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US in recession since December 2007: official panel
WASHINGTON
Petroleumworld.com, December 02, 2008A US recession began in December 2007, a panel of economists charged with the official designation of business cycles said Monday.
The Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) said it made the determination during a conference call on Friday.
Although a recession is generally defined as two consecutive quarters of declining activity, the panel has its own criteria for determining a downturn.
"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income and other indicators," the panel said.
"A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion."
The committee said it "identified December 2007 as the peak month, after determining that the subsequent decline in economic activity was large enough to qualify as a recession."
"The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months," said NBER, a private economic group accepted as the official arbiter of business cycles.
According to official government data, the US economy contracted at a 0.2 percent pace in the fourth quarter of 2007 but grew 0.8 percent in the first quarter and 2.8 percent in the second quarter of 2008. It then contracted 0.5 percent in the third quarter, based on a provisional estimate.
But the gross domestic product (GDP) data may have been skewed by tax rebates that stimulated consumer spending, according to analysts.
The NBER said "we do not identify economic activity solely with real GDP, but use a range of indicators" in determining the onset of recession. It said over the past year there have been unusually wide discrepancies between income and output.
A major factor in determining recession is employment, which has been declining since last December, the panel said. Other factors include monthly data on income, manufacturing and retail sales.
The NBER makes no forecast on how long a recession will last, but said that in the past they have run from six to 18 months. The panel said it has no definition of the term "depression."
The White House acknowledged the NBER conclusion and said it has been working to foster recovery.
"NBER determines the start and end dates of business cycles, and they've done that," White House spokesman Tony Fratto said.
"But what's important is what is being done about it. 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."
The NBER is a nonprofit organization of economists from research firms, universities and other organizations.
The news came as little surprise to analysts, many of whom have been saying a recession was on the way if it had not already begun.
"So far in 2008, employers have slashed 1.2 million jobs, and the bad news is expected to continue when we get employment data for November this Friday," said Michael Fowlkes, analyst at Investor's Observer.
"Recession fears have now become a reality, and the questions that remain are just how bad and for how long this recession will linger over us."
Augustine Faucher at Moody's Economy.com said his firm expects the downturn to last through the first half of 2009 and to be "the worst of the post-World War II era."
"Even with a substantial stimulus package, unemployment is likely to peak close to 9.0 percent in early 2010," he said.
"However, this downturn is unlikely to be more severe than the combined impact of the 'double dip' recessions of the early 1980s."
Meanwhile, the recession was being felt on the state and local level across the United States as well: California on Monday declared a "fiscal emergency" and called a special session of the state legislature to deal with the crisis created by an 11.2 billion dollar revenue shortfall.
Story by Rob Lever from AFP
AFP 02 0027 GMT 12 08
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