GOLDMAN: There's a 60% chance that the economic recovery goes on for another 4 years
This economic recovery could go on until at least 2019.
Six years into the recovery, it's turning out to be one of the longest ever. Since starting in July 2009, the recovery has lasted for 76 months, nearly twice as long as the average age of expansions since 1854, according to the National Bureau of Economic Research that dates business cycles.
This is raising questions about how much longer the expansion can run, among other symptoms of a possible recession that we recently outlined.
But looking more closely at the data, Pandl finds that the probability that this expansion lasts another few years is about 60%.
First, a look at the ages of expansions in developed countries via the chart below shows that the average age has increased over time.
Goldman
Pandl writes that based on these historical cycles, it's possible to calculate the probability that an expansion will go on given a certain starting point.
Pandl writes,
"When an expansion is just starting out, the odds that it will last more than six years - i.e. beyond the life the current US expansion - are only about 45%, based on data since 1950. However, the "mortality rate" of business cycles is fairly steady from one year to the next, with only a slight tendency to increase over time. Therefore, conditional on an expansion reaching six years of age, the odds that it can continue are still reasonably good. Again using data since 1950, we calculate that the unconditional odds that a six-year-old expansion will avoid recession for another four years-and mature into a 10-year-old expansion-are about 60%.
Pandl notes that these conclusions don't factor in unexpected conditions that could develop over the next few years, just like people in countries with the highest life expectancy still die of terminal diseases.
But for what it's worth, it may be time to stop talking about a recession, for now.