The National Bureau of Economic Research declares the recession ended in June 2009.

Business Cycle Dating Committee, National Bureau of Economic Research

This report is also available as a PDF file.

CAMBRIDGE September 20, 2010 - The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.

In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

The committee waited to make its decision until revisions in the National Income and Product Accounts, released on July 30 and August 27, 2010, clarified the 2009 time path of the two broadest measures of economic activity, real Gross Domestic Product (real GDP) and real Gross Domestic Income (real GDI). The committee noted that in the most recent data, for the second quarter of 2010, the average of real GDP and real GDI was 3.1 percent above its low in the second quarter of 2009 but remained 1.3 percent below the previous peak which was reached in the fourth quarter of 2007.

Identifying the date of the trough involved weighing the behavior of various indicators of economic activity. The estimates of real GDP and GDI issued by the Bureau of Economic Analysis of the U.S. Department of Commerce are only available quarterly. Further, macroeconomic indicators are subject to substantial revisions and measurement error. For these reasons, the committee refers to a variety of monthly indicators to choose the months of peaks and troughs. It places particular emphasis on measures that refer to the total economy rather than to particular sectors. These include a measure of monthly GDP that has been developed by the private forecasting firm Macroeconomic Advisers, measures of monthly GDP and GDI that have been developed by two members of the committee in independent research (James Stock and Mark Watson, (available here), real personal income excluding transfers, the payroll and household measures of total employment, and aggregate hours of work in the total economy. The committee places less emphasis on monthly data series for industrial production and manufacturing-trade sales, because these refer to particular sectors of the economy. Movements in these series can provide useful additional information when the broader measures are ambiguous about the date of the monthly peak or trough. There is no fixed rule about what weights the committee assigns to the various indicators, or about what other measures contribute information to the process.

The committee concluded that the behavior of the quarterly series for real GDP and GDI indicates that the trough occurred in mid-2009. Real GDP reached its low point in the second quarter of 2009, while the value of real GDI was essentially identical in the second and third quarters of 2009. The average of real GDP and real GDI reached its low point in the second quarter of 2009. The committee concluded that strong growth in both real GDP and real GDI in the fourth quarter of 2009 ruled out the possibility that the trough occurred later than the third quarter.

The committee designated June as the month of the trough based on several monthly indicators. The trough dates for these indicators are:

Macroeconomic Advisers' monthly GDP (June)
The Stock-Watson index of monthly GDP (June)
Their index of monthly GDI (July)
An average of their two indexes of monthly GDP and GDI (June)
Real manufacturing and trade sales (June)
Index of Industrial Production (June)
Real personal income less transfers (October)
Aggregate hours of work in the total economy (October)
Payroll survey employment (December)
Household survey employment (December)
The committee concluded that the choice of June 2009 as the trough month for economic activity was consistent with the later trough months in the labor-market indicators–aggregate hours and employment–for two reasons. First, the strong growth of quarterly real GDP and real GDI in the fourth quarter was inconsistent with designating any month in the fourth quarter as the trough month. The committee believes that these quarterly measures of the real volume of output across the entire economy are the most reliable measures of economic activity. Second, in previous business cycles, aggregate hours and employment have frequently reached their troughs later than the NBER's trough date. In particular, in 2001-03, the trough in payroll employment occurred 21 months after the NBER trough date. In 2009, the NBER trough date is 6 months before the trough in payroll employment. In both the 2001-03 and 2009 cycles, household employment also reached its trough later than the NBER trough date.

The committee noted the contrast between the June trough date for the majority of the monthly indicators and the October trough date for real personal income less transfers. There were two reasons for selecting the earlier date. The first was described above -- the fact that quarterly real GDP and GDI rose strongly in the fourth quarter. The second was that real GDI is a more comprehensive measure of income than real personal income less transfers, as it includes additional sources of income such as undistributed corporate profits. The committee's use of income-side measures, notably real GDI, is based on the accounting principle that the value of output equals the sum of the incomes that arise from producing the output. Apart from a random statistical discrepancy, real GDI satisfies that equality while real personal income does not.

The committee also maintains a quarterly chronology of business cycle peak and trough dates. The committee determined that the trough occurred in the second quarter of 2009, when the average of quarterly real GDP and GDI reached its low point.

For more information, see the FAQs and the more detailed description of the NBER's business cycle dating procedure at http://www.nber.org/cycles/recessions.html. An Excel spreadsheet containing the data and the figures for the indicators of economic activity considered by the committee is available at that page as well.

The current members of the Business Cycle Dating Committee are: Robert Hall, Stanford University (chair); Martin Feldstein, Harvard University; Jeffrey Frankel, Harvard University; Robert Gordon, Northwestern University; James Poterba, MIT and NBER President; James Stock, Harvard University; and Mark Watson, Princeton University. David Romer, University of California, Berkeley, is on leave from the committee and did not participate in its deliberations.

[ NBER Home Page | More information ]

NBER, 1050 Massachusetts Ave., Cambridge, MA 02138, 617-868-3900, www.nber.org


(September 20, 2010)

8 Problems That Could Trigger a Double-Dip Recession

8 Problems That Could Trigger a Double-Dip Recession

So what exactly is a 'double-dip' recession?

In the July 1, 2010 article "So what exactly is a 'double-dip' recession?," Associated Press economics writer Jeannine Aversa explains the answer:

WASHINGTON (AP) -- Concerns are rising that the economy is at risk of slipping into a "double-dip" recession.

High unemployment, Europe's debt crisis, a slowdown in China, a teetering housing market and sinking stock prices are all weighing on a fragile U.S. recovery.

So what exactly is a double-dip recession?

Robert Hall has an idea of what one looks like but no precise definition. He's chairman of the National Bureau of Economic Research, a group of academic economists that officially declares the starts and ends of recessions.

In Hall's view, a double dip is akin to a continuous recession that's punctuated by a period of growth, then followed by a further decline in the economy.

The NBER doesn't define a double dip any more specifically than that, says Hall, an economics professor at Stanford University.

In econo-speak, Hall explains: "The idea -- hypothetical because it has yet to happen -- is that activity might rise for a period, but not far enough to complete a cycle, then fall again, and finally rise above its original level, only then completing the cycle."

Hall says the closest the United States has come to a double dip was in 1980 and 1981. But the NBER concluded that those were two distinct, though closely spaced, recessions -- "not a double dip," he says.

Not so, says Sung Won Sohn, professor at California State University, Channel Islands. Sohn says the back-to-back recessions of the early '80s fit his definition of a double dip: A recession followed by a short period of growth followed by a recession.

Brian Bethune, economist at IHS Global Insight, has a view similar to Hall's: A period in which the economy shrinks, starts growing again and then shrinks again -- for at least six months.

"There is no mathematical formula; it's a judgment call," Bethune says.

The NBER has declared the economy fell into a recession in December 2007. It hasn't yet pinpointed an end to the recession. It said in April that it would be "premature" to do so.

Many other economists say the recession ended in June or July of last year. The economy returned to growth again in the third quarter of 2009, after four straight quarters of declines. More recently, the economy has added jobs in each of the first five months of this year.

Still, the threats to the recovery from overseas and at home are growing. So are the risks that the recovery will fade out. Economists say the odds of that remain low but have crept up since a couple of months ago. Analysts are downgrading their growth forecasts for the second half of this year.

In determining the starts and stops of recessions, the NBER reviews data that make up the nation's gross domestic product. The GDP measures the value of goods and services produced in the United States. The NBER also reviews incomes, employment and industrial activity.

The panel, based in Cambridge, Mass., tends to take its time in declaring when a recession has started or ended.

It announced in December 2008 that the recession had actually started one year earlier -- in December 2007.

And it declared in July 2003 that the 2001 recession was over. It had actually ended 20 months earlier -- in November 2001.

In President George W. Bush's eight years in office, the United States fell into two recessions. The first started in March 2001 and ended that November. The second started in December 2007; its end date is pending the NBER's determination.

The timing of the NBER's decision likely means little to ordinary Americans now muddling through a sluggish economic recovery and weak job market.

Many will continue to struggle. Unemployment usually keeps rising well after a recession ends. After the 2001 recession, for instance, unemployment didn't peak until June 2003 -- 19 months later.

Signs the economy is really getting better

In the April 6, 2010 U.S. News & World Report article How To Tell When The Recession Is Really Over, Rick Newman says "the recession is officially over, but many Americans won't feel the recovery until these things happen."

There are two kinds of recessions: the one that economists measure, and the one that ordinary people feel.

The official recession is over. That's because the economy is growing again after a sharp decline, with GDP back to the levels of mid-2008. For people who have kept their jobs, suffered no loss of income and enjoyed a rebound in their investments thanks to the year-long stock market rally, things are pretty good.

Then there's the unofficial recession, which clearly persists. More than 8 million people have lost their jobs over the past two years, and the economy has barely started to add those back. Many others have had their pay or hours cut. The housing bust, in its fourth year, still isn't over. Foreclosures continue to mount, businesses and consumers remain gloomy, and many families are struggling to get by on reduced income. "It's a recovery, but it sure doesn't feel like it," says Nariman Behravesh, chief economist for forecasting firm IHS Global Insight. Here are five things that still must happen for a robust recovery to kick in.

Banks need to lend more. The government's emergency measures helped stabilize the financial system, but banks haven't taken the next step and increased lending. With trillions in bad loans still on their books, many banks continue to hoard cash and turn down loan applications. That depresses the market for homes, cars, appliances and other costly items that many consumers can't pay for in cash. It also squeezes small businesses, which often rely on credit to meet payroll, order supplies, invest and grow. Behravesh predicts that lending could bottom out and start to pick up by late this year or early next year--although that would probably be the point at which the Federal Reserve starts to raise interest rates to subdue inflation. A few things that will signal improvements in the credit market: a drop in the required down payment for well-qualified home buyers, which is typically 30 percent or more now; increased availability of car loans for subprime borrowers with a credit score below 680; and banks' willingness to increase their customers' credit-card limits, if asked.

Incomes need to rise. Median income was stagnant for about a decade leading up to the recession, and it probably fell 5 percent or more over the past couple of years. Some economists worry that reduced incomes could indefinitely curtail consumer spending, which has long fueled the U.S. economy. A glut of unemployed workers will keep wages low in many industries for years. And since many families have lost wealth because of falling home values or declining investment portfolios, or both, they need to save more to prepare for retirement. That leaves less money to buy stuff. The good news is that inflation is low and energy prices are stable, which helps stretch a dollar.

Housing needs to stabilize. Most of the pain is probably in the past, but home values continue to erode in many regions. Moody's Economy.com predicts that house prices, which have fallen more than 30 percent from their 2006 peaks, could still fall another 5 to 10 percent through the end of this year. Since many families still have the majority of their wealth invested in their homes, the economy can't really get healthy again as long as such a huge asset is falling in value. The end of the federal home-buyer tax credit and other government programs throughout the year will test whether the housing market can stand on its own. If it can't, the government could step back in, but that would only signal further weakness in a sector that accounts for more than 15 percent of the economy. The silver lining is that falling prices make it a great time to buy, for those with enough cash or the ability to get a mortgage.

Confidence needs to rebound. Americans remain gloomy, with most consumer-confidence surveys showing only modest improvements from the low points hit during the recession. The most obvious reasons are the weak job market and a sense that the recovery will be weak at best. Businesses are downbeat too, with CEOs worried that strapped consumers will put their wallets away. That makes them reluctant to hire, which perpetuates the malaise. Confidence is a perplexing psychological phenomenon, and economists aren't sure what it will take to make consumers upbeat enough to propel a robust recovery. But once home prices stop falling, jobs seem more secure, and people feel like the bloodletting is over, that will certainly help.

Jobs need to return. The availability--or lack--of jobs is the single biggest factor in the economy, and unfortunately, a pickup in hiring is likely to be painfully slow. Many of the 8 million lost jobs are probably gone forever, as manufacturers downsize their operations and many companies substitute technology or cheaper foreign labor for American workers. The unemployment rate, which is 9.7 percent now, might even rise throughout the year, as workers who gave up looking for jobs try again and the labor force swells.

Still, economists recognize some familiar patterns in the job market that suggest things are finally getting better instead of worse. Corporate profits are strong, thanks to aggressive cost-cutting over the past two years. That means companies can afford to hire workers, if they decide to. And productivity gains have hit record levels recently, which means companies are extremely efficient; if demand picks up, they may only be able to meet it through increased staffing. A good indicator of real improvement would be several consecutive months of six-figure job gains, due to permanent hiring and not temporary factors like the census or weather-related events. "The recent resumption of employment growth will be sustained and gather strength over time," insists T. Rowe Price chief economist Alan Levenson. That's not the kind of roaring endorsement most Americans want to hear, but it suggests that sooner or later, the recovery in your neighborhood will catch up with the one that economists see in the data.

Lax Oversight Caused Crisis, Bernanke Says

In the January 4, 2010 New York Times article "Lax Oversight Caused Crisis, Bernanke Says," Catherine Rampell reports that the Federal Reserve chairman blames regulatory failure for the economic decline of recent years:

ATLANTA — Regulatory failure, not low interest rates, was responsible for the housing bubble and subsequent financial crisis of the last decade, Ben S. Bernanke, the Federal Reserve chairman, said in a speech on Sunday.

Mr. Bernanke’s remarks, perhaps his strongest language yet assessing the roots of the financial crisis, came as he awaited confirmation for a second term as Fed chairman and as he sought greater regulatory authority from Congress.

“Stronger regulation and supervision aimed at problems with underwriting practices and lenders’ risk management would have been a more effective and surgical approach to constraining the housing bubble than a general increase in interest rates,” Mr. Bernanke said in remarks to the American Economic Association.

Mr. Bernanke, addressing accusations that the Fed contributed to the financial crisis, argued in his speech that the interest rates set by the central bank from 2002 to 2006 were appropriately low. He was a member of the board of governors of the Federal Reserve system for most of that period.

“When historical relationships are taken into account, it is difficult to ascribe the house price bubble either to monetary policy or to the broader macroeconomic environment,” Mr. Bernanke said.

Some lawmakers and economists have argued that the Fed kept interest rates too low in the aftermath of the 2001 recession, making loans cheap and feeding reckless lending by banks.

“I strongly disapprove of some of the past deeds of the Federal Reserve while Ben Bernanke was a member and its chairman, and I lack confidence in what little planning for the future he has articulated,” Richard Shelby of Alabama, the Senate Banking Committee’s top-ranking Republican, said in December during a committee vote on Mr. Bernanke’s reconfirmation.

The Senate Banking Committee approved Mr. Bernanke’s renomination last month. He is expected to be reconfirmed by the full Senate before his current term expires on Jan. 31, despite some vocal opposition.

Even if confirmed, however, Mr. Bernanke is likely to face further political challenges over financial regulatory reform and the governance of the Fed.

The House passed a provision to audit the Fed as part of a larger financial reform package last month. Representative Ron Paul, Republican of Texas, has been carrying the banner for such an audit for decades.

The debate over what caused the financial crisis comes as the economy shows signs of recovery and as Congress considers a wide-ranging overhaul of financial regulation.

In a separate talk on Sunday at the conference, Donald L. Kohn, the Fed’s vice chairman, listed several measures the central bank was likely to take to shed the problematic assets it took from banks during the financial crisis. He said “the appropriate use and sequencing of these tools is under active discussion” by regulators.

But, as members of the rate-setting Federal Open Market Committee said last month, he noted that the fragile economic recovery and weak job market would “warrant exceptionally low” interest rates “for an extended period.”

Mr. Bernanke, in his talk, echoed his previous calls for Congress to grant the Fed greater oversight powers over the financial system, like the ability to help monitor and regulate against “systemic risk.”

The implication is that the Fed believes that regulation and supervision, rather than tighter monetary policies, should be used to address asset bubbles in the future.

Mr. Bernanke has pointed to the Fed’s extraordinary efforts to stem the crisis, including the creation of new lending vehicles to banks and a reduction of bank-to-bank interest rates to virtually zero, as evidence that the Fed has a firm grasp of what the economy needs. The Fed’s handling of the crisis has been widely praised by economists.

The Treasury and other government agencies already have supervisory power over parts of the financial system, but so, too, does the Federal Reserve.

In his talk on Sunday, Mr. Bernanke acknowledged as much, rattling off a list of regulatory efforts the bank made to address nontraditional mortgages and poor underwriting practices.

But, he said, “these efforts came too late or were insufficient to stop the decline in underwriting standards and effectively constrain the housing bubble.”

The Difficulty Balance Between the Short-Term Need to Stimulate the Economy and the Long-Term Need to Reduce Deficits & Debt

In the November 11, 2009 National Public Radio (NPR) article "Orszag: Deficit Can Help But Slows Recovery," Peter Orszag, the Director of the Office of Management and Budget, explains that budget deficits are appropriate fiscal policy for fighting recessions, but in the long run there is a need to reduce deficits and the public debt to avoid its burdensome impact on future economic growth.

White House budget director Peter Orszag has his hands full these days trying to wrangle down a deficit that has ballooned to an estimated $1.4 trillion. Part of that borrowing was necessitated by the recession, while part of it was designed to shorten the economic crisis.

Orszag says the federal deficit needs to be cut to about 3 percent of economic growth in the coming years to reduce the sea of debt. At the same time, the U.S. has to guard against sending the economy into a tailspin by pulling back too soon on stimulus programs.

Striking a balance is "extraordinarily challenging," Orszag tells NPR's Steve Inskeep.

But he says it's important to note that the economy has made significant progress in the past year.

"On the one hand, [you have] the GDP gap, the gap between how much the economy is producing and how much it could produce, and, on the other hand, these deficits," he says.

"If we only faced one or the other, the way forward would be clearer. But balancing between the two keeps me up at night."

Sometime around 2011 to 2013, "that's where we're going to start to need some transition from the extraordinary assistance that the federal government has been providing to try to jump-start the economy," he says. "We're working through [this], and we haven't made final decisions on the best path to walk down from where we are now to where we need to get."

He says the deficits needed to be wound down from their current 10 percent of the economy to "something around 3 percent" but that it should be "done in a way that avoids the risks of 1937 — where you pulled fiscal support away from the economy too quickly and threw the economy back into a recession."

The current era of high deficits is "exceptional times," notes Orszag, an economist who led the Congressional Budget Office before being tapped to head the Office of Management and Budget. In fact, he says, the national economic situation is more precarious than at any time in the past 50 years.

Orszag makes no apologies for not projecting a balanced budget anytime in the near-term: "You have to remember the situation that we inherited."

The Medicare Prescription Drug Benefit and the 2001 and 2003 tax cuts weren't paid for, he points out. That was compounded by the reduction in tax revenue from the economic downturn, the cost of the economic stimulus and the need for increased spending on unemployment benefits and food stamps.

"So, the point being, we inherited a big hole," Orszag says.

But he says the economy has been pulled back from the brink, and the past year has seen an amazing turnaround.

"I do think it's important to step back," he says. "If in November 2008, someone told you that credit spreads would be back to normal levels and the economy would be growing by 3.5 percent, you probably would have looked at them like they were a little bit crazy."

Orszag, who studied health care policy at the Washington-based Brookings Institution, says he thought the House and Senate health care legislation had "captured important opportunities."

"Given the need to actually enact legislation, we are doing about as much as could be done," he says.

But the budget chief is circumspect about the difficulty of getting budget priorities through Congress.

"The thing about the politics of the deficit is that the deficit is unpopular, but so are many specific steps to reduce it," Orszag says. "There are some that will decry the deficit but are unwilling to embrace anything that will actually bring it down."

Thank heavens for the downturn? Some people think so

In the October 30, 2009 article "Thank heavens for the downturn? Some people think so," Miral Fahmy reports that the recession has helped some people realize what is most important in life:

SINGAPORE (Reuters) – It seems the financial crisis isn't all doom and gloom: one in four people are glad the world's economy slumped like it did, because it helped them realize their priorities in life, according to a global survey.

Market research firm Synovate polled around 11,400 people across the world and found more than half had permanently changed their attitudes toward money over the last 12 months.

Another 47 percent, however, said they were looking forward to being able to spend freely again.

"The psychology of global recession has changed the way many people do things," Jenny Chang, Synovate's managing director in Taiwan, said in a statement.

"They are making life-altering decisions based on the current global recession, be it postponing marriage, having children, moving house, changing jobs or pursuing higher education. Even in a relatively impact-free economy like Taiwan's."

A quarter of all respondents led by Malaysians said they were glad the world had an economic crisis as it has helped them realize what's really important in their lives.

Nearly 60 percent said they would try their best to keep a tight rein on their spending so that it doesn't go back to what it used to be before the downturn, and over two-thirds are more interested in boosting their savings than reducing their debt.

"The credit crunch has been felt, and it has reinforced the family values of Malaysians, helping them to appreciate what they have rather than continually strive for more," said Steve Murphy managing director of Synovate in Malaysia, Steve Murphy.

The majority of respondents -- over 80 percent -- believed their generation had a responsibility to leave their country better off for the younger generation, even if it involves dramatically altering their lifestyles.

The survey showed that one in five people had put off an overseas trip in the last six months, 6 percent had delayed having a baby and another 5 percent had even postponed surgery until things got better.

And with the United States' economy still trying to shake off the credit crunch, Synovate's U.S.-based Claire Peerson Braverman said Americans, compared to other nationalities, were having to make some of the most difficult decisions concerning money.

"With the relatively high unemployment in the U.S., those Americans who have lost one or more incomes in the family are making very difficult decisions each day ... which bills do, and don't, get paid," she said.

Synovate, the market research arm of Aegis Group, surveyed 11,400 people in August across 16 markets: Australia, Brazil, Canada, Denmark, France, Hong Kong, India, Malaysia, New Zealand, Russia, Serbia, South Africa, Spain, Taiwan, Britain and the United States. More details at www.synovate.com.

Economy grows in 3Q, signals end of recession

In the October 29, 2009 article "Economy grows in 3Q, signals end of recession," Associated Press economics writer Jeannine Aversa reports the U.S. economy grew at a 3.5% annual rate during the third quarter of 2009, perhaps signaling and end to the recession.

WASHINGTON – The economy grew at a 3.5 percent pace in the third quarter, the best showing in two years, fueled by government-supported spending on cars and homes. It's the strongest signal yet that the economy has entered a new, though fragile, phase of recovery and that the worst recession since the 1930s has ended.

Going forward, many analysts expect the pace of the budding recovery to be plodding due to rising unemployment and continuing difficulties by both consumers and businesses to secure loans.

"This welcome milestone is just another step, and we still have a long road to travel until the economy is fully recovered," said Christina Romer, President Barack Obama's chief economist. "It will take sustained, robust ... growth to bring the unemployment rate down substantially. Such a decline in unemployment is, of course, what we are all working to achieve."

The much-awaited turnaround reported Thursday by the Commerce Department ended the streak of four straight quarters of contracting economic activity, the first time that's happened on records dating to 1947.

It also marked the first increase since the spring of 2008, when the economy experienced a short-lived uptick in growth.

The third-quarter's performance — the strongest since right before the country fell into recession in December 2007 — was slightly better than the 3.3 percent growth rate economists expected.

Armed with cash from government support programs, consumers led the rebound in the third quarter, snapping up cars and homes.

Consumer spending on big-ticket manufactured goods soared at an annualized rate of 22.3 percent in the third quarter, the most since the end of 2001. The jump largely reflected car purchases spurred by the government's Cash for Clunkers program that offered a rebate of up to $4,500 to buy new cars and trade in old gas guzzlers.

The housing market also turned a corner in the summer. Spending on housing projects jumped at an annualized pace of 23.4 percent, the largest jump since 1986. It was the first time since the end of 2005 that spending on housing was positive. Purchases of home furnishings and appliances also added to economic growth.

The government's $8,000 tax credit for first-time home buyers supported the housing rebound. Congress is considering extending the credit, which expires on Nov. 30.

The collapse of the housing market led the country into the recession. Rotten mortgage securities spiraled into a banking crisis. Home foreclosures surged. The sector's return to good health is a crucial ingredient to a sustained economic recovery.

A top concern is whether the recovery can continue after government supports are gone.

Many economists predict economic activity won't grow as much in the months ahead as the bracing impact of Obama's $787 billion package of increased government spending and tax cuts fades.

The National Association for Business Economics thinks growth will slow to a 2.4 percent pace in the current October-December quarter. It expects a 2.5 percent growth rate in the first three months of next year, although other economists believe the pace will be closer to 1 percent.

Romer, in remarks last week said the government's stimulus spending already had its biggest impact and probably won't contribute to significant growth next year.

Brisk spending by the federal government played into the third-quarter turnaround. Federal government spending rose at a rate of 7.9 percent in the third quarter, on top of a 11.4 percent growth rate in the second quarter.

In other encouraging developments, businesses boosted spending on equipment and software at a 1.1 percent pace in the third quarter, the first increase in nearly two years.

Third-quarter activity also was helped by increased sales of U.S.-made goods to customers overseas, as economies in Asia, Europe and elsewhere improved. The cheaper dollar is aiding U.S. exporters, making their goods less expensive to foreign buyers. Exports of U.S. goods soared at an annualized rate of 21.4 percent in the third quarter, the most since the final quarter of 1996.

Businesses, meanwhile, reduced their stockpiles of goods less in the third quarter, after slashing them at a record pace in the second quarter. With inventories at rock-bottom levels, even the smallest increase in demand probably will prompt factories to boost production. This restocking of depleted inventories is expected to help sustain the recovery in the coming months, economists said.

Even with the third-quarter improvement, the economy isn't out of the woods yet.

Federal Reserve Chairman Ben Bernanke and members of Obama's economics team have warned that the nascent recovery won't be robust enough to prevent the unemployment rate — now at a 26-year high of 9.8 percent — from rising into next year.

Economists say the jobless rate probably nudged up to 9.9 percent in October and will go as high as 10.5 percent around the middle of next year before declining gradually. The government is scheduled to release the October jobless rate report next week.

The Labor Department said Thursday that newly laid-off workers seeking unemployment insurance fell by 1,000 to a seasonally-adjusted 530,000. Analysts expected a drop to 521,000.

The number of people continuing to claim benefits, fell by 148,000 to 5.8 million, steeper than analysts expected. Those figures lag initial claims by a week.

With joblessness growing and wages dipping slightly in the third quarter, consumers are expected to turn more restrained in the months ahead. That would put a much heavier burden on America's businesses to keep the recovery going.

"We're beginning to crawl out a very deep hole," said economist Ken Mayland, president of ClearView Economics. "It will take time to get back to normal again and there are questions about how consumers will hold up in the months ahead. But I think the recovery will be sustained."

To foster the recovery, the Fed is expected to keep a key bank lending rate at record low near zero when it meets next week and probably will hold it there into next year.

With the economy on the mend, the Fed has slowed down some key emergency support programs but doesn't want to pull the plug until the recovery is on firm footing.

Even if the economy climbs back into positive territory in the third quarter, it will be up to another group to declare the recession over. The National Bureau of Economic Research, a panel of academics, is in charge of dating the beginning and ends of recessions. It usually makes it determinations well after the fact.

Recession or not? US economy likely to be in limbo

In the October 25, 2009 article "Recession or not? US economy likely to be in limbo," Rob Lever reports:

WASHINGTON (AFP) – The US economy is poised to show growth in the third quarter, rebounding from its worst slump in decades, but whether the recession is over is a more complex question.

The first official estimate due Thursday on gross domestic product (GDP), or output of goods and services, is expected to show expansion of between 3.0 and 4.0 percent in the July-September period after four negative quarters in a row.

Yet the economy may linger for months in a "no-man's land" in which GDP is expanding but no one is sure if the recession is "officially" ended, because of the way business cycles are defined in the United States.

For decades, the US government and economic community have recognized a panel of academicians with the private National Bureau of Economic Research as the official arbiter of business cycles.

The NBER panel does not use the definition employed in many countries of recession as two consecutive quarters of declining GDP.

NBER says a recession is "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

Moreover, the NBER generally waits months before its pronouncement, leaving the question of recession or not in limbo.

Complicating the issue is the sharp rise in unemployment, which has hit a 26-year high of 9.8 percent, making it still feel like recession for many.

"The average American doesn't think you have recovery until the unemployment rate comes down, and it won't come down until you have a sustained rate of 3.0 percent," says Cary Leahey, senior economist at Decision Economics, a research firm.

"This is not really a meaningful recovery."

Leahey expects the economy to show growth of roughly 3.9 percent in the third quarter, but sees a slowdown to around 2.0 percent in the fourth quarter as the expansion stalls.

Moreover, analysts point out that much of the growth will be the result of businesses rebuilding inventories following sharp production cuts, and from government stimulus efforts that may not be sustained.

Nariman Behravesh, chief economist at the research and consulting firm IHS Global Insight, said he believes the recession ended in June or July and that NBER should provide at least a preliminary pronouncement of the fact.

"I'm sure the recession is over, the only question is the strength of the recovery," he said.

"NBER could provide a preliminary reading, they could say, 'This is our best estimate,' instead of leaving everybody guessing."

Behravesh said it may be as long as a year before NBER decides and that the state of uncertainty "is not helpful for businesses."

Federal Reserve chairman Ben Bernanke said last month the recession is likely over "from a technical perspective" but that the economy will struggle due to difficult credit conditions and high unemployment.

"It's still going to feel like a very weak economy for some time as many people will still find that their job security and their employment status is not what they wish it was," the Fed chief said.

The NBER declared the current recession on December 1, 2008, a full year after the downturn began. That was made despite data showing modest growth in the fourth quarter of 2007 and second quarter of 2008.

NBER declared an end to the 2001 recession only in July 2003, even though revised data showed there were not two consecutive negative quarters for GDP.

Roger Farmer, chairman of the economics department at the University of California at Los Angeles, said he believes NBER will eventually declare the recession ended in May 2009.

But Farmer said many Americans still will be feeling economic pain and that the NBER should consider other factors such as long-term unemployment.

"I think the economy is fragile, and the recovery could easily fizzle out," he said.

Even if the recession were declared over, "until the unemployment rate comes down, the US economy is going to be in trouble," he said.

"Only when we start spending again, and confidence returns to the private economy will the recession be over."

Recession's surprising winners & losers

In the October 21, 2009 Wall Street Journal article "Women's Wages Outpaced Men's During Recession," Sara Murray says "Men are more likely to be unemployed than women — but that's not their only problem."

The wages of the typical woman who had a job during the worst recession in decades rose faster than those of the typical man, new data from the Bureau of Labor Statistics show.

Over the past two years, the wages of the median woman -- at the statistical middle -- rose 3.2% when adjusted for inflation. Wages of the median man rose 2%. Minority men were particularly hard hit, while minority women and highly educated women of all races did better.

The typical full-time female worker earned $657 a week in the third quarter, the BLS said. The typical man earned $812 a week. Men are more likely to be unemployed, though: The male jobless rate is 11%; for women, it's 8.4%

Economists cautioned that the wage numbers and the increases don't reflect the large numbers of workers who aren't working at all.

There were about 8.2 million fewer full-time wage and salary workers in the third quarter than two years ago; the data don't include part-time or self-employed workers. Low-wage workers are hit disproportionally during recessions, and their absence from the tally could cause median wages to rise even if the typical worker isn't getting a raise.

"This is a situation where everyone's losing but men are losing more, and that's not really a victory for women," said Heidi Shierholz of the Economic Policy Institute, a left-leaning Washington, D.C., think tank.

Asian men fared worse than other men, but the median weekly wage for Asian men and women was $877 in the third quarter -- higher than any other ethnic group. Whites were next at $753, then blacks at $607 and Hispanics at $527. The median pay of Asian men declined 4.1% between the third quarter of 2007, just before the recession began, and the third quarter of 2009. The typical black man saw his wages fall 2.8%.

The recession began in December 2007 and most economists believe it ended this past summer. Women's wages have long lagged behind men's, but minority women did much better than their male counterparts during the recession.

Over the past two years, the wages of the typical black male full-time worker fell, but wages rose 7.3% for black women. Among Hispanics, the median male wage rose 0.4% over the past two years, but the median female wage rose 5.5%.

Wages of white and Asian women didn't rise as much as those of other women; the median increased 2.4% and 1.8%, respectively, over the past two years. White males were slightly better off: Their wages rose 2.8%. It was the only ethnic group in which men's wages rose more during the recession than women's; white women's wages rose 2.4%.

"It's risky to make too much of these fluctuations," said David Autor, an economics professor at the Massachusetts Institute of Technology. "That said, male employment has been in relative decline for some time, and I would not be at all surprised that the industries and occupations in which males are most concentrated have been hit relatively hard by the recession."

The pattern of larger gains among some women and minorities isn't likely to hold when the U.S. economy recovers. As jobs return, there will be more low-wage jobs, and that will pull down the median wage. But higher-paying jobs in male-dominated sectors, such as manufacturing, construction and finance, will return as well, and that will boost the median male wage.

Young workers, particularly vulnerable during recessions, were the only age group to see their wages decline over the past two years. Wages for 16- to 19-year-olds fell 0.3% based on numbers that the BLS didn't adjust for inflation. Seniors fared the best: The wage of a typical worker over age 65 rose 15.4% over the two-year period.

Education also was a factor: Those without a high school diploma earned a median of $448 a week in the third quarter, compared to $1,145 for those with at least a bachelor's degree. Pay of women with advanced degrees grew faster than pay of men with advanced degrees. But men still earned more: The highest-paid 10% of male workers with advanced degrees earned $3,260 or more weekly, compared to $2,252 or more for women of the same education level.

Wages of full-time workers in the top 10% grew much faster during the two-year recession (9.5% before adjusting for inflation) than those of workers in the bottom 10% (5.2% before adjusting for inflation).

Write to Sara Murray at sara.murray@wsj.com

Daily Show video shows how the economic recession has affected rappers

In the four-minute video "Still a Boss", rapper Slim Thug gives props to John Maynard Keynes as he explains how the economic recession has affected his lifestyle:

Still a boss. Still gettin' checks.
Still gettin this paper, but just a little less.

Slim Thug, mother @#$%&#, known as the boss,
running the game because I cut out costs.

And the recession hit rappers like a bullet to the shoulder.
They dodging phone calls from their .... holders

If you lost all your cash flying G5 planes.
I'm still flying first ... Thanks John Maynard Keynes

(Slim Thug holds a copy of a biography of John Maynard Keynes by Jennifer Terrell.)

Trying to beat your face, I cut costs to the end.
You're broke. Say hello to my liittle friend.

(Video of Federal Reserve chairman Ben Bernanke testifying before Congress.)

Still a boss. Still gettin' checks.
Still gettin' this paper, but just a little less. (I'm gettin' paid, man.)

I don't pop bottles in the club. They cost too much.

Better take some shots of Patrone and shut the hell up.

I shop at Costco. It's half the cash.
I buy a bottle with what you spendin' on one glass.

Now I call. I save money.

Who will buy shares in AIG?

(Video of a television personal investments advisor recommending the purchase of stock in the American International Group (AIG) insurance company shortly before the company's liquidity crisis and collapse.)

No thanks for the advice.

Got me tracking the S&P.

(The Standard and Poor's stock market index)

And now I'm mad at my money, mad at my money.

(A reference to Jim Cramer's personal investments television show "Mad Money." Cramer advised an inquirer not to sell stock in the investment bank Bear Stearns a week before its collapse and takeover.)

My crew rode deep. Always spending my stacks.
So I made 'em all dependents on my income tax.
I'm gonna say they my sons,
And if that don't work, tax man, show my thumbs

1099 and the W-4.

(tax forms)

Blast them up with my credit score.

Mortgage paid off. Got a house that I own.

I traded in the Bentley. Got the cash for chrome.

We drive Smart cars now.

The recession is over, but jobs won't come back until much later.

In the October 12, 2009 CNN Money article "Survey of top economists find most believe recession is over," Chris Isidore reports that the recession may be over, but it could be a while before there is a significant drop in unemployment.

More than 80% of top economists believe that the recession that started almost two years ago is finally over. But most don't expect meaningful improvement in jobs, credit or housing for months to come.

That's according to a survey released Monday by the National Association for Business Economics (NABE). The group asked 43 top economists last month if they believe the battered U.S. economy has pulled out of the worst U.S. downturn since World War II. Those surveyed include economists from leading Wall Street firms and major corporations, as well as from highly respected universities and research firms.

Thirty-five respondents, or 81%, believe the recovery has begun. Only four, or 9%, believe the economy is still in a recession. The other four say they're uncertain.

Economists in the survey forecast that the U.S. economy grew at an annual rate of 3% in the three months that ended in September, though the official reading of gross domestic product won't be out for weeks.

And all of the economists surveyed expect the recovery to be slow and painful, leaving many people and businesses feeling the effects of the downturn for years to come.

The only organization that can officially declare the beginning or the end of a recession is the National Bureau of Economic Research. But that group doesn't make any sort of declaration until months after the fact, in order to take into account final readings of various economic measures such as employment, income and industrial production. For example, the NBER didn't declare that the recent recession had begun in December 2007 until a full year after the fact.

Lingering weakness

The NABE survey results echo comments made by many other prominent economists who have recently said they think the economy hit bottom at some point this summer.

Most notably, a recent statement from the Federal Reserve declared that economic readings "suggest economic activity has picked up following its severe downturn."

Still, the NABE survey found that economists are forecasting lingering weakness in the labor and housing markets, and that the tight credit markets will continue to be a drag on economic growth into next year.

Unemployment, which was at a 26-year high of 9.8% in September, is forecast to hit 10% during the last three months of this year, and stay there through the first quarter of 2010. By the end of next year, it's only expected to fall back down to 9.5%.

About 54% of those surveyed don't expect the economy to regain the jobs it lost during the recession until 2012, while another 38% expect that to take even longer. Just three of the economists that the NABE spoke to expect these jobs to come back in 2010 or 2011.

And many don't think the worst is over yet for housing either. About a third of economists believe that home prices won't bottom out until early 2010 or later, while a quarter of them believe the low will come in the fourth quarter.

Half of those surveyed expect the financial markets to continue to be a drag on the economy until next year, while 30% of them said that trend could continue into 2011.

The NABE last surveyed economists in May, and they were far less optimistic at the time. Only 18% of them thought the economy would recover in the last quarter of 2009, while 7% saw a turnaround sometime in 2010.

College cutbacks make it harder to earn degrees

In the October 12, 2009 article "College cutbacks make it harder to earn degrees," Associated Press writers Terence Chea and Justin Pope report that the economic recession is making it more difficult for many students to complete their college degrees:

SAN FRANCISCO – It isn't just tuition increases that are driving up the cost of college. Around the country, deep budget cuts are forcing colleges to lay off instructors and eliminate some classes, making it harder for students to get into the courses they need to earn their degree.

The likely result: more time in college.

And while that may sound agreeable to nostalgic alumni, to students like Michael Redoglia, time is money.

Early this semester at San Francisco State University, Redoglia unsuccessfully crashed 26 different classes, hoping to find space that would move him closer to a hospitality management degree. Outside some classrooms, wait-listed students took turns standing closest to the door so they could hear the lecture and not fall too far behind should they get in.

Redoglia, a fourth-year student, is now enrolled in just two courses. He could lose financial aid, and his plan to finish his degree in 4 1/2 years is up in smoke.

"This semester has put me back another full year," said Redoglia, adding that the delay is "killing me financially."

Policymakers right up to President Barack Obama have been calling on public colleges to move students through more efficiently, and some have been doing so. But experts say any recent progress is threatened by unprecedented state budget cuts that have trimmed course offerings.

"They will not graduate on time. I hope they will graduate at all," said David Baggins, who as chairman of political science at Cal State University-East Bay has been bombarded with requests for spots in already packed classes.

"Before," Baggins said, "there was always a way to help the student who really needed help." This year, "all I can do is say no."

Some students struggle for places in the core entry-level classes such as composition and math because the part-time instructors who typically teach those courses are the first to be laid off in tough times. Other students are shut out of crowded core courses in their majors by upperclassmen. Some upperclassmen face an even tougher road: The upper-level classes they need have been cut entirely because they aren't popular enough.

A federal study of 1999-2000 graduates found it takes students roughly 4.5 years on average to earn a bachelor's degree. About two-thirds of traditional-age college students who finished got through within five. A study of 2009 graduates is not yet complete.

In the 450,000-student California State system — the nation's largest public university system — the average is longer, in part because of large numbers of low-income, part-time and transfer students. A 2007 study of students who entered 12 years earlier found they took an average of 5.7 years. Officials say that number was probably falling slightly before the current cuts hit.

To help students get the courses they need to graduate, the University of North Carolina-Chapel Hill raised enrollment caps on some English and foreign language classes from 19 to 24. The University of Kansas also increased some class sizes — but offered fewer sections of a big introductory chemistry course. Both schools insist most students who truly needed a class eventually got in.

But at Central Oregon Community College in Bend, Ore., where enrollment has grown over 60 percent in the past three years, nearly 400 students don't have even one of the courses they requested. Many of the school's worker retraining programs consist of classes that are supposed to be taken in sequence, so students who can't get slots could be stuck until next fall.

The 23-campus Cal State system has raised tuition more than 30 percent, increased class sizes, laid off hundreds of teachers and cut thousands of class sections in response to a 20 percent state budget cut.

Around the country, the belt-tightening has made the usual begging and pleading with professors to make more space especially urgent.

"Some of them are more open — they understand you're trying to get into classes you need," said Haley Sink, a sophomore at Virginia Tech from Kernersville, N.C., who failed to get into several classes this year and hopes to avoid a fifth year of out-of-state tuition. "Others say, `I absolutely cannot handle more students.'"

Money isn't necessarily the only problem, some experts argue. Patrick Callan, president of the National Center for Public Policy and Higher Education, said universities focus too much on prestigious but unessential graduate programs at the expense of the undergraduate basics. Others want professors pushed harder to teach essential courses instead of their own boutique interests — and students to accept more unpopular, early-morning slots.

But some students say they are out of choices.

Sherrie Canedo, a fifth-year senior at Cal State-East Bay, was recently told she could finish her ethnic studies degree through independent study because most of the courses she needs were eliminated.

"I don't feel that's an acceptable way to learn," said Canedo, who is working two jobs and trying to string together enough financial aid to finish her education. "I'm paying to be taught in a classroom."

____

For young people, the recession offers deals of a lifetime

In the October 5, 2009 article "For young, recession offers deals of a lifetime," Associated Press business writer Chip Cutter reports that young people have some great financial opportunities now ... if they are in a position to take advantage of them:

NEW YORK – The Great Recession has turned into the best of times for young investor Daniel Lee.

Early this year, the 30-year-old salesman in Scottsdale, Ariz., shelved expensive meals and vacation plans and threw "every spare dollar" into the stock market. The value of his portfolio has more than tripled as the market has rallied since March.

"This is like buying a swim suit in the fall or a winter jacket in the spring," he says. "Get in while it's a good deal."

Halfway across the country in Detroit, retiree Irvin Hall, 70, is living through the recession in a different way.

His mutual funds fell 35 percent during the stock market plunge that started last fall and continued for six months, and his monthly pension from General Motors dropped by 10 percent. He and his wife pay more for health care and medicine after the company reduced his insurance benefits.

"It takes your mind a while to really adjust to this," he says. "You're expecting, hey, I'm set for life, and then all of a sudden that's taken away."

The plight of baby boomers and retirees has been well-documented in the year after the financial meltdown. But for people in their 20s and 30s who have a good job and feel it's secure, this is the best of times. Many were renters and had little or no money in the stock market. They didn't take a six-figure hit to the value of a home or 401(k) account. Now they're positioned to invest at prices no one would have believed during the boom years.

Home prices are down 30 percent, on average, and 50 percent or more in some markets. The Standard & Poor's 500 stock index is nearly 34 percent below its record high in October 2007.

Young people are benefiting in other ways, too. The Cash for Clunkers program allowed them to trade in beaten-up used cars and buy new ones at a discount. "They're never going to see that again," says John Rogin, who owns a Buick dealership in Livonia, Mich.

The Consumer Price Index has recorded a rare drop over the past 12 months — 1.5 percent. And the decline for many goods and services has been much greater, allowing young people to put even more money into stocks and housing.

"This is a historic time," says George Jaramillo, 35, a business analyst in Atlanta, who recently purchased three homes, including two at foreclosure prices. "It's a great opportunity to make some great gains in the future."

Besides low prices, many have been spurred by low interest rates and a tax credit of up to $8,000 for first-time homebuyers. First-timers, many between 25 and 34, accounted for about 45 percent of home sales at the end of July, a figure that has risen steadily over the past two years, says Walter Molony, a spokesman with the National Association of Realtors. Only 39 percent of adults under 35 are homeowners, compared with 80 percent of those over 55, according to the U.S. Census Bureau. So the opportunity for those in their 20s and 30s to take advantage of the real estate crash is greater than for any other age group.

Young people also got a break with the stock market. Even with the surge since it hit a 12-year low on March 9, the S&P 500 index is nearly 30 percent lower than it was at the end of 1999. A recent study by T. Rowe Price, a money management company, highlights the benefits that young people can receive from investing in a down market.

The study compared how returns differ if someone starts investing during a weak decade for stocks that's followed by a strong one — and vice versa. Somebody who invested $500 a month in a fund replicating the S&P 500 starting in 1970 and continuing through the bull market of the 1980s would have ended 1989 with $589,707 — for an annualized rate of return of 11.5 percent.

The 1970s were characterized by high inflation and high unemployment and a flat market, setting the stage for the 1980s when the S&P 500 tripled.

If the decades are reversed, and the strong years of the 1980s were followed by the 1970s bear market, the account would be valued at $358,972, even though the annual rate of return would still be 11.5 percent. The difference is that the investor in the first situation would have been buying more shares of stock each month during the bad years of the '70s.

"We need to be shouting from the rooftops that this is not the time to get out of the market if you're young," says Christine Fahlund, a senior financial planner with T. Rowe Price. "This is the time to be in the market."

For young people to take advantage of deals, however, they need to have a job — and cash. Neither is a given.

The unemployment rate for workers ages 20 to 24 jumped to 14.9 percent in September, up from 10.8 percent in the same month a year ago. Unemployment for those 25 to 34 is 10.6 percent, almost a point above the rate of 9.8 percent for people of all ages.

And the skyrocketing cost of undergraduate education means graduating seniors who borrowed money for tuition enter the work force with an average of $23,118 in student-loan debt, according to the Department of Education. About 65 percent of students take out a loan to finance their education.

Plenty of people, though, are taking advantage of this recession's generation gap. Ann Seiden, 28, bought a home in Phoenix last November for 15 percent below the asking price.

Some people are casualties of the recession, she says. "And there are those who have kind of seized on the opportunities in it."

What's getting cheaper in the recession

In the October 5, 2009 article "Great Time for U.S. Consumers: America Is on Sale," Rachel Beck reports that "one benefit of US recession is the boon to consumers: America is on sale." The U.S. recession has increased unemployment and reduced the incomes of many people. Reductions in income cause a decrease in the demand for normal products. (The demand curve shifts to the left.) Thus, this article provides a good example of how a decrease in the demand for products reduces their prices, other things equal (ceteris paribus).

There has never been a better time to be a consumer. America is on sale.

The Great Recession has caused massive job losses and hardship for millions, but it has also fostered a shoppers' paradise. Anyone who still has the means to spend can find unheard of deals.

Prices on everything from clothes to coffee to cat food are dropping, some faster than they have in half a century. Items rarely discounted -- like Tiffany engagement rings -- are now on sale. The two biggest purchases most people make -- homes and new cars -- are selling at steep price reductions.

"This is the new normal," says Donald Keprta, president of Dominick's, a supermarket chain in the Midwest, which just cut prices by as much as 30 percent on thousands of items. "We aren't going back."

Consumers like Karen Wilmes, a mother of two in Hopkinton, R.I., relish the steals. During a recent trip to Shaw's Supermarkets, she bought a basketful of goods, including Eggo waffles, Kleenex tissues and Betty Crocker cake mix. The retail price: $63.89. Wilmes paid $7.31 by buying items on sale and using coupons.

"The deals out there are unbelievable," says Wilmes, 36, who writes the Frugal Rhode Island Mama blog, which tracks local and national bargains. "We can put the money I save toward something else."

And she's doing just that, but only when she can find another deal. Wilmes and her husband recently bought a Samsung television from Best Buy's Web site for $1,299, about $300 less than she found at other stores. She also got free delivery and another $13 back from ebates.com, which receives commissions from online retailers for directing customers their way.

What's happening now has been building for years. Wal-Mart Stores Inc. introduced "every-day low prices" many years ago. Amazon.com redefined the idea of bargain prices during the late 1990s when it helped introduce online shopping. After the 2001 recession, automakers introduced zero-percent financing to boost sales. McDonald's "Dollar Meals" made fast food even cheaper.

But until the Great Recession came along, consumers hadn't seen anything yet.

Last fall's financial meltdown triggered a plunge in stock prices and home values and wiped out 11 percent -- $6.6 trillion -- of household wealth in six months. It also put an end to easy credit, which had fueled the consumption that powered the economy for most of the decade.

Those who still have jobs don't want to spend as they once did. There is a new societal pressure to be careful and smart when buying almost anything. From Chicago's Miracle Mile to malls around Orange County, Calif., it was once a status symbol to trot around with armloads of shopping bags with designer names on them. Now, it's considered ostentatious.

Traditionally, manufacturers and retailers lowered prices to clear inventory. Today, they're cutting prices because consumers are demanding it. If it lasts, the ramifications will be wide-ranging.

"There's almost a new morality to spending," Liz Claiborne Inc. CEO Bill McComb told an investor conference last month.

The bargains being offered at the Garden State Plaza in Paramus, N.J., make it seem the day after Christmas. But it's only a weekday in September. The deals start at 25 percent off and keep getting better. Neiman Marcus, Forever 21, Ann Taylor, Macy's, Gap -- across the retailing spectrum there are promotions.

Retail sales remain sluggish, and more than half of the people surveyed recently by America's Research Group and UBS said they are shopping less. But when they do shop, most go to stores with lower prices or wait for sales before returning to their favorite retailer, according to the survey.

Dave Ratner sees this price chase first hand. His four-store chain in western Massachusetts, Dave's Soda & Pet City, has never been so focused on promotions and low prices. During the past year, customers stopped buying $50 bags of premium dog food and "special" $10 pet treats. Pet-related Halloween merchandise usually sells well, but he isn't stocking any this year because he doesn't think people will buy it. Instead, he's offering big discounts on cheaper brands of pet food.

"It's killing my profit margins, but if you don't offer specials and lots of promotions, you aren't operating in the current world," he says.

Great buys are not exclusive to retailing. The government's Cash for Clunkers program is over, but more than half of car buyers still get a cash rebate, according to J.D. Power & Associates.

Hotel rooms cost travelers nearly 20 percent less, on average, than last year, the biggest decline since Smith Travel Research began collecting data in 1987.

Home prices have dropped 30 percent, on average, from the peak in 2006. In some markets, they're down more than 50 percent. Homes in parts of Detroit are cheaper than a new car.

Overall, prices are tumbling at the fastest rate in decades. The government's Consumer Price Index, which measures the average price of goods and services purchased by households, has fallen 1.5 percent over the last 12 months. The reading for July showed a 2.1 percent annual decline, the biggest since 1950.

The largest decline has been in energy prices, but other areas have fallen, too. Among them: food, appliances, furniture, jewelry, sporting goods, audio and visual equipment and apartment rents.

People like Bruce Halkin, 64, an advertising executive in Aventura, Fla., are benefiting. He will soon close on a three-bedroom home in nearby Boca Raton on a golf course. He's paying $335,000, 8 percent below the $365,000 asking price. The sellers bought the home for $410,000 in 2006 and spent $75,000 on renovations.

Halkin's deal-chasing doesn't stop there. On a recent trip to Macy's, he picked up two pairs of Ralph Lauren Polo shorts, a Polo shirt and a hat for $50. At full price, the bill would have topped $200.

"I've learned to buy when I see deals not necessarily when I need anything," he says. "Thankfully, the bargains keep coming."

Those with goods and services to sell hope that the discounting bolsters sales, which would help get the economy chugging along again. Consumer spending accounts for 70 percent of the economy.

But ever-lower prices have risks, too. The more shoppers expect prices to fall, the less they shop until prices drop. It becomes a self-fulfilling prophecy that forces companies to keep cutting. That reduces profits, making it less likely companies will hire workers or raise wages. Economists say the worst scenario would be a deflationary spiral, which Japan has been stuck in for the last two decades.

"The Japanese government has been trying to stimulate the economy there since the 1990s," says Gary Shilling, who runs an economic consulting firm in Springfield, N.J., and has written two books on deflation.

The U.S. economy is not near such an extreme. But what's emerging is the realization that pricing is being redefined.

Dominick's supermarkets announced in late August that prices on a range of items in its 81 stores would fall by as much as a third. Included in the cuts were both private-label goods and national brands, such as Coffee Mate creamers, Bumble Bee tuna and Tombstone frozen pizza.

Profit margins at grocery stores typically are just 2 percent. Dominick's hopes the low prices will attract customers, who will also buy enough full-priced items to make up the difference.

Other companies are assessing pricing as never before. Procter & Gamble long dismissed the idea of cutting prices for its stable of well-known brands, including Tide detergent and Gillette razors.

In September, the world's largest consumer products maker relented. It announced price cuts across 10 percent of its global line and plans to increase its promotions emphasizing value.

Others are learning that aggressive price cutting can move merchandise. Sony cut prices on its PlayStation 3 video game console by $100 to about $300 in August, and sales shot up 300 percent during the following three weeks.

Dick's Sporting Goods sold boxes of a dozen Nike One golf balls for $42.99 at the start of the year. The balls are used by Tiger Woods and other professional golfers, but sales were lackluster. Now, Dick's offers two boxes for $59.

Demand has soared.

Note that the last sentence of this article is incorrect. The demand for golf balls has NOT soared. (There has been a soar in the QUANTITY DEMANDED.) The article's author does not understand the difference between DEMAND and QUANTITY DEMANDED. When the price of golf balls decreases, there is an increase in the quantity of golf balls demanded. There is NOT an increase in demand. That would imply consumers wish to purchase more golf balls AT EVERY POSSIBLE PRICE.

Religious life won't be the same after downturn

In the September 28, 2009 article "Religious life won't be the same after downturn," Associated Press religion writer Rachel Zoll reports that the recession has strained the financial resources of churches and other religious organizations:

NEW YORK – Organized religion was already in trouble before the fall of 2008. Denominations were stagnating or shrinking, and congregations across faith groups were fretting about their finances.

The Great Recession made things worse.

It's further drained the financial resources of many congregations, seminaries and religious day schools. Some congregations have disappeared and schools have been closed. In areas hit hardest by the recession, worshippers have moved away to find jobs, leaving those who remain to minister to communities struggling with rising home foreclosures, unemployment and uncertainty.

Religion has a long history of drawing hope out of suffering, but there's little good news emerging from the recession. Long after the economy improves, the changes made today will have a profound effect on how people practice their faith, where they turn for help in times of stress and how they pass their beliefs to their children.

"In 2010, I think we're going to see 10 or 15 percent of congregations saying they're in serious financial trouble," says David Roozen, a lead researcher for the Faith Communities Today multi-faith survey, which measures congregational health annually. "With around 320,000 or 350,000 congregations, that's a hell of a lot of them."

The sense of community that holds together religious groups is broken when large numbers of people move to find work or if a ministry is forced to close.

"I'm really still in the mourning process," says Eve Fein, former head of the now-shuttered Morasha Jewish Day School in Rancho Santa Margarita, Calif.

The school, a center of religious life for students and their parents, had been relying on a sale of some of its property to stay afloat but land values dropped, forcing Morasha to shut down in June.

"I don't think any of us who were in it have really recovered," Fein says. "The school was 23 years old. I raised my kids there."

The news isn't uniformly bad. Communities in some areas are still moving ahead with plans for new congregations, schools and ministries, religious leaders say.

And many congregations say they found a renewed sense of purpose helping their suffering neighbors. Houses of worship became centers of support for the unemployed. Some congregants increased donations. At RockHarbor church in Costa Mesa, Calif., members responded so generously to word of a budget deficit that the church ended the fiscal year with a surplus.

"We're all a little dumbfounded," says Bryan Wilkins, the church business director. "We were hearing lots of stories about people being laid off, struggling financially and losing homes. It's truly amazing."

In the Great Depression, one of the bigger impacts was the loss of Jewish religious schools, which are key to continuing the faith from one generation to the next. Jonathan Sarna, a Brandeis University historian and author of "American Judaism," says enrollment in Jewish schools plummeted in some cities and many young Jews of that period didn't have a chance to study their religion.

Today, some parents, regardless of faith, can no longer afford the thousands of dollars in tuition it costs to send a child to a religious day school. Church officials fear these parents won't re-endroll their kids if family finances improve because it might be disruptive once they've settled into a new school.

Enrollment in one group of 120 Jewish community day schools is down by about 7 percent this academic year, according to Marc Kramer, executive director of RAVSAK, a network of the schools. A few schools lost as many as 30 percent of their students. Many of the hundreds of other Jewish day schools, which are affiliated with Reform, Conservative and Orthodox movements, are also in a financial crunch.

Kramer says 2009-10 will be a "make or break" year for Jewish education, partly because of the additional damage to endowments and donors from Bernard Madoff's colossal fraud.

Overall, U.S. Jewish groups are estimated to have lost about one-quarter of their wealth.

"It's going to be painful," Kramer says. "There will be some losses."

The Association for Christian Schools International, which represents about 3,800 private schools, says enrollment is down nationally by nearly 5 percent. About 200 Christian schools closed or merged in the last academic year, 50 more than the year before.

At least 80 members of the Association of Theological Schools, which represents graduate schools in North America, have seen their endowments drop by 20 percent or more.

The National Catholic Education Association is still measuring the toll on its schools, but expects grim news from the hardest hit states, after years of declining enrollment.

"Some schools that were on the brink — this whole recession has just intensified that," says Karen Ristau, president of the association.

Clergy in different communities say worship attendance has increased with people seeking comfort through difficult times, although no one is predicting a nationwide religious revival.

Americans for years have been moving away from belonging to a denomination and toward a general spirituality that may or may not involve regular churchgoing.

The 2008 American Religious Identification Survey found more people who call themselves "nondenominational Christians" and rising numbers who say they have no religion at all.

Before the stock market tanked last fall, only 19 percent of U.S. congregations described their finances as excellent, down from 31 percent in 2000, according to the 2008 Faith Communities Today poll.

Because of these trends, mainline Protestants were among the most vulnerable to the downturn. Their denominations had been losing members for decades and had been dividing over how they should interpret what the Bible says on gay relationships and other issues. National churches had been relying on endowments to help with operating costs, along with the generosity of an aging membership that had been giving in amounts large enough to mostly make up for departed brethren.

The meltdown destroyed that financial buffer.

The Episcopal Church, the United Methodist Church, the Evangelical Lutheran Church and other mainline denominations were forced to cut jobs and their national budgets.

The damage was felt across Methodist life. As of the summer, more than half of the church's 62 U.S. regional districts, or annual conferences, reported they had budget deficits. Some sold property and buildings to continue their ministries. Two national Methodist boards cut more than 90 jobs. Fifty bishops took a voluntary pay cut. Annual conferences in hard-hit regions, such as Florida and Ohio, lost thousands of members as people moved to find work elsewhere.

"Many of these groups have such large endowments that they're not going away," Roozen says. "But I think there's no question that they're going to be smaller both as organizations and in membership."

Roman Catholic dioceses for years had been struggling with maintaining their aging churches, paying salaries and health insurance and funding settlements over clergy sex abuse. With the hit to investment income and a drop in donations, they are now freezing salaries, cutting ministries and staff. The Archdiocese of Detroit, at the heart of the meltdown, had a $14 million shortfall in a $42 million budget in the fiscal year that ended in June 2008.

Conservative Protestant groups, known for their entrepreneurial spirit and evangelizing, were not immune. The 16.2 million-member Southern Baptist Convention, the largest Protestant group in the country, has had budget cuts in its North American Mission Board, at least three of its six seminaries and in its publishing and research arm.

Religious leaders say the next year or so will be key in determining which organizations survive the downturn intact. Even if the recession ends soon, religious fundraisers say the angst donors feel will not lift immediately, prolonging the difficulties for congregations, schools and ministries.

Meltdown's lasting cultural impact tough to gauge

In the September 27, 2009 article "Meltdown's lasting cultural impact tough to gauge," Associated Press national writer Jocelyn Noveck reports:

The economy is really bad, Jay Leno told his "Tonight Show" audience in March.

How bad?

"So bad that on 'Sesame Street,' they won't even talk about the letters A, I or G anymore."

Not that Leno was content to leave it at that. In fact, in eight months starting on Labor Day 2008, the comedian told no fewer than 863 jokes about the financial meltdown in his "Tonight Show" monologues, according to a Washington group that monitors such things.

Counting jokes is straightforward enough. It's a lot harder, of course, to gauge the more subtle ways in which the Great Recession has impacted our culture: How we interact, how we entertain ourselves, how we worship, what we wear and buy and read and watch.

One cultural message has been clear, and Leno's populist jokes reflect it: The country has been in no mood to celebrate ostentatious wealth, or those forces seen to have brought us to such a precarious place in our history.

But some historians say such a mood is in some ways cyclical, a phenomenon that has followed past recessions and then disappeared — until the next downturn.

"It's a critique that emerges periodically in our history, that consumption is corrupting," says Peter J. Kastor, a professor of history and American culture at Washington University in St. Louis. "Those concerns have been around since 1776." But, he says, we are a society of consumers, and that's what will ultimately prevail. Others agree.

"Certainly, you can see more critical attitudes toward conspicuous displays of wealth," says Bruce Schulman, a historian at Boston University. "And you can expect popular culture to reflect those attitudes. But we are a country that depends on consumption, and that's why I would not expect us to see really enduring cultural changes."

Perhaps that's also why some designers allowed themselves a little optimism at this month's Fashion Week shows in New York. The glitz of some previous spring seasons was gone, but in contrast to the more somber fall styles now in stores, one could spy some feathers and even a little tinsel from at least one influential label, Proenza Schouler.

"The last thing the world needs is another black pencil skirt," said Proenza's Lazaro Hernandez. "You want something that feels more joyful." And something different, he might have added, to bring women back to the stores and keep the industry afloat.

Designer clothes are, of course, accessible only to a few. One can't say the same for movies, which do well in times of economic distress because they're a relatively cheap, not to mention escapist, form of entertainment.

Indeed, Hollywood is coming off a huge summer in what's been a banner year, with revenues running at a record pace of $7.4 billion for the year, 7.8 percent ahead of 2008 ticket sales, according to box office tracker Hollywood.com.

Could the content of our films be impacted by the recession, just as the Great Depression fueled the popularity of Frank Capra's common-man-fights-corruption films? There's always a lag between current events and cinematic versions of them, because it takes time to get movies made. One upcoming film, though, promises a scathing look at the forces that contributed to the recession: Oliver Stone's "Wall Street 2," now filming, with Michael Douglas returning as Gordon Gekko, the voracious financier who uttered that famous line, "Greed is good."

As for comedy, look for Leno, David Letterman and others to continue to wring all the rueful jokes they can out of our economic woes. "Populist outrage is the undercurrent of all of it," says Dan Amundson, research director at the Center for Media and Public Affairs, which monitors the late-night shows. "Particularly for Leno, it's been a regular shtick." (A favorite Leno target has been AIG, the insurance giant bailed out by the government.)

The recession may also have changed the nature of our celebrity obsession. Take a look at your favorite celeb weekly these days, and the cover story will as likely be about a reality TV star, like Kate Gosselin of "Jon & Kate Plus 8," now famously split from her equally famous reality husband, as about a movie star or wealthy socialite like Paris Hilton.

"It brings the celebrity addiction down to our own level," says Samir Husni, director of the Magazine Innovation Center at the University of Mississippi. "It's a more serviceable fantasy. Not everyone can be Beyonce, but we can be Kate."

From celebrity worship to houses of worship: Though charity giving in America fell by 2 percent in 2008, forcing many groups to lay off staff, cut wages and eliminate programs, the same wasn't true of giving to religious organizations, which was actually up by 5.5 percent, according to a study by Giving USA.

And, in what could be called a further silver lining for religious institutions, many have sensed a renewed purpose in serving communities that need them more than ever.

"It's an opportunity for the church to be the church," says Susan DeLay, spokesperson for the Willow Creek megachurch outside Chicago, which has four campuses and a combined attendance of about 24,000 worshippers each week. "It's an affirmation of what God has called for the church to be. That's very satisfying."

Unlike some other churches in more hard-hit areas, attendance at Willow Creek has remained basically steady, while giving is down by 2 percent so far this year, DeLay says. Meanwhile, there's been a huge increase in demand for the church's services — such as the food pantry, where output is almost twice that of last year.

Demand has also gone up for the church's cars ministry, which gives donated cars to those in need, and for a career transition workshop. And also for premarital counseling, DeLay says: "It's interesting that people are eager to give their marriages the best chance."

Speaking of marriage, one might think the divorce rate would go up in times of economic difficulty. There are, however, no statistics yet available past 2007, according to the National Center for Health Statistics, which compiles the information from states.

Whether divorces are up or down, divorce attorneys say anecdotally that they're busy in court amending agreements because people's finances have changed, with some unable to keep up their financial obligations to their exes. Another product of both the recession and the collapse of the housing market: Some couples are staying together under the same roof, albeit unhappily, because they can't sell their homes or can't afford to divorce.

And then there are the more subtle effects of economic stress on family life, the lasting nature of which will likely depend on how long the recession itself lasts.

"Both as couples and as parents, adults under stress often forget to express the kind of daily appreciation of partners and children that makes family life go smoothly," says Stephanie Coontz, a professor of family studies at Evergreen State College in Washington state and the author of "Marriage, A History."

On the other hand, she notes, there may be long-range benefits from the economic meltdown, such as families learning to entertain and cook for themselves. They're figuring out how to spend time together, rather than money.

"When people can't afford to outsource family chores or pick up fast food, for example, they may rediscover the pleasures of doing some tasks as a family," she says.

"If the Great Depression is any guide, one long-term good result of this economic crisis could be to remind people that bad things can happen to good people, and that ultimately we are all in the same boat — or at least subject to the same tides."
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Census: Recession had sweeping effect on US life

In the September 22, 2009 article "Census: Recession had sweeping effect on US life," Associated Press writer Hope Yen reports:

WASHINGTON – The recession is profoundly disrupting American life: More people are delaying marriage and home-buying, turning to carpools yet getting stuck in ever-worse traffic, staying put rather than moving to new cities.

A broad array of U.S. census data, released Monday, also shows a dip in the foreign-born population last year, to under 38 million after it reached an all-time high in 2007. This was due to declines in low-skilled workers from Mexico searching for jobs in Arizona, Florida and California.

Health coverage swung widely by region, based partly on levels of unemployment. Massachusetts, with its universal coverage law, had fewer than 1 in 20 uninsured residents — the lowest in the nation. Texas had the highest share, at 1 in four, largely because of illegal immigrants excluded from government-sponsored and employer-provided plans.

Demographers said the latest figures were striking confirmation of the social impact of the economic decline as it hit home in 2008. Findings come from the annual American Community Survey, a sweeping look at life built on information from 3 million households.

Preliminary data earlier this year found that many Americans were not moving, staying put in big cities rather than migrating to the Sunbelt because of frozen lines of credit. Mobility is at a 60-year low, upending population trends ahead of the 2010 census that will be used to apportion House seats.

"The recession has affected everybody in one way or another as families use lots of different strategies to cope with a new economic reality," said Mark Mather, associate vice president of the nonprofit Population Reference Bureau. "Job loss — or the potential for job loss — also leads to feelings of economic insecurity and can create social tension."

"It's just the tip of the iceberg," he said, noting that unemployment is still rising.

The percentage of people who drove alone to work dropped last year to 75.5 percent, the lowest in a decade, as commuters grew weary of paying close to $4 a gallon for gasoline and opted to carpool or take public transportation.

Twenty-two states had declines in solo drivers compared with the year before, with the rest statistically unchanged. The decreases were particularly evident in states with higher traffic congestion, such as Maryland, Texas and Washington.

Average commute times edged up to 25.5 minutes, erasing years of decreases to stand at the level of 2000, as people had to leave home earlier in the morning to pick up friends for their ride to work or to catch a bus or subway train.

Palmdale, Calif., a suburb in the high desert north of Los Angeles, posted the longest commute at 41.5 minutes. It barely edged out New York City, with its congestion and sprawling subway system, at 39.4 minutes. Shortest commute time: Bloomington, Ill., at 14.1 minutes.

Nationwide, more than 1 in 8 workers, or 17.5 million, were out the door by 6 a.m.

Marital bliss also suffered. Nearly 1 in 3 Americans 15 and over, or 31.2 percent, reported they had never been married, the highest level in a decade. The share had previously hovered for years around 27 percent, before beginning to climb during the housing downturn in 2006.

The never-married included three-quarters of men in their 20s and two-thirds of women in that age range. Sociologists say younger people are taking longer to reach economic independence and consider marriage, because they are struggling to find work or focusing on an advanced education.

The Northeast had the most people who were delaying marriage, led by states such as New York and Massachusetts. People in the South were more likely to give marriage a try, including those in Arkansas, Tennessee and Texas.

The dip in foreign-born residents comes as the government considers immigration changes, including stepped-up border enforcement and a path toward U.S. citizenship. At nearly 38 million, immigrants made up 12.5 percent of the population in 2008; an estimated 11.9 million are here illegally.

In three large metro areas, Miami, San Jose, Calif., and Los Angeles, more than one-third of all residents are foreign-born.

Roughly half the states showed declines in the number of immigrants from 2007 to 2008. Major metro areas also posted decreases, including Los Angeles, Phoenix, Detroit and Tampa, Fla. An influx of workers from India, who came looking for specialized jobs in telecommunications, manufacturing, computers and software, partially offset the national immigration decrease.

About 1 in 5 U.S. residents spoke a language other than English at home, mostly clustered in California, New Mexico and Texas.

The number of foreign-born and minority residents often tracked closely with how a state ranked in the levels of uninsured.

The highest numbers were in agricultural communities with large Hispanic populations in California's San Joaquin Valley, South Texas and South Florida. Regions in New Mexico, Nevada, Arizona, Alaska, Oklahoma and Georgia also fared poorly.

The numbers help explain why the debate over illegal immigration and health insurance is so heated.

"The fact that many election 'swing states,' with large and growing Hispanic populations, rank low on health insurance for children and young adults points to the significance of this issue for both parties in future national elections," said William H. Frey, a demographer at Brookings Institution, a think tank.

Democratic proposals to overhaul health insurance would exclude illegal immigrants from benefits, but Republicans contend the prohibition is meaningless because of lax enforcement. President Barack Obama has now proposed broader and tougher restrictions; opponents say the steps are still not enough.

Other findings:

• The homeownership rate fell to 66.6 percent last year, the lowest in six years, after hitting a peak of 67.3 percent in 2006. Residents in crowded housing jumped to 1.1 percent, the highest since 2004, a sign people were "doubling up" with relatives or friends to save money.

• The share of people who carpooled to work rose to 10.7 percent, up from 10.4 percent in the previous year. Commuters who took public transportation increased to 5 percent, the highest in six years, with Washington, D.C., at the top.

• Women's average pay still lagged men's, but the gap has been narrowing. Women with full-time jobs made 77.9 percent of men's pay, up from 77.5 percent in 2007 and about 64 percent in 2000.

• More people have high school diplomas. Only two states, Texas and Mississippi, had at least 1 in 5 adults without high school diplomas. This is down from 17 states in 2000 and 37 in 1990.

• More older people are working. About 15.5 percent of Americans 65 and over, or 6.1 million, were in the labor force. That's up from 15 percent in 2007.