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Rumors of its death have been greatly exaggerated, although it has often resembled the walking wounded, if not occasionally the walking dead. While the economic expansion has set records for sickliness, it does celebrate its third birthday next month, which offers some evidence of its durability. By next month, following the end of the Great Recession in second quarter '09, the U.S. economy will have scored 12 calendar quarters of uninterrupted growth in real gross domestic product.
Growth over the 12 calendar quarters has averaged a bit less than an annual 2.4%, assuming the Blue Chip consensus of 50 forecasters is right about real GDP growth in the current quarter (+2.2%). How sickly is that? So sickly, in fact, that if you go back to 1950, and examine all previous cycles of expansion, you find there has never been a 12-quarter period of expansion that ran as slow as 2.4%.
Add the fact that growth usually runs much faster following a deep recession, and this three-year period's dubious distinction gets even starker. Following the deep recessions of 1974-75 and 1981-82, the first 12 quarters of growth averaged 4.5% and 5.8%, respectively.
Even following the mild recessions of 1990-91 and 2001, growth over the first 12 quarters ran, respectively, 3.2% and 2.9%.
But what if we back out of gross domestic product the recent drag from the government portion ("Where Government Shrinks," April 30)? That sort of handicap is probably too generous to the recent period, since to some degree at least, an expanding government probably crowds out private-sector growth, while a shrinking government probably enhances it. But if we do back out government, the recent period loses some of its record-breaking status.
Private-sector real GDP growth over the 12 quarters has averaged nearly 2.7%. That 2.7% is still one of the very slowest three-year periods of private-sector growth, during cycles of expansion, since 1950. But the 12-quarter periods around 1987, 2005, and 2007.
To appreciate the sickliness of that 2.7%, take one final comparison: Over the entire span from 1950 through 2007, which includes all recessions and expansions—except the most recent cycle—private-sector growth averaged 3.0%.
AS MENTIONED, THE CONSENSUS of 50 forecasters foresees real GDP growth running at an annual rate of 2.2% in the second quarter, the same as in the first quarter, according to the monthly Blue Chip Economic Indicators released Thursday.
The consensus also projects some pickup in the third and fourth quarters, to 2.4% and 2.6%, respectively. For the year, fourth-quarter-over-fourth quarter growth is projected at 2.3%, a noticeable improvement over the 1.6% of 2011.
Next year should see a further pickup, with fourth-quarter-over-fourth-quarter growth projected at 2.7%. The unemployment rate, currently at 8.1%, is projected to tick down to 8.0% by the fourth quarter of this year, and to 7.6% by the fourth quarter of next. Annual price inflation is expected to run in the low-2% range this year and the next, about in line with the target set by Fed Chairman Bernanke.
In other words, expect more of the same, as the expansions limps on to its fourth birthday, and then advances toward its fifth.
E-mail: gepstein@barrons.com
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“ Come on Bruce, you know that the political game is the same on both sides of the aisle. Give the citizens services that you do not tax them for in order to buy their votes. Give the rich tax loopholes in exchange for the money to fund your reelection campaign. The fact is that we all get the government that we deserve because we DEMAND that the above conditions are met. ”
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