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A recession? Sure sounds like we’re in one already

Economists brace for the worst, and continue to be surprised

A restaurant on Newbury Street in Boston. Governor Charlie Baker effectively shut down the restaurant industry, aside from allowing takeout and delivery orders, and banned gatherings with more than 25 people.David L. Ryan/Globe Staff

Treasury Secretary Steve Mnuchin said he doesn’t think the country has entered a recession.

Good luck finding an economist who agrees with him on that one.

In an ABC News interview on Sunday, Mnuchin conceded a “slowdown” is inevitable. However, he also boasted about economic activity picking up later in the year. Of course, the secretary has a vested interest in painting the rosiest picture possible: His boss is up for reelection.

Let’s be realistic here. Many economists are saying we most likely entered a recession this month, as coronavirus-related shutdowns grind various industries to a halt. Some predict US gross domestic product will slide 5 percent, on an annualized basis, in the April-June quarter. And they’re the optimistic ones.


Our economic problems are shifting and deepening at a seemingly unprecedented pace.

Consider the challenges facing the MassBenchmarks editorial board. The panel of local experts met on Friday, in a regularly scheduled quarterly meeting to discuss the state of the local economy. It was the first time they had met by teleconference, not in person. But here’s something even more unusual: By Monday, they were already passing around revisions to their upcoming report by e-mail, because of how quickly circumstances changed over the weekend.

On Monday, the conditions seemed even more serious. Governor Charlie Baker effectively shut down the restaurant industry, aside from allowing takeout and delivery orders, and banned gatherings with more than 25 people; Massachusetts became just of one of many places across the country imposing similar restrictions within the past few days.

Baker’s decision was announced Sunday. As was the Federal Reserve’s emergency action to reduce the federal funds rate to as close to zero as possible, and to embark on a massive shopping spree of government bonds. The Fed’s action did little to reassure investors: The stock market had one of its worst days in history on Monday.


Even President Trump had to change his tune a bit, admitting Monday afternoon that the country “may be” heading into a recession.

Talk to members of the MassBenchmarks board, and several would say we’re already there. The shutdowns have been swift and staggering. Everything from conventions to Celtics games has been taken off the calendar. Add the construction industry in Boston to that list: Mayor Martin J. Walsh closed it down on Monday as a safety precaution — one more engine of the Massachusetts economy sputtering to a stop. And small businesses that rely on the everyday flow of commerce are getting hammered in this new Work From Home World.

The board members didn’t want to go into detail about their collective projection for Massachusetts, ahead of an internal approval of the board’s report expected on Tuesday. The deliberations were challenging, to say the least. Normally, they look to the state’s economic performance in previous months — sales tax revenue, employment stats, and the like — to predict the future. Those tools were nearly useless this time. There are two economies now: Before the Virus and After the Virus.

They don’t expect the fate of the state’s economy to differ much from the nation’s. And for that outlook, we have plenty of guesstimates to review. For example, Joel Prakken, chief US economist at business information provider IHS Markit, said his firm sees a 5.4 percent contraction in GDP in the second quarter. Assuming consumer spending recovers in the summer, IHS Markit still sees a 1.9 percent contraction over the second half of the year. Meanwhile, JPMorgan Funds chief global strategist David Kelly said 5 percent is on the low side for Q2. The upper end? The economy could contract by 10 percent in the April-June quarter.


The pace of recovery will depend on two crucial variables: the duration of this pandemic, and the effectiveness of the stimulus measures crafted by state and federal governments to blunt its many impacts.

Economists typically look to the National Bureau of Economic Research, a Cambridge nonprofit, to be the final arbiter of whether we’re in a recession, defined by the group as a broad contraction in the economy. A recession is sometimes defined as two consecutive quarters of declines in the nation’s GDP. But the bureau uses monthly data as well as quarterly GDP figures, and it usually takes many months before that call is made.

Many of those same economists would agree: We don’t need to wait for that official decision to know we’re in the thick of it already.

Jon Chesto can be reached at Follow him @jonchesto.