On July 19, the recent economic downturn was recognized as the shortest U.S. recession on record. The National Bureau of Economic Research (NBER), which maintains a chronology of the peaks and troughs of U.S. business cycles, announced the recession began in February 2020 and ended in April 2020—just two months.
“The committee determined that a trough in monthly economic activity occurred in the US economy in April 2020,” NBER stated. “The previous peak in economic activity occurred in February 2020.” May 2020 was the first month of subsequent expansion, the bureau reported.
Conventionally, a recession is two consecutive quarters of contraction or negative gross domestic product (GDP) growth. To identify a recession, the NBER typically looks at the depth of the contraction, how long it lasts, and whether economic activity declined broadly across the economy. For this recession, even though the downturn was shorter than earlier contractions, “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.”
The announcement didn’t surprise many economists, including Joe Pickard, ISRI’s chief economist and director of commodities, and Bret Biggers, ISRI’s senior economist. As the Bureau of Economic Analysis reported on July 29, real GDP rose 6.5% in the second quarter of 2021 and a revised 6.3% in the first quarter, well below the Conference Board’s forecasted rate of 9% (annualized) for the second quarter. However the board’s predicted 6.6% year-over-year rate in 2021 could still be on track. “Real quarterly GDP, not seasonally adjusted, is less than 1.3% away from where it was in the fourth quarter of 2019,” Biggers says. “We’re almost back in all measurements of GDP.” The current quarter, nominal and annualized real GDP surpassed the fourth-quarter 2019 pre-recession level.
Though the 2020 recession might be over, the NBER did not conclude that the economy has returned to operating at normal capacity. Along with GDP, employment, one of the major economic indicators, has not yet returned to pre-COVID-19 levels. In June, the U.S. economy generated 850,000 million new nonfarm jobs, and the unemployment rate rose to 5.9% from 5.8% in May. While new job growth is a good sign for the economy, the numbers over the past three months haven’t reached expectations. Economists anticipated 671,000 demand-driven new jobs in May; for April, there were 266,000 nonfarm jobs, well behind the nearly 1 million jobs economists expected. It seems June’s employment gains are playing catch up.
“The NBER is looking at industrial production, labor market, and other areas,” Pickard explains. “The labor market was, and still is, pretty depressed compared to pre-pandemic times, even though we’re seeing monthly growth, if you look at a longer time period, we still have a long way to go to get back the jobs we lost during the pandemic.”