The recession is commonly defined as “Two or more consecutive quarters of a shrinking economy.” During the month of March 2001, the world’s largest economy - The United States of America - began experiencing a downturn, leading into a recession. (“Economists call it recession”). In comparing previous recessions that occurred, it appears that similar patterns exist also in the 2001-2002 recession. Such patterns start with increasing interest rates by the Federal Reserve Open Committee, proceeded by growth slowdowns, the fall of real output, and eventually the rise in unemployment. According to Robert E. Scott and Christian Weller, “further increases in real short - term interest rates herald a slowdown.” Further evidence that suggests a recession was on the horizon was information released from the National Bureau of Economic Research that states, “A peak marks the end of an expansion and the beginning of a recession.”(The Business Cycle Peak, March 2001.) During an expansion, however the economy is experiencing normalcy, and during this period the economy is between a trough and peak.

The National Bureau of Economic Research, however, defines a recession a

With talks of a recession prevalent in the air by March 2001, consumer confidence became further eroded. Furthermore, even before the recession, the stock market was down since the beginning of the year 2000, thus reducing the ability and/or willingness of investors and the holders of company stock to participate in the ongoing credit expansion. When the United States stocks resumed trading after a four-day close due to the September 11th 2001 terrorist attacks, the stocks were sharply lower in the first hour of trading. This delicate state of the stock market added to the erosion of consumer confidence and therefore hurt consumer spending. Consumer spending, however, fuels two-thirds of the United States economy. Boosting consumer confidence therefore is quintessential to the ending of the recession.

Recessions, however, have been noted to last for an average of between eight to eleven months. It is also noted that around the time when the Federal Reserve ratcheted up interest rates during 1999 and 2000 the economy noticed a slowdown. In addition to this, however, several other factors have contributed to the 2001-2002 recession. Factors such as the erosion of consumer confidence, rising energy prices, and stock market instability, as well as the effects of the terrorist attacks of September 11th 2001, and technological change and productivity can also be viewed when discussing the causes that led to the recession.

So after all the whispers and worry about the state of the economy, finally the U.S. economy did the only thing left to do, climb back up.

The U.S. economy was said to be at the end of the recession on March 3, 2002, by Alan Greenspan. Greenspan told Senate Bank Committee members that, “The recent evidence increasingly suggests that an economic expansion is already underway although an array of influences unique to this business cycle seems likely to moderate the speed.”(Hagenbaugh and Hager.)

Furthermore, by the month of October 2001, a noticeable fall in U.S. employment had occurred. Figures supporting this unemployment rate showed a rise from “4.9 percent in September to 5.4 percent in October.” (US unemployment rates rockets.) These figures released in October were the first to show the effects of the terrorist attacks of September 11th 2001. “This rate of unemployment was the biggest one-month rise in twenty -one years, as well as the highest rate since December 1996, reported the Labor Department.” (US unemployment rockets.) These job losses in October were felt across most industry groups, with noticeably larger declines in the manufacturing and services sector. Figures from the Labor Department showed a one hundred and eleven thousand job losses to the service industry, while the manufacturing sector saw employment fall by one hundred and forty two thousand. This marked the fifteenth consecutive month of factory job losses. Economist Ken Mayland said, “Companies are in survival mode and they are cutting jobs to control costs.” (US unemployment rockets.) This was certainly true because job cuts and layoffs were felt in most industries throughout the United States.

Fiscal Policy is the federal government’s decisions about the amount of money the government spends and collects in taxes to achieve a full employment and non-inflationary economy. Vice President Cheney said, “ A new report proves Bush’s tax relief eased the recession and saved thousands of jobs” (New Economic Report Shows Tax Relief.) In addition, a CEA report states that the tax relief provided powerful stimulus for the future, with reductions in marginal tax rates.(New Economic Report..) Such reductions improved incentives and left a greater share of money in the hands of Americans to spend on consumption. This was the intention of President Bush to stimulate consumer confidence in order to resume spending and further enhance the

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