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A Dramatic Pause In Economic Growth Thumbnail

A Dramatic Pause In Economic Growth

The current economic expansion, as of July, is officially the longest growth cycle in modern U.S. history. In turning 11, this growth cycle eclipses the longevity of the 10-year expansion that bracketed the 1990s. However, growth has moderated lately. In a dramatic pause following 10 years of strong growth, the U.S. Leading Economic Index in May was unchanged. The LEI clearly points to a moderation in economic growth, according to economists at The Conference Board, the business group that publishes the monthly LEI data. From the devastation of The Great Recession, the current growth cycle began in April 2009, with GDP growing only modestly until 2015, when real wage gains accelerated, and that has propelled stronger than expected growth for the U.S. for over four years. Growth in wages recently leveled off, but it has been a spectacular expansion by modern standards! The Federal Reserve was nimble in changing interest rate policy as fears of a trade war and, now, a real war, have heightened in recent weeks, and the expansion is poised to continue into 2020, but the Fed’s model of the economy has not always been accurate in the past. Far from it! The Fed’s caused every recession since 1954 by making a monetary policy mistake and misreading the economy — tightening credit too much and choking growth. Since this expansion began, the Fed’s forecast for inflation has been incorrect. Fritz Meyer, an independent economist whose research we purchase, says the Fed’s fear of inflation is overblown. If he’s right, the Fed may come around and allow the economy to grow through most of 2020 without raising interest rates. Watch for the Fed to show less fear of inflation in the months ahead. Please contact us with any questions or to set up a meeting, and don't hesitate to share this video with people who might benefit from my work. Send us an email to fulbrightteam@moneyful.com to join our newsletter.