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In June, the U. S. economic recovery that began in June of 2009 hit its tenth year, matching the previous longest recovery cycle of March 1991-March 2001. There are signs of slowdown but no signs of recession in the foreseeable future, making the current cycle the expected longest recovery period in U. S. history. What is equally noteworthy is that despite the fifty-year low unemployment, there is no inflationary pressure in sight. We believe that both the U. S. labor and businesses have matured as a result of the great recession shock and are conducting themselves with great restraint. Similar to the Germans, no one seems to be interested in living in an inflationary cycle. The national net worth has rebounded from the biggest drop since 2004, by $3.96 trillion in 2018: Q1 to $4.69 trillion growth in 2019: Q2 with equity and home prices making up the majority of the gain. This phenomenon points to further deepening of wealth distribution disparity with longterm implications in term of consumption, savings, education, social mobility, and productivity growth. Homeownership is rising only among those who can afford pricier homes. The Bureau of Economic Analysis reported the first quarter of GDP growth at 3.2 percent, well above the Dow Jones expected 2.5 percent. Our consensus puts the growth in the GDP at a conservative 1.55 percent between 2019: Q3 and 2020: Q2.
CONSUMERS: HOME OWNERSHIP AT ALL TIME LOW
Thanks to the Fed slowing down in reducing its balance sheet to tighten the credit market, mortgage rates have trended down. However, a mix of low stock and high priced new homes is making home purchases out of reach for many households. Homeownership hit another all-time low at 62.9 percent in 2016: Q2, matching the same rate in 1965: Q1. Homeownership has rebounded somewhat to 64.2 percent in 2019: Q1, well below the 69.2 percent we saw in 2004: Q2. Historically, homeownership has been the major source of wealth for most U. S. Households, with the smoothing effect of consumption through business and life cycles. The low homeownership rate will contribute to volatility in consumption spending both in the short-run and the long-run during the retirement age. Consensus puts the growth in personal disposable income at 3.24 percent by...