Washington: Weathering the worst ever financial storm in nearly 80 years, the US economy in September, will not only be in recession for 22 consecutive months but the month also marks the first anniversary of Lehman Brothers’ failure.
Unlike last September, this time around, the financial conditions have improved and the pace of GDP contraction is slowing down.
A slew of unprecedented measures including mammoth stimulus packages and near-zero interest rate seem to have helped in bringing the nation’s economy on stabilisation path.
Despite the efforts, the US economy next month would be in recession for 22 months continuously, the longest ever since the 1930s Great Depression.
The American economy officially slipped into recession in December 2007 and the situation turned for the worse, with the bankruptcy of then Wall Street giant Lehman Brothers on 15 September, 2008.
Indicating that the worst could well be over, the US GDP shrank less than expected at 1% in the second quarter of 2009 and is widely anticipated to exit recession later this year.
In the first quarter, the GDP contracted 6.4%. Moreover, the rate of unemployment slipped to 9.4% in July while the count of people seeking unemployment benefits came down for the week that ended on 22 August.
Since Lehman Brothers bankruptcy, the country has seen millions of job losses, rising bank failures and massive public spending, to name a few. The unemployment rate is currently hovering around 9.4% and is anticipated to remain higher, till the economy stabilises.
Further, so far this year, the number of US bank failures has shot up to 84, over three times that of just 25 in 2008.
Apart from a stimulus package worth $787 billion, the Federal government has also pumped in billions of dollars into the system by way of various programmes and bailout measures. Moreover, since late last year, the benchmark interest rate is at near-zero.
With huge public spending, the country’s fiscal deficit for 2009 is projected to be around $1.6 trillion. Nonetheless, recently, US Federal Reserve Chairman Ben S Bernanke said that economic activity is “levelling out” and that financial conditions have improved.