Could the recession already be over?
The National Bureau of Economic Research just Monday said the economy fell into recession in February, and while many voices expect it will be a short recession, one group believes it has already ended.
NBER's Business Cycle Dating Committee, which determines recessions, said the 128-month expansion, which began in June 2009, ended in February, when recession began.
While recessions are generally determined by two quarters of negative gross domestic product growth, the committee said the coronavirus pandemic, and the economic shutdown that resulted from attempts to keep the virus in check, "resulted in a downturn with different characteristics and dynamics than prior recessions. Nonetheless, it concluded that the unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions."
The economics team at Payden & Rygel noted the recession was "self-induced," as the economy was shut down to prevent the spread of COVID-19, "not caused by misguided investment in a goods sector spilling over into the broader economy."
Touching on the NBER's statement, they added, “Interestingly, the sharpest recession ever could also end up being the shortest.” Since a "recession lasts from ‘peak to trough,’ not from ‘peak to peak,’ ... the severity of the decline in output suggests a ‘bounce’ is likely as economies re-open, marking a trough in GDP and employment soon.”
With nonfarm payrolls rising 2.5 million in May, "it’s possible that the payrolls data troughed in April."
The 1980 recession, which lasted six months, and a seven-month recession coinciding with the Spanish flu pandemic in 1918, are the shortest on record.
"We will, therefore, stick our necks out: the recession is already over," the Payden team said. "The April-May data on employment and consumption will mark the trough. The downturn will have lasted two--or maybe three--months, the shortest on record. That doesn't mean the recovery will be a V-shaped, snapback affair, as not all of the web of production and consumption that made up the global economy will be viable in the post-COVID-19 world. But, the worst of the contraction is behind us."
Small business optimism
The Small Business Optimism Index rose to 94.4 in May from April’s 90.9, according to the National Federation of Independent Business.
"Owners are optimistic about future business conditions and expect the recession to be short-lived," according to the release.
“As states begin to reopen, small businesses continue to navigate the economic landscape rocked by COVID-19 and new government policies,” said Bill Dunkelberg, chief economist for the NFIB. “It’s still uncertain when consumers will feel comfortable returning to small businesses and begin spending again, but owners are taking the necessary precautions to reopen safely.”
April wholesale inventories rose 0.3% in April after a revised 1.1% decline in March, first reported as a 0.4% increase, the Commerce Department said Tuesday.
Wholesale sales dropped 16.9% after a 5.1% decline in March.
Economists polled by IFR Markets expected inventories to gain 0.4%