Blink and you may have missed it – America’s Covid recession, that is, which it seems was almost over before it started.
Economic recessions are conventionally (or ’technically) described as two successive quarters or more where economic growth (Gross Domestic product) falls – as it did in Australia in the March and June quarters when growth fell 0.3% and 7.0% respectively.
In America, recessions are officially classified in a different manner – yes there is the conventional way of classifying them, but there is a body responsible for declaiming on just when a slump started and when it ended.
It’s called the US Business Cycle Dating Committee and on Monday of this week it ruled that the recession triggered in 2020 by the first wave of Covid 19 and subsequent lockdowns lasted only two months, making it the smallest recession on record.
The Committee consists of a group of macroeconomists who assign the start and end dates of US business cycles. iI said in a statement on Monday that while America had by no means returned to normal operating capacity at that point, indicators of both jobs and production “point clearly to April 2020 as the month of the trough,” with a rebound beginning in May.
“The committee has determined that a trough in monthly economic activity occurred in the US economy in April 2020. The previous peak in economic activity occurred in February 2020. The recession lasted two months, which makes it the shortest US recession on record,” the statement said.
“In determining the date of a quarterly peak or trough, the committee relies on real GDP and real GDI (Gross Domestic Income) as published by the Bureau of Economic Analysis (BEA), and on quarterly averages of key monthly indicators.
“As with the monthly trough, there is strong agreement across the indicators about the timing of the quarterly trough: the indicators all point strongly to 2020Q2 (June quarter).
“Quarterly real GDP and real GDI both reached clear troughs in 2020Q2 (The June quarter), as did quarterly averages of both the monthly payroll and household employment series.”
In fact the committee said that the resumption of growth was so rapid that it was only “the unprecedented magnitude of the decline” that led members to consider what happened to be a recession in the first place, with a downturn typically requiring “depth, duration and diffusion” to qualify for the label.
“The recent downturn had different characteristics and dynamics than prior recessions,” the Committee explained in its statement:
“Nonetheless, the committee concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warranted the designation of this episode as a recession, even though the downturn was briefer than earlier contractions.”
Around 22 million jobs disappeared from company payrolls in March and April of 2020 which in turn triggered fears of a new Depression and led Congress and the White House to approve the first of several massive relief packages to keep firms and households afloat.
Reuters pointed out that the Committee’s judgement makes the pandemic recession by far the shortest on record, at two months and only a third as long as the six-month downturn at the start of 1980, and a fourth as long as the recession that followed the collapse of the tech bubble in 2001.
But the ruling also failed to heed the realities of the US jobs market.
Measured by GDP (output), the economy has largely recovered, by measured by employment, the US economy is still adrift with more than 7 million jobs lost last year still not recovered.
Employment “reached a clear trough in April before rebounding strongly the next few months and then settling into a more gradual rise,” with incomes rising as well, the committee said in a statement released through the National Bureau of Economic Research.
But don’t tell those still unemployed that the slump is over.
