NCPA - National Center for Policy Analysis

Shorter Recessions, Longer Expansions

May 20, 1999

Something basic has changed in the U. S. economy: periods of business expansion last longer, while recessions have become shorter in duration. So suggests a study by Carl E. Walsh, a visiting scholar at the San Francisco Federal Reserve Bank.

  • Back in 1873, the U.S. entered a recession that lasted five years and five months -- longer by far than the Great Depression, which lasted 43 months.
  • Since the Depression, no recession has lasted even half as long -- with the average slump lasting just over 10 months.
  • On the expansion side, only three of the 21 which occurred prior to World War II lasted more than three years.
  • Since then, only three of the 10 expansions the U.S. experienced have lasted less than three years.

While methods of measuring expansions and contractions have become more sophisticated, the explanation for the change in business cycles may lie in an improved understanding of the needs of businesses and improved economic policies.

"In general, the tremendous changes experienced in recent years associated with the information revolution are likely to affect the cyclical behavior of the economy in ways not yet fully understood," Walsh writes.

Source: Macroscope, "Cycles of Change," Investor's Business Daily, May 18, 1999.


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