Is the US Expansion Nearing Its Peak?
- By Dominique Dwor-Frecaut
- 4 min read
The expression ‘business cycle’ conjures the image of a nicely behaved cyclic function. The reality is much messier: other than rising and falling, growth follows no obvious pattern (Chart 1). Expansions are highly variable in duration and end for various reasons – often but not always due to monetary and fiscal tightening and sometimes unpredictable shocks such as the pandemic. Occasionally, policy tightening interacts with underlying fragility to trigger the recession, e.g., the 2004-06 Fed tightening and credit bubble.
The US Economy Could Be End-Cycle
While expansions are of highly variable shapes and durations, a few recurrent differences between the start and end exist. I have used the NBER chronology to break the past 50 years of expansions into four equal phases, and I compare key economic variables in the first and last parts of the expansion (I have omitted the 1980-81 expansion because it lasted only eight months). Here are some stylized facts:
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