which is two or more quarters of negative growth in GDP, the recession ended a long time ago. There were only 3 quarters of negative GDP growth (2001 Q1-Q3) according to the Bureau of Economic Analysis National Economic Accounts website.

What has happened is that the job growth has been slow to recover. As one wag put it, "If your neighbor loses his job, it's a recession. If you lose your job, it's a depression."

There were a lot of factors behind all of this. From my perspective as someone who was working in the tech industry at the time, I believe one of them is the "negative wealth effect" that came from falling stock market prices (they peaked in 2000). During the 1990s, a lot of people saw their net worth increasing due to the values of their portfolios (remember, at least half of all Americans are invested in the market in some form, such as mutual funds for 401Ks and IRAs). Economists called this the "wealth effect". People thought they were richer, so they spent more. Since consumer spending accounts for about 2/3rds of the US economy, this built upon itself.

A lot of this growth in stock prices in the 1990s was due to the tech boom. Much of that was driven by the so-called "New Economy" of Internet dot.bomb companies, a lot by rampant speculation, and a lot by outright fraud. Far too many people were dumping money into some really dumb Internet business ideas that had no chance of ever being successful, and huge IPOs of these companies fed the feeding frenzy for more of the same.* The speculated growth in Internet companies caused the telecomm companies to spend billions increasing their infrastructure on such things as fibre optic networks to carry the expected data loads. Companies like Cisco and Compaq sold a lot of high end servers and routers to the .Bomb companies. There was also the spectre of Y2K causing mainstream corporations to spend a lot of money upgrading their computer infrastructure with new hardware and software. These factors caused the tech-heavy NASDAQ to soar.

However, they also led to it's fall. Companies that had spent a fortune on new computers and software in preparation for Y2K decided they wanted to get some return on their investment, so they slashed purchases in 2000. This hit a lot of hardware and software companies hard. Investors began to lose faith in the www.dumbassidea.com "New Economy" and quit sinking more money into companies that would never show a profit. The collapse of those companies dragged down a lot of other Internet companies, too. The reduced demand for bandwidth left the telecomms with a lot of surplus capacity and a lot of debt. Many of them ended up filing for bankrupsy. As the dot.bomb companies liquidated, a lot of good servers and routers were available for pennies on the dollar, making it hard for the manufacturers to sell new equipment. All of these things caused tech stocks (and the NASDAQ) to decline sharply.

When people saw their net worth declining, they began to cut purchasing. This caused job losses outside of the tech industry, too. Job creation is always a lagging economic indicator after a recession. Companies do their best to shed jobs and cut costs during a recession, and they don't want to rush in too soon afterwards. It's almost a game of "You first" as they're waiting for other companies to pick up on hiring before they start hiring, too.

However, the so-called "jobless recovery" might not be as bad as reported. Last night on NBC News, they reported how small businesses have been hiring quite a bit during the past year, and how those numbers aren't tracked well by the government, understating job creation. The report stated that small businesses account for 2/3rds of all job creation in the US, so if it's accurate, this is good news.

As I write this, the NASDAQ rose 50% last year. The DJII rose over 20% and the S&P500 was up sharply, too. All of these indices are a long way from their peaks in 2000, and I suspect it'll be a very long time before we see the NASDAQ anywhere near 5000 again. However, it seems the current values are more grounded in reality than those insane peaks, so perhaps it'll have staying power this time.

* My favorite example of a really Dumb Ass Idea was the Internet company that wanted to sell pet food cheaper than you could buy it at the local grocery store. They neglected to factor in the cost of shipping (and it costs a lot to ship a 50 pound bag of dog food), so they lost a lot of money on every sale. They were the living embodiment of the old joke, "We lose money on every sale but make it up in volume." Only, under the delusions of the "New Economy", they actually thought this was an acceptible business practice. They lost millions and ultimately went bankrupt.