Many economists predict that a recession is coming due to the pullback in the economy caused by COVID-19.
What is a recession, anyway? According to the National Bureau of Economic Research:
“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP*, real income, employment, industrial production, and wholesale-retail sales.”
*Gross Domestic Product: the monetary value of all finished goods and services made within a country during a specific period. (Investopedia)
Bill McBride, the founder of Calculated Risk, believes we are already in a recession:
“With the sudden economic stop, and with many states shutting down by closing down schools, bars and restaurants…my view is the US economy is now in a recession (started in March 2020), and GDP will decline sharply in Q2. The length of the recession will depend on the course of the pandemic.”
How deep will it go?
No one knows for sure. It depends on how long it takes to beat this virus. Goldman Sachs predicts a difficult first half of the year, and then the economy will recover in the second half (see below):
This aligns with the projection from Wells Fargo Investment Institute:
“Once the virus infection rate peaks, we expect a recovery to gain momentum into the final quarter of the year and especially into 2021.”
No one knows for sure how long this will last. Most experts agree that when it does end, the economy will regain its strength quickly.
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