This essay examines the state of the United States economy as it emerges from the 2001 recession. A comparison of several central economic variables indicates that the 2001 recession was the mildest recession in the postwar period. In light of highly diﬀerentiated characteristics of recessions, the paper suggests that we diﬀerentiate among downturns by a ﬁve-category “recession severity scale,” analogous to the Saﬀir-Simpson Hurricane Scale. According to this approach, the 2001 recession ﬁts in the least severe box, a “category I recession,” along with the 1963 and 1967 non-recessions. The paper next examines the behavior of proﬁts in recent years and shows that ﬁnancial ﬁnagling has infected the aggregate proﬁts numbers. Finally, the study constructs a measure of the forward-looking return on equities and concludes that the prospective real yield on equities in early 2002 is at its low point of the last half-century.
Nordhaus, William D., "The Mildest Recession: Output, Profits, and Stock Prices as the U.S. Emerges from the 2001 Recession" (2002). Cowles Foundation Discussion Papers. 1632.