By Howard Schneider – It was only last year that U.S. gross domestic product caught up with estimates of its potential, surpassing where Congressional Budget Office analysts feel it would have been if the housing bubble hadn’t burst in 2007, investment bank Lehman Brothers hadn’t failed the following year, and the world had not cratered into a deep recession.
The periods when GDP exceeds potential are typically when workers enjoy the greatest wage gains and members of historically sidelined communities find jobs. In recent years, those periods have not lasted long, a fact that Fed and other officials are wrestling with as they weigh possible interest rate cuts and assess just where the U.S. economy now stands.
The approach of the decade-long expansion mark has boosted speculation about how much longer the recovery might last, whether a recession is inevitable in the next couple of years, and whether the Fed and U.S. government are adequately prepared to fight another downturn.
For the type of progress Fed and elected officials feel is needed to rebuild middle-class incomes, it may take several more years.
But the environment has changed.
In the short-term, global trade disputes and other risks could slow the economy no matter what the Fed does. more>
- Rich get richer, everyone else not so much in record U.S. expansion, Trevor Hunnicutt