Economic expansion occurring with less excess

The modest pace of the U.S. economic recovery has a silver lining, as the expansion shows signs of lasting almost twice as long as average.

Four years into the upswing, the economy isn’t seeing many of the excesses that often presage the start of contractions. Inflation is slowing, not quickening. Household debt is shrinking, not expanding. The labor market is slack, not tight.

Pent-up demand also bodes well for the longevity of the recovery, which has averaged annual growth of about 2 percent since its start in June 2009. Confronted by elevated unemployment and a depressed housing market, Americans put off forming families, buying homes and acquiring cars.

“The current expansion can continue another four to five years,” said Robert Gordon, a professor at Northwestern University in Evanston, Ill., who’s a member of the National Bureau of Economic Research committee that determines when recessions begin and end.

That would make this upswing the second longest on record, behind only the 10-year period that spanned the 1990s. The average since the end of World War II is just shy of five years, at 58 months.

Reflecting the slow, steady pace of the recovery, payrolls rose 175,000 last month, in line with the average over the past year, Labor Department figures released earlier this month showed.

“If the economy keeps expanding for the next three to five years, earnings will go up and the stock market will go up,” said Allen Sinai, chief executive officer of Decision Economics Inc. in New York. He said the Standard & Poor’s 500 Index may rise as high as 1,750 later this year and could hit 2,000 in 2015.

A shock could knock the recovery off course, said Mark Zandi, chief economist at Moody’s Analytics Inc. Among the possibilities: a collapse of the stock market, a sudden spike in long-term interest rates or a military confrontation between the U.S. and Iran that drives up oil prices. While increased domestic energy output has made the U.S. less vulnerable to an oil run-up, the economy would nevertheless take a hit if one occurred, he said.

“There are no significant imbalances in the private economy,” he said. “Barring some unforeseen shock, I think we’re in pretty good shape.”