![Treasury Yield Spreads](https://upload.wikimedia.org/wikipedia/commons/b/bb/Treasury_Yield_Spreads.webp)
The early 2000s recession was a decline in economic activity which mainly occurred in developed countries. The
recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
affected the
European Union
The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been des ...
during 2000 and 2001 and the
United States
The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territorie ...
from March to November 2001. The
UK,
Canada
Canada is a country in North America. Its ten provinces and three territories extend from the Atlantic Ocean to the Pacific Ocean and northward into the Arctic Ocean, covering over , making it the world's second-largest country by tot ...
and
Australia
Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
avoided the recession, while
Russia
Russia (, , ), or the Russian Federation, is a List of transcontinental countries, transcontinental country spanning Eastern Europe and North Asia, Northern Asia. It is the List of countries and dependencies by area, largest country in the ...
, a nation that did not experience prosperity during the 1990s, in fact began to recover from said situation. Japan's
1990s recession continued. This recession was predicted by economists, because the boom of the 1990s (accompanied by both low
inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
and low
unemployment
Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...
) slowed in some parts of
East Asia
East Asia is the eastern region of Asia, which is defined in both geographical and ethno-cultural terms. The modern states of East Asia include China, Japan, Mongolia, North Korea, South Korea, and Taiwan. China, North Korea, South Korea and ...
during the
1997 Asian financial crisis
The Asian financial crisis was a period of financial crisis that gripped much of East Asia and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1 ...
. The recession in industrialized countries was not as significant as either of the two previous worldwide recessions. Some economists in the United States object to characterizing it as a recession since there were no two consecutive quarters of negative growth.
United States
![Recession2001](https://upload.wikimedia.org/wikipedia/commons/4/4f/Recession2001.PNG)
After the relatively mild
1990 recession ended in early 1991, the country hit a belated unemployment rate peak of 7.8% in mid-1992. Job growth was initially muted by large layoffs among defense related industries.
However, payrolls accelerated in 1992 and experienced robust growth through 2000.
Predictions that the bubble would burst emerged during the
dot-com bubble
The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet.
Between 1995 and its peak in March 2000, the Nasdaq Compo ...
in the late 1990s. Predictions about a future burst increased following the
October 27, 1997 mini-crash
The October 27, 1997, mini-crash is a global stock market crash that was caused by an economic crisis in Asia, the "Asian contagion", or '' Tom Yum Goong crisis'' ( th, วิกฤตต้มยำกุ้ง). The point loss that the Dow Jo ...
, in the wake of the
1997 Asian financial crisis
The Asian financial crisis was a period of financial crisis that gripped much of East Asia and Southeast Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion. However, the recovery in 1998–1 ...
. This caused an uncertain economic climate during the first few months of 1998. However conditions improved, and the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
raised interest rates six times between June 1999 and May 2000 in an effort to cool the economy to achieve a
soft landing Soft landing may refer to:
*Soft landing (aeronautics)
A soft landing is any type of aircraft, rocket or spacecraft landing that does not result in significant damage to or destruction of the vehicle or its payload, as opposed to a hard la ...
. The burst of the stock market bubble occurred in the form of the
NASDAQ
The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
crash in March 2000. Growth in
gross domestic product
Gross domestic product (GDP) is a money, monetary Measurement in economics, measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjec ...
slowed considerably in the third quarter of 2000 to the lowest rate since a contraction in the first quarter of 1992.
According to the
National Bureau of Economic Research
The National Bureau of Economic Research (NBER) is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic c ...
(NBER), which is the private, nonprofit, nonpartisan organization charged with determining economic recessions, the U.S. economy was in recession from March 2001 to November 2001,
a period of eight months at the beginning of President George W. Bush's term of office. The NBER's Business Cycle Dating Committee determined that a peak in business activity occurred in the U.S. economy in March 2001. A peak marks the end of an expansion and the beginning of a recession. The determination of a peak date in March is thus a determination that the expansion that began in March 1991 ended in March 2001 and a recession began.
The expansion lasted exactly 10 years, the longest in the NBER's chronology.
However, economic conditions did not satisfy the common shorthand definition of recession, which is "a fall of a country's real gross domestic product in two or more successive quarters", and has led to some confusion about the procedure for determining the starting and ending dates of a recession.
The NBER's Business Cycle Dating Committee (BCDC) uses monthly, rather than quarterly, indicators to determine peaks and troughs in business activity, as can be seen by noting that starting and ending dates are given by month and year, not quarters. However, controversy over the precise dates of the recession led to the characterization of the recession as the "Clinton Recession" by Republicans, if it could be traced to the final term of President
Bill Clinton
William Jefferson Clinton ( né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 and agai ...
. BCDC members suggested they would be open to revisiting the dates of the recession as newer and more definitive data became available.
[Henderson, Nell (January 22, 2004)]
Economists Say Recession Started in 2000
''The Washington Post.'' In early 2004, NBER President Martin Feldstein said:
However, in 2008, the NBER confirmed that the recession started in March 2001.
From 2000 to 2001, the
Federal Reserve
The Federal Reserve System (often shortened to the Federal Reserve, or simply the Fed) is the central banking system of the United States of America. It was created on December 23, 1913, with the enactment of the Federal Reserve Act, after a ...
, in a move to protect the economy from
the overvalued stock market, made successive interest rate increases. Using the stock market as an unofficial benchmark, a recession would have begun in March 2000 when the
NASDAQ
The Nasdaq Stock Market () (National Association of Securities Dealers Automated Quotations Stock Market) is an American stock exchange based in New York City. It is the most active stock trading venue in the US by volume, and ranked second ...
crashed following the collapse of the dot-com bubble. The
Dow Jones Industrial Average
The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
The DJIA is one of the oldest and most commonly followed equity inde ...
was relatively unscathed by the NASDAQ's crash until the
September 11, 2001
The September 11 attacks, commonly known as 9/11, were four coordinated suicide terrorist attacks carried out by al-Qaeda against the United States on Tuesday, September 11, 2001. That morning, nineteen terrorists hijacked four commerc ...
attacks, after which the DJIA suffered its worst one-day point loss and biggest one-week losses in history up to that point. The market rebounded, only to
crash once more in the final two quarters of 2002. In the final three quarters of 2003, the market finally rebounded permanently, agreeing with the unemployment statistics that a recession defined in this way would have lasted from 2001 through 2003.
The Labor Department estimates that a net 1.735 million jobs were shed in 2001, with an additional net 508,000 lost during 2002. 2003 saw a small gain of a mere 105,000 jobs. Unemployment rose from 4.2% in February 2001 to 5.5% in November 2001, but did not peak until June 2003 at 6.3%, after which it declined to 5% by mid-2005.
Canada
Canada's economy is closely linked to that of the United States, and economic conditions south of the border tend to quickly make their way north. Canada's stock markets were especially hard hit by the collapse in high-tech stocks. For much of the 1990s the rapid rise of the
TSX
The Toronto Stock Exchange (TSX; french: Bourse de Toronto) is a stock exchange located in Toronto, Ontario, Canada. It is the 10th largest exchange in the world and the third largest in North America based on market capitalization. Based in t ...
had almost wholly been attributed to two stocks:
Nortel
Nortel Networks Corporation (Nortel), formerly Northern Telecom Limited, was a Canadian multinational telecommunications and data networking equipment manufacturer headquartered in Ottawa, Ontario, Canada. It was founded in Montreal, Quebec, ...
and
BCE
Common Era (CE) and Before the Common Era (BCE) are year notations for the Gregorian calendar (and its predecessor, the Julian calendar), the world's most widely used calendar era. Common Era and Before the Common Era are alternatives to the or ...
. Both companies were hard hit by the downturn, especially Nortel, which was forced to lay off much of its workforce. The events of September 11 also hurt the Canadian stock markets and were especially devastating to the already troubled airline sector.
However, in the wider economy, Canada was surprisingly unhurt by these events. While growth slowed, the economy never actually entered a recession. This was the first time that Canada had avoided following the United States into an economic downturn. The rate of job creation in Canada continued at the rapid pace of the 1990s. A number of explanations have been advanced to explain this. Canada was not as directly affected by 9/11 and the subsequent wars, and the downward pressure of these events was more muted. Canada's fiscal management during the period has been praised as the federal government continued to bring in large surpluses throughout this period, in sharp contrast to the United States. Unlike the United States no major tax cuts or major new expenditures were introduced. However, during this time, Canada did pursue an expansionary monetary policy in an effort to reduce the effects of a possible recession. Many provincial governments suffered greater problems with a number of them returning to deficits, which was blamed on the
fiscal imbalance Fiscal imbalance is a mismatch in the revenue powers and expenditure responsibilities of a government.
In the literature on fiscal federalism, two types of fiscal imbalances are measured: Vertical Fiscal Imbalance and Horizontal Fiscal Imbalance. W ...
. 2003 saw elections in six Canadian provinces and in only one did the governing party not lose seats.
Russia
The Soviet Union's last year of economic growth was 1989, and throughout the 1990s, recession ensued in the
Former Soviet Republics
The post-Soviet states, also known as the former Soviet Union (FSU), the former Soviet Republics and in Russia as the near abroad (russian: links=no, ближнее зарубежье, blizhneye zarubezhye), are the 15 sovereign states that wer ...
. In May 1998, following the 1997
crash of the East Asian economy, things began to get even worse in Russia. In August 1998, the value of the ruble fell 34% and people clamored to get their money out of banks (see
1998 Russian financial crisis
The Russian financial crisis (also called the ruble crisis or the Russian flu) began in Russia on 17 August 1998. It resulted in the Russian government and the Russian Central Bank devaluing the ruble and defaulting on its debt. The crisis had s ...
). The government acted by dragging its feet on privatization programs. Russians responded to this situation with approval by electing the more pro-
dirigist and less
liberal
Liberal or liberalism may refer to:
Politics
* a supporter of liberalism
** Liberalism by country
* an adherent of a Liberal Party
* Liberalism (international relations)
* Sexually liberal feminism
* Social liberalism
Arts, entertainment and m ...
Vladimir Putin
Vladimir Vladimirovich Putin; (born 7 October 1952) is a Russian politician and former intelligence officer who holds the office of president of Russia. Putin has served continuously as president or prime minister since 1999: as prime min ...
as President in 2000. Putin proceeded to reassert the role of the federal government, and gave it power it had not seen since the Soviet era. State-run businesses were used to out-compete some of the more wealthy rivals of Putin. Putin's policies were popular with the Russian people, gaining him re-election in 2004. At the same time, the export-oriented Russian economy enjoyed considerable influx of foreign currency thanks to rising worldwide oil prices (from $15 per barrel in early 1999 to an average of $30 per barrel during Putin's first term). The early 2000s recession was avoided in Russia due to rebound in exports and, to some degree, a return to
dirigisme
Dirigisme or dirigism () is an economic doctrine in which the state plays a strong directive (policies) role contrary to a merely regulatory interventionist role over a market economy. As an economic doctrine, dirigisme is the opposite of ''lai ...
.
Japan
Japan's recession, which started in the early 1990s, continued into the 2000s, with
deflation
In economics, deflation is a decrease in the general price level of goods and services. Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). Inflation reduces the value of currency over time, but sudden deflation ...
being the main problem. Deflation began plaguing Japan in the fiscal year ending 1999, and by 2005 the
yen
The is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar (US$) and the euro. It is also widely used as a third reserve currency after the US dollar and the e ...
had 103% of its 2000 buying power. The
Bank of Japan
The is the central bank of Japan.Louis Frédéric, Nussbaum, Louis Frédéric. (2005). "Nihon Ginkō" in The bank is often called for short. It has its headquarters in Chūō, Tokyo, Chūō, Tokyo.
History
Like most modern Japanese instituti ...
attempted to cultivate
inflation
In economics, inflation is an increase in the general price level of goods and services in an economy. When the general price level rises, each unit of currency buys fewer goods and services; consequently, inflation corresponds to a reductio ...
with high
liquidity
Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include:
* Market liquidity, the ease with which an asset can be sold
* Accounting liquidity, the ability to meet cash obligations when due
* Liqui ...
and a nominal 0%
interest rate
An interest rate is the amount of interest due per period, as a proportion of the amount lent, deposited, or borrowed (called the principal sum). The total interest on an amount lent or borrowed depends on the principal sum, the interest rate, th ...
on loans. Other aspects of the Japanese economy were good during the early 2000s; unemployment remained relatively low, and
China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
became somewhat dependent on the Japanese exports. The
bear market
A market trend is a perceived tendency of financial markets to move in a particular direction over time. Analysts classify these trends as ''secular'' for long time-frames, ''primary'' for medium time-frames, and ''secondary'' for short time-fram ...
, however, continued in Japan, despite the best efforts of the Bank.
European Union
![Évolution du taux directeur de la BCE (1999-2004)](https://upload.wikimedia.org/wikipedia/commons/9/93/%C3%89volution_du_taux_directeur_de_la_BCE_%281999-2004%29.svg)
Transition left the economy of the European Union in a cautiously optimistic state during the early 2000s. The most difficult years were 2000–2001, precipitating the worst years of the American recession. The European Union introduced a new currency on January 1, 1999. The
euro
The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
, which was met with much anticipation, had its value immediately plummet, and it continued to be a weak currency throughout 2000 and 2001. Inflation struck the
Eurozone
The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies ...
for a few months in summer 2001 but the economy deflated within months. In 2002, the value of the euro began to rapidly rise (reaching parity with the US dollar on July 15, 2002). This hurt business for companies based in Europe, as the profits made abroad (especially in the
Americas
The Americas, which are sometimes collectively called America, are a landmass comprising the totality of North and South America. The Americas make up most of the land in Earth's Western Hemisphere and comprise the New World.
Along with th ...
) had an unfavorable exchange rate.
France
France (), officially the French Republic ( ), is a country primarily located in Western Europe. It also comprises of Overseas France, overseas regions and territories in the Americas and the Atlantic Ocean, Atlantic, Pacific Ocean, Pac ...
and
Germany
Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...
both entered recession towards the end of 2001, but in May 2002 both countries declared that their recessions had ended after a mere six months each. Both economies suffered from
global tech crash with the ruling German party introducing the then unpopular austerity, tax cuts and labor reforms nicknamed
Hartz concept
The Hartz concept, also known as Hartz reforms or the Hartz plan, is a set of recommendations submitted by a committee on reforms to the German labour market in 2002. Named after the head of the committee, Peter Hartz, these recommendations went o ...
to boost the German economy in wake of an economic slump that would persist until the mid-2000s with unemployment peaking in early 2005 of 12.7%. However, some European Union countries – including the
United Kingdom
The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom (UK) or Britain, is a country in Europe, off the north-western coast of the continental mainland. It comprises England, Scotland, Wales and North ...
– managed to delay sliding into recession until the late 2000s.
References
Further reading
*
*
{{DEFAULTSORT:Early 2000s Recession
20th-century economic history
21st-century economic history
2000 in economics
2001 in economics
Recessions in the United States
Presidency of George W. Bush
2001 in the United States