At what stage of the business cycle is the US economy currently operating?

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pohnpei397 eNotes educator| Certified Educator

It is not always possible to tell where an economy is in the business cycle at any given time.  This is because the statistics for gross domestic product (GDP) at any given time are just a snapshot of where the country is at that point.  They cannot tell us what will happen in the future.  Therefore, it is never possible to know for sure where we are in the business cycle.

There are four phases in a business cycle.  If GDP has been going up but is no longer rising, the economy is at the peak of the business cycle.  From then, if GDP starts to shrink, the economy is in a recession.  It is important to note that there is no recession (officially) until the economy has been shrinking for six months.  If the economy has been in a recession but has bottomed out (GDP has stopped shrinking), it is at the trough.  As the economy improves and GDP grows, the economy is in recovery or expansion.

Looking at the statistics, the US economy is most likely in a recovery or expansion.  GDP has been rising for the last 13 quarters for which official data are available.  Of course, the country could be at a peak.  It could be that this growth is about to end and GDP is about to go down.  There is simply no way to know this for sure.

The US, then, is most likely (given what most economists think) in a gradual expansion.  However, there is no statistical proof (and there can be no such proof) that we are not at a peak.