US recession started in February, ending 128-month expansion

[WASHINGTON] The US economy reached its peak and entered recession in February, ending 128 month of expansion amid a brutal downturn caused by the coronavirus pandemic, the committee making the determination said on Monday.

Recessions typically are defined by several months of declining economic activity, according to the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), a non-profit, non-partisan research organisation.

However, "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," the committee said.

Government data show the US economy contracted by 4.8 per cent in the first quarter, even though most of the nationwide lockdowns did not occur until the final two weeks of the period.

That ended the longest US expansion since 1854, NBER said, and this downturn had different characteristics than prior slowdowns.

A recession is defined by "a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators," but the committee also "weighs the depth of the contraction, its duration and whether economic activity declined broadly across the economy."

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Employment is a key factor in deciding the start of a recession, and the committee said official data on payrolls - which showed 22 million jobs destroyed in March and April - reached a "clear peak" in February.

The committee notes that "a recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion."

AFP