The Recession Isn’t Over Until They Say It’s Over. (However Who Are They?)


“I think in March 2020 the question arose, ‘Are we going to call this a recession?'” Said Tara Sinclair, an economist at George Washington University who studies business cycles. “Or if this takes a few weeks then the economy will recover in a moment, should it be treated as a recession or the equivalent of a natural disaster?”

It makes sense to wait to come up with an endpoint, she said as the committee looked for evidence of a second wave of the virus outbreak that could crash the economy again. Indeed, a wave of infections in the fall dragged employment numbers down for a single month, but according to most evidence, it did not result in a broad or sustained decline in economic activity.

But “at this point it is taking a particularly long time to hit a particularly clear low,” said Professor Sinclair.

There’s one more fold that shows how strange the pandemic recession is. Another common definition of recession, particularly widespread outside of the United States, is a two-quarter decline in GDP

Even if the actual economic downturn lasted only a few weeks in early 2020, it appears to have dragged on over two quarters in the GDP tables. The economy shut down so badly in mid-March that the economy contracted at an annual rate of 5 percent for the first quarter that ended March 31.

Then the ongoing economic slump through early April caused the second quarter, which began on April 1, to see another rate of contraction of 31 percent. If the pandemic had started at the beginning of a quarter instead of the end, the data would most likely have shown only a single quarter of declining GDP

The exact start and end dates don’t really matter, of course, unless you’re a chart maker focused on where the gray bars should go in an economic data visualization or a politician looking for an election campaign topic. What is important for people is how long and how difficult the bad times are.