With 29 million Americans collecting unemployment benefits, the COVID-19 recession still feels very real.
Technically, though, it’s probably been over for a while. James Bullard, president of the St. Louis Federal Reserve Bank, said on CNBC recently that he believes the recession ended in April, only two months after it began.
Other economists back him up. Officially, a recession ends when the economy bottoms out and starts growing again, even if it takes months or years to recover the lost output and jobs.
The U.S. added 10.6 million jobs between May and August, putting us solidly in recovery mode, but we’re nowhere close to making up the 22 million jobs that disappeared in March and April.
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“Even if the recession is over by the economist’s narrow definition, the economy is still not healthy,” says Steven Fazzari, a professor of economics at Washington University.
“To the person on the street it probably doesn’t feel like it’s been much of a recovery, especially if that person works in one of the service industries that have been hit the hardest,” adds Paul Christopher, head of global market strategy for Wells Fargo Investment Institute.
If the recession really did last just two months, it would be the shortest on record. Because of the way the coronavirus pandemic shut down millions of businesses this spring, it is also one of the most severe.
Climbing out of such a deep hole may take years, but we should be used to long, drawn-out climbs. The so-called jobless recovery of the early 1990s lasted nearly two years, and the U.S. needed nearly five years to regain all the jobs lost in 2008 and 2009.
This time around, Christopher’s firm forecasts that the economy won’t be fully recovered until sometime in 2022. An effective COVID-19 vaccine could speed that up a little, he said, but a new wave of infections could push it back.
The expiration of federal stimulus programs isn’t helping. Airlines, to name just one troubled sector, plan to lay off tens of thousands of employees on Oct. 1 if they don’t get more government
aid. Still, Fazzari figures that the economy is likely to stay on its recovery path. “I can easily imagine a slow and sluggish recovery, but right now I think it unlikely that we’ll have a literal downturn again, unless we get bad news about the virus.”
Christopher’s forecast is similar. “There are always risks out there,” he said. “We think the economy will recover, but gradually, and our base case is that there won’t be a double-dip recession.”
A double dip would mean the economy starts shrinking again after several months of growth. It’s the one scenario in which Bullard and other economists would be wrong in supposing that the recession ended in April.
The National Bureau of Economic Research, a private-sector group, is the official arbiter of when recessions start and end. It waited 15 months to declare that the last recession ended in June 2009, and it’s likely to take a wait-and-see attitude this time too.
We’ve never experienced a recession caused by a public health crisis, so the NBER probably won’t make the call until it’s sure the pandemic is in the rearview mirror.
For the rest of us, it won’t feel like a recovery until the layoff notices stop coming, the restaurants are fully open and the lines at food banks don’t stretch around the block. That day, unfortunately, seems a long way off.