Let’s just say it: The longest economic expansion in U.S. history may already be over, killed by Covid-19. It might seem crazy to talk about a recession when jobs are plentiful. Today the Bureau of Labor Statistics announced a decline in the February unemployment rate to 3.5%, tying a 50-year low. But a recession isn’t when things are bad. It’s when they aren’t quite as good as they were at the peak. (Conversely, an “expansion” begins when the economy hits bottom and starts back up.)
When economic historians look back, they may pick February as the peak of the expansion that began in June 2009. That would give it a longevity of 128 months, the longest in records maintained by the National Bureau of Economic Research going back to 1854. This wouldn’t be the first time the U.S. was in a recession without knowing it. In the summer of 2008 policymakers of the Federal Reserve were still predicting decent economic growth for that year and the next—even though a recession had begun the previous December, as later determined by the business cycle dating committee of the National Bureau of Economic Research.
The February jobs report that just came out is based on household and business surveys conducted in the week containing the 12th of the month. A lot has changed since then. On Feb. 12 there were still almost no cases of Covid-19 reported in the U.S. By March 5 there were 99, including 10 deaths, reported to the Centers for Disease Control and Prevention.
New research from State Street Associates and Massachusetts Institute of Technology indicates that the U.S. economy was vulnerable to a recession even before Covid-19 struck. In January the chance of recession over the next six months was about 70%, even though the stock market was then up about 22% over the previous year, it says.