It's official: Recession began in February, ending longest U.S. expansion ever
The U.S. economy entered a recession in February, a group of economists declared Monday, ending the longest expansion on record just as the novel coronavirus began swiftly spreading across the country.
The economists said employment peaked in February and fell sharply afterward, marking the beginning of the downturn as cases of COVID-19 metastasized throughout the U.S., soon killing thousands, shutting down millions of businesses and sparking stay-at-home orders for much of the nation's population by mid-March.
What a difference a pandemic can make: Just weeks earlier in February, the jobless rate stood at 3.5%, the lowest rate in 50 years, and employers in February had added 273,000 workers. The subsequent job losses — tens of millions of newly unemployed Americans from March to May — were the steepest ever seen in the U.S.
The economists who declared the recession's start make up a committee within the National Bureau of Economic Research, a trade group that determines when recessions begin and end. It defines a recession as "a decline in economic activity that lasts more than a few months."
The committee noted, though, that in this case, the depth of the downturn since February had led it to determine that a recession had begun.
"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," the NBER panel said.
The unemployment rate is officially 13.3%, down from 14.7% in April. Both figures are higher than in any other downturn since World War II. A broader measure of underemployment that includes some of the unemployed who have given up looking and those who have been reduced to part-time status is 21.2%.
The NBER's placing of the recession's start in February 2020 also marks the official end of the longest economic expansion in U.S. history: More than 10 years of growth, or 129 months, that started during the depths of the financial crisis during the Obama administration in June 2009.
In an indication of the unusual scale and nature of the downturn, "the NBER called this recession just over three months after its onset, making this the fastest call since the 1980 recession, much shorter than the usual nine months to a year," Gregory Daco, chief U.S. economist with Oxford Economics, said in a report.
Gross domestic product — the total value of goods and services — fell nearly 5% in the first three months of 2020. Forecasters predict that annualized growth during the second quarter has tumbled 30% to 40%.
The economy could slow even further if there is a second coronavirus wave, with experts warning that the decline in positive cases in largely clustered in a few parts of the country, such as New York City.
"This raises the risk of a rise in infections as the economy opens up further, which might trigger renewed government restrictions or voluntary changes in behavior that weigh on growth," Goldman Sachs chief economist Jan Hatzius wrote in a client note.