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What's the Difference Between a Boom and a Bull?

Emily YoffePosted Monday, March 19, 2001, at 6:15 PM ET

With things looking shaky in the economy and the stock markets, what do economists mean when the talk about the possible end of the boom and the bull (or the beginning of the bust and the bear)?

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We'll get to "boom" in a second, but first some basics. This month the U.S. economy entered the 120th month of the longest expansion in U.S. history. (The last previous record was 106 months between February 1961 and December 1969.) Expansion means that the gross domestic product (GDP)--the value of all goods and services produced--went up. In the last quarter of 2000, the growth was only at an annual rate of 1.1 percent, but as long as the numbers are on the positive side, the country is not in recession. A recession is when the GDP declines for six consecutive months; the last recession lasted from July 1990 to March 1991. During an expansion the economy can contract for up to five months, but as long as it finally turns around by the sixth month, it is has not technically entered a recession, and even those few negative months will be considered part of an overall expansion. But with growth of only 1.1 percent, we are out of boom territory. A boom is a colloquial term for an economy that is expanding above the GDP's average annual growth. In recent years that average has been around 3.5 percent. The U.S. economy was booming between 1995 and 2000--in the last quarter of 1999 the economy grew at an 8.3 percent annual rate.

The longest bull market in history began in 1982 when the Dow Jones Industrial Average, at a low of 777, began its climb. General agreement describes a bear market as one in which the stock market declines 20 percent off its peak. As of last week, the Dow Jones was off by 16 percent.

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Explainer thanks Ken Goldstein of the Conference Board and James Cramer of TheStreet.com.

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Emily Yoffe is the author of What the Dog Did: Tales From a Formerly Reluctant Dog Owner. You can send your Human Guinea Pig suggestions or comments to .

COMMENTS

Reader Comments From The Fray:

Folks are accustomed to instant gratification, these days. We want our burgers in two minutes, and if you tell them we are in a bear market, they look at their watch. You may need a calendar, for this one. A bear market can last for years, languishing in small corrections, and low volume. Yes the Dow is down a mere 16 percent, but NASDAQ is down 67%.

For just this sort of post, I asked my fellow [Fray] posters, last week, what the difference was between the total market capitalization of the entire stock market at the beginning of the bear market, and what it was last week, in Trillions of dollars. According to our fellow poster, "The Observer," market capitalization, total stock market, declined Four Trillion by the end of last year, and in his opinion, at least another Four Trillion this year, for a total of Eight Trillion Dollars. This is more than the national debt, which if my memory serves correct, stands in the vicinity of Five Trillion.

When you combine this disturbing fact with an energy crisis which includes high petroleum costs; consider California's economy, one fifteenth of the U.S. losing its juice (not just OJ Simpson); and add to that growing consumer pessimism about the future, 70% negative. Then, for icing on the cake, Europe and Asia can't let us plan a recession on our own, they want to crash our wake. In its totality, this picture is not pretty. In fact, if it were not for the fact that we are sitting on the most powerful and innovative economic machine in the world, America, I would be insisting that it is a great depression, and not a mere recession, in my crystal ball

--David W. Rochlin

(To reply, click here.)

(3/22)

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