No-respect U.S. recovery may wind up becoming longest ever

It may not seem like much of a recovery to most Americans, but the current economic expansion has many of the makings to become the longest in more than 150 years.

Low inflation, healthy consumer finances and pent-up demand for housing all argue that the recovery is well-positioned to withstand any fallout from the Greek crisis and has room to run as it enters its seventh year on Wednesday.

“There’s a high probability that we will exceed the 10- year expansion of the 1990s,” the longest in records going back to 1854, said Allen Sinai, chief executive officer of Decision Economics Inc. in New York.

The benefits of such an outcome would be dramatic. Unemployment would drop below 5 percent – it’s 5.5 percent now – and keep on falling. Corporate profits, already at record levels, would rise further. And the stock market would make repeated new highs, according to Sinai.

One big proviso: the ability of the Federal Reserve to raise interest rates from rock-bottom levels without upending inflated financial markets and squelching growth. Many of the past upswings were cut short when the central bank tightened credit to keep the economy from overheating as unemployment fell and factories operated closer to capacity.

Most Fed officials expect to raise interest rates this year for the first time since 2006, according to projections released after their meeting earlier this month.

Fed Vice Chairman Stanley Fischer said Tuesday in Oxford, England, that U.S. central bankers were aware of the risks of tightening policy prematurely and planned to raise interest rates only gradually from current levels near zero.

The expansion already has gone on longer than the postwar average of just under five years and next month will match the duration of the 2001 to 2007 upturn. It’s been marked by ebbs and flows as the U.S. was buffeted by everything from a government shutdown in Washington to a tsunami in Japan that disrupted global trade.

The Greek crisis is the latest shock, and like the previous ones, it could curb U.S. economic growth, not end it, said Nariman Behravesh, chief economist in Lexington, Massachusetts, for IHS Inc. “It’s not necessarily all bad for the U.S.,” he added, as foreign investors worried about the durability of the euro region buy Treasury securities.

The current upswing so far has been the weakest of the post-World War II period, with growth averaging 2.2 percent annually, below the 2.8 percent pace of the previous expansion and the 3.6 percent recorded in the 1991 to 2001 upturn.

It’s no news to most Americans that the economy’s performance has been lackluster. Three out of five polled by Fox News last month said the country is still in recession.

“I call it the Rodney Dangerfield expansion,” said David Rosenberg, chief economist at Gluskin Sheff & Associates, in Toronto, alluding to the U.S. comedian’s trademark complaint that he “don’t get no respect.”

This story was originally published June 30, 2015 at 4:54 PM with the headline "No-respect U.S. recovery may wind up becoming longest ever."