2001
March 2001 marked the turning point of a business cycle that lasted exactly ten years. The growth rate of GDP in the first quarter was 1.3, second quarter at .3, third quarter –1.3 and then rose again in the last quarter by 1.7. To compare with previous years, GDP was growing and in an expansionary state. This year, while only having one quarter of negative growth, would not normally be considered a recession. Traditionally, two consecutive quarters of negative growth are needed to classify the period as a recession. However, the NBER uses more than just GDP data to estimate economic growth. Another indicator of economic well-being was the percentage of unemployment. From January to December, unemployment rose from 4.2 percent to 5.8 percent while in previous years has been steady around 4.0. Due to the unemployment rise, and the slight fall in GDP, 2001 was considered by the NBER as a recession year. As discussed in class the inflation rate stayed relatively steady at 2-3 percent.
With the events of September 11th, the recession seemed like it would be more severe than it actually was. Government policies implemented during the year included; the war on terrorism, an increase in government spending, and a tax cut by the Bush administration. According to the Wall Street Journal, the federal interest rate decreased to the lowest it has been in almost four decades. Because of this the interest rates on mortgages and car loans also went down. Because of these policies, people were more motivated to spend, not save, and the recession was mild and short.