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Economy & Business

U.S. Recession Began In February, National Bureau Of Economic Research Says

RACHEL MARTIN, HOST:

It is official. The recession began in February. That's according to the National Bureau of Economic Research, which studies such things. But for Federal Reserve officials gathering this week, the question is when will this recession end, and what will the economic recovery look like? David Wessel is director of the Hutchins Center at the Brookings Institution, and he joins us with some answers. Hi, David.

DAVID WESSEL, BYLINE: Good morning.

MARTIN: So the recession is now 4 months old, which is nice to know, I guess (laughter), that we've been in this for a while. And, hopefully, that means we'll get out. But when will that happen? When is it going to end, David?

WESSEL: (Laughter) Well, that's a good question. You know, this is a really unique recession. It was triggered by the government ordering a shutdown of the economy. It was very abrupt. It was very deep. The April-May-June quarter will be one of the worst on record. Technically, the recession will be over when the economy stops contracting and starts growing again. The best guess of forecasters - that'll occur sometime this summer. Doesn't mean the economy is going to be healthy or that unemployment will go back below 4%, only that things will start getting better rather than worse sometime this summer.

MARTIN: So getting better is better than getting worse. But when the forecasters at the Fed and in the private sector look into their crystal balls that aren't so crystal, what kind of recovery do they see?

WESSEL: Well, we're going to learn from the Fed tomorrow, on Wednesday, what they see for the economy when they give us their new forecast. But it's even harder than usual because this is such - a situation we've never seen before. Analysts have developed a kind of shorthand, an alphabet shorthand, to describe the possible scenarios. The economy was chugging along nicely till the pandemic hit. Then it took this abrupt downturn. The optimistic scenario is that the economy will be shaped like a V - sharp down, sharp up - as people go back to work and shopping and stuff.

Last Friday's jobs report that we added jobs in May has encouraged the optimists. That includes the people in the White House and, at least yesterday, the stock market, which has recovered, as of yesterday, all the gain - all the losses that it took since the beginning of the year.

MARTIN: All right. So that's the sunny scenario. What are the others?

WESSEL: Well, one of them resembles the Nike swoosh. We get a burst of euphoria as businesses open up and we go back to work, but it's a slow - a long, slow climb out of the ditch. Restaurants are only serving half as many people. People are reluctant to get on airplanes. So that - by that scenario, it takes maybe years before we get back to the path we were on. And there's an even less pleasant scenario, the dreaded W. That's where things get better, but we have a surge in COVID cases and another round of shutdowns later in the fall.

MARTIN: OK. So we could have a V. That would be good. We could have a swoosh - eh, not so great. The W - please tell me that's the worst-case scenario. Or does it possibly get worse?

(LAUGHTER)

WESSEL: I'm afraid it's not the worst. The worst case looks like an L. The economy does grow, but we never get back to the path we were on before the pandemic. Some laid-off workers never find jobs. Lots of businesses go bankrupt. Malls and restaurants remain empty for a long time. You know, there's lots of vacancies. Businesses do less R&D, so we have fewer innovations. That sounds really bleak, but that's what the economy looked like for several years after the last recession, 2008 and 2009.

MARTIN: All right. David Wessel, director of the Hutchins Center at the Brookings Institution. David, we appreciate it, as always. Thank you.

WESSEL: You're welcome. Transcript provided by NPR, Copyright NPR.