The National Bureau of Economic Research (NBER) reported Monday (June 8) that the U.S. economy entered a recession in February, marking the end of an economic expansion that began in June 2009.
The expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854. The previous record was held by the business expansion that lasted for 120 months from March 1991 to March 2001.
“A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion,” the NBER noted in its statement.
Mervin Jebaraj, an economist and director of the Center for Business & Economic Research at the University of Arkansas, said the recession call is not unexpected and he believes it could be a deep recession.
“It should come as no surprise that we have been in a recession that started when economic activity slowed down dramatically in response to the pandemic. This will turn out to be one of the deepest recessions, and it’s unfortunate that it comes on the back of the economy finally being strong enough to generate wage increases. The federal government’s fiscal response has been fairly decent so far, but it’s going to take a lot more to keep household incomes stable through the rest of the year,” Jebaraj told Talk Business & Politics.
The NBER committee also commented on the impact of COVID-19 on pushing the economy into recession.
“The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions. Nonetheless, it 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.”
When might the recession end? Economist Greg Kaza, director of the Arkansas Policy Foundation, said he is watching four metrics.
“The four coincident indicators will signal when the recession has ended. They are payroll employment, industrial production, real income less transfer payments, and manufacturing and trade sales,” Kaza noted.
Committee members participating in the decision were: Robert Hall, Stanford University (chair); Robert Gordon, Northwestern University; James Poterba, MIT and NBER President; Valerie Ramey, University of California, San Diego; Christina Romer, University of California, Berkeley; David Romer, University of California, Berkeley; James Stock, Harvard University; Mark Watson, Princeton University.