NEW YORK (CNN/Money) - No sooner have indicators started pointing to the beginning of a full-fledged economic expansion than the bears have started to grumble that the expansion won't last very long.
After last Friday's jobs report, it's hard to argue that the economy is about to falter here. Although consumer spending is likely to slow from its torrid third-quarter growth, businesses do appear to have begun to take up the slack, hiring workers and laying out money for capital expenditures.
One can argue, if one wishes to, that this passing of the baton from the consumer to other areas of the economy will falter. U.S. households have high debt levels and full closets -- or garages, if you want to draw a finer point on it. With the interest-rate environment less friendly, households are going to retrench.
But even economists with a penchant for the negative (which is to say most economists) find such arguments unpersuasive. First off, nothing affects consumer behavior so much as the employment picture. With the economy no longer bleeding jobs, people are less likely to get skittish at the malls. Companies that are dependent on the consumer can relax their guard, as well, and start hiring back workers. So begins a virtuous cycle.
What's more this year's tax cut means that many people will be getting a big tax refund next year. Assuming that many of us are going to file (hand raised here) as soon as possible, there's going to be some extra money sloshing about in the economy in fairly short order.
So the economy is in the midst of a genuine recovery which is going to push it into a genuine expansion. Accept no substitutes.
But what of the quality of that expansion?
One of the really great things that happened to the United States beginning in the early 1980s is that the economic cycle got drawn out. Think of it: A 21-year old today has only lived through two recessions. A 21-year old in 1980, on the other hand, had lived through four.
These long expansions are an investing paradise -- and here "investing" doesn't mean just taking a fly on the stock market, but investing in new equipment for your company, or laying out the money to start a new company, or buying a house. Why? An economy that is fairly recession resistant means that you don't have to worry about that the shocks that make such investments go sour.
Will this next expansion be similarly long-lived? Perhaps, but it will be a tough trick to turn. First off, the long expansions of the 1980s and 1990s came during a period where the Fed was fighting hard against the forces of inflation. The Fed won, and now inflation is so low that there isn't anything left to disinflate anymore. With the Fed now as worried about the possibility of deflation as inflation, it's in a new game -- one that it has no experience at playing.
More important, structurally the economy doesn't look the way it has at the beginning of past recessions. The current account deficit -- the gap in the United States' trade in goods and services with the rest of the world -- has risen to about 5 percent of the total economy. That's as high as it's ever been. In contrast, at the beginning of past economic expansions the current account has tended to be in surplus.
Housing prices usually get hurt during recessions. In this one, they did not. Consumer spending usually sees some sort of slowing. Again, didn't happen this time.
For some economists, these things represent structural flaws in the economy which will make the expansion less potent and less long than the ones that preceded it. If that's right, it could have important implications for investors who, in the high valuations they're putting on stocks, appear to be betting that the next boom will be as long as the one that preceded it.
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