It’s Official: The U.S. Recession Began in February

The record-long U.S. expansion ended in February, according to the academic panel that serves as the arbiter of America’s business cycles, putting an official date on the start of the coronavirus-induced recession.

“The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020,” the National Bureau of Economic Research’s Business Cycle Dating Committee said in a web statement on Monday. “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 said the past expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854. Its statement hinted that the downturn could be shorter than usual, with signs of recovery already evident, including an unexpected gain in jobs last month. If that continues, the recession could be dated to last only a few months.

“It does seems like there has been an improvement in the economy since mid-April,” said James Stock, a Harvard University economist and committee member. “What happens going forward depends on policy, specifically epidemiological policy, and on the course of the virus.”

Stock said he’s worried that a “second wave” of infections could hurt any recovery and lengthen a downturn, which would have the result of turning short-term unemployment into long-term joblessness, with a wave of bankruptcies. Some economists worry the recovery won’t be robust, just as the 10-year expansion was muted following the financial crisis.

“Technically, the recession could be over, making it the deepest and shortest on record,” said Ryan Sweet, head of monetary policy research at Moody’s Analytics. “Even though growth has resumed, marking a technical end to the recession, for a large number of businesses and individuals, it’s going to feel like a recession for years to come.”

Many economists informally define a recession as two negative quarters of gross domestic product. The bureau doesn’t use that definition and instead looks for a significant decline in economic activity, typically lasting more than a few months. In the case of the latest downturn, the depth of the decline outweighed its brevity.

“The committee weighs the depth of the contraction, its duration, and whether economic activity declined broadly across the economy,” the NBER said. “The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions.”

Committee members said the depth of the downturn — with a record drop in employment — made the call easier to make without a lengthy delay for deliberations. Typically, it’s taken the committee six to 18 months following a peak to declare a recession.

“All of our decisions involve a painstaking review of all the relevant data, including this one,” said Robert Hall, a Stanford University professor who leads the committee. “The decline in economic activity starting in March was huge.”

Harvard’s Stock said, “in this case, the peak was clear, from nearly all indicators.” The “profound depth” of the decline makes it clearly a recession “even if the duration is as short as two months — a theoretical possibility — although we might not know the actual trough for quite a while, there are so many special factors affecting the data.”

The committee commented on the possible brevity of the recession, not to conclude it’s over but to emphasize the NBER would be comfortable with the call even if the downturn is very short, said James Poterba, NBER president.

“The committee doesn’t have a crystal ball and the statement was not making any forecast,” he said.

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