Economists Officially Declare US Has Entered Recession, Ending Record Expansion
Economists have declared that the longest economic expansion in American history, which has been presided over partly by President Donald Trump since his taking office in January 2017, has come to an end.
But if the experts were talking recession on Monday, Wall Street was talking recovery as three major market indicators surged higher Monday.
According to the Business Cycle Dating Committee of the National Bureau of Economic Research, the economy hit a peak in February, as America was beginning to come to grips with the major threat posed by the coronavirus but before lockdowns slammed the brakes on most economic activity.
The report dated the just-concluded economic expansion as having started in June 2009. The report said the 128-month expansion broke the former record of 120 months, from March 1991 to March 2001.
Employment numbers from the Bureau of Labor Statistics household survey, which excludes people paid but not working, “fell steeply from February to March,” according to the report.
The committee said the economy hit a peak in the fourth quarter of 2019. A statement on the NBER website said that it was unusual for the peak month to fall outside the peak quarter but noted that “[t]he economy contracted so sharply in March (the final month of the quarter)” that multiple economic measures for the first quarter of 2020 ended up lagging behind those of the final quarter of 2019.
“The committee recognized that this survey was affected by special circumstances associated with the pandemic of early 2020,” the report said, noting that just because the economy has slumped since February does not mean the recession will last very long.
“The committee recognizes that the pandemic and the public health response have resulted in a downturn with different characteristics and dynamics than prior recessions. Nonetheless, it concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions,” the report continued.
Trump said last week that the May jobs report, which showed the U.S. adding 2.5 million jobs, is reason for hope, according to a White House media pool report.
The jobs report said the unemployment rate fell to 13.3 percent.
“Economists forecast that the unemployment rate, as I said, would be about 19 percent, and they were hoping for 20 percent, the opponents of ours. They’d rather have things be bad so they can try and win an election. So they were hoping it would be 20 percent. Instead, it’s 13 percent. That was good. That — we made up a lot of time, a lot of distance. It’s really great,” Trump said.
“Even I was surprised by this one. This was better than I thought. I thought it would be OK, but I didn’t know this.”
A note at the bottom of the jobs report indicated a “misclassification error” made the unemployment rate appear roughly 3 percentage points lower than reported. The unemployment rate should be about 16.1 percent, according to Forbes, as 4.7 million people were mistakenly classified as employed when they were unemployed.
During an appearance at Puritan Medical Products in Guilford, Maine, Trump said that America is currently in a period he calls “transition to greatness” and will bounce back.
“I built it once, now I’m building it again,” Trump said. “We had to close it down. We did the right thing. We closed it down and we saved millions of lives.”
Trump was upbeat about the future.
“This next year will be better, I think, than any year we’re ever had. That’s how I feel about it,” Trump said.
“America’s economic comeback has begun. The next year is set to be a year, and — I remember I said it, but it’s going to be an amazing year,” he said.
Wall Street shared Trump’s optimism on Monday, according to The Washington Post.
The Nasdaq composite index hit a record at 9,924.75, a 110-point gain. The previous record high was set in February.
Standard & Poor’s 500 index, which had been down 30 percent in March, reached 3,232.39, wiping out its losses for the year to date.
The Dow Jones industrial average kept its six-day streak of gains going, rising 461 points to close at 27,572.44.
During Monday’s media briefing, White House press secretary Kayleigh McEnany said the Wall Street showing was “an unexpected note that the market believes in this President, that employers believe in this President, that they — they believe they can open their doors in the Trump economy,” according to a White House media pool report.
“So it was a note of a great first step of progress. But rest assured there are many more steps that we have to take to get back to the hottest economy in modern history, but we will get there under President Trump,” she added.
UPDATE, June 9, 2020: This article has been updated to include information about a “misclassification error” in the jobs report that made the unemployment rate appear roughly 3 percentage points lower than reported.
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