The National Bureau of Economic Research (NBER) said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy. The NBER is a private group of leading economists charged with dating the start and end of economic downturns. It typically takes a long time after the start of a recession to declare its start because of the need to look at final readings of various economic measures. The NBER said that the deterioration in the labor market throughout 2008 was one key reason why it decided to state that the recession began last year.
The recession announcement came on a day when the American stock market fell nearly 9 percent in a single session. The Dow Jones industrial average dropped 679.95 points (the fourth worst drop in history) or 7.7 percent. There have only been three days in market history with bigger point losses for the Dow - the Monday after the Sept. 11 attacks, and Sept. 29 and Oct. 15 of this year. Investors have long assumed that the country was in recession, and analysts said that after last week’s gains, including the biggest five-day rally in decades, a sell-off was to be expected.
Still, Monday’s losses were striking, and they reminded investors that nothing can be predicted in today’s environment. The major indexes fell by hundreds of points from the start, led by huge declines in shares of financial firms. Citigroup, Merrill Lynch and Morgan Stanley shares all dropped nearly 20 percent. Most other major Wall Street banks were also in double-digit percentage declines. The broader Standard & Poor’s 500-stock index was down 8.9 percent, and the Nasdaq fell 8.95 percent. The S.&P. and the Dow are back to their levels of last Monday, erasing nearly four days of gains. Crude oil futures for January delivery settled Monday at $49.34 barrel, down $5.09. in New York trading.
The country entered a recession exactly one year ago, at least according to the Business Cycle Dating Committee, which is made up of seven prominent economists, most from the academic sector. The group made their official announcement on Monday that the economy entered a recession in December 2007.
“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 members said in a statement. “A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”
This is the first official recession since 2001, when the economy suffered after the bursting of the technology bubble. The period of expansion lasted 73 months, from November 2001 to December 2007. The manufacturing industry suffered its worst month since 1982, according to a closely watched index published by the private Institution for Supply Management. The index fell to 36.2 in November from 38.9 in October, on a scale where readings below 50 indicate contraction. That was the worst monthly reading since 1982, and a sign that the worldwide credit crisis was taking a serious toll on American businesses. New orders fell sharply, although export orders held steady from October.
plez sez: i didn't need the NBER to tell me that the US is in a recession... i can look at my bank account and whimpering 401(k) to tell me that!
but to hear that we've been wallowing in a recession for over a year before they "announced" it pure bull! based on some past recessions that lasted less than 11 months, we would already be in the recovery phase. but i get the strange feeling that this one is going to cut alittle deeper and last longer than 11 months. there have been no reduction in the number of monthly job losses, the credit crunch hasn't eased, homes are still going into foreclosure, crude oil prices (along with the dow average) are crashing... and the wall street bailout hasn't trickled down to main street, yet.
Read the New York Times article about the dow being down on recession news.
Read the Forbes article about the big dow drop on monday.
Read the CNN Money article about how the dow plunged 680 points.
Read the CNN Money article about the recession news.