CHICAGO – Today marks the U.S. economy’s second-longest since 1785, according to new research released by global commercial real estate services firm Cushman & Wakefield. If this trend continues through July 1, 2019, the expansion of this economic cycle will officially be the longest on record.
Cushman & Wakefield’s Spotlight: The Economic Cycle report examines two of the most popular and widely-watched economic indicators – the yield curve and the state of the U.S. stock market – to offer insight into the state and future of the current expansion.
Long expansions are not the historical norm, according to Revathi Greenwood, head of Americas research with Cushman & Wakefield. The expansion from 1961 through 1969 was, until today, the second longest in U.S. history, and the only other expansion that has been longer than that spanned the decade from 1991 to 2001.
“Through World War II, the odds were fairly even that in any given year, the U.S. would be in a recession,” Greenwood said. “Since then, though, recessions have become less frequent. While context matters for why some expansions last longer than others; one thing is clear: they don’t die of old age.”
Current estimates of the probability of a recession within the next year are between zero and 25 percent, according to the report, with a majority of forecasters squaring their predictions at between 10 and 15 percent.
“Recessions typically start after excesses in the economy or financial markets develop and some trigger then causes the bubble to burst,” according to Rebecca Rockey, an economist and lead forecaster with Cushman & Wakefield in New York who co-authored the report. “Economic history is littered with bubbles and shocks, not all of which directly lead to downturns – and that’s why economists and analysts use factors like the yield curve and stock markets to evaluate expansions that may be nearing their tipping points.”
The yield curve has been compressing recently as short-term interest rates have risen faster than long-term rates, and Rockey predicts it has the potential to compress further or to sit comfortably as-is for some time. Other leading indicators, including confidence, the labor market, and manufacturing orders, remain strong, she says.
However, “there’s little reason to think that the end of the expansion is in sight,” Greenwood said. “Tailwinds from the fiscal stimulus and the revival of emerging markets as a global growth engine bode well for the economy in the near term, and recent stock price volatility is probably telling us a lot more about investors’ reactions to earnings reports and their appetites for unpredictable policies than anything about the business cycle. Popular leading indicators are not flashing red – it’s more like light orange.”
About Cushman & Wakefield
Cushman & Wakefield is a leading global real estate services firm with 45,000 employees in more than 70 countries helping occupiers and investors optimize the value of their real estate. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.
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