Is The Recession Over?

gross domestic product economy up
The U.S. economy, propelled by a surge in consumer spending on cars and the biggest increase in government spending in 15 years, grew at an annual rate of 0.2 percent in the final three months of the year, the Commerce Department reported Wednesday.

The small increase in the broadest measure of the economy, the gross domestic product, could mean that economists will date the end of the recession around the end of last year or the beginning of this year. Analysts had expected the economy to contract by 1 percent in the 4th quarter.

This welcome but unexpected development was good news for President Bush, who in his State of the Union address pledged to wage war on recession, challenging Congress to pass his proposed extended unemployment benefits and tax cuts to spur business investment.

The war may already be won.

"We are well-positioned for recovery here. We almost have to look back and call this a recession-ette, rather than a recession," said Diane Swonk, chief economist at Bank One in Chicago.

Bush's Prescription
President Bush, in his first State of the Union speech, urged Congress to enact an economic stimulus plan to help pull the U.S. economy from recession and return the over one million Americans who have lost their jobs back to work.

Mr. Bush urged Congress to pass a fiscal stimulus package that would not only aid the unemployed but offer corporate tax breaks to spur job creation and help lead the country out of the recession it entered in March.

Offering few details, Mr. Bush said he supported extending unemployment benefits and direct assistance for health care coverage, but he emphasized that job creation would come from tax reform and improved foreign trade.

"Good jobs depend on sound tax policy," he said as he urged lawmakers to make permanent the $1.35-trillion, 10-year tax cut package enacted last year. (Reuters)

If the GDP, the country's total output of goods and services, remains in positive territory in upcoming monthly revisions, it will mean that this recession had only one negative quarter when output contracted, a drop of 1.3 percent at an annual rate in the July-September quarter.

David Wyss, chief economist at Standard & Poor's in New York, said that based on the current GDP figures, "This will be the mildest recession in postwar history."

If Friday's unemployment report shows businss payrolls stopped contracting and grew in January, he said, the National Bureau of Economic Research may well end up declaring that the recession ended in December.

That would mean the downturn lasted nine months, two months shorter than the average in the post-World War II period. In November, the NBER declared that the recession had begun in March.

Mr. Bush hailed the 4th-quarter numbers as "positive," reports CBS News White House Correspondent Peter Maer. But in a written statement, the president contended that "we can not take growth and job creation for granted." Mr. Bush said growth in consumer spending proved last year's tax relief plan "was the right thing to do."

Based on the current GDP data, total output will have declined by 0.3 percent, the smallest drop in GDP during a recession in postwar history. By comparison, the last downturn, the 1990-91 recession, saw a 1.5 percent drop in GDP.

While the rule of thumb for recessions is two consecutive quarters of declining GDP, the NBER uses several monthly statistics to better pinpoint the economy's exact turning points and there have been other downturns that did not meet the two-negative-quarter definition.

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