US recession? Unemployment, the current situation and where to get help

The US economy has suffered a decline in reaction to the coronavirus lockdown, shrinking almost 5% in the first quarter of 2020 and signaling what many experts are predicting will be the worst economic recession “in our lifetime.” Comparisons to the Great Depression of the 1930s abound, and the European Union is predicting the worst recession in the EU’s history. 

Layoffs continue to push as many as 33 million US workers into unemployment, while companies, too, are beginning to suffer. Even if you haven’t personally been affected, you may be starting to worry. That’s why it’s important to know the terminology. What do “recession” and “economic depression” even really mean — for the economy as well as your own pocketbook? How we define the growing economic crisis affects how we respond to it, from government leaders and bank CEOs down to individuals like you and me. 

To help put the current economic climate into perspective, we provide a look at what financial experts typically mean when they use terminology like “recession” and “depression.” Read on for what you can do to support yourself, your community and the national and global economies during this trying time. Note that this story is intended to provide an informational overview, not to serve as financial advice. It updates frequently as the situation develops. 

What’s our current economic situation?

Technically, what we’re in right now is generally considered an economic downturn, but with one fiscal quarter of negative economic growth already under our belt, we’re mere months away from what could blossom into a bona fide recession (keep reading for the full definition). Economic downturns can be a normal, regular part of a healthy economy that ebbs and flows, with periods of growth followed by periods of contraction. 

What makes this downturn different, however, is that it’s caused by our response to the coronavirus pandemic and not the result of a natural economic shift or cycle. Lockdown orders, the closure of nonessential businesses and the rapidly rising unemployment rate have led to reduced consumer spending in virtually every category except groceries. 

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A leveling off of the pandemic by either a SARS-CoV-2 vaccine or an effective treatment for COVID-19 (or both) may be the most obvious solution, but that will take time. Meanwhile, as states and countries slowly emerge from lockdown, some analysts are anticipating a swift reversal of the current downward economic trend as a result of businesses reopening and the lifting of stay-at-home restrictions.

Recession vs. depression: What’s the difference?

Recession: Most experts agree that a recession happens when the economy shrinks for at least two fiscal quarters in a row — in other words, six months. This is measured by gross national product, or GDP, which is a number that represents the total value of goods and services produced within a country — every car built, every hamburger sold, every lawn mowed and so on. A recession, then, is a period of at least six months when that number goes down instead of up. When GDP climbs back to prerecession levels, the recession is over.

Depression: A depression is far more uncommon and longer lasting. For example, in the last 166 years, there have been 33 recessions and only one depression. Think of a depression as two or more recessions linked together with no economic recovery in between. The Great Depression of the 1930s is the most recent and well-known example. Economic depressions last years as opposed to months.

How the government is trying to bolster the economy and avoid recession

The $2 trillion stimulus package passed as part of the CARES Act in March represents the US government’s first attempt at thwarting a recession, but we won’t be able to measure its impact for some time. The economic relief law includes stimulus payments of up to $1,200 for most US taxpayers, as well as a loan program for businesses to be able to keep paying their employees.

The Federal Reserve recently indicated it will continue to hold interest rates close to 0% for the foreseeable future, which often has the effect of encouraging more borrowing, which leads to more spending, and that generally improves the economy. There’s even talk of a second round of stimulus funding, though it’s too soon for that to develop one way or another.

Finally, doctors and scientists are racing to develop either a SARS-CoV-2 vaccine, a COVID-19 treatment or both. Human trials of a potential vaccine are slated to begin in mid-May, but it may still be another year or longer before anything is approved for widespread use. The development of a coronavirus vaccine is fast-paced and details change daily.

What can I do to help out?

It’s easy to feel helpless, but if you’re feeling financially secure or have time to give, there are ways to make a difference. My CNET colleague Katie Conner has some excellent recommendations for things you can do to help your local community and businesses, including no-cost contributions like online volunteering or donating blood, as well as ordering take-out or delivery, and buying restaurant gift cards. 

Other local businesses like bookstores, gardening centers, toy shops and boutiques may have a website where you can support them with a curbside order, if they remain closed.

The best advice I’ve heard so far about how you can individually help prop up the economy is this: Spend to the best of your ability and within your means.

What if I need help?

If you’ve suffered financial hardship as a result of the coronavirus pandemic, here are some resources you can turn to for help: