Well, it is official: The National Bureau of Economic Research finally has declared that we are in a recession. They date the start of the recession as March, so we have been in recession for 11 months. Since World War II, recessions have averaged 11 months, with the longest lasting 16 months and the shortest lasting six months. Economic expansions have widely varying lengths, ranging from 12 to 120 months, while recessions are pretty well contained in length. This is no accident. There are standard, predictable economic and policy responses that stop recessions and return the U.S. economy to growth. Fortunately, those forces are in motion today.

On the economic side, in recessions, companies cut employment, inventories and capital spending to halt the slide in earnings. In past recessions, these cuts took about a year to complete; this time around, we are 11 months into that purging process. This recession is a tough one for corporate profits. After-tax earnings for S&P 500 companies have dropped 60%. This and other profit measures are showing post-war record declines. Consequently, over the last year, more than 2.5 million people have lost their jobs. And we have experienced record drops in business inventories and capital-goods orders.

On the economic policy side, things look brighter; policy is responding quickly. We had a very timely tax cut in July, and the Fed has cut short-term interest rates to levels last seen in 1961. The U.S. government already is ramping up spending on defense, intelligence and domestic security. Defense orders jumped from $6 billion in September to $18 billion in October, and that is just a downpayment on military spending. Also, a domestic stimulus package is likely. Finally, timely automatic stabilizers-unemployment insurance and lower marginal tax rates-already are buffering the downturn.

One recession benefit is that inflation has, in my opinion, evaporated. Most leading inflation indicators are pointing strongly down. Commodity prices have collapsed, crude oil and other energy prices are down sharply, the National Purchasing Managers Price Index has fallen to levels last seen in 1949, the Producer Price Index is falling, U.S. import and export prices are falling, and the U.S. dollar exchange rate is extremely strong. I think we have a good chance of driving CPI inflation to zero in 2002, and some other inflation measures may stay in outright deflation for a while. Some have expressed concern that deflation in the United States will put us in the same hole as Japan. While I am very worried about Japan, I completely reject the comparison. The United States is going through a short, but painful, process of purging excessive costs and restructuring companies and balance sheets. The result will be an economy poised again for growth. Japan, on the other hand, has tried to avoid this short-term pain and is mired in uncompetitive regulatory and corporate structures and sharply rising balance-sheet risk. So, while a financial crisis in Japan remains on my radar screen as one risk to global growth, a prolonged Japanese-style recession in the United States does not.

As a result of actions by business and government, I am confident that this recession will end soon, and the U.S. economy will resume growth this year. I do not, nor does anybody else know exactly when, but my guess is that the economy will begin expanding by the second quarter. Given all the stimuli in the pipeline, I expect a very strong second-half growth, with GDP growth in the 5% range and inflation remaining close to zero.

However, for the next two or three months, we are likely to see more bad news on the economy-rising unemployment, falling inventories and capital spending and weak company earnings. But we also will see more fiscal policy stimulus, perhaps another interest-rate cut and falling inflation. That should be good news for U.S. financial markets. U.S. equity markets usually start to rise about six months before recessions end, as investors look ahead for a rebound in company earnings. Given my expectation that this recession will end by spring, the current recovery in equity markets makes sense, despite the gloomy news on the economy. I also expect high volatility until the tension between current weak economic statistics and terrorist threats on one side and better economic policy and a successful military program on the other is resolved.

Lincoln Anderson is managing director and chief investment officer of LPL Financial Services in Boston. He served on President Reagan's Council of Economic Advisors and is a frequent contributor to the Wall Street Journal's Op-Ed page.