You can relax now. The recession is over. You see, the economists at the National Bureau of Economic Research, an independent group that tracks the business cycle, looked carefully at the numbers and decided that the recession that began in March 2001 ended just eight months later.
Those economists pay a lot of attention to something you don't: The Gross Domestic Product. The GDP is essentially the value of all the goods and services in the American economy. Basically, a recession officially starts whenthe GDP drops for two quarters in a row; and ends when the GDP picks up again, as it did 20 months ago.
Maybe you don't know about this because you live in a world where people get paychecks and have to pay bills. And this everyday world still looks pretty bad. Just last month, even more jobs disappeared -- tens of thousands of them. And even if you have a job, your wages are still going nowhere, and your benefits are vanishing.
But, hey, the official recession has been over for almost two years, so you have nothing to complain about. ... Or maybe you do, and the way recessions aremeasured ought to be dumped.
I don't mean this as a criticism of the economists at the National Bureau of Economic Research, who do their work carefully and competently. It's just that the GDP may be losing its relevance. After all, the GDP grows when people with jobs produce more than they did before. But these productivity gains don't meanmuch when they're coming from companies laying off employees.
After the last recession of 1990-91 officially ended, it took only 12 months for employers to start hiring again. This time, we're 20 months out and employers are still handing out pink slips. The fact is, today's economy is very different from the one after the last recession. These days, companies areunder more pressure to cut costs. Fewer employees are unionized. A smaller portion of the workforce is in manufacturing. And high-speed digital connections have made it far easier to outsource even white-collar jobs to places like India and the Philippines. (Just recently it was reported that two senior IBM officials told their corporate colleagues around the world that IBM has to accelerate its move of white-collar jobs overseas, including software design.)
In other words, these days a rise in the GDP doesn't translate nearly as well into an increase in jobs.
So here's my proposal: Measure recessions according to jobs. A recession beginswhen the number of jobs in the economy drops for two straight quarters. And it ends when jobs increase two quarters in a row. By my definition, the recession that began in 2001 was still going strong in the first half of 2003. And, unfortunately, it will probably continue for at least another years -- whateverhappens to the GDP.
