“The committee recognizes that the pandemic and the public health response have resulted in a downturn with characteristics and dynamics different from those of previous recessions,” the NBER business cycle committee said in a statement. “Nevertheless, he concluded that the unprecedented scale of the decline in employment and output, and its wide scope across the economy, justifies naming this episode as a recession, even if it it turns out to be shorter than previous contractions. ”
In making the statement, the committee determined that a “net peak in monthly economic activity” had occurred in February. The peak of quarterly activity occurred in the fourth quarter of 2019.
In general, recessions are expected to lead to two consecutive quarters of negative GDP growth. However, this is not always the case, and it is usually the NBER’s decision to determine recessions.
The committee noted that “a significant drop in economic activity has spread throughout the economy, normally seen in production, employment and other indicators. A recession begins when the economy reaches a peak in economic activity and ends when the economy reaches its bottom. ”
US GDP fell 5% in the first quarter and is expected to post the worst decline in history for the second quarter – perhaps over 50%.
The recession ends the longest expansion in US history, which the NBER dated 128 months, nearly 11 years ago. This growth seemed poised to continue until the coronavirus was declared a pandemic, a decision that triggered the shutdown of 95% of the US economy and brought down the unemployment rate, which was at its lowest level in 50 years. , at 14.7%. , its worst in post-World War II history.
However, most economists believe the contraction will end in the second quarter, ending the recession. Goldman Sachs chief economist Jan Hatzius said that while it was “almost certainly the deepest recession since” the war “, it was also certainly the shortest recession”.
In fact, Hatzius said, no recession has lasted less than six months, dating back to the mid-1800s.