NBER: U.S. Recession Ended in November 2001
Thursday, July 17, 2003 11:08 AM ET
Dow Jones Newswires
NEW YORK -- The U.S. economy officially ended the recession it entered
into in March 2001 in November of the same year, a group responsible for
dating changes in the business cycle said Thursday.
The National Bureau of Economic Research said that "the recession lasted
eight months, which is slightly less than average for recessions since
World War II."
The NBER is officially responsible for dating changes in the U.S.
business cycle. While the group has long cautioned that it takes a
considerable amount of time to officially date the end of a recession,
its decision had been long expected.
"The committee waited to make the determination ... until it was
confident that any future downturn in the economy would be considered a
new recession and not a continuation of the recession that began in
March 2001," the group said in a press release.
The criteria used by the NBER for dating recessions differ from the
common market shorthand, which defines a recession as two consecutive
quarters of contraction in gross domestic product. The group, which has
served as the official scorekeeper of economic activity for decades,
instead looks at changes in employment, real income, industrial
production, and wholesale-retail sales that are "normally visible in
real GDP."
It seeks to determine peaks and troughs in activity in these sectors as
the key determining factors of whether the economy is in an expansionary
or recessionary phase. "The behavior of these series strongly suggests
that the trough occurred in late 2001," the NBER noted.
The NBER's call on the 2001 recession means that a renewed downturn
would represent a fresh recession, rather than the much-talked-about
double dip.
And the NBER was quick to note that just because the 2001 recession had
ended, it wasn't saying the economy had entered into a period of strong
growth.
"In determining that a trough occurred in November 2001, the committee
did not conclude that economic conditions since that month have been
favorable or that the economy has returned to operating at normal
capacity," the group said in a press release.
"Rather, the committee determined only that the recession ended and a
recovery began in that month," the group said.
The group acknowledged that one its main barometers, employment, has
remained problematic, even as real GDP "has risen substantially since
November 2001." Indeed, since the end of the recession, unemployment has
risen from 5.6% to 6.4% as of June 2003. "The NBER defines expansions
and recession in terms of whether aggregate economic activity is rising
or falling" and that is what drives the ultimate determination, the
group said.
The NBER's official "all clear" on the economy comes amid rising
optimism that after a long period in the wilderness, the U.S. economy is
finally poised for a more enduring economic recovery. The group's report
also follows testimony by Federal Reserve Chairman Alan Greenspan
earlier this week which signaled the central bank's expectation that
economic growth, which has muddled onward since the official end of the
recession, should now begin to accelerate.
In the Fed's updated forecasts for growth that were provided to
Congress, it said that real GDP growth for the current year is seen
ranging between 2.25% and 2.75%, accelerating to between 3.75% and 4.75%
next year.
Mr. Greenspan also said that the Fed would continue to keep interest
rates low for as long as it took to get the economy back on track. The
Fed has cut interest rates 13 times since Jan. 3, 2001, lowering the
funds rate target from 6.5% to a 45-year low of 1% as of the late June
meeting, as it has fought to stimulate growth levels.
The Fed's current concern is that already weak price pressures will grow
even softer and put the economy at risk of a deflationary price spiral.
While it sees the possibility that there will be broad-based decline in
prices as remote, it nevertheless is letting that concern drive policy.
-Michael S. Derby, Dow Jones Newswires; 201-938-4192; michael.derby@
dowjones.com
[though the "bourgeois recession" may have ended in November 2001, the
"proletarian recession" continues as unemployment still rises.]
Jim Devine
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
