Is the U.S. Recession Over?

Written by: Jordan Jackson

Last month, the Business Cycle Dating Committee of the National Bureau of Economic Research—the “scorekeepers” of economic recessions and expansions in the U.S.—marked the peak month of the previous expansion in February 2020, officially marking an end to the longest expansion on record (128 months) dating back to 1854. While sweeping lockdowns across the U.S. in March and April crystalized the recession, the gradual yet bumpy reopening and rebound in economic activity begs the question: is the recession over?

While many assume an economic recession consists of two-quarters of negative GDP growth, the official definition for a recession is “a significant decline in economic activity spread across the economy, normally visible in production, employment and other indicators”. Given this, monthly data through May and June suggests the U.S. economy has already emerged from a recession.

In February, the unemployment rate was 3.5%, initial jobless claims were averaging less than 220k per week, consumer spending was rising at a healthy 3.1% y/y and manufacturing and services sectors were in expansion. In April—the month in which the economy appears to have bottomed—the unemployment rate lurched to 14.7%, jobless claims averaged 5 million per week, consumer spending fell by -16.3% relative to a year ago and manufacturing and service sectors fell into deep contraction. While a significant amount of damage was done to the economy over March and April, a rapid reversal in activity due to reopenings has helped contribute to a broad improvement, albeit from very depressed levels.

After plunging through April, retail sales jumped 7.5% in June on top of an 18.2% surge in May. Notably, sales in June were only 0.6% below that of February. Manufacturing output was up an impressive 3.8% in May and 7.2% in June. Elsewhere, after losing roughly 22 million jobs cumulatively through March and April, the U.S. has clawed back about 7.5 million jobs in May and June. Despite the strong recent data, the economy is still expected to contract by -35% q/q saar in the second quarter. However, recent momentum may continue through the third-quarter, which could bounce +20% q/q saar.

Broadly, it is evident that the self-induced social distancing recession in order to combat the spread of COVID-19 pulled the economy into one of the deepest recessions on record. However, the U.S. has likely already emerged from this recession after just a two-month period. The expansion and recession follows a trend in the U.S. of long summers and short winters, meaning economic expansions typically last much longer than recessions. Even so, going forward, the recovery will be much more gradual, and GDP may not pass its 2019 peak until at least late 2021.

Length of economic expansions and recessions

Source: BEA, NBER, J.P. Morgan Asset Management. *Chart assumes most recent recession began in March 2020 and ended April 2020. Current expansion is assumed to begin in May 2020 and continued through June 2020, lasting 2 months so far. Data for length of economic expansions and recessions obtained from the National Bureau of Economic Research (NBER). These data can be found at and reflect information through June 2020. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – U.S. Data are as of July 21, 2020.

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