The current expansion of the U.S. economy began in the spring of 1991, so it has already achieved its sixth birthday. It has been a long and remarkably well-balanced expansion, accompanied by modest inflation, moderate interest rates and advancing equity prices, In general over this period, employment has increased significantly, the unemployment rate has fallen, and business activity in most sectors of the economy and most regions of the country has improved demonstrably. Moreover, this period of growth has followed on the heels of the expansion of 1982-1990, so our economy has in fact churned out an enviable record for an extended period. Furthermore, prospects seem excellent for this positive performance to continue, with economic growth sustained through the balance of this year and into the next. Among other things, one has to guard against complacency in this setting, and we should bear in mind the difficulty of accurately forecasting turning points in economic activity.
Most downturns come as a surprise to most forecasters and to most policy-makers.
Still, the economy appears well positioned for another year of balanced growth. After the macroeconomic turbulence of the 1970s and early 1980s, our more recent experience is both welcome and reassuring. Further, I suspect that this experience has been no accident, because as a nation we generally have in place incentives favorable to improved productivity and growth. Moreover, through much of the expansion of the 1980s and in this decade as well, inflation has been contained to moderate rates, a characteristic shared by the long expansion of the economy during the 1960s. Causality is exceedingly difficult to prove in economics, but we seem to be building a considerable body of evidence which suggests that, at least in the United States, modest inflation and prolonged periods of growth go hand in hand.