Tuesday, June 9, 2020

The recession officially began in February 2020

The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. 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.
The committee also determined that a peak in quarterly economic activity occurred in 2019Q4. Note that the monthly peak (February 2020) occurred in a different quarter (2020Q1) than the quarterly peak.
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.

The NBER defines "troughs" and "peaks".  A trough means that a recession has ended and a recovery has begun the same month.  A peak means that the expansion has ended and the recession has begun in the same month.  The last trough was in June 2009.  June 2009 to February 2020 is 10 full years plus 7 months in 2009 and 2 in February 2020, so that is 129 months.  So they allocate 1/2 month to both recession and expansion.  Effectively, what they are saying is that the expansion began on June 15, 2009 (plus or minus a few days) and ended on February 15, 2020 (plus or minus a few days), and since mid-February we have been in a recession.

The last recession began in December 2007 to June 2009, which was 18 months.  Hopefully, this recession won't last that long, but if it does, it wouldn't be over until August 2021.

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