The U.S. is officially in a recession, bringing an end to a historic 128 months of economic growth, after the coronavirus pandemic swept the country and shut down the economy.
For more than a decade, the American economy seemed to contradict the adage “What goes up, must come down.” That ended in February, according to the National Bureau of Economic Research, or NBER, the agency that identifies periods of economic growth and contraction.
The economic expansion would have turned 11 years old this month — a span unmatched in the postwar economy.
The NBER noted that the quarterly peak was the final quarter of 2019. Gross domestic production dropped by 5 percent in the first quarter of 2020, and analysts predict that the drop in the current quarter is likely to be historically steep. A tracking tool from the Atlanta Federal Reserve estimated a drop of nearly 54 percent for the quarter.
“March represented a huge contraction, and that contraction was significant enough that it offset the growth in January and February,” Bankrate.com chief financial analyst Greg McBride said. “That really underscores the significant and sudden stop in the economy, because the lockdowns didn’t even kick in on March 1. So, in reality, it was the last two weeks of the quarter.”
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The dizzying speed of the drop in those final weeks was enough to cancel out the rest of a robust quarter.
Sam Stovall, chief investment strategist at CFRA Research, said: “This was a man-made recession-slash-bear market where, in a sense, there was almost no uncertainty about what was going to happen to us. The only question was how deep would it go.”
The speed of the NBER’s announcement is another unusual dynamic. While the usual rule of thumb for defining a recession is two consecutive quarters of negative GDP growth, that’s not a hard-and-fast rule.
“In some ways, it’s not a surprise that the NBER told us we were in recession faster than any other prior time,” Stovall said.
The NBER’s Business Cycle Dating Committee said in a statement that the extenuating circumstances surrounding the economic collapse were so historic that an exception was warranted.
“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,” it said.
Stovall suggested that despite the speed and severity of the shock, a rebound could be swift. “It looks like we’re out of the woods because of the tremendous speed and quantity of both fiscal and monetary stimulus,” he said.