THE US economy slipped into recession in December 2007, the country's business cycle arbiter declared yesterday, and the downturn could be the worst since the second World War.
The National Bureau of Economic Research said its business cycle dating committee members met by conference call last Friday and concluded that the economic expansion that started in November 2001 had ended.
The previous period of economic expansion, which ended in 2001, lasted 10 years.
The current recession, which many economists expect to persist through the middle of next year, is already the third-longest since the Great Depression, behind only the 16-month slumps of the mid-1970s and early 1980s.
"I think that we've got a ways to go, that this is going to be probably a deep and long recession," Jeffrey Frankel, a Harvard University economist who sits on the audit committee, told CNBC. "It could be the worst postwar recession. We don't know yet."
The national bureau does not define a recession as two consecutive quarters of decline in real gross domestic product, as is the rule of thumb in many countries.
Instead it looks for a decline in economic activity, spread across the economy and lasting more than a few months.
The current downturn was particularly tricky to define because gross domestic product remained positive in the first half of 2008.
The bureau said its committee looked at payrolls, which peaked in December 2007 and declined in every month since then, as well as real GDP and other data.
"The committee determined that the decline in economic activity in 2008 met the standard for a recession," the bureau said in a statement. "All evidence other than the ambiguous movements of the quarterly product-side measure of domestic production confirmed that conclusion."
The White House acknowledged the declaration, but said that did not change its course on coping with the financial crisis that has raged since August 2007.
"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," White House spokesman Tony Fratto said.
President Bush is the first US president since Richard Nixon to preside over two recessions. Several key Democratic lawmakers said the bureau's pronouncement underscored the urgent need for another dose of government spending to kick-start the economy.
- (Reuters)
