The Expansion Phase: The Engine of Growth - The Unavoidable Business Cycle
Updated: Sep 14
From the developing Thriving Through the Storm Business & Leadership series
Updated September 2026
Expansion creates opportunity. Businesses invest, hire, add capacity, enter markets, and pursue growth. Those decisions can strengthen an organization. They can also create commitments that become difficult to carry when conditions change.
That is the strategic challenge of Expansion. Leaders should pursue legitimate opportunities while using strong conditions to make the organization more capable, financially resilient, and adaptable.
The National Bureau of Economic Research defines Expansion as the period between a business-cycle Trough and the next Peak.¹ The current United States Expansion began in May 2020, following the April 2020 Trough.²
For business leaders, the central question is not simply:
“How fast can we grow?”
It is:
“How can we grow without making the organization fragile?”
Why the Expansion Phase Matters Now
Under the current National Bureau of Economic Research chronology, the United States remains in the Expansion that began following the April 2020 Trough. But being in Expansion does not mean that every economic or business condition is equally strong.
Real gross domestic product increased at a 1.5 percent annual rate in the second quarter of 2026, compared with 2.1 percent in the first quarter.³
Total nonfarm payroll employment increased by 162,000 in August, while the unemployment rate remained at 4.1 percent.⁴
The Consumer Price Index was 3.4 percent higher in August 2026 than a year earlier, while the index excluding food and energy was 2.4 percent higher.⁵
At its July 29 meeting, the Federal Open Market Committee maintained the federal funds target range at 3.50 to 3.75 percent. The Committee described economic activity as expanding at a solid pace while inflation remained elevated relative to its 2 percent goal.⁶
These measures illustrate an important distinction for business leaders. An economy can remain in Expansion while growth, costs, labor conditions, financing, customer behavior, and risk continue to change.
The strategic question therefore should not be:
“How long will the Expansion last?”
It should be:
“Are we using today’s conditions to make the organization stronger for whatever comes next?”
What Actually Happens During Expansion?
Expansion describes the broad business-cycle environment. It does not mean that every company, industry, region, or financial market will experience the same conditions.
That distinction matters because business leaders operate inside their own markets, customer relationships, cost structures, labor conditions, and financial circumstances.
A rising stock market does not define Expansion. Neither does low unemployment, consumer confidence, or any single economic indicator.
The National Bureau of Economic Research determines business-cycle turning points by examining a range of measures of broad economic activity rather than relying on one mechanical indicator.⁷
For leaders, the practical question is therefore not whether every economic measure looks favorable.
It is how the conditions surrounding the business affect demand, pricing, costs, labor, capacity, cash flow, borrowing, investment, and risk.
Expansion can provide opportunities to invest and grow. The leadership challenge is making sure that growth strengthens the organization rather than quietly increasing its vulnerability.
Postwar America: Growth Across Multiple Expansions
The decades following World War II brought extraordinary economic growth and structural change to the United States. But they were not one uninterrupted business-cycle Expansion.
The National Bureau of Economic Research chronology identifies Peaks in November 1948, July 1953, August 1957, April 1960, and December 1969, with Contractions following each. The Expansion that began after the February 1961 Trough continued until the December 1969 Peak and lasted 106 months.⁸
That distinction matters.
Long-term economic growth can contain multiple Expansions and Contractions. Business leaders should therefore avoid confusing a powerful long-term trend with an uninterrupted business cycle.
Government programs also helped reshape postwar life. Within seven years of passage of the Servicemen’s Readjustment Act of 1944, approximately eight million veterans had received educational benefits. By 1955, 4.3 million home loans had been granted under the program.⁹
Homeownership increased from 43.6 percent in 1940 to 55.0 percent in 1950 and 61.9 percent in 1960.¹⁰
Productivity also increased. Nonfarm business labor productivity grew at an average annual rate of 2.7 percent from 1947 through 1973.¹¹
The leadership lesson is not that the postwar economy simply boomed for decades without interruption.
It is that powerful long-term growth can create enormous opportunity while still containing shorter cycles that require leaders to adjust.
Postwar growth demonstrates the opportunity strong economic conditions can create without suggesting that favorable conditions continue indefinitely. Growing demand can support investment, innovation, productivity, and new business models.
The leadership lesson is not simply that successful companies grow during good times.
It is that strong conditions give leaders an opportunity to build capability before conditions become more difficult.
Amazon During the 2001–2007 Expansion: Growth Creates Opportunity—and Strain
The United States Expansion that followed the November 2001 Trough continued until the December 2007 Peak, a period of 73 months.¹²
Amazon grew substantially during that Expansion.
The company introduced Amazon Prime in February 2005.¹³ Net sales increased from approximately $8.49 billion in 2005 to $10.71 billion in 2006 and $14.84 billion in 2007.¹⁴
But the company’s own reporting shows another side of rapid growth.
In its 2006 annual report, Amazon warned that its expansion increased business complexity and placed significant strain on management, personnel, operations, systems, technical performance, financial resources, and internal financial-control and reporting functions.¹⁵
That makes Amazon useful as more than a growth success story.
Growth creates opportunity.
Growth also creates strain.
As an organization becomes larger and more complex, leaders must strengthen the people, processes, systems, capacity, controls, and financial resources supporting that growth.
The lesson is not simply to grow.
It is to make sure the organization underneath the growth is becoming stronger.
What Leaders Should Do While Conditions Are Strong
Expansion should not cause leaders to become cautious about every opportunity.
It should cause them to become disciplined about which opportunities make the organization stronger.
Invest with Purpose, Not Momentum
Do not allow growth itself to become the justification for every additional employee, machine, facility, technology investment, acquisition, or fixed cost. Ask what the investment accomplishes, what assumptions support it, and what happens if growth is slower than expected.
Strengthen Liquidity While Cash Flow Is Strong
Use stronger conditions to improve cash reserves, working-capital discipline, borrowing capacity, and financial flexibility. Cash is easier to protect before it becomes scarce.
Control Leverage Before Growth Makes It Look Harmless
Debt that appears manageable under rising revenue and healthy margins may become much more difficult when those assumptions change. Research examining firms during the Great Recession found that highly leveraged firms experienced significantly larger employment declines in response to household-demand shocks than firms with lower leverage.¹⁶ Evaluate borrowing against weaker revenue, margin, and cash-flow scenarios before making the commitment.
Build Capacity Deliberately
Growth can create legitimate capacity needs. It can also tempt organizations to build ahead of demand because recent growth is assumed to continue. Separate capacity required by demonstrated demand from capacity justified primarily by optimistic forecasts.
Strengthen the Organization Behind the Growth
Use Expansion to improve people, processes, systems, suppliers, quality, technology, management capability, and customer relationships. A larger organization is not necessarily a stronger organization.
Establish Decision Triggers Before Conditions Change
Identify in advance the changes that should cause leadership to reassess its assumptions. Those signals may include orders, backlog, margins, receivables, inventory, capacity utilization, customer forecasts, borrowing costs, or liquidity.
The purpose is not to predict the exact Peak.
It is to recognize when the assumptions supporting current decisions are changing.
The Strategic Lesson of the Expansion Phase
Expansion is not merely a period in which businesses can grow. It is often the period in which leaders have the greatest freedom to decide how they will grow.
Cash flow may be stronger. Customers may be buying. Capacity may be filling. Confidence may be high. Those conditions create choices.
The strategic mistake is converting every available choice into a permanent commitment based on the assumption that current growth will continue unchanged.
The objective is not to avoid growth.
It is to grow in ways that strengthen the organization while preserving the ability to adjust when conditions change.
Summary and Conclusion — The Expansion Phase
Four lessons matter most. Expansion creates opportunity, but strong conditions can also encourage commitments that become difficult to reverse.
Growth should strengthen the organization, not simply make it larger.
Expansion gives leaders opportunities to invest, hire, innovate, enter markets, and build capacity. The measure of successful growth is whether those decisions improve the organization’s long-term capability and resilience.
Strong conditions should be used to prepare for weaker ones.
Cash, borrowing capacity, systems, people, processes, customer relationships, and operational capability are easier to strengthen before pressure rises.
Debt, capacity, fixed costs, and major investments should be tested against weaker conditions before they become permanent commitments.
A decision that works only if current growth continues is not a resilient decision.
Continue pursuing opportunity—but grow in ways that preserve choices when conditions eventually change.
Expansion should encourage ambition without allowing optimism to replace discipline.
The next phase of the business cycle is Peak—the turning point between Expansion and Contraction. Understanding how to prepare for changing conditions without pretending that leaders can predict the exact turning point is central to the developing Thriving Through the Storm Business & Leadership series.
Endnotes
Endnote 1: “Business Cycle Dating,” National Bureau of Economic Research, accessed September 14, 2026, https://www.nber.org/research/business-cycle-dating.
Endnote 2: Business Cycle Dating Committee, National Bureau of Economic Research, “Business Cycle Dating Committee Announcement July 19, 2021,” July 19, 2021, https://www.nber.org/news/business-cycle-dating-committee-announcement-july-19-2021.
Endnote 3: United States Bureau of Economic Analysis, “GDP (Second Estimate) and Corporate Profits, 2nd Quarter 2026,” August 26, 2026, https://www.bea.gov/news/2026/gdp-second-estimate-and-corporate-profits-2nd-quarter-2026.
Endnote 4: United States Bureau of Labor Statistics, “The Employment Situation — August 2026,” September 4, 2026, https://www.bls.gov/news.release/archives/empsit_09042026.htm.
Endnote 5: United States Bureau of Labor Statistics, “Consumer Price Index — August 2026,” September 11, 2026, https://www.bls.gov/news.release/archives/cpi_09112026.htm.
Endnote 6: Board of Governors of the Federal Reserve System, “Federal Reserve Issues FOMC Statement,” July 29, 2026, https://www.federalreserve.gov/newsevents/pressreleases/monetary20260729a.htm.
Endnote 7: “Business Cycle Dating,” National Bureau of Economic Research, accessed September 14, 2026, https://www.nber.org/research/business-cycle-dating.
Endnote 8: “US Business Cycle Expansions and Contractions,” National Bureau of Economic Research, last updated March 14, 2023, https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions.
Endnote 9: National Archives and Records Administration, “Servicemen’s Readjustment Act (1944),” last reviewed May 3, 2022, https://www.archives.gov/milestone-documents/servicemens-readjustment-act.
Endnote 10: Frank Hobbs and Nicole Stoops, Demographic Trends in the 20th Century, Census 2000 Special Reports, CENSR-4 (Washington, DC: United States Government Printing Office, 2002), 125, https://www.census.gov/content/dam/Census/library/publications/2002/dec/censr-4.pdf.
Endnote 11: United States Bureau of Labor Statistics, “Long-Term Labor Productivity by Sector for Selected Periods,” last updated September 3, 2026, https://www.bls.gov/productivity/charts/long-term-labor-productivity-by-sector-for-selected-periods.htm.
Endnote 12: Business Cycle Dating Committee, National Bureau of Economic Research, “Business Cycle Dating Committee Announcement December 1, 2008,” December 1, 2008, https://www.nber.org/news/business-cycle-dating-committee-announcement-december-1-2008.
Endnote 13: Amazon.com, Inc., “Amazon.com Announces Record Free Cash Flow Fueled by Lower Prices and Free Shipping; Introduces New Express Shipping Program—Amazon Prime,” press release, February 2, 2005, filed as Exhibit 99.1 to Form 8-K, United States Securities and Exchange Commission, https://www.sec.gov/Archives/edgar/data/1018724/000119312505017451/dex991.htm.
Endnote 14: Amazon.com, Inc., Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2007, filed February 8, 2008, United States Securities and Exchange Commission, https://www.sec.gov/Archives/edgar/data/1018724/000119312508024707/d10k.htm.
Endnote 15: Amazon.com, Inc., Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2006, filed February 16, 2007, United States Securities and Exchange Commission, https://www.sec.gov/Archives/edgar/data/1018724/000119312507034081/d10k.htm.
Endnote 16: Xavier Giroud and Holger M. Mueller, “Firm Leverage and Unemployment during the Great Recession,” National Bureau of Economic Research Working Paper 21076, April 2015, revised July 2015, https://doi.org/10.3386/w21076.
Bibliography
Amazon.com, Inc. Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2006. Filed February 16, 2007. United States Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1018724/000119312507034081/d10k.htm.
Amazon.com, Inc. Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2007. Filed February 8, 2008. United States Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1018724/000119312508024707/d10k.htm.
Amazon.com, Inc. “Amazon.com Announces Record Free Cash Flow Fueled by Lower Prices and Free Shipping; Introduces New Express Shipping Program—Amazon Prime.” Press release, February 2, 2005. Filed as Exhibit 99.1 to Form 8-K. United States Securities and Exchange Commission. https://www.sec.gov/Archives/edgar/data/1018724/000119312505017451/dex991.htm.
Board of Governors of the Federal Reserve System. “Federal Reserve Issues FOMC Statement.” July 29, 2026. https://www.federalreserve.gov/newsevents/pressreleases/monetary20260729a.htm.
Business Cycle Dating Committee, National Bureau of Economic Research. “Business Cycle Dating Committee Announcement December 1, 2008.” December 1, 2008. https://www.nber.org/news/business-cycle-dating-committee-announcement-december-1-2008.
Business Cycle Dating Committee, National Bureau of Economic Research. “Business Cycle Dating Committee Announcement July 19, 2021.” July 19, 2021. https://www.nber.org/news/business-cycle-dating-committee-announcement-july-19-2021.
Giroud, Xavier, and Holger M. Mueller. “Firm Leverage and Unemployment during the Great Recession.” National Bureau of Economic Research Working Paper 21076. April 2015. Revised July 2015. https://doi.org/10.3386/w21076.
Hobbs, Frank, and Nicole Stoops. Demographic Trends in the 20th Century. Census 2000 Special Reports, CENSR-4. Washington, DC: United States Government Printing Office, 2002. https://www.census.gov/content/dam/Census/library/publications/2002/dec/censr-4.pdf.
National Archives and Records Administration. “Servicemen’s Readjustment Act (1944).” Last reviewed May 3, 2022. https://www.archives.gov/milestone-documents/servicemens-readjustment-act.
National Bureau of Economic Research. “Business Cycle Dating.” Accessed September 14, 2026. https://www.nber.org/research/business-cycle-dating.
National Bureau of Economic Research. “US Business Cycle Expansions and Contractions.” Last updated March 14, 2023. https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions.
United States Bureau of Economic Analysis. “GDP (Second Estimate) and Corporate Profits, 2nd Quarter 2026.” August 26, 2026. https://www.bea.gov/news/2026/gdp-second-estimate-and-corporate-profits-2nd-quarter-2026.
United States Bureau of Labor Statistics. “Consumer Price Index — August 2026.” September 11, 2026. https://www.bls.gov/news.release/archives/cpi_09112026.htm.
United States Bureau of Labor Statistics. “Long-Term Labor Productivity by Sector for Selected Periods.” Last updated September 3, 2026. https://www.bls.gov/productivity/charts/long-term-labor-productivity-by-sector-for-selected-periods.htm.
United States Bureau of Labor Statistics. “The Employment Situation — August 2026.” September 4, 2026. https://www.bls.gov/news.release/archives/empsit_09042026.htm.
