Posted on: Friday, February 22, 2002

Upbeat readings show recession may be over

By Martin Crutsinger
Associated Press

WASHINGTON — The recession is shaping up as one of the shortest and mildest on record. In fact, it may already be over, private economists said yesterday, basing their assessments on an array of upbeat reports.

The Conference Board reported that its Index of Leading Economic Indicators, a gauge of future activity, rose 0.6 percent in January, its fourth consecutive increase.

"The strong signal from the indicators is that the recession is ending and that the recovery could be more vigorous than earlier anticipated," said Ken Goldstein, a senior economist with the New York-based industry group that issues the index.

Another report yesterday showed that last year's slowdown may not have been as severe as first believed. The Commerce Department reported that the U.S. trade deficit narrowed by 11.4 percent in December to $25.3 billion, its best showing since September.

This unexpectedly large improvement sent economists scurrying to upwardly revise their estimates for overall economic activity in the fourth quarter. Many said the gross domestic product may have risen by 1 percent in the October-December quarter, because of the stronger trade showing, instead of the originally reported 0.2 percent increase.

Kevin Hassett, an American Enterprise Institute, economist, said the statistics will show the recession actually ended in November.

The National Bureau of Economic Research, the official arbiter of when recessions begin and end, has said the downturn began in March, ending a record 10-year stretch of prosperity. The bureau is not expected to issue a ruling on the end of the downturn for several more months.

If current indications hold up and the third quarter, when the GDP fell at a 1.3 percent rate, is the only negative period, the drop in economic output during the recession will be a small 0.3 percent, making this the mildest recession in U.S. history. That record has been held by the 1969-70 recession, which also ended a long expansion, when GDP fell by 0.6 percent.

The National Association for Business Economics said yesterday that 60 percent of the economists on its forecasting panel believe that the recession is already over. Only two of the 37 forecasters said they believe that the downturn will linger into the spring.

"America's longest recession in history has been followed by one of the shortest, shallowest recessions on record," said association president Harvey Rosenblum, director of economic research at the Dallas Federal Reserve bank.

The newest forecast by the National Bureau of Economic Research put economic growth at 1.5 percent for this year and an even stronger 3.8 percent in 2003.

David Wyss, chief economist at Standard & Poor's in New York, said the worry now is not whether the recession is ending but how strong the recovery will be. He said the early part of the recovery may be a jobless recovery like the early months of the last upturn during the former Bush administration.