Recession Ended in November Of 2001
But Panel Still Sees Economy Slumping
By John M. Berry
Washington Post Staff Writer
Friday, July 18, 2003; Page E01
The U.S. economic recession that began in March 2001 ended eight months later in November, but the economy has not returned to good health, according to the accepted arbiters of when slumps begin and end.
"Indeed, the most recent data indicate that employment has not begun to recover at all," the Business Cycle Dating Committee of the National Bureau of Economic Research, said in a statement yesterday.
In determining that the economic decline ended in November 2001, "the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity," it said. "Rather, the committee determined only that the recession ended and a recovery began that month."
The committee concluded that the economy has been growing for the past 20 months and that any new downturn would be a separate recession.
The 2001 recession was slightly shorter than the average of the nine other U.S. downturns since World War II, and it was also among the mildest in terms of lost economic output. The 1990-91 recession also lasted for eight months.
The committee's conclusion about the most recent recession's end was in line with that of many other economists, who have noted that the broadest measure of economic activity, the gross domestic product figures produced by the Commerce Department, had shown the economy growing for the 18 months ended in March of this year.
"It is a great call," said Ken Mayland of ClearView Economics LLC in Cleveland. "It only comes about one year too late. Not one of my colleagues, for a long time, has seriously believed that the economy was still in recession. . . . This is something we needed to get behind us to ease trepidations about the recovery." ....
....The National Bureau of Economic Research committee defines a recession this way:
"A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in [inflation-adjusted] GDP, real income, employment, industrial productions and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle."
The committee historically has let considerable time pass before it determines the beginning and end of a slump to be sure that revised data would not change its conclusion. The group waited until late November 2001 to say that a recession had started the previous March. And it waited until December 1992 to decide the 1990-91 recession had ended in March 1991.
"The committee waited to make the determination of the trough date until it was confident that any future downturn in the economy would be considered a new recession and not a continuation of the recession that began in March 2001," the statement said.
This time, the key reason for the delay was the failure of the number of payroll jobs to rise even though the economy was growing, according to GDP figures. By November 2001, payroll employment had declined by almost 1.7 million, but since then it has dropped 938,000 more.
As of this April, the committee was sticking with its traditional position that it did not consider GDP changes in making its calls because it has always used monthly indicators, and the GDP was available only quarterly.
But in a June statement, which was updated only last week, the committee switched gears, saying that GDP was the best measure of whether the economy was growing. It also said it had begun to use a monthly GDP measure calculated by Macroeconomic Advisers LLC, a St. Louis forecasting firm.
Yesterday, the committee noted that in the first quarter of this year, inflation-adjusted GDP was 4 percent higher than it was at its low point in the third quarter of 2001 and 3.3 percent above its pre-recession peak in the fourth quarter of 2000. Two other important indicators, personal income, excluding transfer payments such as Social Security benefits, and the volume of manufacturing, wholesale and retail sales, adjusted for inflation, "have also surpassed their pre-recession peaks," the committee said.
The committee picked November as the low point for several reasons, it said. The official estimate of GDP grew strongly in the fourth quarter of 2001, and the monthly version moved upward moderately in November and significantly in December. At the same time, personal income, employment and industrial production were all substantially lower in October and November than in September.
On the other hand, September was ruled out because the committee has always avoiding using temporary losses associated with unusual events, such as the terrorist attacks of Sept. 11, 2001, in its dating decisions.
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