Economic Snapshot | Retirement

Business sector declines mean longer recession

A weekly presentation of downloadable charts and short analyses designed to graphically illustrate important economic issues. Updated every Wednesday.

Snapshot for February 13, 2002.

Business sector declines mean longer recession
The recent release of productivity data provides useful information for judging whether the recession is over. As the figure below shows, private business sector output fell last quarter (by 0.4%), as it had in the previous two quarters. Thus, even though gross domestic product grew by 0.2% in the fourth quarter, this was the result of an expanding public sector. In fact, output in the private sector actually shrank last quarter.

Business sector output and hours, 2001

The figure also shows the strong decline in hours over the last three quarters, reflecting job losses and hours reductions. The reasonably fast productivity growth in the last three quarters (2.1%) is a sign that productivity is still growing at a rate higher than that of the 1973-95 period, and it can be expected to grow even faster in the early part of a recovery. This, however, suggests that output will have to grow faster in this recovery than in earlier recoveries in order to generate jobs and reduce unemployment.

This week’s Snapshot by EPI vice president Lawrence Mishel.

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