The US has officially declared a recession
The longest economic growth in American history is officially over. National Bureau of Economic Research (NBER) Says Country Recession Started In February.
The economy collapsed so quickly that it didn’t take long for the NBER to identify problems, which is in stark contrast to previous downturns where the Economic Research Bureau took over a year to announce what most people already knew..
Social distancing requirements introduced to combat the pandemic have devastatingly affected all segments of the U.S. economy, from airlines and engineering to restaurants and public events..
«The unprecedented scale of the decline in employment and production explains the onset of a period of recession, even if it turns out to be shorter than previous economic downturns», – writes National Bureau of Economic Research.
Over 42 million Americans applied for unemployment benefits. Major companies including JCPenney, J. Crew and Hertz have filed for bankruptcy. Economists predict GDP will collapse at an annualized rate of 40% in the second quarter.
Pandemic ends mediocre but lengthy recovery from the Great Recession. In July 2019, this expansion officially became the most a long period of continuous growth in US history since 1854. The country’s economy grew for 128 straight months, breaking the previous record of 120 months set between March 1991 and March 2001.
Previous recessions started more smoothly, causing significant lags before the NBER announced them.
For example, NBER not announced until December 1, 2008 years that the US entered a recession 12 months ago. By then the business Bear stearns and Lehman brothers has already crashed and stock market crashed.
Although the current recession started suddenly, it is hoped that it could be relatively short.. Experts predict GDP will turn positive in the third quarter as businesses continue to recover and consumer activity resumes.
In addition, the country’s economy is receiving unprecedented aid from the federal government..
Congress and White House passed record stimulus package that provided direct assistance to households, wrote off loans to small businesses and supported a number of large companies.
The Fed’s response to the 2008 financial crisis was more subdued than it is now.. The regulator lowered interest rates to zero, pledged to buy unlimited bonds and launched a series of emergency lending programs. Federal Reserve System for the first time in history manages the purchase of corporate bonds, including garbage. These moves unblocked financial markets that froze in March, freeing high-debt companies to borrow..
There are glimmers of hope that the worst is over.
In particular, the U.S. Bureau of Labor Statistics (BLS) shocked economists and investors on Friday by stating that the U.S. restored 2.5 million jobs in May.. it biggest monthly gain since BLS started tracking metrics in 1939.
Wall Street has already recovered much of its losses as investors are betting on a V-shaped economic recovery. Index S&The P 500 is up more than 40% from March 23. Nasdaq is at an all-time high.
However, it is worth remembering the risk second wave of infection, which remains the greatest threat to consistent and sustainable recovery.
Donald Trump declares a state of emergency due to the spread of the coronavirus epidemic in the country