Pandemic pushes US into official recession

(BBC) – The economic downturn in the US triggered by the pandemic has been officially declared a recession.

The National Bureau of Economic Research made the designation on Tuesday, citing the scale and severity of the current contraction.

It said activity and employment hit a “clear” and “well-defined” peak in February, before falling.

The ruling puts a formal end to what had been more than a decade of economic expansion – the longest in US history.

Meanwhile, US markets rose by more than 1% on Monday, as investors remained optimistic that the downturn will be short-lived.

A recession was expected after the US economy contracted 5% in the first three months of the year.

Employers also reported cutting roughly 22 million jobs in March and April, as restrictions on activity intended to help control the virus forced many businesses to close.

Some economists are hopeful that the job losses have now stopped, and a rebound has begun. In May, US employers added 2.5 million jobs.

Chart showing US unemployment rate

The National Bureau of Economic Research, a private research organisation, said it viewed the scale of the decline that started in February as more significant than its duration.

“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,” it said.

The bureau typically defines a recession as an economic contraction that lasts “more than a few months”.

It has declared 12 recessions since 1948, the longest of which was the Great Recession, which lasted 18 months, from December 2007 to June 2009.