The economy fell into recession late last year, according to a panel of economists that is responsible for determining the dates of business cycles.
Monday's declaration by the panel of the National Bureau of Economic Research confirms what many private economists, lawmakers and members of the general public already have assumed and puts an official date on it: A U.S. recession began in December 2007.
That was the same month employment peaked, and the economy began shrinking in a downturn that has been exacerbated by the financial crisis that took hold of markets beginning in September.
The White House commented on the news without ever actually using the word “recession,” a term President George W. Bush and his aides have repeatedly avoided.
Instead, spokesman Tony Fratto remarked upon the fact that the NBER “determines the start and end dates of business cycles.”
“What’s important is what is being done about it,” Fratto said. “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.”
The NBER's seven-member Business Cycle Dating Committee met Friday and determined that economic activity peaked last December and has essentially been declining since then.
Payroll employment peaked that month and has declined every month since then, with the economy shedding some 1.2 million jobs, the committee noted in a statement on the NBER Web site.
Two new reports on the economy provided a grim snapshot of how steep the slump is becoming. The Commerce Department reported Monday that construction spending fell by a larger-than-expected 1.2 percent in October, while the Institute for Supply Management said its gauge of manufacturing activity dropped to a 26-year low in November.
Federal Reserve Chairman Ben Bernanke said Monday 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.
“Although further reductions ... are certainly feasible, at this point the scope for using conventional interest rate policies to support the economy is obviously limited,” Bernanke said in a speech to business executives in Austin, Texas. The Fed is widely expected to cut a key interest rate when officials next meet Dec. 15-16.
The committee's determination puts an end to an expansion that began in late 2001 and latest 73 months. The previous expansion in the 1990s lasted 10 years, or 120 months.
A common definition of a recession is a period when the nation's gross domestic product shrinks for two consecutive quarters, but the committee noted that GDP figures have been erratic this time around. GDP fell in the final quarter of 2007 but then rose in the first half of 2008 before falling again in the third quarter of this year.
Nevertheless the committee found that other key figures — including personal income, industrial production and wholesale sales -- all peaked between November 2007 and June 2008.
The committee defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income and other indicators."
The decision on the recession means that during the eight years that Bush has been in office, the country has seen two recessions. The first downturn lasted from March 2001 until November of that year.