U.S. recession could be worse than recent downturns
Joanne MorrisonReutersWednesday February 6, 2008
The chances of the United States avoiding a recession appear to be growing dimmer by the day, and any contraction in the economy will likely last longer and be more severe than other downturns in the past 20 years.
Recent reports have shown the housing market slump and rising defaults in the mortgage market are now taking their toll on job growth and on the manufacturing and services sector.
But heavy consumer debt, a growing federal budget gap, and rising prices could make any recession worse than Americans have experienced over the past two decades.
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"If we do go into recession, it's going to be more severe and long-lasting than the last one," said Jeffrey Frankel, a Harvard professor and member of the private-sector panel that dates U.S. recessions.
The nation's last two recessions, in 1990-1991 and 2001, each lasted for just eight months.
But the two downturns that ended in 1975 and 1982, when economic conditions bore some similarities to today, each lasted 16 months, making them the longest recessions since the Great Depression of the 1930s, according to the National Bureau of Economic Research, the accepted arbiter of U.S. recessions.
The U.S. economy entered the recessions of 1975 and 1982 saddled with huge government budget deficits from spending on social programs and the Vietnam war, and was suffering double-digit consumer price inflation.
Frankel said members of NBER's business-cycle dating panel have been in contact with each other over the prospect of a recession through e-mails, but it would likely take months, or perhaps even more than a year, for the panel to determine whether the economy had turned down.
Joanne MorrisonReutersWednesday February 6, 2008
The chances of the United States avoiding a recession appear to be growing dimmer by the day, and any contraction in the economy will likely last longer and be more severe than other downturns in the past 20 years.
Recent reports have shown the housing market slump and rising defaults in the mortgage market are now taking their toll on job growth and on the manufacturing and services sector.
But heavy consumer debt, a growing federal budget gap, and rising prices could make any recession worse than Americans have experienced over the past two decades.
(Article continues below)
"If we do go into recession, it's going to be more severe and long-lasting than the last one," said Jeffrey Frankel, a Harvard professor and member of the private-sector panel that dates U.S. recessions.
The nation's last two recessions, in 1990-1991 and 2001, each lasted for just eight months.
But the two downturns that ended in 1975 and 1982, when economic conditions bore some similarities to today, each lasted 16 months, making them the longest recessions since the Great Depression of the 1930s, according to the National Bureau of Economic Research, the accepted arbiter of U.S. recessions.
The U.S. economy entered the recessions of 1975 and 1982 saddled with huge government budget deficits from spending on social programs and the Vietnam war, and was suffering double-digit consumer price inflation.
Frankel said members of NBER's business-cycle dating panel have been in contact with each other over the prospect of a recession through e-mails, but it would likely take months, or perhaps even more than a year, for the panel to determine whether the economy had turned down.
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