US enters recession as lockdown-battered economy crashes

It’s official: the battered US economy has entered recession following months of lockdowns and more than 40 million people applying for unemployment benefits. But Wall Street didn’t seem to mind the news.

The US is officially in recession. Picture: AP

The US economy officially entered a recession in February, ending a 128-month expansion, an association of economic researchers found.

The National Bureau of Economic Research said that the economy hit its peak in February and had since fallen into a downturn, as pandemic-related shutdowns tanked activity and brought an end to a record-long expansion — one that had lasted nearly 11 years.

Analysts often refer to recessions as two consecutive quarters of contraction.

COVID-19 lockdowns have strangled the US economy. Picture: AP

“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 bureau said in a statement.

Yet Wall Street seemed to have already factored in the news in advance as it continued to make small gains.

The NBER said the collapse in employment and incomes was so steep that it could quickly determine that a recession had begun.

The unemployment rate is officially 13.3 per cent, down from 14.7 per cent in April. Both figures are higher than in any other downturn since World War II.

A broader measure of underemployment that includes those who have given up looking and those who have been reduced to part-time status is 21.2 per cent.

Wall Street was largely unruffled by the unsurprising news the US is in recession. Picture: AFP

Globally, “this is almost certainly the deepest recession” since at least the Second World War, Jan Hatzius, Goldman Sachs chief economist, wrote in a note on Monday.

On Friday, the government said that employers added 2.5 million jobs in May, an unexpected gain that suggested job losses may have bottomed out.

Even if so, most economists expect a full recovery could take two years or more, with the unemployment rate likely still 10 per cent or higher at the end of this year.

With few Americans travelling, eating out or shopping at anywhere near their previous levels, consumer spending - the primary driver of the US economy - could keep economic activity weak for many more months.