Academics - Recession ended November 2001
Friday, July 18, 2003
WASHINGTON -- The 2001 recession, the country's first downturn in a decade, officially ended in November of that year, only eight months after it had begun, an academic group declared Thursday.
The decision was made by the National Bureau of Economic Research, a group of academic economists which is the recognized arbiter of when recessions begin and end in the United States.
The announcement came after a meeting of the NBER's Business Cycle Dating Committee, which has struggled for months to reconcile the fact that while the U.S. economy resumed growth in late 2001, as measured by the gross domestic product, unemployment has continued to rise.
While the determination of the official ending date for the recession is of interest to economic historians, it is likely to bring little comfort to the nation's unemployed, who have seen their ranks swell in recent months.
The unemployment rate hit a nine-year high of 6.4 percent in June, bringing more charges from Democrats that President Bush is mishandling the economy.
The timing of Thursday's announcement raised some eyebrows among economists, coming as it did during a period when the unemployment rate is rising rapidly. However, Stanford University economist Robert Hall, who is chairman of the NBER's cycle dating committee, told reporters in a conference call that political considerations played no role in the timing of the committee decision.
In a statement, the NBER cycle dating committee stressed that its announcement of when the downturn ended did not mean that the economy's hard times ended at that point.
"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 panel said in a statement.
The panel said that it was determining only that in November 2001, the recession -- which it defines as a period of falling economic activity spread across the economy -- came to an end and the economy began growing again.
After contracting for the first three quarters of 2001, the GDP, the country's total output of goods and services, began growing again in the fourth quarter of 2001 and has been rising ever since, although in a zig-zag pattern that has not been strong enough to keep unemployment from rising further.
The so-called jobless recovery surpasses in duration a similar jobless recovery that Bush's father had to endure in the months after the recession of that period had ended in March of 1991.
The NBER did not decide to declare the 1990-91 recession over until December of 1992, after Bush's father had lost his re-election bid to Bill Clinton, who had made the economy's poor performance the centerpiece of his campaign attacks on the Republicans.
The 1990-91 recession also lasted eight months, coming to an end in March 1991, when a 10-year economic expansion, the longest in U.S. history, began. That expansion ended in March 2001 and the recession began the same month. Under the system the NBER uses, the month that various economic indicators reach a peak is picked as the month the expansion ended and a recession began.
The NBER has pinpointed the beginning and ending dates of recessions in the United States going back to 1854. There have been 31 downturns during that period, lasting an average of 18 months. Since the end of World War II, recessions have grown shorter and periods of expansions have become longer.
While an often-used definition of a recession is two consecutive quarters of falling GDP, the NBER uses a more complex formulation that looks at a variety of monthly statistics to determine when recessions begin and end.
In the past, it has not used the GDP for its purposes of determining the beginning and ending points for recessions because that statistic from the Commerce Department is compiled on a quarterly basis.
However, because of the unusual nature of this downturn, where growth resumed so far ahead of an improvement in the unemployment rate, the committee decided to also look at GDP as well as its other four indicators -- employment, real income, industrial production and wholesale-retail sales.
The NBER in its statement said that it had also waited to call an end to the 2001 recession because it wanted to be sure that any future downturn would be a separate event and not just a continuation of the 2001 slump.
"The main reason that the committee's decision in this episode was particularly difficult was the divergent behavior of employment," the NBER said. "The committee felt that it was important to wait until real GDP was substantially above its pre-recession peak before determining that a trough had occurred."