For the first time in US history, a decade will pass without the country falling into a recession
Reuters/Carlos Barria (Trump), Larry Downing (Obama)
- In every decade since the period immediately before the Civil War, the US economy could be relied on to do one thing: tumble into recession.
- But the American economy is on pace to defy that trend for the first time in nearly 170 years as it enters the 2020s.
- The 2010s would be first time a decade has come and gone without the nation falling into recession, which is commonly defined as two consecutive quarters of contracting gross domestic product.
- Economists told Business Insider some supporting factors include the extremely slow recovery and people continuously looking for work.
In every decade since the period immediately before the Civil War, the US economy could be relied on to do one thing: tumble into a recession.
The last one stretched from December 2007 until June 2009, unleashing 18 months of massive job losses and historic rates of home foreclosures. The severe downturn also triggered a global financial crisis that some experts say contributed to the rise of authoritarian and populist leaders around the world.
But the American economy is likely to defy that trend for the first time in nearly 170 years as it enters the 2020s. The 2010s would be first time a decade has come and gone without the nation falling into recession, which is commonly defined as two consecutive quarters of contracting gross domestic product.
The close of the decade will cap an extraordinary period for the US economy - one that saw it recover from the depths from the Great Recession and lock in a record interval of sustained growth. President Obama steered an economy on the verge of collapse and helped put it back on track, which has continued under President Trump.
Business Insider spoke to three economists to see why the economy didn't spiral into recession in the 2010s.
The US escaped a recession in the 2010s since the economy could only grow
Dr. Ioana Marinescu, an assistant professor of economics at the University of Pennsylvania, says a big reason the US escaped a recession was the last nosedive was so bad that the economy only had room to grow throughout the decade.
"The 2010s recovery followed the worse recession since the 1930s," Marinescu told Business Insider. "So there was room to grow without much adverse effects."
Still, economists say that effects of the last recession are still felt today in the form of accelerating wealth inequality and worsened career prospects for millennials and other young adults.
"We had such a terrible recession and a really slow recovery," Dr. Tara Sinclair, an associate professor of economics at George Washington University, told Business Insider. "The last three recessions, we haven't seen a boom period."
Sinclair noted there was a slow crawl toward the historic levels of unemployment present today, and the real wage gains are lower compared to what previous generations experienced after a recession.
"These big employment gains suggest there are people still needing jobs," Sinclair said, referring to the blockbuster November jobs report that showed the economy beat expectations and added 266,000 new jobs.
Others, like Dr. Robert Barro, a professor of economics at Harvard University and a visiting scholar at the conservative American Enterprise Institute, also noted surges in the number of employed people under both Obama and Trump.
"There has been no recession because the growth rate of real GDP has been remarkably stable, although at a low average rate," Barro told Business Insider in an email, noting a steady performance averaging out to 2% since 2010.
Still, Barro said the economy has been "hampered" by "the crazy trade war" and says it's a big factor dragging it down this year, and increases the odds of an economic downturn in 2020.
When it comes to fending off the next recession, Sinclair said that economists should be focused on equipping the government with the right tools, noting her research showing the profession has a poor record of predicting them.
"There is not any consistent evidence that economists can predict the onset of a recesssion. We don't have that sort of insight or crystal ball," Sinclair said. "But economists can tell when we are in a recession, and that's when we can focus on whether we have policies that can act quickly to reduce the impact of one."
This will be the first decade in modern economic history (since 1850) that the US won't experience a single recession pic.twitter.com/4KxZO2uWxb- Ben Carlson (@awealthofcs) December 6, 2019