The early 2000s recession was characterized by a drop in economic activity, primarily in industrialized countries. During the years 2000 and 2001, the European Union was hit by the recession, as was the United States from March to November 2001. The United Kingdom, Canada, and Australia escaped the recession, while Russia, which had not seen prosperity during the 1990s, began to recover. The recession in Japan that began in the 1990s has continued. Economists foresaw this downturn since the 1990s boom (characterized by low inflation and unemployment) weakened in several regions of East Asia during the Asian financial crisis of 1997. The global recession in industrialized countries was not as severe as the two previous global recessions. Because there were no two consecutive quarters of negative growth, some economists in the United States oppose to calling it a recession.
How long did the 2008 recession last?
Between 2007 and 2009, the Great Recession was a period of substantial overall deterioration (recession) in national economies around the world. The severity and timing of the recession differed by country (see map). The International Monetary Fund (IMF) declared it the worst economic and financial crisis since the Great Depression at the time. As a result, normal international ties were severely disrupted.
The Great Recession was triggered by a combination of financial system vulnerabilities and a series of triggering events that began with the implosion of the United States housing bubble in 20052012. In 20072008, when property values collapsed and homeowners began to default on their mortgages, the value of mortgage-backed assets held by investment banks fell, prompting some to fail or be bailed out. The subprime mortgage crisis occurred between 2007 and 2008. The Great Recession began in the United States officially in December 2007 and lasted for 19 months, due to banks’ inability to give financing to businesses and households’ preference for paying off debt rather than borrowing and spending. Except for tiny signs in the sudden rise of forecast probabilities, which were still significantly below 50%, it appears that no known formal theoretical or empirical model was able to effectively foresee the progression of this recession, as with most earlier recessions.
While most of the world’s developed economies, particularly in North America, South America, and Europe, experienced a severe, long-term recession, many more recently developed economies, particularly China, India, and Indonesia, experienced far less impact, with their economies growing significantly during this time. Oceania, meanwhile, was spared the brunt of the damage, thanks to its proximity to Asian markets.
In the 2000s, was there a recession?
During the late 2000s, the Great Recession was characterized by a dramatic drop in economic activity. It is often regarded as the worst downturn since the Great Depression. The term “Great Recession” refers to both the United States’ recession, which lasted from December 2007 to June 2009, and the worldwide recession that followed in 2009. When the housing market in the United States transitioned from boom to bust, large sums of mortgage-backed securities (MBS) and derivatives lost significant value, the economic depression began.
What caused the recession of 2000?
After the comparatively mild 1990 recession ended in early 1991, the country’s jobless rate reached a late high of 7.8% in mid-1992. Large layoffs in defense-related businesses initially hindered job development. Payrolls, on the other hand, surged in 1992 and grew rapidly through 2000.
During the dot-com bubble in the late 1990s, there were predictions that the bubble would burst. Following the October 27, 1997 mini-crash, which occurred in the aftermath of the 1997 Asian financial crisis, predictions of a future burst intensified. During the first several months of 1998, this created an unstable economic climate. However, things improved, and between June 1999 and May 2000, the Federal Reserve hiked interest rates six times in an attempt to calm the economy and create a smooth landing. The NASDAQ fall in March 2000 was the catalyst for the stock market bubble to explode. GNP growth slowed significantly in the third quarter of 2000, reaching its lowest level since a contraction in the first quarter of 1992.
According to the National Bureau of Economic Research (NBER), a private, nonprofit, nonpartisan institution tasked with assessing economic recessions, the US economy was in recession from March to November 2001, a period of eight months during the start of President George W. Bush’s presidency. The Business Cycle Dating Committee of the National Bureau of Economic Research estimated that the US economy peaked in March 2001. A peak signals the conclusion of an expansion and the start of a downturn. The conclusion that the growth that began in March 1991 ended in March 2001 and a recession began is thus a conclusion that the expansion that began in March 1991 ended in March 2001. The expansion lasted exactly ten years, making it the longest in NBER history.
However, economic conditions did not meet the conventional shorthand definition of recession, which is “a decrease in a country’s real gross domestic product in two or more consecutive quarters,” causing some confusion regarding how to determine when a recession began and ended.
The NBER’s Economic Cycle Dating Committee (BCDC) determines peaks and troughs in business activity using monthly, rather than quarterly, indices, as seen by the fact that starting and ending dates are given by month and year, not quarters. However, a dispute over the exact dates of the recession led Republicans to label it the “Clinton Recession” if it could be linked to President Bill Clinton’s final term. As more and more definitive evidence became available, BCDC members indicated that they would be open to reviewing the dates of the recession. Martin Feldstein, President of the National Bureau of Economic Research, stated in early 2004:
The new data clearly shows that our March timeframe for the start of the recession was far too late. Before making a final decision, we need to wait for more monthly statistics. We won’t be able to make a decision until we get further information.
From 2000 to 2001, the Federal Reserve raised interest rates in order to preserve the economy from an inflated stock market. A recession would have started in March 2000, when the NASDAQ plummeted following the fall of the dot-com boom, if the stock market were used as an unofficial benchmark. The Dow Jones Industrial Average escaped the NASDAQ’s meltdown largely untouched until the September 11, 2001 attacks, when it suffered its greatest one-day point loss and worst one-week loss in history. After a brief recovery, the market crashed again in the final two quarters of 2002. The market ultimately recovered in the final three quarters of 2003, agreeing with unemployment figures that a recession defined in this approach would have lasted from 2001 to 2003.
According to the Labor Department, 1.735 million jobs were lost in 2001, with another 508,000 positions lost in 2002. A total of 105,000 jobs were added in 2003. Unemployment increased from 4.2 percent in February 2001 to 5.5 percent in November 2001, but did not reach a peak until June 2003, when it reached 6.3 percent, before falling to 5% by mid-2005.
Was 2009 a recession year?
The Great Recession lasted from December 2007 to June 2009, making it the longest downturn since World War II. The Great Recession was particularly painful in various ways, despite its short duration. From its peak in 2007Q4 to its bottom in 2009Q2, real gross domestic product (GDP) plummeted 4.3 percent, the greatest drop in the postwar era (based on data as of October 2013). The unemployment rate grew from 5% in December 2007 to 9.5 percent in June 2009, before peaking at 10% in October 2009.
The financial repercussions of the Great Recession were also disproportionate: home prices plummeted 30% on average from their peak in mid-2006 to mid-2009, while the S&P 500 index dropped 57% from its peak in October 2007 to its trough in March 2009. The net worth of US individuals and charity organizations dropped from around $69 trillion in 2007 to around $55 trillion in 2009.
As the financial crisis and recession worsened, worldwide policies aimed at reviving economic growth were enacted. Like many other countries, the United States enacted economic stimulus measures that included a variety of government expenditures and tax cuts. The Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009 were two of these projects.
The Federal Reserve’s response to the financial crisis varied over time and included a variety of unconventional approaches. Initially, the Federal Reserve used “conventional” policy actions by lowering the federal funds rate from 5.25 percent in September 2007 to a range of 0-0.25 percent in December 2008, with the majority of the drop taking place between January and March 2008 and September and December 2008. The significant drop in those periods represented a significant downgrading in the economic outlook, as well as increasing downside risks to output and inflation (including the risk of deflation).
By December 2008, the federal funds rate had reached its effective lower bound, and the FOMC had begun to utilize its policy statement to provide future guidance for the rate. The phrasing mentioned keeping the rate at historically low levels “for some time” and later “for an extended period” (Board of Governors 2008). (Board of Governors 2009a). The goal of this guidance was to provide monetary stimulus through lowering the term structure of interest rates, raising inflation expectations (or lowering the likelihood of deflation), and lowering real interest rates. With the sluggish and shaky recovery from the Great Recession, the forward guidance was tightened by adding more explicit conditionality on specific economic variables such as inflation “low rates of resource utilization, stable inflation expectations, and tame inflation trends” (Board of Governors 2009b). Following that, in August 2011, the explicit calendar guidance of “At least through mid-2013, the federal funds rate will remain at exceptionally low levels,” followed by economic-threshold-based guidance for raising the funds rate from its zero lower bound, with the thresholds based on the unemployment rate and inflationary conditions (Board of Governors 2012). This forward guidance is an extension of the Federal Reserve’s conventional approach of influencing the funds rate’s current and future direction.
The Fed pursued two more types of policy in addition to forward guidance “During the Great Recession, unorthodox” policy initiatives were taken. Credit easing programs, as explored in more detail in “Federal Reserve Credit Programs During the Meltdown,” were one set of unorthodox policies that aimed to facilitate credit flows and lower credit costs.
The large scale asset purchase (LSAP) programs were another set of non-traditional policies. The asset purchases were done with the federal funds rate near zero to help lower longer-term public and private borrowing rates. The Federal Reserve said in November 2008 that it would buy US agency mortgage-backed securities (MBS) and debt issued by housing-related US government agencies (Fannie Mae, Freddie Mac, and the Federal Home Loan banks). 1 The asset selection was made in part to lower the cost and increase the availability of finance for home purchases. These purchases aided the housing market, which was at the heart of the crisis and recession, as well as improving broader financial conditions. The Fed initially planned to acquire up to $500 billion in agency MBS and $100 billion in agency debt, with the program being expanded in March 2009 and finished in 2010. The FOMC also announced a $300 billion program to buy longer-term Treasury securities in March 2009, which was completed in October 2009, just after the Great Recession ended, according to the National Bureau of Economic Research. The Federal Reserve purchased approximately $1.75 trillion of longer-term assets under these programs and their expansions (commonly known as QE1), with the size of the Federal Reserve’s balance sheet increasing by slightly less because some securities on the balance sheet were maturing at the same time.
However, real GDP is only a little over 4.5 percent above its prior peak as of this writing in 2013, and the jobless rate remains at 7.3 percent. With the federal funds rate at zero and the current recovery slow and sluggish, the Federal Reserve’s monetary policy plan has evolved in an attempt to stimulate the economy and meet its statutory mandate. The Fed has continued to change its communication policies and implement more LSAP programs since the end of the Great Recession, including a $600 billion Treasuries-only purchase program in 2010-11 (often known as QE2) and an outcome-based purchase program that began in September 2012. (in addition, there was a maturity extension program in 2011-12 where the Fed sold shorter-maturity Treasury securities and purchased longer-term Treasuries). Furthermore, the increasing attention on financial stability and regulatory reform, the economic consequences of the European sovereign debt crisis, and the restricted prospects for global growth in 2013 and 2014 reflect how the Great Recession’s fallout is still being felt today.
Is a recession every seven years?
“Recessions follow expansions as nights follow days,” said Ruchir Sharma, Morgan Stanley Investment Management’s head of emerging markets and global macro. “Over the previous 50 years, we’ve had a worldwide recession once every seven to eight years.”
What was the cause of the Great Recession of 2007-2009?
The Great Recession, which ran from December 2007 to June 2009, was one of the worst economic downturns in US history. The economic crisis was precipitated by the collapse of the housing market, which was fueled by low interest rates, cheap lending, poor regulation, and hazardous subprime mortgages.
What was the economy like in the 2000s?
Because of inadequate job creation and an increasing divide between rich and poor, the middle class has not taken out an equal part of what it put into the economy, according to Bernstein.
In the 2000s, the country was hit by a jobless recovery. According to the EPI, job growth was only 0.6 percent throughout this time period, which was insufficient to keep up with the expanding population. As a result, at the end of the business cycle, there were 1.5 million more unemployed workers than at the start.
“The official unemployment rate in the 2000s undervalued how tough it was to obtain work,” EPI analyst Heidi Schierholtz said. “After the 2001 recession, the United States’ job-creation machine came to a halt, scarcely picking up momentum in the recovery.”
The State of Working America was co-written by Schierholtz, Bernstein, and Lawrence Mishel, another EPI economist. The book was first published in 1988, and the current edition includes chapters on jobs, earnings, and income that have been revised.
According to the book, the economy took four years after the 2001 recession to return to its original peak employment level, which is an unusual amount of time. The recovery took more than twice as long as the average of all recoveries after 1945, which was 21 months.
A second round of very weak economic growth near the end of the cycle did not support jobs.
Bernstein compared the economy of the 2000s to shampoo instructions: “Bubble, bust, repeat.” “We need to develop growth that is long-term and not based on speculative bubbles.”
Nearly one-fifth of unemployed workers had been jobless for at least six months by the end of the business cycle.
Furthermore, in the 2000s, one out of every eleven workers was underemployed because they were looking for full-time work but were forced to take part-time jobs. In the 2000s, workers’ hours were cut by 2.2 percent, canceling out a 1 percent increase in hourly income for the median family.
However, Sherk claims that unemployment rates are equivalent to those seen in decades other than the 1990s, when the tech boom created a disproportionate amount of jobs.
“Unemployment is high in comparison to the late 1990s, but not in comparison to the 1980s,” Sherk explained. “It’s not exceptionally high, especially given that the work force hasn’t risen at the same rate as it did in the 1990s.”
What was the recession of 2001 like?
The 2001 recession was an eight-month economic slowdown that lasted from March to November. 1 While the economy began to recover in the fourth quarter of that year, the effects lingered, and national unemployment rose to 6% in June 2003.
What triggered the Great Recession of 2008?
The Federal Reserve hiked the fed funds rate in 2004 at the same time that the interest rates on these new mortgages were adjusted. As supply outpaced demand, housing prices began to decrease in 2007. Homeowners who couldn’t afford the payments but couldn’t sell their home were imprisoned. When derivatives’ values plummeted, banks stopped lending to one another. As a result, the financial crisis erupted, resulting in the Great Recession.
Was the economy in the 2000s strong?
According to a wide range of data, the last decade was the worst for the US economy in modern times, with zero net job growth and the weakest growth in economic output since the 1930s. Many people who stayed in jobs were impacted as well, with middle-income families earning less in 2008 than they did in 1999, when adjusted for inflationthe first decade since the 1960s that median incomes have decreased. Overall, American households fared worse:
And, when adjusted for inflation, the net worth of American householdsthe value of their homes, retirement savings, and other assets minus debtshas decreased, compared to substantial advances in every preceding decade since data were first gathered in the 1950s.
This was the first business cycle in which a working-age household was worse off at the end than it was at the start, despite significant productivity growth that should have been able to improve everyone’s well-being, said Lawrence Mishel, president of the Economic Policy Institute, a liberal think tank.
The problem is that we mismanaged the macroeconomy, and that got us into enormous trouble, said IHS Global Insight Chief Economist Nariman Behravesh to the Washington Post. Meanwhile, Wall Street CEOs received an estimated $200 billion in bonuses in 2009, the majority of which would be tax-free. Despite efforts to pull Republicans on board, the House has already enacted finance regulatory reform without a single Republican vote, and some Senate Republicans have openly attacked reform.