Recession in U.S. Started in December 2007, NBER Says (Update2)
By Timothy R. Homan and Steve Matthews
bloomberg.com
Dec. 1 (Bloomberg) -- The U.S. economy entered a recession a year ago this month, the panel that dates American business expansions said today.
The declaration was made by the cycle-dating committee of the National Bureau of Economic Research, a private, nonprofit group of economists based in Cambridge, Massachusetts. The last time the U.S. was in a recession was from March through November 2001, according to NBER.
“The committee determined that the decline in economic activity in 2008 met the standard for a recession,” the group said in a statement on its Web site. The 1.2 million drop in payroll employment so far this year was the biggest factor in determining that start of the contraction, the group said.
Federal Reserve policy makers at their last meeting predicted the economy will contract through the middle of 2009, in line with private economists’ forecasts. If correct, the recession would be the longest since the Great Depression.
“It is clearly not going to end in a few months,” Jeffrey Frankel, a member of the group and a professor at Harvard University, said in an interview. “We would be lucky to get done with it in the middle of next year.”
The contraction would be the second under President George W. Bush’s watch, making him the first U.S. leader since Richard Nixon to preside over two recessions.
White House Comment
“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,” White House Deputy Press Secretary Tony Fratto, said in an e-mailed statement. “Addressing these areas will do the most right now to return the economy to growth and job creation.”
U.S. employers cut 240,000 jobs in October, a 10th consecutive decline in payrolls. The unemployment rate rose to 6.5 percent, the highest level since 1994, according to Labor Department statistics.
Employment probably fell by 325,000 workers last month, the most since the last recession, according to the median forecast of economists surveyed by Bloomberg News ahead of a Labor Department’s report due Dec. 5. The jobless rate is projected to increase to 6.8 percent.
Recession Definition
The 73-month expansion that ended in December 2007 was well short of the previous record 10-year cycle. At 12 months, the current contraction already exceeds the average of 10 months in the postwar era and would be the longest since the 1981-82 slump that covered 16 months, casting doubt on economists’ view that that the business cycle was moderating in recent decades.
“Everyone had thought long, deep recessions were a thing of the past,” Frankel said. “There was a lot of talk of the new economy.”
Although a recession is conventionally defined as two quarters of successive contraction in gross domestic product, the private committee doesn’t require supporting GDP data to make a recession call. Its members focus on month-to-month changes in the economy.
The NBER committee defines a recession as a “significant” decrease in activity over a sustained period of time. The decline would be visible in gross domestic product, payrolls, industrial production, sales and incomes.
The U.S. economy shrank at a 0.5 percent pace in the third quarter after expanding 2.8 percent in the previous three months. Economists at Goldman Sachs Group Inc. and Morgan Stanley in New York are among those projecting the economy will contract at a 5 percent pace this quarter.
Members of the committee are Frankel; Stanford University professor Robert Hall; Martin Feldstein of Harvard University; Northwestern University economics professor Robert Gordon; NBER president James Poterba; David Romer of the University of California at Berkeley; and Conference Board economist Victor Zarnowitz.
To contact the reporters on this story: Timothy R. Homan in Washington at thoman1@bloomberg.netSteve Matthews in Atlanta at smatthews@bloomberg.net
Last Updated: December 1, 2008 13:39 EST |
