The private economics research group that has the task of being the arbiter for estimating business cycles in the United States has said that the country’s economy has entered recession in February as a because of the economic impact of the coronavirus pandemic bringing an end to the longest period of growth and economic expansion of the country.
Its members “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,” said the Business Cycle Dating Committee of the National Bureau of Economic Research in a statement.
While economists were expecting this development for the economy, what was worrying was the speed at which it happened as the development happened within just four months after the recession began.
On earlier occasions, a longer period of time had been taken by the committee before coming to a conclusion about whether a recession has occurred or not. For example, when the US economy started to slow down in 2007, it took the committee more than a year to declare a recession.
However there was little doubt this time because of the depth and speed of the economic collapse in the US because of the coronavirus pandemic.
“In deciding whether to identify a recession, the committee weighs the depth of the contraction, its duration, and whether economic activity declined broadly across the economy. ... 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 committee said in a statement.
In the first three months of the year, there was a drop of 4.8 per cent at an annualized rate in the gross domestic product of the US. And it is expected that the April-June quarter will show a deeper decline at a rate of about 20% or greater. The rate of unemployment also rose to a record high of 14.7% in April and 13.3% in May after reaching a record low of 3.5% in February.
But economists also expects growth to kick in into the US economy soon which will make this downturn not only the steepest and fastest in history but also the shortest ever for the economy.
The recessions since the Second World War have typically lasted for between six to 18 months while the Great Depression that started in 1929 lasted for 43 months.
This time however, even though the data emerging form the economy is close to that of the Great Depression, economists are also expecting resumption in growth starting this summer and most likely continue till such time that there is a resurgence if the pandemic.
“It could very well be that this is the beginning of the trough,” Jack Kleinhenz, chief economist for the National Retail Federation, said in an economic outlook seminar organized by the National Association for Business Economics. But “there are so many moving parts,” he said. “If we have a reoccurrence of the pandemic and it comes on stronger, there is the potential of another dip” in economic growth.
(Source:www.nytimes.com)
Its members “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,” said the Business Cycle Dating Committee of the National Bureau of Economic Research in a statement.
While economists were expecting this development for the economy, what was worrying was the speed at which it happened as the development happened within just four months after the recession began.
On earlier occasions, a longer period of time had been taken by the committee before coming to a conclusion about whether a recession has occurred or not. For example, when the US economy started to slow down in 2007, it took the committee more than a year to declare a recession.
However there was little doubt this time because of the depth and speed of the economic collapse in the US because of the coronavirus pandemic.
“In deciding whether to identify a recession, the committee weighs the depth of the contraction, its duration, and whether economic activity declined broadly across the economy. ... 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 committee said in a statement.
In the first three months of the year, there was a drop of 4.8 per cent at an annualized rate in the gross domestic product of the US. And it is expected that the April-June quarter will show a deeper decline at a rate of about 20% or greater. The rate of unemployment also rose to a record high of 14.7% in April and 13.3% in May after reaching a record low of 3.5% in February.
But economists also expects growth to kick in into the US economy soon which will make this downturn not only the steepest and fastest in history but also the shortest ever for the economy.
The recessions since the Second World War have typically lasted for between six to 18 months while the Great Depression that started in 1929 lasted for 43 months.
This time however, even though the data emerging form the economy is close to that of the Great Depression, economists are also expecting resumption in growth starting this summer and most likely continue till such time that there is a resurgence if the pandemic.
“It could very well be that this is the beginning of the trough,” Jack Kleinhenz, chief economist for the National Retail Federation, said in an economic outlook seminar organized by the National Association for Business Economics. But “there are so many moving parts,” he said. “If we have a reoccurrence of the pandemic and it comes on stronger, there is the potential of another dip” in economic growth.
(Source:www.nytimes.com)
