Is the U.S. in a Recession Right Now?

by Ray Keating

The Keating Files – March 17, 2020

Unfortunately, with each passing day and further steps being taken by government to deal with the coronavirus/COVID-19, it becomes clearer that the U.S. is in a recession right now. Indeed, government actions – while largely necessary to limit the damage of this pandemic – have in effect shutdown significant chunks of our economy.

Yet, assorted analysts and business media keep talking about a possible recession arriving in the second quarter of this year and extending into the third quarter. But let’s keep in mind that we are still in the first quarter right now, and the economy clearly has hit the brakes.

For good measure, as I noted a week ago, contrary to what people had talked themselves into regarding the pre-coronavirus economy, growth slowed notably over the past five quarters, in which real GDP growth averaged only 2.1 percent. Most critically, real business investment declined in each of the last three quarters, and trade has been a drag on growth for two years. So, the economy wasn’t exactly roaring when we ran into the coronavirus.

Business investment now seems to be in freefall, along with trade, and toss in workers being told to stay home and commensurately reining in their spending, and it’s hard to see how a recession has not already started.

Keep in mind, by the way, that the back-of-the-envelope definition of a recession is at least two successive quarters of negative GDP growth. However, the official start and end dates of recessions are determined, based on an assortment of factors, by the National Bureau of Economic Research.

No one knows how the coronavirus and its effects are going to fully play out, but it seems like a safe bet to see this anti-virus effort extending into the summer, and with it, a recession – even with federal government so-called “stimulus” efforts. With little confidence, the best guess-timate from this economist is that the recession began this month, and will last into the third quarter of this year. But it also must be noted that if entrepreneurs, businesses and investors get a strong whiff of more anti-growth policymaking emerging from the November’s presidential and congressional elections, then the recession could last longer, or the threat of a double-dip recession – that is, the recession ends with a brief period of growth, followed by another downturn – looms in the distance.

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Ray Keating is a columnist, an economist, a novelist (his latest novels are The Traitor: A Pastor Stephen Grant Novel, which is the 12^thbook in the series, and the second edition of Root of All Evil? A Pastor Stephen Grant Novel with a new Author Introduction), a nonfiction author (among his recent works is Free Trade Rocks! 10 Points on International Trade Everyone Should Know), a podcaster, and an entrepreneur. You can also order his forthcoming book Behind Enemy Lines: Conservative Communiques from Left-Wing New York – signed booksor for the Kindle. The views expressed here are his own.