March 2nd 2016 - Written by: Julian Baca

US Business Cycle: Average Duration (Expansions and Contractions)

Although the length of time of economic expansions and contractions are not necessarily predictive of the duration of future market cycles, it is interesting to look back at the historical performance. As measured by the National Bureau of Economic Research (NBER), the peak-to-trough contractions have averaged twelve months in the last forty-five years. The most recent recession has been commonly referred to as the Great Recession both because it was the longest contraction since the Great Depression and also due to the large drop-off in employment and economic activity. The 2008-09 contraction spanned eighteen months. The 1973-75 and 1981-82 recessions lasted sixteen months each. The Great Depression (1929-33) gripped the US economy for 4-1/2 years.

Since 1970, the average expansion has averaged seventy-two months, or approximately six years. The US enjoyed ten consecutive years (March 1991 – March 2001) of uninterrupted growth in the 1990s. After Fed Chairman Volcker put a lid on runaway inflation in the 1970s by pushing the Fed Funds Rate to the high teens, the US economy expanded for nearly eight years in the 1980s. The nearly nine year-long expansion from February 1961 to December 1969 is the second longest period of growth on record.  The current expansion began in July 2009 and is seventy-eight months old (6-1/2 years), longer than the seventy-two month average over the last 45 years.

 

Durations of Expansion & Contractions r1

 


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