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It's official: US has been in a recession all year
WASHINGTON — It's official. The U.S. economy has been in a recession for the past year.
The start of the downturn was announced Monday by the National Bureau of Economic Research.
The NBER _ a private, nonprofit research organization _ said its group of academic economists who determine business cycles met and decided that the U.S. recession began last December.
By one benchmark, a recession occurs whenever the gross domestic product, the total output of goods and services, declines for two consecutive quarters. The GDP turned negative in the July-September quarter of this year, and many economists believe it is falling in the current quarter at an even sharper rate.
But the NBER's dating committee uses broader and more precise measures, including employment data. In a news release, the group said its cycle dating committee held a telephone conference call on Friday and made the determination on when the recession began.
The White House commented on the news that a second downturn has officially begun on President George W. Bush's watch without ever actually using the word "recession," a term the president and his aides have repeatedly avoided. Instead, spokesman Tony Fratto remarked upon the fact that NBER "determines the start and end dates of business cycles."
"What's important is what is being done about it," Fratto said. "The most important things we can do for the economy right now are to return the financial and credit markets to normal, and to continue to make progress in housing, and that's where we'll continue to focus."
Many economists believe the current downturn will be the most severe since the 1981-82 recession. The country is being battered by the most severe financial crisis since the 1930s as banks struggle to deal with billions of dollars in loan losses.
The Bush administration won approval from Congress on Oct. 3 for a $700 billion rescue package for the financial system. Bush said in an interview with ABC's "World News" to be aired Monday that he would support additional intervention if necessary to end the recession.
"I'm sorry it's happening, of course," Bush said, referring to a global financial crisis that has eliminated millions of jobs and damaged retirement accounts.
Federal Reserve Chairman Ben Bernanke said Monday that further interest rate cuts were possible but he cautioned that there were limits to how much such action will be able to revive an economy expected to remain weak well into next year.
"Although further reductions ... are certainly feasible, at this point the scope for using conventional interest rate policies to support the economy is obviously limited," Bernanke said in a speech to business executives in Austin, Texas. The Fed is widely expected to cut a key interest rate when officials next meet on Dec. 15-16.
Treasury Secretary Henry Paulson said the Bush administration is looking for more ways to tap a $700 billion financial rescue program and will consult with Congress and the incoming administration of President-elect Barack Obama.
"While we are making progress, the journey ahead will continue to be a difficult one," Paulson said in a speech to business executives in Washington. "But I have confidence that we are pursuing the right strategy to stabilize the financial system and support the flow of credit into our economy."
In his remarks Monday, Paulson did not provide specifics on what type of programs the administration had under consideration other than to say that it was looking at ways to boost capital into financial institutions.
Asked about the NBER panel's decision that the U.S. fell into a recession in December 2007, Paulson said that he didn't think that decision was going to be "big news" to Americans who have been dealing with the slowdown for some time.
He said that a year ago, the administration could see that the economy was slowing significantly and that officials had moved very quickly to respond to the challenges. That was apparently a reference to the $168 billion economic stimulus plan that Paulson helped push through Congress last February.
Two new reports provided a grim snapshot of how steep the economic slump is becoming. The Commerce Department reported Monday that construction spending fell by a larger-than-expected 1.2 percent in October, while the Institute for Supply Management said its gauge of manufacturing activity dropped to a 26-year low in November.
The GDP contracted by 0.2 percent at an annual rate in the fourth quarter of 2007, but that that drop was followed growth in the first two quarters of this year, partially boosted by the distribution of millions of economic stimulus payments.
But employment, one of the measurements tracked by the NBER, has been falling since January.
The NBER decision means that the economic expansion lasted from November 2001 until December 2007. Economic expansions peak and recessions begin in the same month, according to the NBER's dating methods. Founded in 1920, the NBER has more than 1,000 university professors and researchers who act as bureau associates, studying how the economy works.
The decision on the recession means that during the eight years that Bush has been in office, the country has seen two recessions. The first lasted from March 2001 until November that year.
The current recession, which will be a year old this month, has already lasted longer than the 10-month average for recessions in the post World War II period. Two downturns, the 1973-75 slump and the 1981-82 recession, both lasted for 16 months, the longest stretch during the post-war period.
Both the 2001 recession and the 1991-92 recession lasted eight months.
The last expansion, from November 2001 to December 2007, lasted six years and one month. The longest expansion in U.S. history was the 10 years of uninterrupted growth from March 1991 till March 2001.
Among the monthly statistics the NBER uses are payroll employment, which peaked in December of last year and has been falling every month since then. Other figures it uses include GDP, industrial production, personal incomes and wholesale and retail trade.
The chair of the NBER dating panel is James Poterba, an economist at the Massachusetts Institute of Technology and the president of the NBER. NBER officials said there was no reason that the Friday after Thanksgiving was chosen for the committee to hold its conference call other than that was one day when all panel members were available.
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MARTIN CRUTSINGER | December 1, 2008 06:41 PM EST |
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