How The U.S. Avoided A Recession For A Decade

How The U.S. Avoided A Recession For A Decade

For the first time ever,
or at least since official tallying began,
the U.S. economy has started and
ended an entire decade without entering
a recession. That means this economic
expansion is now older than the i-Pad Instagram and
the Tesla Model S From the end of 2009 to
the end of 2019, the U.S. economy has added more
than 20 million jobs. We have launched an economic
boom, the likes of which we have
never seen before. It’s been the longest
economic expansion in the country’s history taking place
in a decade marked by the memory of the
Great Recession and by unprecedented access to
information about the state of the economy. Both consumers have been
more cautious and businesses have also become
more cautious, simply out of fear that
we might experience something similar to what we
saw 10 years ago. But just because it’s
the longest expansion doesn’t necessarily mean
it’s the strongest. Overall economic growth over
the past decade has been slower compared
to previous booms. And not everyone is
reaping the benefits. Today in America, you
got three people owning more wealth than the
bottom half of America. So how did the U.S.
get through this historic decade? And will it last? The simplest explanation for
how the U.S. economy has avoided a
recession during this decade is that it was
coming from a very low point at the end
of the last decade. As some economists
have put it: The deeper the hole, the
longer it takes to climb out. None of us
anticipated the full ramifications and extent
of the crisis. The economic picture from 2007
to 2009 was so gloomy it’s called
the Great Recession. Many experts define a
recession as two consecutive quarters of
negative GDP growth. GDP or gross domestic product
is one metric to gauge the overall health
of the economy. In the U.S., a
nonprofit organization called the National Bureau of Economic
Research, or NBER, decides if the economy
has entered a recession. The NBER takes into account
GDP and a wider range of measures like
income, employment, industrial production and
wholesale-retail sales. U.S. government agencies
like the Treasury Department and the Federal
Reserve go by the NBER’s definition of
a recession. The most recent recession,
according to NBER’s definition, was the
Great Recession. From 2007 to 2009. U.S. GDP fell 4.3 percent. The unemployment rate
doubled from 5 percent to 10 percent. And house prices and
stock markets crashed. People were hit essentially
both in terms of losing their jobs and a
lot of people were also hit very significant in
terms of losing their homes and home prices going
down and the stock market going down. The
only other time the economy was in
worse shape? During the Great Depression
in the 1930s. A stock market crash and
a series of banking panics put an end to
the economic boom of the Roaring 20s. Millions of
Americans lost their jobs and livelihoods as
the downturn lasted an entire decade. In the Great Depression
of the 1930s, unemployment peaked at
almost 25 percent. There were booms and busts
and every decade after World War Two. But one
notable thing started to happen. Economic expansions
lasted longer. The period from the
mid-1980s to 2007 became known as the
Great Moderation. Prices remain stable, and
while there were occasional dips on the
whole, the economy chugged along. One reason for this
is that officials at the Federal Reserve got
more effective at responding to changes in
the economy and because inflation was steady. Policymakers could act aggressively
when the next crisis came along. When the Great Recession
hit, policymakers in DC took unprecedented steps to
try to get the economy back on track. Their actions resulted in
trillions of dollars of economic stimulus. A very important reason
why the U.S. had had such a long
and very protracted expansion is that U.S. fiscal policy and monetary
policy, meaning the Federal Reserve and politicians,
were much more quick out of the box
in terms of supporting the economy. In 2008,
Congress authorized the Treasury Department to
invest hundreds of billions of dollars to
try to revitalize the country’s ailing financial and
auto sectors as part of the Troubled
Asset Relief Program, otherwise known as TARP. A year later in 2009,
President Obama signed the American Recovery and
Reinvestment Act. The law pumped hundreds
of billions of dollars into areas like infrastructure
and clean energy. The biggest stimulus effort
was underway in another part of Washington
at the Federal Reserve. By the end of
2008, the central bank had already lowered its key
interest rate to essentially zero. So it
undertook an unusual effort called quantitative
easing, or QE. David Wilcox worked at
the Federal Reserve Board during the crisis in the
Division of Research and Statistics. The Fed was able
to come in and purchase about 4 trillion
dollars worth of securities, drive up their
price and therefore bring down the interest
rate at which businesses were able to borrow. Households were able to
take out a mortgage. Do you think that that
those QE efforts helped the economy recover and get
to the point where it is today? There is no
question in my mind and there’s no question in
any of the academic literature that absent those
steps, you would have had an implosion of
the economy, the likes of which we hadn’t
seen since the 1930s. The Fed has kept
borrowing rates low throughout the decade, gradually raising them
at the end of 2015 through 2018 and
then quickly cutting again in 2019 to try to fend
off any instability in the economy. This past decade
has been characterized by very low interest
rates and generally fiscal stimulus. That means
lower taxes, higher government spending. In
December 2017, President Trump signed into law the
Tax Cuts and Jobs Act, which slashed corporate tax
rates for American companies. The effect was a
boost to GDP at the start of 2018. Regulation rollbacks by
the Trump administration have also cut down
some costs for businesses. There’s no denying the
American economy is in better shape at the end
of this decade than the last. As of December 2019,
it expanded for a record 126 straight months
while the unemployment rate was near its lowest
level in 50 years. Even though the last 10
years brought the longest expansion ever in the US,
it hasn’t exactly been an economic boom
by historical standards. Many Americans still feel
left behind and this decade has been marked as
much by the growing economy as
increasing inequality. There are pockets of
the country and important groups of individuals,
communities, families, households who still are
not enjoying anything that they would describe
as economic prosperity. GDP growth during this
recovery has been slower than in previous
economic expansions. Some investors point to
mini recessions over the past 10 years where GDP
growth has just barely exceeded 0 percent. We’ve had a number of
mini cycles within this expansion, but generally speaking,
if you look at GDP over the last 10 years,
it has really, and it looks just amazing, been 2
percent for a very, very long time. So it
has been relatively flat. The memory of the
financial crisis has made consumers and businesses
more cautious about spending money and more
attuned to the next recession. Unlike in
previous decades, the Internet has given consumers
access to the latest news and economic
indicators, potentially making them hyper aware of any
changes in the economy. I think because there was
so many things that we all missed in the
financial crisis, both before and when he was going on. In terms of the speed of
the slowdown, I do think that both the press and
consumers and the Federal Reserve and us in
financial markets are basically much more alert to
what’s going on. That caution has meant
there aren’t imbalances in the financial system which
has helped the recovery go on
for longer. Typically, expansions end
because they overheat. What I mean by that
is the economy is rip- roaring, booming. You know, you see
a lot of construction, overbuilding. You see a
lot of borrowing, high leverage. You see a
lot of speculation in markets. But in this
expansion, we never really got going. We don’t
have that overbuilding problem. We don’t have
over-leverage in general. But some of the
steps policymakers took during the crisis have only
made inequality worse. One glaring blemish is the
gap between the haves and the have nots. Look
no further than the stock market. U.S. markets are
near record highs, but many Americans have missed out
on the bull run. By one estimate, the
wealthiest 10 percent of Americans own more than 80
percent of the stock market’s wealth. As the
stock market rises, you know that this benefits that
the top 20 percent and really the top 10
percent and really the top 1 percent and really the
top one tenth of 1 percent. So the wealth
distribution is gotten much more skewed. The
other thing that’s happened is homeownership rates
have declined. Homeownership was key to
the wealth of middle-income Americans. That obviously got creamed
in the financial crisis and the
housing bust. And so homeownership rate
today is meaningfully lower than it was when
it peaked ten, fifteen years ago. And that
means that middle-income Americans just haven’t been
able to build wealth. Economists like to say
expansions don’t die of old age, meaning there’s no
time limit for how long a period of
growth can happen. But there are still warning
signals that could be pointing to the
next recession. Record low interest rates
have fueled record high debt levels. Some economists
and investors fear U.S. public debt, which
totals more than 23 trillion dollars, is the
next ticking time bomb. That debt is only set to
go up in the next decades as America’s
population gets older. And if interest rates go
up, it will be even harder for the government
to pay off. A lot of discussions
whether the expansion can continue or not is all
about: Are we vulnerable in the expansion because of
student debt being so high? Are we vulnerable
in the expansion because of corporate debt
being so high? Political and trade uncertainty
are also creating unease about the future health
of the economy as the U.S. enters
a new decade. The trade war that could
really screw things up. Businesses are very
nervous, particularly larger business with
multinational operations. Others look to technical
indicators like the yield curve, which has
been flashing recession signals. We know there will
be a next recession. We just don’t know
when it will be. We don’t know whether it
will be six months from now, a year from now
or three years from now. We haven’t seen the
last economic recession in U.S. history. But maybe as
the chairman of the Fed has said, there can’t
be a bust when there hasn’t been a boom
in the first place. What we’ve seen is three
of the four longest business cycles in U.S. recorded history have
been quite recent. So we’re seeing that. And
if you look at today’s, look at today’s economy,
there’s nothing that’s really booming that would
that would want to bust, in other words.
It’s a pretty sustainable picture.

100 thoughts on “How The U.S. Avoided A Recession For A Decade

  1. Here's what I don't understand: you see this chart at 06:16. Well, that sort of checks out: you have ten years of unemployment, and with an average of 275,000 jobs every month it has gradually grown back so that that chart now hits around 4%. But in those 10 years, not only new workers have entered the job market, not all the old ones left, because what age were they when they left? So, where are they? I feels like I am missing some data here. There are of course those who did not reenter the job market after the financial crisis, but still.

  2. A recession is looming given to the whole retail vs online shopping thing. Amongst one of the factors and also student debt and the national debt. I think a combination of those things will be the cause of the next recession. Online is killing a lot of retail jobs and businesses

  3. Delayed recovery had more to do with Obama policies that caused businesses to hold off on any expansions. I was a commercial lender at the time. Almost all owners echoed this. Markets took off a day after Trump won elections. Look it up.

  4. They don't provide examples of those "left behind.". Where are they!?! Sounds like fake news. Wait wat!?! This is NBC? I guess that's why.

  5. Racism is a big problem. Theres over 35 million white Americans living in poverty .. Twice as many as blacks. We need a Affirmative action to help fight discrimination

  6. Fed is not a US government agency! think a smart girl like you would know it is a privately owned bank! Oh NCBC under the CBS logo that explains it. fake news. A propaganda  hit piece.

  7. Because America ave up on capitalism and implemented socialism for the rich with ultra low rates and QE to infinity. They tightened just a little and started to sell assets in 2018 and the market started to crash, then the plunge protection team came in to help with socialism for stocks and assets. Don't worry, we still have capitalism for the middle class and poor. America's new slogan should be privatize profits and socialize losses.

  8. With the amount of money on the line and influence bankers have on politics, there is no accidental "recession." See how the bankers got payed off the first great recession of this century. Go back further in history for more insight.

  9. It is just inflation. The economy is running white hot but they can't raise rates. Why???? Fed tried and the economy went nuts. It just proves that this economy is fake. Also, debt govt, corporate, student loan etc is out of this world. This next recession will be a depression….

  10. Other records that have been shattered –first time in history anyone has ever borrowed so much money and also the longest a debt binging debacle has ever been allowed to continue.

  11. TRUMP 2020

    But for real this would have happened regardless of the president. Boomers are retiring and Gen X’s are filling those holes. The problem is there are less X’s than boomers. So obviously there will be a smaller unemployment rate. There are less workers out there looking for those jobs that are becoming available . But CNBC and economists are too stupid to realize that.

  12. QE was a mistake ! It was a bandaid when you needed a solution.
    The solution is to let the recession hit !!! Obama delayed it. Trump is setting the economy backwards. And we don't have a president willing to do what's right….and that's let the market become free. No bailouts, let it collapse and rebuild it better ! Social unrest now is better than social unrest 100 times stronger in the future !

  13. Why lie??? Printing money and giving it value backed by no form of precious metals, is not, NOT being in a recession.
    The recession is here, HAS been here and has not stopped! Its been steady ongoing since 2008. Why lie about it??

  14. Ask Jeff bezos and Elon musk to stop all the space programs and pump the money into local businesses and others. There you go Boom.Let China bankrupt itself trying to go to space.

  15. All based on fabricated lies in a fraudulent market sustained by a monetary scam…
    ¿Why does anybody waste any time listening to these crony experts…I mean thieves???

  16. I like the positive outlook at the end. There will always be recessions, but they don't necessarily have to be often, or as bad as the ones we've had.
    I'm probably wrong, but I've always seen them as anomalies – caused by a specific disaster in some industry. At least in recent history, where we've had the longest expansions.

  17. Trump is the greatest president of all time: booming economy, soaring stocks, record low unemployment. #MAGA 🇺🇸🇺🇸🇺🇸

  18. So many people feel like they havent even left the reccesion and i would like to grow up and build wealth thru homes like everyone else back then 🙁

  19. Well at 20 Trillion Debt I'm happy we still have something. But we have to pay it back someday. We can't just continue endlessly, the interest payment will catch up with us eventually

  20. Panic of 1907… Let's create the Federal Reserve… 20 depressions/recession/new names later let's pump the economy with our quantitative easing packages… Yay Americans still have not caught on, let's fund all central banks around the world… Yay the whole world hasn't caught on…

  21. 44% of Americans make 18 thousand dollars a year. That not a small pocket, It's a Grand Canyon size hole. You can not be pumping 500 billion dollars in one month into Wal street. Along with doing more quantitative easing, and call the last 10 years a success.

    More than half the country is in debt to their eyeballs, including corporate debt is at 9 trillion dollars.

  22. Give me a break. The bottom 50% have more in their bank accounts than ever before. Who cares about what the “top 1%”

  23. I’m sick and tired of hearing how low the employment rate is. What good is employment when most can’t afford a car, home, or healthcare?

  24. You know the story today. So many adults have to work (2 or 3 jobs with no benefits,) and hope to make the monthly payments. As long as we keep coming up with new technology toys people "have to buy," and extend consumer credit, ie. 7 year car loans, we'll ward off a future recession. And the banks…their flush with cash. If you're a saver, you spend your free time looking for one hundreds of a decimal point extra on savings accounts. Crazy!

  25. When people talk about bubbles, its based off of a statistical value that means something is overvalued or bloated but really it means that Americans become too poor to provide the work the rich request. A recessive bubble is actually greed

  26. US and world is still recovering. At best. You want proof of that. How about interest rates? Why are they so low if everything is so good. I think current state of world economy, not just US, is so fragile at smallest disturbance everything will collapse.

  27. I like the effect it is a slower expansion. That is far healthier than sudden uprises (such as we are in right now.) Moderated growth. The problem with capitalism is the extremes of greed which lead to the abyss.

  28. its easy to not have a recession when you keep moving the goal post for how the data is measured. If we measured the economy the way we did 30-40 years ago, the US would be in a decade long depression.

  29. Oh don’t worry it’s coming. The fed can’t just inject massive sums of money for infinity ♾. Rising cost of just about everything means more households taking on more debt they can’t afford. Eventually a bubble will burst starting a chain reaction.

  30. [Abcdef.]. The Great Depression is, over. The Politics of today is, just that absurd because, of the clashing political powers of different governments.

  31. I’m hoping the recession occurs during Trumps “2nd election” I want to see this idiot blame Hillary Clinton or Obama

  32. 7'55 from the clown at Moody's Analytics "in this case we don't have that an overbuilding problem, we don't have overleverage in general." Is this guy serious..?

  33. Hahahahahahaha ! And repo market is not QE4, honest injun. Pinky swear. And you can take that to the bank, or perhaps not.

  34. It’s overdue and has been extended, and as a result we shouldn’t feel complacent. It’s probably going to be more impactful and devastating when it does happen given the fact that we we didn’t have one in a decade as is the usual trend. We may think we averted it all together, but I wouldn’t let our guards. It may prove to be catastrophic in comparison to the others.

  35. What they dont tell you is that rich people have not had a recession in a decade, while poor people have been in a depression since the 70's with the move towards the dollar as a fiat currency. This meant that the financial sector could continue to grow for a bit. But what is obvious looking over time, is that capitalism will be unable to grow economies by 2050, the profit rate will invert by then. Every time we have "gotten out of a crisis" has been state interventions in the economy, through colonialization or bank bailouts and de-regulation. Mark my words, the USA will go to war before admitting capitalism has a built in self destruct timer. And just in case you think a capitalist economy can operate with negative growth, you are correct, for a time, for the rich only. They will already have automated most work places and the excuse of negative growth will be the excuse to finally introduce fascism officially as state ideology as it already is unofficially in many departments of the US regime.

  36. it's all smoke and mirrors trump rode in on the economy doing well and these so call tax cuts his administration benefited the rich and these corporations that the consumers bailed out

  37. Democrats have no common sense, How could you explain it?  Well they are the same as sports fans follow their team even if this is the worst team.  And they put their own family’s life in their hands, so you put  your feelings first than your  logic I feel very sorry for you.

  38. China has become a engine dragging the whole world economy up. It has changed the rules governing the economy trend and may be some economy textbooks as well.

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