As GDP Tops 1990 Peak, Committee May Declare Slump Over
THE committee of economists which "dates" the peaks and troughs of the business cycle in the United States may soon pronounce an end to the 1990-91 recession. But it won't do so before the election Tuesday.
"We are very close," says Victor Zarnowitz, one of seven economists given the dating task by the National Bureau of Economic Research (NBER). "We should probably declare it."
The chairman of that committee, Robert Hall, a Stanford professor, says he expects to call a meeting in "a month or two."
Prospects for a meeting have been heightened by the Department of Commerce report Tuesday that real national output rose at a 2.7 percent annual rate in the third quarter. That was faster than the expected 1.5 percent growth rate in gross domestic product (GDP). As important for the dating committee, the growth boosted GDP above the peak just prior to the recession.
"That certainly paves the way a little more," says Geoffrey Moore, another committee member and director of the Center for International Business Cycle Research at Columbia University.
Although the 1990-91 recession was about average in depth compared to other postwar downturns, the subsequent recovery has been weak. Dr. Moore notes that the nine quarters taken for GDP to reach its previous peak is the longest since the recovery from the Great Depression. It took four years, from 1933 to 1937, for GDP to reach its previous peak.
The weakness of the current recovery, says Moore, could be one reason for the anxiety among consumers about the economy. According to a measure by the Conference Board, consumer confidence fell in October for the fourth straight month.
"The availability of jobs, both present and anticipated, represents the consumer's major concern," says Fabian Linden, executive director of the Board's Consumer Research Center.
"The job uncertainty is real," says Robert Falconer, an economist with Aubrey G. Lanston & Co. A normal recovery, he says, generates 2.5 million or more jobs in its first year. This recovery has produced only 196,000 nonfarm jobs in the 12 months ended in August. Of these, 194,000 were temporary-agency jobs.
Another factor in current pessimism may be that more of the job loss has been permanent, rather than temporary. A Bureau of Labor Statistics economist notes that 85 percent of layoffs between July 1990 and June 1992 were permanent, compared to an average of 56 percent in the previous four recessions.
A survey released last week by the American Management Association found that layoffs and job eliminations in US companies could continue at record numbers in 1993.
Moreover, because of the weak expansion, it may be that those laid off remain unemployed longer. The median weeks of unemployment rose from 12 in 1990 to 13.5 in 1991. The comparable figure for 1992 is not yet available.
The NBER committee has not dated the recovery earlier because of its fear of making a mistake that would eventually need to be corrected. "It would be very embarrassing," says Dr. Zarnowitz, a retired University of Chicago professor.
Economists know that the first GDP numbers are usually revised - on average 0.7 percent. Also other indicators have not yet reached their previous peaks. These include industrial production and personal income. Real retail sales and manufacturing and trade sales are close to their previous peak, notes Zarnowitz.