The Economy Peaked, Entered Recession, in February 2020

The National Bureau of Economic Research (NBER) declared on June 8th, that a recession started in February. 

The Business Cycle Dating Committee of the National Bureau of Economic Research maintains a chronology of the peaks and troughs of U.S. business cycles. The committee has determined that a peak in monthly economic activity occurred in the U.S. economy on February 22, 2020. The peak marks the end of the expansion that began on June 9, 2009, and the beginning of a recession. The expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854. The previous record was held by the business expansion that lasted for 120 months from March 1991 to March 2001.

A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. 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.

Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide indicators of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.

Epic Collapse in Demand

With so many people out of work, an epic collapse in demand is underway.

Consumer Credit Declines an Amazing $68.7 Billion

In April Consumer Credit Declined an Amazing $68.7 Billion.

Revolving credit fell an annualized 64.9%. 

Clearly, consumers have a lot more rebalancing to do. Equally clearly, the Fed wants to prevent just that. 

$68.7 billion is an unprecedented decline, but what’s coming is even more important.

A Decline in Mortgage Forbearance Plans But Payments Drop Too

The good news is a Decline in Mortgage Forbearance Plans. The Bad News is Payments Dropped Too.

Employment Level 

The actual employment level is less than it was in January of 2003. That makes it 17 years of employment wiped out, with “only” 15 for nonfarm jobs, a subset of employment.

Rebound?

A post-COVID-19  economic rebound is underway, but realistically, with so much damage the economy has incurred, where is it going?

Percentage-wise, the rebound may look good as we enter the election season, but the collapse of the normal economy has set in motion problems that will play out over many months that will cause human suffering on a mass scale before economic activity gets back to was prior to COVID-19 Pandemic hit.