Coronavirus-induced Recession in U.S. Began in February


We are in a recession with unprecedented government relief being pushed into our financial system. Whats to come?

The coronavirus-induced recession in the U.S. began in February, indicating the end of the 128-month expansion, according to The Wall Street Journal.

While the length of the expansion was for the record books it lacked the power of those that came before it, and was marked by weak growth and a slow labor-market recovery. With constant government interventions, the Federal Reserve cut interest rates to zero and held them there for 7 years while growing its bond portfolio to $4.5 trillion from less than $1 trillion.

“Even if it turns out to be briefer than earlier contractions, the severity and breadth of this time’s recession have broken the commonly past practice,” according to the National Bureau of Economic Research’s Business Cycle Dating Committee.

The Dow Jones Industrial Average increased 1.7% on Monday, just 6.7% lower than its February highs.

As Congress has already provided a $3.3 trillion stimulus package, a lasting recession will make economists and policy makers worry about a likely rising budget deficit.

The director of President Trump’s National Economic Council, Larry Kudlow, has projected that the economy will recover once the country is able to ease its social distancing measures.

In contrast, others have worried about lasting economic damage.

The outcomes may be similar to the previous one in 2007-09, even the probable duration of recession will be shorter, said Karen Dynan, a senior fellow at the Peterson Institute for International Economics and former Treasury Department official.

The Congressional Budget Office has estimated a 5.6% drop in gross domestic product and double-digit unemployment rate by the end of the year.

In March and April, 22 million jobs lost and the jobless rate rose to 14.7%, up from 3.5% in February.

With 2.5 million jobs being added, the unemployment rate fell to 13.3% in May.

The White House and Congress are in the discussion of another potential stimulus package. Both businesses and households will face an extended recovery and states are predicted to have huge revenue shortfalls. Additionally, the Federal Reserve can not really cut rates any further. From 2015 to 2018, the central bank raised its benchmark rate 9 times to a range between 2.25% and 2.5%, before cutting rates 3 times last year.

Alongside the additional economic relief, the potential futures of COVID-19 and shutdowns together will determine the economic outlook.

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Economics, Finance and Investing