It's Official: The US Recession is Here [What it means] - Seattle Real Estate Podcast

4 years ago
16

The United States recession has officially been called. What does this mean for our economy? Find out on the Seattle Real Estate Podcast.

More than 42 million Americans have filed for unemployment benefits. Major companies including JCPenney, J.Crew, and Hertz have filed for bankruptcy. And economists are predicting GDP imploded at an annualized rate of 40% during the second quarter.

The pandemic marked an end to the mediocre but long recovery from the Great Recession. In July 2019, that expansion officially became the longest period of uninterrupted growth in US history dating back to 1854. It spanned 128 months, easily breaking the prior record of 120 months set between March 1991 and March 2001 during the dotcom boom.

US billionaires have regained $565 billion in wealth since the pit of the crisis
Normally, economists define a recession as consecutive quarters of negative growth. The United States already endured one-quarter of a shrinking economy, with GDP dropping by 5% during the first quarter.

NBER decided not to wait for a second quarter of a contracting economy, although it is widely expected to happen during the second quarter. The body also declared that while the economy peaked on a monthly basis in February, the quarterly peak happened in the fourth quarter. That disparity "reflects the unusual nature of this recession," NBER said.
"The economy contracted so sharply in March," NBER said, that by the first quarter GDP and employment was "significantly below" the levels of the fourth quarter of 2019.

Previous recessions began more subtly, causing a significant lag before NBER declared them.
For example, NBER didn't announce until December 1, 2008, that the United States had tumbled into recession the prior December. By then, Bear Stearns and Lehman Brothers had already collapsed. The stock market had imploded and Fannie Mae and Freddie Mac were taken over by the government.

Although this recession began suddenly, there is hope that it could be relatively brief. Economists are predicting GDP will turn sharply positive in the third quarter as businesses continue to reopen and Americans begin to travel again.

New infections are still the biggest risk to the economy
The economy is benefiting from unprecedented help from the federal government.
Congress and the White House passed a record-breaking stimulus package that provided direct aid to households, forgivable loans to small businesses, and bailouts to some large companies.
The Federal Reserve is taking steps that make its response to the 2008 financial crisis look tame. The Fed has slashed interest rates to zero, promised to buy an unlimited amount of bonds, and rolled out a series of emergency lending programs. The US central bank is even, for the first time, directing the purchase of corporate bonds, including junk bonds. These steps have unlocked financial markets that froze in March, freeing even highly leveraged companies to borrow.

#usrecession #useconomy

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