It is now official — the National Bureau of Economic Research has declared that economic activity peaked in February of this year. That means the expansion that started in June of 2009 is now over, and we are officially in a recession.
In the past, the NBER has watched an economic decline for much longer before officially declaring a recession. But Teresa Ghilarducci, professor of economics and policy analysis at The New School in New York City, said this is no ordinary contraction.
“It would have been a bit ridiculous to wait to tell the world what we already knew and felt,” she said.
The NBER said the magnitude of production and employment declines warranted the official designation. Ghilarducci said what’s different this time is how quickly we went from full employment to double-digit rates of unemployment.
“It took two years in the 1930s to get to the kinds of rates that we’re seeing now,” Ghilarducci said.
In previous recessions, economist Peter Orazem at Iowa State University said unemployed people jumped to other jobs in less-affected industries. But this has been a nearly universal shutdown.
“That’s going to make it much more difficult for people to shift from one job to another as a way of surviving the economic consequences of the pandemic,” Orazem said. That could make it even harder to recover, he said.
COVID-19 Economy FAQs
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
How long will it be until the economy is back to normal?
It feels like things are getting better, more and more people getting vaccinated, more businesses opening, but we’re not entirely out of the woods. To illustrate: two recent pieces of news from the Centers for Disease Control. Item 1: The CDC is extending its tenant eviction moratorium to June 30. Item 2: The cruise industry didn’t get what it wanted — restrictions on sailing from U.S. ports will stay in place until November. Very different issues with different stakes, but both point to the fact that the CDC thinks we still have a ways to go before the pandemic is over, according to Dr. Philip Landrigan, who used to work at the CDC and now teaches at Boston College.
How are those COVID relief payments affecting consumers?
Payments started going out within days of President Joe Biden signing the American Rescue Plan, and that’s been a big shot in the arm for consumers, said John Leer at Morning Consult, which polls Americans every day. “Consumer confidence is really on a tear. They are growing more confident at a faster rate than they have following the prior two stimulus packages.” Leer said this time around the checks are bigger and they’re getting out faster. Now, rising confidence is likely to spark more consumer spending. But Lisa Rowan at Forbes Advisor said it’s not clear how much or how fast.
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