WASHINGTON (AP) – The recession is shaping up as one of the shortest and mildest on record. In fact, it may already be over, private economists said Thursday, based on various upbeat reports.
The Conference Board reported that its Index of Leading Economic Indicators, a key gauge of future activity, shot up 0.6 percent in January, its fourth consecutive monthly increase.
The strong signal from the indicators is that the recession is ending and that the recovery could be more vigorous than earlier anticipated, said Ken Goldstein, a senior economist with the New York-based industry group that issues the index.
While the leading index was flashing signals of a rebound, another report Thursday showed that that last years slowdown may not have been as severe as first believed.
The Commerce Department reported that the nations trade deficit narrowed by 11.4 percent in December to $25.3 billion, its best showing since September.
This unexpectedly large improvement sent economists scurrying to upwardly revise their estimates for overall economic activity in the fourth quarter. Many said the gross domestic product may have risen by 1 percent in the October-December quarter, based on the stronger trade showing, instead of the originally reported 0.2 percent increase.
Kevin Hassett, an economist at the American Enterprise Institute, said the statistics will show that the recession actually ended in November.
The National Bureau of Economic Research, the official arbiter of when recessions begin and end, has said the downturn began in March, ending a record 10-year stretch of prosperity. The bureau is not expected to issue a ruling on the end of the downturn for several more months.
If current indications hold up and the third quarter, when the GDP fell at a 1.3 percent rate, is the only negative period, the drop in economic output during the recession will be a small 0.3 percent, making this the mildest recession in U.S. history. That record has been held by the 1969-70 recession, which also ended a long expansion, when GDP fell by 0.6 percent.
The National Association for Business Economics said Thursday that 60 percent of the economists on its forecasting panel believe the recession is already over. Only two of the 37 forecasters said they believe the downturn will linger into the spring.
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Americas longest expansion in history has been followed by one of the shortest, shallowest recessions on record, said NABE President Harvey Rosenblum, director of economic research at the Dallas Federal Reserve bank.
The NABEs newest forecast put economic growth at 1.5 percent for this year and an even stronger 3.8 percent in 2003.
President Bushs economic braintrust also expressed optimism about a rebounding economy during a round-table discussion Thursday with reporters.
Chief White House economist Lawrence Lindsey said, The first quarter is likely to be a fairly good one as these things go. And R. Glenn Hubbard, head of the presidents Council of Economic Advisers, said a consensus private forecast of growth of around 1.5 percent in the current quarter appeared to be on target.
David Wyss, chief economist at Standard & Poors in New York, said the worry now is not whether the recession is ending but how strong the recovery will be.
He said the early part of the recovery may be a jobless recovery like the early months of the last upturn when Bushs father was president.
My worry is what are we going to do for an encore after the effects of the governments tax cuts and interest rate reductions wear off, Wyss said.
Wyss predicted that unemployment will rise to around 6.5 percent at midyear before starting to decline. But he said the improvement may stall around where the jobless rate is currently – at 5.6 percent.
The Labor Department reported Thursday that the number of Americans filing new claims for unemployment benefits rose to 383,000 last week. Although that was an increase of 10,000 from the previous week, analysts noted that new claims remained near a six-month low and the rash of layoffs that occurred after the Sept. 11 terrorist attacks seems to have abated.
The trade report showed that the deficit for the entire year shrank to $346.3 billion, the first improvement in six years, reflecting the recessions impact on Americans demand for foreign goods.
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