Is a Recession Imminent?

By Bill McBride

Last Friday I posted five economic questions I’m frequently asked.  Earlier this week I discussed: Are house prices in a new bubble?

Another common question is: Is a recession imminent (within the next 12 months)? Once again my short answer was: No.

First, I use NBER to date recessions and expansions. The trough of the recent recession was in June 2009, and the current expansion has lasted for 101 months. This is already the 3rd longest expansion in NBER history (since mid-1800s), trailing only the ’90s expansion (from March ’91 to Mar ’01), and the ’60s (from Feb ’61 to Dec ’69).

However, just because this is a long expansion, doesn’t mean the expansion will end soon. Expansions don’t die of old age!  There is a very good chance this will become the longest expansion in history.

There are several reasons this has been a long expansion.  Recoveries from a financial crisis tend to be slow since it takes years to resolve all the excesses.  Also, there was an early pivot during the recovery to fiscal austerity that slowed the pace of recovery.   Importantly, the Federal Reserve didn’t overtighten like in the ’30s (a lesson learned).  And housing, always a key cyclical sector, didn’t participate early in the recovery since there were so many foreclosures.  This delayed the usual boost from housing, but housing now a key driver of the expansion.

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