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Experts Say US Recession May be Over - 2002-02-27


The fast-growing U.S. economy entered its first recession, or period of negative growth, nearly one year ago. But this recession appears to be unusually shallow and experts believe it has probably already ended.

The National Association for Business Economics says America's longest-ever expansion has been followed by one of the shortest and shallowest recessions on record. Thirty-five NABE forecasters say the recession probably ended by last December.

NABE president Harvey Rosenblum, a vice-president at the Federal Reserve Bank in Dallas, believes economic growth resumed during the fourth quarter of 2001. Mr. Rosenblum said, "That quarter included October and November and December. And during October and November we still had pictures on the front pages of newspapers of airplanes crashing into buildings. We had real and imagined anthrax scares. We had anthrax being found in the mail of high-ranking officials and high level people in the media. Our post office was half shut down in the eyes of most people. People were afraid to go to the [shopping] mall. And if you can consider having positive growth during a quarter that included two months like that, I think that speaks volumes about the underlying resilience and strength of the U.S. economy."

Curiously to some, it is a private sector group and not the government that determines when the U.S. economy entered and emerged from recession. That six-member panel, the National Bureau for Economic Research, declared only last November that the recession had begun in March. The panel says it is not yet ready to say the recession is over.

Stephen East is the chief economist at Friedman Billings, a brokerage and investment-banking firm in suburban Washington. Mr. East said the recession has ended. "We have not heard from the NBER yet, as to when the recession ended, if indeed the NBER shares my view that it has ended. In my personal opinion," he said, "it probably ended in November or December."

If so, the 2001 recession will have been only six to eight months in duration, one of the shortest on record. The Commerce Department this week will issue its revised fourth quarter gross domestic product report. It is expected to show growth of about eight tenths of one percent in the October to December quarter.

Stephen East expects moderate two to three percent economic growth this year. "I'm looking for what I call a U-shaped recovery," he said. "There's a lot going positive for the economy, which briefly listed would be massive monetary stimulus - that is, 475 basis points [4.75 percent] in short-term rate reductions last year; fiscal stimulus as well as monetary stimulus - even though we didn't get a package with that label out of Capitol Hill, we still are going to have a significant increase in government spending this year; energy prices have fallen, and that's a positive for the economy; and I believe the inventory correction is probably beginning its final phase."

Mr. East says despite these positive developments, there are negatives that will restrain growth. These include a high level of corporate and personal debt, sluggishness in Europe and Japan and the possibility of another external shock, like the terrorist attacks of September 11.

The International Monetary Fund and several global forecasters expect less than one percent growth in the U.S. economy this year.

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