Unemployment is up, spending is down, and at least one financial research organization has declared we’re in a recession.
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It’s official. The US is now in a recession brought on by the coronavirus pandemic. That’s according to the National Bureau of Economic Research, which monitors economic trends. In fact, our current economic predicament has been called the “most severe economic recession in nearly a century” by a June OECD report, and is projected to last for years. This coronavirus recession has been branded a “global recession.”
“Until the public is confident that the disease is contained, a full recovery is unlikely,” said US Federal Reserve Chairman Jerome Powell on Tuesday, in testimony before the Senate Banking Committee. As coronavirus cases surge in 21 US states, some areas are considering reinstating some of the lockdown measures that triggered the financial crisis in the first place. A second wave of business closures would certainly take an economic toll.
The US economy was sent reeling after a nationwide lockdown meant to curb the pandemic led to a plunge in consumer and business spending and a 5% drop in production for the first quarter of 2020. That put an end to a decade of steady growth.
Confusing the issue, the jobs numbers showed signs of rebounding in May, but experts say that could’ve been the result of a “misclassification error” and not a true sign of recovery. With so much contradictory information, it can be hard to tell if the US economy is getting better or worse.
Read on for the latest news about the coronavirus recession, where to find help, what makes a recession and the government’s response. Note that this story is intended to provide an informational overview, not to serve as financial advice. It updates frequently as the situation develops.
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What does it mean that we’re in a recession?
Terms like “recession” and “economic depression” have specific meanings — 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 further put the current economic climate into perspective, we provide a look at what economists typically mean when they use terminology like “recession” and “depression” and what the consensus is regarding the current financial landscape.
America’s decade of growth is over. Now we face an economic plunge.
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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 anticipate a swift reversal of the current downward economic trend as a result of businesses reopening and the lifting of stay-at-home restrictions.
How the government has tried to bolster the economy
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. The economic relief law included stimulus payments of up to $1,200 for most US taxpayers, as well as a loan program for businesses to keep paying their employees.
The US government injected $2 trillion into the economy in April, including sending checks of up to $1,200 to individuals.
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A second stimulus package proposing a similar payout is currently working its way through Congress, but still appears a long way off from being finalized. Meanwhile, the Federal Reserve has 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 more spending generally improves the economy.
Finally, doctors and scientists are racing to develop either a vaccine, a COVID-19 treatment or both. Several vaccine candidates, including one developed by Moderna and another joint effort by Astrazeneca and Oxford University have shown promise in human trials. Other vaccines by Pfizer and Novavax are currently in such trials. Even so, 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.
Spending money at locally owned businesses (while wearing a mask and maintaining social distancing) can help keep your economy afloat during the recession.
Jessica Dolcourt/CNET
Recession vs. depression: What’s the difference anyway?
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 domestic 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. 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. After dubbing the current situation “the first global economic depression of our lifetimes,” Time magazine defines economic depressions as “global, much worse than typical recessions, and their impact on both the economy and society last far longer.”
How can I help?
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.