US recession started in February as coronavirus spread globally
It’s official: February marked the month in which the coronavirus pandemic ended the US’s longest economic expansion in history and fell into recession, according to the semi-official arbiter of the nation’s booms and busts.
Closely watched measures of economic activity ranging from employment to personal consumption spending and personal income peaked in the second month of 2020 and tumbled thereafter, the National Bureau of Economic Research revealed on Monday.
That coincides with the spread from China of coronavirus around the world, but predates moves by numerous US states in March to impose lockdowns in an effort to curb the spread of coronavirus that were seen as a sharp curtailment of economic activity.
A recession typically involves a drop in economic activity that lasts more than a few months — Wall Street likes to define it as two consecutive quarters of contraction — but the NBER said the coronavirus pandemic and the subsequent public health response have resulted in a downturn with “different characteristics and dynamics” than previous episodes.
“[T]he 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’s business cycle dating committee said.
The NBER said that while the drop in measures of economic activity has been affected by the coronavirus outbreak in the early part of this year, there were signs of a slowdown even in late 2019, most notably in the labour market.
Payroll employment, which the NBER normally views as “the most reliable comprehensive estimate of employment” reached a peak in February. This survey, though, counts individuals as employed if they are paid, even if they are not actually working or producing.
“Workers on paid furlough, who became more numerous during the pandemic, thus resulted in an overcount of people working in recent months,” the NBER said.
The committee went on to note the household survey from the Bureau of Labor Statistics, which excludes individuals who are paid but on furlough, “plateaued from December 2019 through February 2020” and then tumbled from February to March.
But because both employment data series measure employment during the week or pay period containing the 12th of any month, the surveys “understate the collapse” of the labour market in the second half of March, and from where the surge in Americans filing for jobless benefits began.
Official data have revealed the US economy contracted 5 per cent in the first three months of 2020 from a year earlier. The NBER’s call for a February peak draws the curtain on a 128-month expansion for the US economy that began in June 2009 and bested by eight months the previous record for the run from March 1991 to March 2001.