Posted on 07/17/2003 5:18:41 PM PDT by The Electrician
The 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.
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."
Also see this earlier thread based on an AP report.
Sure, a bunch of useless dot.coms and criminal telecommunications firms bit the dust and many thousands of people lost their jobs, but the economy overall has been sound. Traffic is still heavy at rush hour, good restaurants still have a 1-2 hour waiting time and shopping malls are usually packed to capacity. My work (I deal in office equipment like high-speed printers and copiers) never slowed down and you still have to see a scalper if you want to see a good concert or a big sporting event.
I don't know, maybe I'm delirious. But I never noticed the recession in the first place. Now watch, I go into work tomorrow and get my pink slip.
U.S. GDP has been growing slowly since late 2001, and it now stands 3.3 percent above its pre-recession peak in the fourth quarter of 2000.
Hall said the panel had waited until it could be confident any potential future drop in activity would be a separate recession before placing its historical marker.
"The fact that the broadest, most comprehensive measure of economic activity is well above its pre-recession levels implied that any subsequent downturn in the economy would be a separate recession," the panel said in its statement.
"We don't know and we don't take a stand on what is ahead, but we do say that this one belongs in the record book," Hall said.
Panel members were also aware that 2004 is an election year and they had no desire to draw the type of criticism they did in 1992 when they called an end to the 1990-91 recession in December, one month after an election in which Republican President George Bush lost to Democrat Bill Clinton.
"This is not the first time that there has been some political sensitivity," Hall said. "We try very, very hard to try to essentially ignore politics."
And the people continuing to go out are not "goof offs" or easily labeled with other trailer trash throw away lines.
Obviously one more lagging indicator.
Could it be that recession and unemployment are two different terms??????
What kind of "engineers" were these? The term "engineer" is used rather widely these days.
I've seen some "engineers" with advanced degrees who were really not much more than highly paid Web page designers or Java programmers. It should have been clear that those job descriptions were going to move down the pay scale.
Software experts whose talent is knowing just a few specific software products have a short career. Unless they're lucky enough to have picked one that has a long shelf life - and no one ever knows in advance.
Exactly. These are great times compared to the 1970s.
And even during the 70s I got tired of hearing people whining and complaining about how bad things were.
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