In a report released by the National Bureau of Economic Research, on June 8, the bureau’s Business Cycle Dating Committee determined that the economy reached a peak in February before officially entering a recession. The NBER defines recessions as “a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators.”
Domestic production and employment, according to the NBER, are prime measurements of economic activity. Data released by the Bureau of Economic Analysis May 28 estimates that gross domestic product fell 5% in the first quarter of 2020. Job figures from the Department of Labor show that the unemployment rate skyrocketed to 14.7% in April before unexpectedly dropping 1.4 points in May.
The report confirms the close of the longest period of continuous growth on record, according to the trade group. The 128-month growth period was longer than any other since at least 1854.
Where that growth period peaked precisely is slightly different depending on if you’re looking for its monthly peak or its quarterly peak, the NBER says. Unusually, although the monthly peak of the economic growth occurred in February, its quarterly peak happened in the fourth quarter of 2019. The reason for the discrepancy, according to the committee, reflects the severity of the contraction: “The economy contracted so sharply in March (the final month of the quarter)” that the quarterly figures for GDP, gross domestic income, and employment were “significantly below” their levels in the last quarter of 2019. In other words, the collapse of employment and GDP in March brought economic conditions for the first quarter below those of the quarter before.
NBER included a note on the unusual nature of the recession, the beginning of which coincided with the increase of the novel coronavirus in the United States and Europe. Ordinarily, the NBER requires that a “recession” must be longer than “a few months,” but the sheer breadth and depth of impact of the contraction caused by the novel coronavirus led it to make an exception.
“The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions,” read the report. But it concluded the “unprecedented magnitude” of contraction in employment and production and its impact on the economy as a whole “warrants the designation of this episode as a recession.”
