Experts: U.S. has been in a recession since Dec. 07

(AP) - It's official. The U.S. economy has been in arecession for the past year. The start of the downturn was announced Monday by the NationalBureau of Economic Research. The NBER - a private, nonprofit

News 12 Staff

Dec 2, 2008, 4:59 AM

Updated 5,709 days ago

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(AP) - It's official. The U.S. economy has been in arecession for the past year.
The start of the downturn was announced Monday by the NationalBureau of Economic Research.
The NBER - a private, nonprofit research organization - said itsgroup of academic economists who determine business cycles met anddecided that the U.S. recession began last December.
By one benchmark, a recession occurs whenever the gross domesticproduct, the total output of goods and services, declines for twoconsecutive quarters. The GDP turned negative in the July-Septemberquarter of this year, and many economists believe it is falling inthe current quarter at an even sharper rate.
But the NBER's dating committee uses broader and more precisemeasures, including employment data. In a news release, the groupsaid its cycle dating committee held a telephone conference call onFriday and made the determination on when the recession began.
The White House commented on the news that a second downturn hasofficially begun on President George W. Bush's watch without everactually using the word "recession," a term the president and hisaides have repeatedly avoided. Instead, spokesman Tony Frattoremarked upon the fact that NBER "determines the start and enddates of business cycles."
"What's important is what is being done about it," Frattosaid. "The most important things we can do for the economy rightnow are to return the financial and credit markets to normal, andto continue to make progress in housing, and that's where we'llcontinue to focus."
Many economists believe the current downturn will be the mostsevere since the 1981-82 recession. The country is being batteredby the most severe financial crisis since the 1930s as banksstruggle to deal with billions of dollars in loan losses.
The Bush administration won approval from Congress on Oct. 3 fora $700 billion rescue package for the financial system. Bush saidin an interview with ABC's "World News" to be aired Monday thathe would support additional intervention if necessary to end therecession.
"I'm sorry it's happening, of course," Bush said, referring toa global financial crisis that has eliminated millions of jobs anddamaged retirement accounts.
Federal Reserve Chairman Ben Bernanke said Monday that furtherinterest rate cuts were possible but he cautioned that there werelimits to how much such action will be able to revive an economyexpected to remain weak well into next year.
"Although further reductions ... are certainly feasible, atthis point the scope for using conventional interest rate policiesto support the economy is obviously limited," Bernanke said in aspeech to business executives in Austin, Texas. The Fed is widelyexpected to cut a key interest rate when officials next meet onDec. 15-16.
Treasury Secretary Henry Paulson said the Bush administration islooking for more ways to tap a $700 billion financial rescueprogram and will consult with Congress and the incomingadministration of President-elect Barack Obama.
"While we are making progress, the journey ahead will continueto be a difficult one," Paulson said in a speech to businessexecutives in Washington. "But I have confidence that we arepursuing the right strategy to stabilize the financial system andsupport the flow of credit into our economy."
In his remarks Monday, Paulson did not provide specifics on whattype of programs the administration had under consideration otherthan to say that it was looking at ways to boost capital intofinancial institutions.
Asked about the NBER panel's decision that the U.S. fell into arecession in December 2007, Paulson said that he didn't think thatdecision was going to be "big news" to Americans who have beendealing with the slowdown for some time.
He said that a year ago, the administration could see that theeconomy was slowing significantly and that officials had moved veryquickly to respond to the challenges. That was apparently areference to the $168 billion economic stimulus plan that Paulsonhelped push through Congress last February.
Two new reports provided a grim snapshot of how steep theeconomic slump is becoming. The Commerce Department reported Mondaythat construction spending fell by a larger-than-expected 1.2percent in October, while the Institute for Supply Management saidits gauge of manufacturing activity dropped to a 26-year low inNovember.
The GDP contracted by 0.2 percent at an annual rate in thefourth quarter of 2007, but that that drop was followed growth inthe first two quarters of this year, partially boosted by thedistribution of millions of economic stimulus payments.
But employment, one of the measurements tracked by the NBER, hasbeen falling since January.
The NBER decision means that the economic expansion lasted fromNovember 2001 until December 2007. Economic expansions peak andrecessions begin in the same month, according to the NBER's datingmethods. Founded in 1920, the NBER has more than 1,000 universityprofessors and researchers who act as bureau associates, studyinghow the economy works.
The decision on the recession means that during the eight yearsthat 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, hasalready lasted longer than the 10-month average for recessions inthe post World War II period. Two downturns, the 1973-75 slump andthe 1981-82 recession, both lasted for 16 months, the longeststretch during the post-war period.
Both the 2001 recession and the 1991-92 recession lasted eightmonths.
The last expansion, from November 2001 to December 2007, lastedsix years and one month. The longest expansion in U.S. history wasthe 10 years of uninterrupted growth from March 1991 till March2001.
Among the monthly statistics the NBER uses are payrollemployment, which peaked in December of last year and has beenfalling every month since then. Other figures it uses include GDP,industrial production, personal incomes and wholesale and retailtrade.
The chair of the NBER dating panel is James Poterba, aneconomist at the Massachusetts Institute of Technology and thepresident of the NBER. NBER officials said there was no reason thatthe Friday after Thanksgiving was chosen for the committee to holdits conference call other than that was one day when all panelmembers were available.


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