Rodney

July 17, 2003
Finally, It's Official: the Recession Ended 20 Months Ago
By DANIEL ALTMAN
New York Times

[T] he recession that began in March 2001 ended eight months later, the National Bureau of Economic Research, an independent research group that tracks the business cycle, reported today.

The announcement, which economists said was not a surprise, may be bittersweet for the millions of Americans without jobs. The previous recession, which lasted from July 1990 to March 1991 in the National Bureau's chronology, was followed by six straight months of job growth a year later. This time, 20 months after the recession's finale, the nation's payrolls are still shrinking.

"Most households, most individuals, will really not believe that it is a recovery until we see that job growth as part of the picture," said Lynn Reaser, chief economist of Banc of America Capital Management. But, she added, "the official declaration of the end should help confidence on the part of businesses, investors and consumers."

The decision to date the recession's end in November 2001 was made by a committee of seven academic economists after a meeting in Cambridge, Mass. It was also in November 2001 that the same committee declared the recession to have begun eight months earlier. The announcements are typically made long after the business cycle turns up or down, to avoid mislabeling a short-term change in the economic trend as a definite high or low in the size of the economy.

"In retrospect, we could just as easily have made the call a few months ago," said Jeffrey A. Frankel, a professor at Harvard University who is a member of the committee.

The most recent recession was short and shallow relative to the nine others, averaging 11 months, that occurred since World War II. In its report, the committee cited real gross domestic product ? the sum of the value of all goods and services generated by the economy, adjusted for changes in prices ? as the primary indicator of a recovery.

Jobs have not followed growth, the committee wrote, because of increases in workers' productivity. In fact, Ms. Reaser said, the unemployment rate is unlikely to fall until the economy expands at an annual rate of 3.5 or 4 percent, a pace it has attained in only two quarters since the recovery supposedly began. With productivity growing at more than 2 percent a year, and the labor force growing by about 1 percent a year, she said, the "hurdle rate" of growth for increasing the share of Americans who work cannot be less than 3 percent.

In the past, recessions have often been followed by strong recoveries, as pent-up demand, especially for manufactured goods, helped to engender a sort of economic slingshot effect. But in an economy that derives two-thirds of its activity from the service sector, the usual boost has not been forthcoming.

In addition, said James E. Glassman, a senior United States economist at J. P. Morgan Chase , a string of shocks ? the bursting of the stock market bubble, the Sept. 11 terrorist attacks, corporate scandals, the war in Iraq and SARS ? have essentially kept the economy stagnant for at least a year.

"It would take extraordinary bad luck ? new shocks ? to shift us back into recession," Mr. Glassman said. In the committee's announcement, he said, "the subtle message is: `Get over it. The direction has changed.' "

Professor Frankel insisted that the committee had not made any judgment about the likelihood of a new recession, though. "This has no bearing whatsoever on the current economic outlook, on the odds of a new downturn," he said.

Some economists are still skeptical of the economy's ability to grow at a strong clip. They believe that the economy's tepid performance of late stems not just from shocks but also from structural factors, including the huge debt burden carried by the nation's consumers and businesses. If the saving rate increases to shore up those debts, both groups will offer less support to the economy in the near term.

"I still think the private sector's desire to strengthen balance sheets and return to a more normal level of saving is a significant head wind for the economy," said Bill Martin, chief economist of UBS Global Asset Management. "It's not appreciated that in order for the economy to grow at a satisfactory rate, given current policies, it would be necessary for the still-low rate of saving to fall over time."

But Mr. Glassman argued that lower costs of debt service, a result of historically low interest rates, were a mitigating and more important consideration.

Though he agreed with Ms. Reaser that the National Bureau's report might give confidence in the economy a small boost, he also said the disjoint between employment and growth could narrow the report's relevance in the public consciousness.

"Most politicians don't actually care about the definitions," he said. "They care about what people think. In a sense, this isn't going to convince anybody or give them much comfort."

seretogis

Well, I'm still jumping from freelance project to project.

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seretogis - sieg heil
perfect little dream the kind that hurts the most, forgot how it feels well almost
no one to blame always the same, open my eyes wake up in flames

Mr Scorcex

When my dad finds steady work I'll feel better.

The_Dude

doesnt the govt has it's own bureaucracy that tracks this stuff?

i'll save my judgement till they release somethin

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"Luck is what happens when preparation meets opportunity." - Darrel K Royal

JumpinJesus

Did this article originate from the Ministry of Love or the Ministry of Truth?

We've always been at war with Eurasia, right?

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"I can normally tell how intelligent a man is by how stupid he thinks I am" - Cormac McCarthy, All The Pretty Horses