Why a Recovery May Still Feel Like a Recession by Floyd Norris

A year ago, the American economy was in recession. Now it may be about to emerge from that downturn.

But if the economy is about to begin growing again, it will be from a very low level. The recession has produced declines far greater than in previous downturns over the past half-century. As a result, the economy may seem to be depressed even after growth resumes.

One area where that can be seen is shipments of durable goods produced by American companies. The rate of such shipments fell by more than 20 percent during this recession, and would have declined further were it not for increased production of weapons.

In no previous downturn since 1958, when the figures began being recorded, had the decline been as much as 14 percent.

The drop is all the more remarkable because such shipments rose at a relatively restrained rate in the preceding period of economic growth, particularly when military sales were excluded.

The accompanying charts show the trend in durable goods spending, for military purposes and for other shipments of durable goods, from 2000 through this June. In June, seasonally adjusted shipments for civilian purposes were 19 percent below the average monthly figure for 2000. Shipments of military items were running 123 percent above the 2000 average.

Those figures are in nominal dollars, not adjusted for inflation. That fact may exaggerate the trend, since prices of some durable goods, like computers, have fallen over the years.

The United States remains primarily a civilian economy. The military now takes about 8 percent of all durable goods, up from 3 percent in 2000.

The charts also show just how much change there was in durable goods orders, and shipments, in the first half of 2009 compared with the first half of 2008.

Over all, shipments for nonmilitary purposes were down by 20 percent, while orders fell by 27 percent. The declines in some areas were much larger, with orders for primary metal products, like iron and steel, plunging by 44 percent. The government cannot track orders for semiconductors because Intel will not provide figures, but shipments in that category were down by a third.

Shipments of commercial aircraft and parts fell by just 7 percent, largely because there are long lead times for such orders, and that helped to keep the shipment decline lower than it would otherwise have been. But orders fell 65 percent.

Those declines are not from boom periods. By early 2008, the recession was on, and durable goods shipments were already coming down. They had peaked the previous summer, and the National Bureau of Economic Research later determined the recession began in December 2007.


In reporting the June figures this week, the Census Bureau said durable goods orders for some categories were up from the previous month, although shipments were still declining. That provided more evidence that the recession might be nearing an end. But a return to high levels of orders, or shipments, may be many months away.