Issue link: http://palletcentral.uberflip.com/i/1212207
24 PalletCentral • January-February 2020 palletcentral.com THE EXPANSION JUST KEEPS GOING ECONOMY By Lynn Michaelis F or the last few years, articles about the risk of the impending recession would pop-up in the press every few months. My previous articles for PalletCentral also addressed the issue but dismissed the threat since the critical factors that usually trigger recession, such as accelerating inflation and responses by the Federal Reserve to restrict credit, were not present. But when you look at the history of economic expansion, there is basis for concern. The current economic recovery began in 2009 and is the longest expansion at over 126 months since 1950. Two other economic recoveries lasted over 100 months. Still, the average expansion only lasts about below 70 months or less than six years. History of Economic Expansions Several factors have enabled this recovery to be so durable and with modest inflation. First, the economy was coming out of a very deep hole in 2009. It was the worst recession since the depression of the 1930s. There was a tremendous amount of slack in the overall U.S. and the global economy. Second, the average growth has been extremely low, only 2.3% so far, compared average growth rates of over 4% in previous cycles. This situation allowed markets to adjust slowly to recovery in demand, without triggering significant price increases. Finally, global economic growth has been quite low as well, which has kept commodity and oil prices in check. Significant Structural Changes Affect Forecasters But to make life even more difficult for economic forecasting, there have been several structural changes that economists are struggling to understand. For instance, despite unemployment at 3.5%, wage growth appears to have stabilized near 3%. Historically, when unemployment drops below 4%, wages move significantly higher. Unemployment has drifted lower in this recovery and fell below 4% in early 2018. Initially, wage rates did accelerate. Average hourly earnings were rising at a 3.3% rate in early 2019, up from the 2.5% rate of 2017. Then something happened. Wage growth has slowed despite unemployment falling to 3.5%. In part this reflects where the jobs are growing and where jobs are lost. For instance, jobs are being lost in the higher Except for Manufacturing Sector