Please, Don't Sing

The current expansion is 10 years old, but it looks pale compared with previous economic streaks

- Cristina Lindblad

Tune out the trade wars. Pay no attention to the signal of a looming recession being emitted by the bond market. It’s time for a birthday party!

This month marks the 10th anniversary of the U.S. economic expansion that began in June 2009. If the streak continues into July, it will make history, surpassing the 1991-2001 growth cycle to become the longest since 1854, which is as far back as economists have attempted to date business cycles.

The achievement is impressive, but few are in the mood to celebrate. It’s partly a matter of timing. The risk of a downturn is rising, amplified by heightened trade tensions with China and now Mexico. IHS Markit’s U.S. Manufacturing Purchasing Managers’ Index fell in May to its lowest level since September 2009. On June 3 the yield on three-month Treasury bills exceeded that on 10-year Treasury notes by the most since 2007, a strong indicator that a recession is somewhere on the horizon. JPMorgan Chase & Co. says the probability of one beginning in the second half of 2019 has risen to 40% from 25% in early May.

The other reason people are blasé about this milestone is that the expansion has been nothing to brag about. Like Lonesome George, the giant tortoise in the Galápagos Islands who lived past 100, it’s clumped along slowly, never overheating, which is part of the reason for its longevity. Yet we’ve had peppier extended growth cycles before. In the first 39 quarters of the record expansion of 1991-2001, gross domestic product increased 43%. In the 39 quarters through this March, U.S. GDP grew just 22%. And the sluggish expansion has benefited capital more than labor: Workers’ share of national income has fallen from 68.9% to 66.4% over the period.