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Summary

According to the National Bureau of Economic Research, the agency that dates the American business cycle, the longest economic expansion in American history ended in March 2001. The U.S. is now in a recession that is in its 20th month. The average length of the 10 recessions in the post-World War II era is 11 months. The 2.75% rate of growth of Gross Domestic Product (GDP), our basic measure of economic activity, during 2002, probably signals that the recession is over. GDP grew only 0.3% during 2001. This included the contraction of GDP during the first 3 quarters of the year. However, about 40% of the additional GDP produced during 2002 was not sold but added to inventories. The unemployment rate during the 1991-2001 expansion reached a low of 3.9% in September 2000. It has risen since then, reaching a high in April, November and December 2002 of 6.0%. During 2002 it varied between 5.5% and 6.0%. In January 2003, the rate declined to 5.7%. Over 1998 and 2000, the unemployment rate moved within a narrow band of from 4.7% to 3.9%. The monthly unemployment rates recorded during most of the past 4 years have been below those thought by many economists to characterize full employment. Since the contraction began in March 2001 employment has fallen by approximately 1.80 million. The inflation rate has, on average, been low over most of the 1991-2001 expansion. Except for 1996, 1999, 2000, the rate of inflation measured by the Consumer Price Index has declined in each year of the expansion. During 2002 the CPI rose 2.4%. For the 3 months ending in January 2003 it rose at an annual rate of 2.2%. A similar pattern shows up in the two GDP price indexes. Both indexes rose 1.8% during 1997, 1.1% during 1998, 1.5% during 1999, 2.4% during 2000, and 1.8% during 2001. During 2002 the indexes rose 1.3% The rate of rise of per-unit labor costs, a possible indicator of future inflation, which rose 5.0% during 2000, fell -0.5% during 2001, and rose at a modest rate of 0.3% during 2002. Fiscal policy was eased during 2001 and 2002. Monetary policy has been eased over the course of 2001 and late in 2002 and appears to be geared to promoting a real GDP growth rate of from 3.25% to 3.5% this year, a rate thought compatible with a stable rate of inflation. Recent forecasts by private sector individuals and firms for 2003 suggest that GDP will grow between 2.2% and 3.3%, unemployment will range between 5.7% and 6.3%, and inflation will average between 1.3% and 2.6% (based on the consumer price index).

Related Legislation:
• S.20
• S.11

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