Early 2000s Recession - United States

United States

After the relatively mild 1990-91 recession ended in March 1991, the country hit a belated unemployment rate peak of 7.8% in mid-1992. Job growth was initially muted by large layoffs among defense related industries. However, payroll gains accelerated in 1992 and experienced robust growth through the year 2000.

As the Dot Com bubble occurred in the mid and late 1990s, assorted predictions that eventually the bubble would burst emerged frequently. Because of the October 27, 1997 mini-crash in the wake of the Asian crisis, the predictions about a future burst increased, causing an uncertain climate on economy during the first months of 1998, while the Federal Reserve raised interest rates six times between June 1999 and May 2000 in an effort to cool the economy to a soft landing. The actual burst of the stock market bubble occurred in the form of the NASDAQ crash in March 2000. Growth in gross domestic product slowed considerably in the third quarter of 2000 to the lowest rate since a contraction in the first quarter of 1991.

The NBER's Business Cycle Dating Committee has determined that a peak in business activity occurred in the U.S. economy in March 2001. A peak marks the end of an expansion and the beginning of a recession. The determination of a peak date in March is thus a determination that the expansion that began in March 1991 ended in March 2001 and a recession began. The expansion lasted almost 10 years, the longest in the NBER's chronology . According to the National Bureau of Economic Research (NBER), which is the private, nonprofit, nonpartisan organization charged with determining economic recessions, the U.S. economy was in recession from March 2001 to November 2001, a period of eight months at the beginning of President George W. Bush's term of office. However, economic conditions did not satisfy the common shorthand definition of recession, which is "a fall of a country's real gross domestic product in two or more successive quarters," and has led to some confusion about the procedure for determining the starting and ending dates of a recession.

The NBER's Business Cycle Dating Committee (BCDC) uses monthly, rather than quarterly, indicators to determine peaks and troughs in business activity, as can be seen by noting that starting and ending dates are given by month and year, not quarters. However, controversy over the precise dates of the recession led to the characterization of the recession as the "Clinton Recession" by Republicans, if it could be traced to the final term of President Bill Clinton. A move in the recession date in a 2004 report by the Council of Economic Advisors to several months before the one given by the NBER was seen as politically motivated. BCDC members suggested they would be open to revisiting the dates of the recession as newer and more definitive data became available. In early 2004, NBER President Martin Feldstein said:

"It is clear that the revised data have made our original March date for the start of the recession much too late. We are still waiting for additional monthly data before making a final judgment. Until we have the additional data, we cannot make a decision."

From 2000 to 2001, the Federal Reserve in a move to quell the stock market, made successive interest rate increases, credited in part for "plunging the country into a recession." Using the stock market as an unofficial benchmark, a recession would have begun in March 2000 when the NASDAQ crashed following the collapse of the Dot-com bubble. The Dow Jones Industrial Average was relatively unscathed by the NASDAQ's crash until the September 11, 2001 attacks, after which the DJIA suffered its worst one-day point loss and biggest one-week losses in history up to that point. The market rebounded, only to crash once more in the final two quarters of 2002. In the final three quarters of 2003, the market finally rebounded permanently, agreeing with the unemployment statistics that a recession defined in this way would have lasted from 2001 through 2003.