The United States has been in a recession since February.

The question is when will it end.

To get some perspective, Dr. Edmond Seifried, co-chairman of Seifried and Brew Community Bank Experts in Bethlehem and professor emeritus of economics and business at Lafayette College, tackled this topic at the Economic Outlook 2021 hosted by the Carbon Chamber and Economic Development Corp.

Seifried explained that prior to the recession, the United States was in its longest period of expansion in history that started in June 2009 after the Great Recession and continued for 128 months until February 2020.

“This set a record, besting the previous record of 120 months set between March 1991 and March 2001,” he said.

GNP indicator

According to the National Bureau of Economic Research, the gross domestic product or the total value of goods produced and services provided in a country in one year dropped from 2.4% in the fourth quarter of 2019 to -4.8% in the first quarter of 2020.

Seifried explained that the GDP is basically “the total final spending of the American economy. It’s the income of all its families, all the households. They’re mirror images.”

The GDP is the ability for consumers to pay their bills and borrowers to repay their loans, he said.

The GDP for the second quarter dropped further to -31.4%, the lowest since the Great Depression when it was -32.6% from Aug. 1929 to March 1933.

Pandemic Drain

Seifried called the fall the COVID-19 Pandemic Drain.

In the fourth quarter of 2019, the U.S. had GDP value of $19.2 trillion. The bucket began to be drained in the first quarter with a loss of $235 billion. Then COVID-19 hit and the bucket got a second, larger hole and drained out $1.4 trillion.

The economy was also collapsing in other ways. Export spending went from 3.4% in the fourth quarter of 2019 to -9.5% in the first quarter of 2020 to -64.4% in the second quarter of 2020. Import spending dropped from -7.5 to -15% to -54.1%, investment spending from -3.7 to -9% to -46.6%, and consumer spending from 1.6% to -6.9% to -33.2%.

In an effort to prop up the economy, the government poured money into it in the form of a $2.5 trillion stimulus bill followed by the passage of the CARES Act that gave people on the unemployment rolls $600 extra per week until July.

On Oct. 29, the government released the third-quarter GDP results that showed a rebound in the economy of 33.1 percent, according to the Bureau of Economic Analysis.

The economy rebounded, but not completely.

The third quarter gained back about $1 trillion, but it doesn’t quite reach the level it was at in February.

“I was very encouraged by the record 33.1% GDP growth rate,” Seifried said following the release of the third-quarter results. “It now appears, that if the fourth quarter is a strong one. However, this optimism must be tempered against the renewed outbreak of the virus here in the U.S. and abroad.”

Past recessions

Seifried said there are three ways to break down and analyze past U.S. recessions in order to help predict the future: depth, diffusion and duration. Economists look at the depth of the loss in GDP, the depth of unemployment, and the diffusion of unemployment in the various industry sectors.

The period of August 1929 to March 1933 during the Great Depression lasted 43 months, had a loss in GDP of -32.6%, and a depth of unemployment of 24.9%, which was diffused 100% in all industry sectors.

The Great Recession from December 2007 to June 2009 lasted 19 months and saw a loss in the GDP of -4.3%. The unemployment rate was 10.1%, which was diffused in 65% of the industries.

For comparison’s sake, the second quarter GDP of 2020 was -31.4%. The unemployment rate was at its highest at 14.7% in April, but has dropped to 7.9% in September, according to the U.S. Bureau of Labor Statistics. A normal unemployment rate is between 3% and 4%.

The just released third-quarter results also showed that current-dollar personal income decreased by $540.6 billion. It had increased by $1.4 trillion in the second quarter due to the federal stimulus programs, according to the Bureau of Economic Analysis.

Similarly, disposable income decreased by $636.7 billion or 13.2%, and personal savings came in at $2.78 trillion, down from $4.71 trillion in the second quarter.

“Finally, I should add that while the business cycle, as measured by growth in GDP, might prove to be V-shaped, it is likely if one includes some measure of the unemployment rate as well as GDP, the recession will be more U-shaped,” Seifried said Thursday. “Recall during the so-called Great Recession of 2007-09, GDP recovered relatively quickly, whereas the unemployment rate took many years to return to normal.”