U.S. Is Officially In A Recession, But It Could Be Short-Lived

(ConservativePeak.com)- Despite signs of slight improvements, the United States economy is officially in a recession.

The announcement was made Monday by the Business Cycle Dating Committee of the National Bureau of Economic Research, the official “scorekeepers” of economic standing in the U.S.

According to the committee, the economic expansion peaked back in February following a record 128 months. Ever since, the country has been sliding into a recession that’s been driven wholeheartedly by the coronavirus pandemic. The committee said the labeling of economic times as a recession is because of the “unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy.”

That being said, the committee did note that this recession could be much shorter lived than recessions in the past. Because this recession was fueled predominantly by a world-altering event viral spread and lockdown orders that shuttered businesses, it’s possible the economy could make its way out of a recession in a much shorter time than normal.

Just last month, the United States economy added 2.5 million jobs. While that’s a far cry from the 22 million that were lost in March and April, it’s still a fairly significant addition in such a close period of time after the collapse began.

In fact, following the Bureau of Labor Statistics’ release of the May jobs report last Friday, many economists are saying they expect economic output to be on the rise again in the third quarter of this year.

Still, the Business Cycle Dating Committee decided that even if the economic downturn is short lived, it’s still worthy of being labeled a recession because the downturn has been so severe. The standard way that a recession is defined is “a decline in economic activity that lasts more than a few months.”

By this same definition, a recession would “end” when the “bleeding stops” in the economy, no matter how long it takes to do so.

February is the month that the Business Cycle Dating Committee says when the economy peaked and the recession started. The quarterly peak, though, actually happened at the end of 2019.

This year started out well, but the dramatic and sudden losses in March erased all the gains that were made in January and February. That resulted in overall economic output for the first quarter of 2020 to be negative.

Even though the U.S. economy is in a recession, it hasn’t stopped Wall Street from plowing forward. On Monday, the Dow Jones Industrial Average actually finished 460 points higher than the previous day, and the S&P 500 closed up 1.2%, making up all losses it experienced for the year.

The reasoning for this is investors believe the recession will be short lived, and part of that is because of the aggressive action taken by the Federal Reserve. As the chief economist at Moody’s Analytics, Mark Zandi, said:

“The Fed has taken away the tail risk. They’ve said we’re going to do whatever it takes to make sure the financial system performs well and that the stock market doesn’t evaportate.”