Stamina, Not Speed

• Share

Like a runner trained for long distances, America's economic expansion is showing remarkable staying power, if not robust speed. The U.S. recovery, which passed the four-year marker in November, just keeps chugging ahead in spite of ever present doubts and dangers along the road. Since its start in 1982, the expansion has been refreshed at crucial intervals, first by the plunge of interest rates and later by the fall of oil prices. Now, at 49 months and counting, the durable recovery is already the second longest peacetime boom in U.S. history, after the 58-month expansion in 1975-79.

And the economy is expected to keep on kicking long enough to break that record. TIME's Board of Economists, which met last week in Manhattan, predicted that America's gross national product will expand another 2.8% during 1987, compared with an estimated 2.4% this year and 2.9% in 1985. "I see no real break in the stride of the expansion. It will be long but not strong," said Board Member Walter Heller, who served as chairman of the Council of Economic Advisers for Presidents Kennedy and Johnson.

The forecast for further growth largely rests on the increasing conviction that the U.S. has started to make progress against its most draining economic problem: the huge trade gap. For the most part, that gap is the legacy of an American dollar that was too strong in the first half of the decade. That made foreign goods cheap in the U.S. and U.S. exports too expensive in other countries, and the resulting trade imbalance has created a heavy drag on growth. But in recent weeks economists have become persuaded that the nearly two-year decline in the U.S. dollar may have finally triggered a turnaround in trade. "I think the data clearly show a cresting in the deficit," said Alan Greenspan, former chief economic adviser to President Ford. After hitting an estimated $165 billion for 1986, a record total, the trade gap could shrink to about $140 billion next year.

Yet the deficit has already reached such a high level that it will remain a burden next year. Said Greenspan: "Unlike any time in recent American history, the outlook for the domestic economy is being driven by our international accounts." Indeed, last week the Reagan Administration, citing % the troublesome trade situation first among all factors, lowered its economic- growth projection for 1987 from 4.2% to 3.2%.

The U.S. particularly needs to improve its export sales, because the economy is unlikely to benefit from any significant gain in spending among American consumers next year. Since the recovery is so far along, much of the demand for major items, such as houses and autos, that built up during the last recession has been satisfied. While consumers remain fairly confident, they have already gone on an extended shopping spree paid for by a heavy load of installment debt. Just this past fall, millions of consumers rushed to the auto showrooms to take advantage of cut-rate financing offers. "They won't head for the hills now, but they will pull in their horns a little," said Heller. This season's Christmas receipts are expected to be good but not glorious; last week the Commerce Department announced that retail sales in November posted a .5% gain over the previous month.