Today, the National Bureau of Economic Research said the U.S. economy peaked in February, ending the longest expansion in U.S. history at 128 months, or about 10½ years.
NBER’s announcement codifies the painfully obvious. States began shutting down nonessential businesses in mid-March to contain the spread of the coronavirus, halting about 30% of economic activity putting tens of millions of Americans out of work.
It may seem obvious, with double-digit unemployment and plunging economic output. But if there was any remaining doubt that the U.S. is in a recession, it’s now been removed. In making the announcement, the committee pointed to the “unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy.”
At the same time, the committee noted the recession could be short-lived. The U.S. added 2.5 million jobs last month after losing more than 22 million in March and April. Many forecasters said they expect economic output to begin growing again in the third quarter.
Although economists expect a strong recovery, many businesses have shut down permanently. Consumers are likely to return to restaurants, stores and other gathering spots in large numbers only after a vaccine is available, perhaps by mid-2021. As a result, damage from the pandemic is expected to last years.
The standard definition of a recession is “a decline in economic activity that lasts more than a few months.” The committee decided this downturn is so severe it earns the recessionary title, even if the recovery begins quickly. From an official point of view, recessions “end” when the economic bleeding stops, even if it takes years for the patient to make a full recovery.
While the committee points to February as the month the economy peaked and the recession began, the quarterly peak came at the end of last year. The economy slowed so sharply in March — as the government tried to halt the spread of the coronavirus — it erased the gains of January and February and turned economic output for the first quarter negative.