This research was published on February 12th, 2021 in Harvard Business Review.

When the pandemic hit last year, business leaders’ time horizons contracted sharply, forcing their focus on issues of survival, adaptation, and resilience.

With a better than expected recovery ongoing, horizons are expanding again. Yet rather than looking at just the recovery or the year ahead, this is a good time for leaders to think about the next economic cycle in its entirety.

The Life Cycle of an Expansion

The life cycle of an expansion is best viewed through the lens of the labor market. In the so-called “young” stage of the expansion, high unemployment from the preceding recession fuels the expansion. But once labor markets tighten, the cycle enters the “old” stage with fundamentally different characteristics: Hiring is more difficult, growth is scarcer, and vulnerabilities, such as inflation or bubbles, are larger.