refrained from interfering in the nation’s monetary policy.
But Trump’s own policies are also contributing to investor uncertainty. The back and forth on trade between the U.S. and China has rattled the stock market. The economy at large has been able to absorb the tariffs so far, but if the two countries don’t reach a deal soon, U.S.companies and consumers will feel the pain.
If consumers and businesses are forced to pull back on spending because of the trade war, that could contribute to a recession.