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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Jim Willie CB who wrote (44441)	11/26/2001 8:47:14 PM
From: stockman_scott	Respond to of 65232

Happy Days Are Here Again Monday November 26, 5:30 pm Eastern Time By Paul Maidment Forbes.com Here's a ray of cheer: The previous time the panel of private economists officially tasked with calling U.S. recessions did so, in 1992, it later turned out that the recession was already over. So today's announcement by the six respected academic economists who constitute the National Bureau of Economic Research's Business Cycle Dating Committee, that the U.S. economy went into recession in March 2001, ending a record ten-year-long expansion, should mean recovery--if not already here--is but months away. The U.S. has undergone ten recessions since World War II, including this one, by the committee's count. Only two lasted longer than a year, both 16 months. The average was 11 months. The shortest was six months. "Based on past experience, we expect the turnaround to begin anytime from now until July," Ben Bernanke, an economics professor at Princeton University and one of the six, told reporters. He and his colleagues do not measure recessions by the classic definition, which is contraction in inflation-adjusted gross domestic product (GDP) in consecutive quarters. Instead they look at the peaks and troughs of the business cycle. "A peak marks the end of an expansion and the beginning of a recession," they say. Judging the peak is a black art. The six primarily divine it from four monthly broad measures of economic activity: industrial production, employment, real income and wholesale-retail trade. "The committee gives relatively little weight to real GDP because it is only measured quarterly and is subject to continuing, large revisions," it says. To the point, the U.S. government is due to report on Dec. 30 its revised GDP estimate for the third quarter (July to October). Analysts expect the announced -0.4% to become -1.0%. Those same analysts expect the fourth-quarter number will show the economy to have shrunk by 1.5% to 1.8% between October and December. That would be a recession, by any definition, but we won't know for sure until next year. The reason the six economists have waited until now to make the official call of a recession they believe started in March is that they wanted to be sure a peak had occurred. Before the Sept. 11 terrorist attacks, the data were ambiguous. Until then, industrial production was down from its peak in October 2000 by a well-above-recessionary-average 6%. None would gainsay that manufacturing industry has been in recession since last year. Business sales had clearly reached a peak at about the same time, though they had not fallen as precipitously as industrial production; the service sector continued to expand faster than manufacturing shrank. Real personal income continued to rise and employment, which the six reckon to be the broadest measure of economic activity, though it had appeared to have stopped rising in March 2000, was not falling anything like as sharply as a recession would suggest it should. That changed with October's monthly job numbers, the first set to reflect the attacks of Sept 11. Employment tumbled to nearly 1% below March's level, exactly where it should have been seven months into a recession, on the six's reckoning. That tipped the balance in their minds. "Before the attacks, it is possible that the decline in the economy would have been too mild to qualify as a recession,'' they say. "The attacks clearly deepened the contraction and may have been an important factor in turning the episode into a recession." The aspect of the economy that leaves many wondering if this really feels like a recession is the continued rise in real personal income, despite rising unemployment. The six explain that away as household purchasing power being sustained by rapid increases in productivity and falling import prices, especially of oil. They also note that real personal income has not fallen in five of the past nine recessions. Whatever the economists say, U.S. equity investors already gather they can see green shoots of recovery pushing through the asphalt of busy mall parking lots. Since the post-attack lows of Sept. 21, the Nasdaq has risen by more than 36%, the S&P 500 by almost 20% and the Dow by 21%--to just a hurrah short of the 10,000 mark.