The US recession is confirmed. Now what?

(Bloomberg) – Nothing lasts forever. This week, the organisation that serves as the arbiter of America’s business cycles determined that the United States economy’s expansion came to an end in February after a record run of 10 years and eight months as the coronavirus crisis took hold.

“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, ” the National Bureau of Economic Research’s Business Cycle Dating Committee said in a statement on Monday.

The question now turns to how long the recession that the International Monetary Fund said may be the worst since the Great Depression will last. Although the US government and Federal Reserve have taken unprecedented measures to support the economy during the pandemic, Bloomberg opinion columnists agree that more needs to be done, despite the June jobs report that showed businesses unexpectedly added employees.

Said Peter R Orszag: “It would be foolish to celebrate positive jobs numbers without recognising how much the colossal stimulus measures have blunted the effects of the economic crisis. It is likewise important to be cautious about what can happen if fiscal support is withdrawn. As I have warned before, without continued support, the US risks a wave of cascading bankruptcies. The first test will come at the end of July, when expanded unemployment benefits, now supporting many families, are scheduled to expire.”

Noah Smith said, “The most important factor determining the length of this recession is the state of public health. In a best-case scenario, in which some combination of, say, intensive testing and tracing, new treatments and progress on a vaccine brings the risk of serious illness or death for the average person down to a very low level, then an economic recovery could happen relatively quickly. Many people could just go back to their old jobs, or similar ones. That’s the best case.”

According to Tim Duy, “The most obvious challenge is that even though initial unemployment claims are off their peak – a turning point for the economy – they continue to run at a weekly rate of 1.88 million. This compares to the highest level of claims during the last recession of 665,000 in March 2009. Even as the economy reopens, Bloomberg Economics estimates that up to six million jobs could be eliminated in the months ahead.”

Conor Sen, meanwhile, said: “The US can have a V-shaped recovery if our leaders keep pushing – trends in everything from housing to hotels and air travel during the past two months show that there’s more economic momentum already than people thought possible in April. But without more determination by policy makers – and Congress in particular – to avoid the mistakes of the past decade, once the initial bounce is over we’re more likely than not to get a recovery that’s too slow for any of us, and especially America’s workers.”