At the half-way mark of 2019, the U.S. is marking 10 years of continuous economic growth. The current cycle of economic expansion is poised to become the longest ever recorded in this country’s history based on statistics from the National Bureau of Economic Research. The longer the current expansion lasts, the more commentary swirls that it will end soon, followed by an inevitable and deep recession. Such pessimism is likely a residual memory from the severity of the 2008-2009 financial crisis. But while it is true the economy may be in the later phase of expansion, there are a number of structural advantages and recent reforms in the U.S. economy that may lessen the degree or length of a future downturn.
Evidence of comparative advantages in the U.S. economy relative to other economies can be found in the performance of the global stock markets. Since October 2007, the beginning of the financial crisis, international stock markets (excluding the U.S.) remain approximately 25% below their previous peaks. The U.S. S&P 500, however, has gained about 80% over the same time frame. This disconnect between the U.S. and the rest of the world goes against conventional wisdom, given that globalization and trade has generally linked and synchronized economies. The U.S. has enjoyed a robust stock market, low unemployment, and gross domestic product (GDP) growth that is the envy of the rest of the world.
Data from the National Bureau of Economic Research suggests that U.S. economic expansions are lasting longer, while economic contractions have become substantially shorter in duration.
Outside of the U.S., it’s a different story. Since the beginning of the Great Recession, over 10 years ago, U.S. GDP has grown 34% in real terms versus -2% in the Eurozone, -15% in the UK and only 7% in Japan. In addition to the sovereign debt crisis and subsequent austerity measures, Europe’s economy has been shackled by substantial amounts of regulation, restrictive labor laws and a macro central bank dictating a one-size-fits-all policy for 19 separate economies. Japan has been in a deflationary cycle for decades due to a declining population, a high-debt burden and a static corporate environment that avoids restructuring. Investment in the UK has been stifled by the uncertainty over Brexit and the prospect of a decidedly anti-growth / free enterprise alternative should the opposition party win the next election.