For Mark Roberts’ Use: First, the good news: As of June 2019, the US has enjoyed its longest period of economic growth ever. That’s certainly something to celebrate.
While the past ten years have marked the longest period of expansion, they don’t represent the time of greatest expansion. In the early 1990s, a nearly ten-year streak averaged a GDP of 3.7 percent each year. By comparison, the 2009-2019 streak has averaged just 2.3 percent. Still, growth is growth.
But will the growth continue? That’s the more important question, isn’t it? Let’s take a look at some of the common markers of growth, and see what they indicate for both the economy in general and the individual.
Employment. For about the past year, there have been more job openings than workers to fill them. Theoretically, this is good news for workers, because it should indicate a more competitive market for employers. However, wages have yet to fully recover from the Great Recession.
As for unemployment, it’s holding steady at only 3.6 percent; a fifty-year low.
Bond market. For several weeks in May and June, the yield on three-month Treasuries was higher than the yield on ten-year Treasuries. Sometimes an inversion in the curve (in which short-term yields are higher than long-term yields) is predictive of a recession within the next two years.
No signs of a bubble. The last two recessions were preceded by the bursting of asset bubbles (Internet company stocks in 2001 and housing values in 2007). Currently, we aren’t seeing any signs of heavily overvalued assets. Inflation remains low, and household debt is currently sustainable.
World trade. World trade remains somewhat unpredictable, as we await the resolution of trade talks between the US and China. If tariffs continue unabated, they could cut into company profits or consumers’ wallets.
Is a recession coming? The truth is, recessions are sometimes unpredictable, and we often are unaware that one has begun until data is compiled over months. There are some signs that a recession might arrive soon, while others seem to promise continued growth.
No matter what “signs” we see, it’s always a good idea to consider all possible outcomes with regard to your financial strategy. Meet with us regularly to review your own financial health, and we can help you plan around changing economic conditions.