Yesterday was an interesting day. Yes, the headline declines in the stock market made it interesting, and that news is certainly part of it. Still, that kind of volatility is normal. We haven’t seen it for a while, but if you look back, it’s no big deal. In fact, markets are ticking back up again.

Shortest Recession Ever?

What made it really interesting is the second piece of news that came out yesterday: the National Bureau of Economic Research (NBER), the body responsible for such things, announced that the COVID recession has ended. Now, this conclusion was not really a surprise. What was surprising? NBER gave the end date of April 2020, only two months after the NBER announced the recession’s start. Given those dates, this was the shortest recession (at two months) in U.S. history. It was also, however, one of the deepest, with a decline in economic activity of almost one-third (specifically, 31.4 percent). You might be forgiven for thinking that a drop that fast and hard would take longer to recover from than two months.

In that respect, the NBER would largely agree with you. But given the massive stimulus from the federal government and the subsequent snapback in the economy, which recovered a substantial portion of the decline in the next quarter, the NBER decided the following:

“In determining that a trough occurred in April 2020, the committee did not conclude that the economy has returned to operating at normal capacity. . . . The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession associated with the February 2020 peak. The basis for this decision was the length and strength of the recovery to date.”

And this, I think, points out just how different this recession and recovery have been from anything we have seen before. It also highlights the reason for that—which is that the recession and the recovery were due to policy action rather than to economic factors. It was the shutdowns that killed the economy and the stimulus that brought it back. It was a recession, but it was not an economic recession. The NBER recognizes the economic effects (i.e., we had a recession), but it also recognizes the causes were different.

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