The U.S. economy officially entered into a recession in February, sources from the National Bureau of Economic Research, ending the record 128-month expansion that began in June 2009.
The Business Cycle Dating Committee, which tracks and dates business cycles within the NBER, has said that the economy peaked in February before the coronavirus pandemic spread throughout the country and prompted an unprecedented shutdown in economic activity. Recessions often refer to two consecutive quarters of contraction, but the NBER’s formal calculation included other factors, such as domestic production and employment.
“The time that it takes for the economy to return to its previous peak level of activity or its previous trend path may be quite extended,” the committee’s report stated.
Economists frequently point to mid-March as the launching point for sweeping layoffs and frozen consumer spending as people cleared out of stores, restaurants, offices and travel to avoid the virus’s spread. Now, as states slowly ease restrictions, the question will be whether “reopening” fuels an economic bounce back anytime soon, or whether the downturn will extend into next year as people struggle to go back to work and the nation contends with a possible second wave of infections.
That the economy had plunged into a recession was not a surprise. As economist Ernie Tedeschi put it: “It’s now official (and utterly unsurprising).”
Nonetheless, NBER’s report highlighted just how sharply the pandemic riled such vast swaths of the economy and cratered a record-long expansion.
“In the case of the February 2020 peak in economic activity, the committee concluded that the drop in activity had been so great and so widely diffused throughout the economy that the downturn should be classified as a recession even if it proved to be quite brief,” the report noted.
In tracking business cycles and their inflection points, the NBER committee also takes into account indicators such as initial unemployment insurance claims, wholesale retail sales and industrial production. The committee’s official reports come retrospectively or once it becomes clear there won’t be a need for major revisions even when more data becomes available.
Sources from The Washington Post state that Government officials and economists have offered different timelines for when the economy might rebound, offering up an alphabet soup of “W,”- “V”- and “U”-shape recoveries that could arrive later in the year or into 2021.
Experts insist that the turnaround will still hinge on controlling the spread of the novel coronavirus, which has killed more than 109,000 people in the United States. More than 40 million Americans have filed for unemployment benefits, and basic public fear about breaking social distancing has put a toll on consumer spending.
The NBER report did little to shake up U.S. markets, which have become steadily optimistic about a national “reopening.” By late afternoon, the Dow Jones industrial average was up 330 points, or 1.2 percent, and the Standard & Poor’s 500-stock index and the Nasdaq composite index climbed 0.8 percent.