The United States officially entered a recession in February 2020, the committee that calls downturns said Monday, marking the formal beginning of the first economic downturn since the 2007-09 slump.
The National Bureau of Economic Research said that the economy hit its peak in February and has since fallen into a downturn, as pandemic-related shutdowns tanked activity and brought an end to a record-long expansion — one that had lasted 128 months.
While analysts often refer to recessions as two consecutive quarters of contraction, in the United States the bureau formally determines when they begin and end based on a range of factors, most importantly domestic production and employment.
Most economists expect that this recession will be both deep and short, with the economy rebounding as state economies reopen and the world figures out how to function amid the coronavirus pandemic.
“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 bureau explained in a statement.
Globally, “this is almost certainly the deepest recession” since at least the Second World War, Jan Hatzius, Goldman Sachs chief economist, wrote in a note Monday. But it is also probably the shortest: He noted that the bureau’s database shows no other recession that has lasted less than six months in records dating back to the mid-1800s.
The coronavirus pandemic, which has shuttered businesses and halted travel around the world, will shrink the global economy by 5.2 percent this year, marking the deepest recession since World War II, according to a World Bank forecast released Monday.
The projected contraction comes as economies are gradually reopening after months of lockdowns that were imposed to slow the spread of the virus and reflects the deep hole that countries will be facing as they look to resume economic activity. The forecast is more dire than the 3.3 percent contraction that the International Monetary Fund predicted in April.
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said Ceyla Pazarbasioglu, World Bank Group Vice President for Equitable Growth, Finance and Institutions.
According to the report, countries that rely on global trade, tourism, commodity exports, and external financing will face the most severe hit this year.
The World Bank expects the US economy to shrink by 6.1 percent and the Euro Area will shrink by 9.1 percent.
However, in China, where the virus originated and where the most draconian containment measures were taken, growth will slow to 1 percent this year.
The World Bank expects the global economy to rebound next year, with 4.2 percent growth. But, it warns, a more protracted pandemic that leads to a breakdown in financial markets and global trade could darken the outlook.
According to data compiled by The New York Times, new infections are still increasing in more than a third of US states. Public officials are also wary of a spike in new cases as thousands of protesters across the country demonstrate against police brutality after the death of George Floyd.
But the focus remains on the positive. For example, Britain’s government is reportedly considering allowing pubs and restaurants to open for outdoor drinking and dining beginning June 22, earlier than expected. On Monday, New York City began to reopen some businesses.
The pandemic is a disaster for the eurozone economy but also a chance to fight climate change and make better use of information technology, Europe’s top central banker said Monday.
“The crisis can be an opportunity to modernize our economies to make them fit for the future,” Christine Lagarde, the president of the European Central Bank, told members of the European Parliament.
The hundreds of billions of euros that the European Union is spending on crisis relief should be deployed in ways that accelerate the shift to a green economy, Lagarde said.
She did not give specifics, but the term usually refers to technology that is less dependent on fossil fuels and produces less carbon dioxide.
Speaking by video conference, Lagarde also said that the pandemic has helped promote digital technology, an area where Europe often lags the United States.
“Now is the time to expedite the digital transformation on a more permanent basis and bring the EU to the frontier of the digital economy,” she said.