How long will this economy last?

OK, I should probably just end this column right here, because the question posed in the headline is so impossible to answer that I won’t even try.

 

 

 

 

Umm … sorry, I couldn’t stay away. Predicting the unpredictable is too much fun, so here we go!

True, no one knows how long the current U.S. economic expansion — now in its 109th month, the second-longest in history — will continue. If the current expansion lasts past July 2019, it would supplant the longest period of economic growth set during the 1990s, so we’ve got that going for us.

Still, many economists point to sometime in 2019 as the period during which a recession is most likely to occur. They base that on multiple factors, such as the length of the current expansion, inversion of the yield curve, etc. An inverted yield curve reflects an interest-rate environment in which short-term interest rates exceed long-term rates, which some consider a predictor of recession.

Got that? (I have to look it up every time I hear the term.) But I sometimes wonder whether economists are making it up as they go along, anyway.

After all, it’s not like economists have had much success in predicting economic performance. Just take a look at the predictions from the Federal Reserve in October 2007: The Fed’s Open Market Committee provided economic projections of the Federal Reserve governors and Reserve Bank presidents, predicting growth in real gross domestic product nationwide of 1.6 percent to 2.6 percent in 2008, climbing to 2.2 percent to 2.7 percent in 2010.

The reality? Real GDP contracted by 4.3 percent between the fourth quarter of 2007 and the second quarter of 2009, according to the Fed. It was the longest economic downturn since World War II.

Admittedly, the current expansion has garnered some additional tailwinds, with the Tax Cuts and Jobs Act of 2017 providing an enormous stimulus to the US. economy. The stock market is booming. Millions of new jobs have been created. Unemployment remains near historic lows — just 2.6 percent in Larimer County and 2.7 percent in Boulder, Broomfield and Weld counties!

Other factors — the Trump Administration’s tariffs, increasing interest rates, an overvalued stock market or sharp increases in energy costs could drag the economy down.

And it will happen, whether that be in 2019, 2020, 2021 or whenever. And, like in 2007, the cause could be something completely unexpected. Will the Chinese real estate market collapse? Will crypto currencies be the next bubble to burst? Did the financial markets learn their lesson from the subprime mortgage crisis? Will excessive federal spending finally lead to inflation, followed by sharper spikes in interest rates?

We’ll know eventually, I suppose. In the meantime, we can only encourage our elected officials, lenders, borrowers and regulators to do better than they did the last time around.

Oh … I almost forgot: My non-economist prediction is that all of the above factors — joined with increased political turmoil in Washington, D.C., will begin to take a toll on the economy, and that we will enter a recession before or after the fourth quarter of 2019.

See what I did there?

Christopher Wood can be reached at 303-630-1942, 970-232-3133 or cwood@bizwest.com.