U.S. recession began in March after 10 years of growth
AP Economics WriterWASHINGTON (AP) -- It's official. The National Bureau of Economic Research announced Monday that the United States entered a recession in March, the month in which the longest expansion in U.S. history celebrated its 10th anniversary.
The committee, composed of academic economists from Harvard, Stanford and other prestigious universities, posted its decision on its Web site.
It ruled that the long expansion ended in March and the nation's 10th recession since the end of World War II began at the same time.
The declaration means the longest expansion lasted exactly 120 months; the previous record for uninterrupted economic growth was set in the 1960s.
At the White House, the Bush administration said the latest news was further evidence of the need for Congress to pass an economic stimulus plan.
"The president has been worried about the strength of the economy for a long period of time," White House spokesman Ari Fleischer said. "If today's report indicates from an economic or statistical point of view that we're in a recession, that makes it even more important for the Senate to take action.
"There is no need to further any recession," Fleischer said. "The Senate needs to act so that the economy can recover. Failure to act in the Senate risks prolonging a recession."
The NBER panel is composed of six economists including Martin Feldstein, who served as chairman of former President Reagan's Council of Economic Advisers.
"The NBER's Business Cycle Dating Committee has determined that a peak in business activity occurred in the U.S. economy in March 2001," the panel said in its announcement. "A peak marks the end of an expansion and the beginning of a recession."
The country's last recession begin in July 1990 and lasted until March 1991. But he NBER did not officially declare the downturn over until December 1992.
Democrat Bill Clinton used the economy's troubles as a major weapon in his successful campaign to unseat the fist President Bush in 1992.
The dating committee's determination that the current recession began in March means it has picked a quarter in which the gross domestic product was still expanding.
The GDP did shrink at an annual rate of 0.4 percent in the July-September quarter, according to an initial government estimate made last month. That figure will be updated Friday and many economists predict it will be revised to show an even sharper drop in activity of around 1 percent at an annual rate.
Many analysts say the economy is shrinking at a rate of 1.5 percent in the current October-December quarter and will also post negative activity in the first quarter of next year. By one traditional definition, a recession is defined as at least two consecutive quarters of declining GDP.
However, the academic committee bases its determination not on the GDP but on a more narrow set of monthly economic indicators covering such factors as employment, industrial production, real personal income and sales.
"The bureau waits until the data show whether or not a decline is large enough to qualify as a recession before declaring a turning point in the economy is a true peak marking the onset of a recession," the committee explained in its statement.
"The committee is satisfied that the total contraction in the economy is sufficient to merit the determination that a recession is under way," the panel said.
The group noted that through October, the decline in employment had been similar to the average job losses that had occurred at the onset of the past six recessions.
Many private economists believe the current downturn will be mild and will be over by early next year. The most optimistic forecasters are predicting a rebound in the first quarter of 2002 while the more pessimistic analysts are saying the rebound will not occur until in the late spring or early summer.