WRITTEN BY JOSEPH J. BELLINGER
Joseph Bellinger has nearly thirty years of experience as an attorney working in business bankruptcy cases, advising businesses on insolvency issues, restructurings, and workouts
The good news is this recession was caused by the shut down of most of the economy in response to the Coronavirus- a public health crisis - the economy itself was robust. The bad news is the virus is not behind us, and "If people don't want to come out to the ballpark, how are you going to stop them?" – Yogi Berra
The National Bureau of Economic Research (NBER) announced today that the U.S. is officially in a recession. The announcement puts an end to a 10-year period of economic expansion, the longest in the nation’s history. Now that the economy is officially in a recession, the questions are, how bad will it get, and how long will it last? There have been well over fifteen recessions since 1920 and two of them were severe. Most recently, the Great Recession of 2007 was caused by the implosion of the subprime housing market and it lasted at least 5 years. The worst of them all (so far) was the Great Depression which was caused by the stock market crash of 1929, and it lasted 5-10-15 years, depending on what you read.
This recession is different in that it was caused by the shut-down of the economy as a public health response to the Coronavirus pandemic. This recession was caused by a public health crisis, not an economic crisis. A robust economy brought in the new year and continued in January and February 2020, but as the economy shut down starting in March, the unemployment rate rocketed from a historic low of 3.5% to over 14% and production in many industry sectors came to a virtual halt. The widely-held expectation was that the unemployment rate would hit 20% in May- which would have been the highest since the late 1930’s. However, the jobs report for May shows an addition of 2.5 million jobs. Few of the economic experts saw that coming! The unexpected good news may provide reason for hope that the economy will quickly revive, as businesses reopen, and the recession will be short-lived.
On the other hand, the scientists who specialize in pandemics admonish that the Coronavirus is not behind us and remains in charge. If we experience spikes in Coronavirus cases, and deaths, then reopening the economy will likely suffer from stops and starts, and an anemic economy will continue to sputter. The reality appears to be that the virus that caused this recession is still in control of how long it will last and how bad this will be. After all,
"If people don't want to come out to the ballpark, how are you going to stop them?" – Yogi Berra
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This article is intended by the author to provide general information only, and is not intended to create an attorney-client relationship or serve as legal advice.