NEW YORK It’s finally official: The United States is in a recession.
After months of rising unemployment, slowed economic output and stalled consumer spending, the National Bureau of Economic Research, a nonpartisan, nonprofit group of economists officially charged with declaring recessionary periods, on Monday said the U.S. economy entered a recession in December 2007. That would make this recession longer than the average length of the 10 previous recessions since World War II, which from peak to valley averaged 10 months until expansion returned, according to the bureau’s data.
The restaurant industry has borne the brunt of the economic downturn, as consumers saddled with housing concerns, layoffs and increased expenses for gas and utilities have cut back on dining out. Survey after survey from such firms as The NPD Group and RBC Capital Markets continue to show that consumers plan to further reduce spending on dining out even during the holiday season.
Many reports said the National Bureau of Economic Research's announcement was unrelated to the stock market’s free fall on Monday, when the Dow plummeted more than 600 points, or more than 7 percent. The S&P 500 fell 8.9 percent and the Nasdaq fell nearly 9 percent. Instead, reports said the sell-off followed the market’s gain from last week, as has been the volatile trading pattern for some time.
The Nation’s Restaurant News Stock Index, which is a market-cap weighted index of all public restaurant companies, fell 6 percent Monday, one of its largest one-day losses in recent years. Restaurant stocks have been battered of late, some losing more than 80 percent of their value during the year, as consumer spending slowed and operating costs rose, which ate into sales and profit. The aggregate market capitalization of all public restaurant companies has fallen 23 percent this year from $139.1 billion, as of Jan. 4, to $107.4 billion, as of Nov. 28.
The National Bureau of Economic Research defined a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators.” It does not rely on consecutive quarters of real gross domestic product contraction.
“The committee determined that the decline in economic activity in 2008 met the standard for a recession,” the bureau’s statement said. “All evidence other than the ambiguous movements of the quarterly product-side measure of domestic production confirmed that conclusion. Many of these indicators, including monthly data on the largest component of gross domestic product, consumption, have declined sharply in recent months.”
At 12 months past the latest peak in economic activity, this recession already is longer than the downturns of 2001 and 1990-1991, both of which saw economic expansion begin eight months after the last peak was declared, the bureau’s research shows. The recessions of the early 1970s and early 1980s bottomed out 16 months after economic contraction began.