Chart of the Day: The Business Cycle in Action

Here is a chart showing year-over-year changes in G.D.P., consumer spending, and employment:

I couldn't include corporate profits because the swings were too high. But, like G.D.P., year-over-year operating profits for the S&P 500 peaked in the second quarter of 2004 at 31.4 percent.

If we use employment growth as a proxy for the business cycle, this past expansion lasted 48 months. For G.D.P., trough-to-peak is about 43 months.

Both of these values are below the 57-month average for cycles between 1945-2001 as measured by the NBER (which uses a whole host of indicators).

UPDATE
Correction: I forgot that the NBER looks at actual levels as opposed to year-over-year changes. The benefit of looking at y-o-y is that it can help locate inflection points in the economy. The peak of y-o-y often happens before a recession, but the y-o-y trough typically coincides with the end of a recession, meaning that y-o-y "recessions" last longer than NBER recessions.

In the six recessions since 1969, the three indicators above peaked an average of 14 months before recessions started. This implies that the current expansion will last around 60 months, which is very much inline with historical averages.