Is the US economy in a recession? Private non-profit research organization National Bureau of Economic Research claims the country is.
In its Monday statement, the organization believes the US is officially dealing with an economic recession. Economists and experts say a recession happens when GDP drops in back-to-back quarters, though it is the NBER that will officially make the call.
“In deciding whether to identify a recession, the committee weighs the depth of the contraction, its duration and whether economic activity declined broadly across the economy,” the NEBR said.
According to the organization, 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.”
"Very unusual"
Cecilia Rouse, the dean of the Woodrow Wilson School of Public and International Affairs at Princeton University, finds the current economic situation a “very unusual circumstance that we find ourselves in."
“Covid-19 has already exacted an immense impact on the economy," she said.
Economists agree that the factors brewing this economic recession the factors, such as how fast it hit and who it is affecting, are different from previous economic recessions and may end with a different situation.
For example, the previous recessions had issues in the oil prices, financial markets, monetary policy or a specific sector from the start. The Great Recession was rooted in a subprime mortgage crisis and lax lending standards that wrecked the mortgage industry.
The current recession was sparked by a public health crisis.
“It was not started because of a crisis in the financial sector, such as the last Great Recession,” Rouse says. Due to health and safety issues, “the remedy is for us to stand down and pause the economy.”
Unemployment
“Covid-19 has resulted in the most rapid shutdown of economic activity that the U.S., or the global economy, has ever seen,” Furman says.
There was a high number of Americans who filed for unemployment within a matter of weeks, and it soared into the millions. The numbers continued to rise by several million each week. “These are just unheard of numbers,” Stiglitz says.
While NBER officially detected the Great Recession that began in December 2007, the unemployment rate did not reach peak until October 2009.
“The most distinguishing characteristic is that this [downturn] is so much more pervasive,” Stiglitz says.
He said that the Great Recession was an economic slowdown that started in finance and spread to the rest of the economy. However, the current recession affects everyone and hits almost all industries all at once, such as food, travel, and health care.
“What’s unusual here is we actually don’t necessarily even want people out doing the kinds of things that the federal government could have them do,” Rouse says. “We don’t want people in groups of more than 10 people together.”
