2002 job losses harm recovery, economists say

By Carlos Torres
Bloomberg News Service

WASHINGTON — The private group of economists that monitors the ups and downs of the U.S. economy is less inclined to say the recession that began in March 2001 is over because of the "significant" drop in employment in the last two months of 2002.

"Recent data confirm our earlier conclusion that additional time is needed to be confident about the interpretation of the movements of the economy last year and this year," the Business Cycle Dating Committee of the National Bureau of Economic Research said on its Web site.

The latest statement replaces one the committee first adopted in May and maintained through December. The group had said economic data signaled the recession that began in 2001 "may have come to an end." The six-member committee is the accepted arbiter of when recessions start and end.

The economy lost 101,000 jobs last month, the most since February, after losing 88,000 in November, recent Labor Department figures showed. That capped the first two years of back-to-back job losses since the 1950s.

"This kind of recovery is one that makes it extra hard for the committee to gauge the end of the cycle because they don't get a very clear message from the labor market as is traditionally the case" following a recession, said Edward McKelvey, a senior economist at Goldman Sachs Group Inc. in New York. "This is the kind of problem they are going to face in cycles to come."

The group tracks figures on payrolls, industrial production, sales adjusted for inflation, and incomes excluding transfer payments to help determine when the recession ended. It usually waits until these indicators breach their pre-recession peaks before calling an end to a contraction. It puts out a monthly update on its assessment of the economy.

Last year, employment had been "essentially constant until its significant decline in the past two months," the group said. Payrolls were 1.3 percent lower in December than the high reached at the start of the recession in March 2001.

Production figures are also below their previous peaks, while income and sales are higher than before the recession.

The committee maintained it would withhold judgment until it concludes "that a hypothetical subsequent downturn would be a separate recession, not a continuation of the past one."

In making that determination, "we would have to reconcile the conflicting behavior" of the four indicators it follows, the group said. In that regard it considers employment "the single most reliable indicator."

The group waited until December 1992 to determine that the economy had touched bottom in March 1991.

Growth probably slowed to a 1.4 percent annual rate in the final three months of 2002, down from 4 percent in the third quarter, according to the consensus estimate of economists surveyed this month by the Blue Chip Economic indicators.