Report: Recession Actually Started In December 2007

The National Bureau of Economic Research said the U.S. economy has been in a recession since December 2007. The NBER, a private, nonprofit research organization, said its group of academic economists who determine business cycles met and decided that the U.S. recession actually began last December, Reuters said.

The NBER’s committee sais they used broader and more precise measures of what a recession is, including employment data. Many economists believe the current downturn will be the most severe since the 1981-82 recession.

Federal Reserve Chairman Ben Bernanke said that further interest rate cuts were possible, but he cautioned that there were limits to how much such action will be able to revive an economy expected to remain weak well into next year. Treasury Secretary Henry Paulson said the Bush administration is looking for more ways to tap a $700 billion financial rescue program and will consult with Congress and the incoming administration of President-elect Barack Obama.

Asked about the NBER panel's decision that the U.S. fell into a recession in December 2007, Paulson said that he didn't think that decision was going to be "big news" to Americans who have been dealing with the slowdown for some time.

The GDP contracted by 0.2% at an annual rate in the fourth quarter of 2007, but that drop was followed growth in the first two quarters of this year, partially boosted by the distribution of millions of economic stimulus payments. However, employment, one of the measurements tracked by the NBER, has been falling since January.

The NBER decision means that the economic expansion lasted from November 2001 until December 2007. Economic expansions peak and recessions begin in the same month, according to the NBER's dating methods. Founded in 1920, the NBER has more than 1,000 university professors and researchers who act as bureau associates, studying how the economy works. ❖