The end of the recession
The latest U.S. recession, which began in March 2001, ended in November of the same year, according to the National Bureau of Economic Research (NBER), a private economic research organization that is considered to be the official arbiter of the business cycle. The NBER made its decision despite the fact that two of its key statistics — nonfarm employment and industrial production — continued to deteriorate during the 19 months since the recession ended.
In determining that the latest recession was among the shortest and most shallow (in terms of lost economic output) since World War II, the NBER chose to emphasize other relevant data, such as the growth of inflation-adjusted (real) gross domestic product (GDP), which represents the total economic output of goods and services. Fair enough. But unless the economy's growth rate rapidly accelerates, reaching the implied July-December annual growth rates of 3.8 percent (the Federal Reserve) or 4 percent (the White House Office of Management and Budget), then it is clear that neither the labor market nor industrial output will show any significant improvement.
While "real GDP has risen substantially since November 2001," the NBER noted that "this growth in real GDP has resulted entirely from productivity growth. As a result, the growth in real GDP has been accompanied by falling employment." Thus, the NBER emphasized that it "did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity." No kidding.
Indeed, the depth of the labor market's deterioration is striking. Revised Department of Labor data reveal that since the recession began in March 2001, nonfarm payrolls have declined by more than 2.5 million jobs through last month. During the 19 months since the economy began to expand in November 2001, nonfarm jobs have declined by 938,000. Meanwhile, the unemployment rate, which stood at 4.2 percent when the recession began in March 2001, has increased from 5.6 percent in November 2001 (when the recession ended) to 6.4 percent in June.
The economic expansion following the eight-month recession that occurred between July 1990 and March 1991 was widely described as "a jobless recovery." Compared to the recent expansion, however, the labor market during the previous recovery was relatively robust.
Industrial production, which includes the output of the nation's manufacturing, mining and utility industries, remains well below its pre-recession peak. It is less than 1 percent above its level at the trough of the recession 19 months ago. Moreover, industrial output actually declined at an annual rate of 3.2 percent during this year's second quarter, when the total industry capacity utilization rate fell below 75 percent for the first time in 20 years.
In order to reverse the unacceptable trends in unemployment and industrial output, it is essential for the growth rate of the economy to accelerate. That is why the aggressively expansionary fiscal and monetary policies are so appropriate |
