WASHINGTON — The U.S. economy officially entered a recession in February, the committee that calls downturns announced Monday, bringing the longest expansion on record to an end as the coronavirus pandemic caused economic activity to slow sharply.
The economy hit its peak in February and has since fallen into a downturn, the National Bureau of Economic Research’s Business Cycle Dating Committee said. A recession begins when the economy reaches a peak of activity and ends when it reaches its trough.
This downturn is the first since 2009, when the last recession ended, and marks the end of the longest expansion — 128 months — in records dating to 1854. Most economists expect this recession to be both particularly deep and exceptionally short, perhaps just a few months, as states reopen and economic activity resumes.
The National Bureau of Economic Research, a nonprofit group that tracks U.S. economic cycles, noted the unusual circumstances surrounding the slump in its announcement.
“The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions,” the group said. “Nonetheless, it concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions.”
Many economists think that the United States may already have exited the recession — or at least be on its way out.
Robert Gordon, a Northwestern University economist and a member of the dating committee, said that he would bet a recovery started in April or May, meaning that the recession would likely last for only a couple of months. Even so, he said, labeling it a downturn was not a hard choice “because of the extraordinary depth.”
“There’s no way you can observe that happening and not call it a recession,” he said, while acknowledging that it was a very unusual one. “Nothing like it has ever happened.”
The National Bureau of Economic Research formally dates business cycles based on a range of economic markers, importantly gross domestic product and employment.
U.S. economic activity began to contract sharply at the very end of February and into early March as the coronavirus spread across major metropolitan areas. Shops closed, travelers canceled flights and diners began avoiding restaurants, even before some states issued formal stay-at-home orders.
Real-time economic gauges, like a series on Chase credit card spending produced by JPMorgan, show that spending pulled back sharply in early March and has gradually rebounded since late April. Even so, spending remains well below precrisis levels.
The unemployment rate, a crucial gauge of economic health and an important input to business-cycle dating, began to rise in March before jumping to 14.7% in April. It eased slightly to 13.3% in May, data out last week showed, but that is higher than the peak jobless rate in the Great Recession.
“We’ve already seen signs that the economy is past the trough and is in the recovery phase,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank Securities.
But there are differences between the overall level of output and the period-to-period change, because the former is likely to remain depressed for some time, even as the latter bounces back.
Economists in a Bloomberg survey expect growth to contract by 9.7% in the second quarter compared with the same period last year, followed by a 6.8% contraction in the third quarter relative to the third quarter of 2019.
Looking at a commonly used annualized rate, which states the numbers so that they are easily comparable from period to period, growth is expected to contract by a 34% rate in the second quarter before bouncing back at a 15% pace in the third.
“It’s going to take longer to recover the level of activity, even though the growth rate is strong,” Luzzetti said.
The global economy as a whole will experience its deepest recession since World War II this year, according to a World Bank forecast released Monday. Global output will shrink by 5.2%, the institution said, warning that while growth is likely to rebound in 2021, a more protracted pandemic that leads to a breakdown in financial markets and global trade could darken the outlook.