The recession is official, and 2.5 million does not equal 22 million

Given that we had record declines in jobs and economic activity in March and April, today's release from the National Bureau of Economy Research (NBER) should not have been any kind of surprise. But it still seems to be grabbing headlines.

The Business Cycle Dating Committee of the National Bureau of Economic Research maintains a chronology of the peaks and troughs of U.S. business cycles. The committee has determined that a peak in monthly economic activity occurred in the U.S. economy in February 2020. The peak marks the end of the expansion that began in June 2009 and the beginning of a recession. The expansion lasted 128 months, the longest in the history of U.S. business cycles dating back to 1854. The previous record was held by the business expansion that lasted for 120 months from March 1991 to March 2001.

A recession is a significant decline in economic activity spread across the economy, normally visible in production, employment, and other indicators. A recession begins when the economy reaches a peak of economic activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.

Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide indicators of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.

Note that the economy does not need to decline for 6 months in order to officially be a recession, but the 1st quarters of 2020 will be negative anyway, so that traditional definition also works.

However, the length of this recession could be as short as 3 months, as the economy (somewhat) reopened in May followed COVID-19 related shutdowns, and a surprise gain of 2.5 million new jobs was announced in Friday's US jobs report.

This led Trump economic advisor/grifting carnival barker Larry Kudlow to declare "EVERYTHING IS GREAT."

America is coming back! pic.twitter.com/Er1O33va2N

— The White House (@WhiteHouse) June 5, 2020

Given the Midas Touch of Coke-blow, you should be concerned. But it's possible that the economy doesn't get worse from here, and that we (eventually) get back above the level of economic activity that we had in February 2020. But we got a long way to go to get there, and the jobs totals of the last 3 months tell a lot.

For example, we're still down more than 19.5 million total jobs from where we were in February, and nearly 18 million in the hole for the private sector.

The biggest job losers have been in service industries that relied on consumers spending discretionary money at places outside of their homes. For example, food services may have gained back nearly 1.4 million jobs in May, but it had lost more than 6 million in the two months before it. And accomodation services (generally hotel jobs) lost an additional 150,000 jobs while other sectors were gaining.

One sector that had a sizable bounce-back in May was health care, and in particular doctor's and dentist's offices. Many of those facilites shut down as treating COVID afflictions became a bigger priority, and because some people simply weren't willing to come into those offices for non-COVID reasons. However, they are still well below where they were.

Blue-collar industries have not been immune from this trend, as they also got hit by the COVID recession. While construction gained 464,000 jobs in May and manufacturing got 225,000 jobs back, they still have much more to restore.

The question is what happens as stabilization measures like the Paycheck Protection Program and $600 bonus unemployment benefits go away over the next few weeks. We have yet to see the reports on most types of economic spending activity for May, and that's what needs to resume from the record drops that we have seen. Spending can improve from rock-bottom, but if it stays depressed by 10-20% compared to early 2020, we will stagnate at a much lower level of jobs, with unemployment at a level that would be unacceptable in any year since the 1930s.

A one-time return to work for a fraction of the people who lost their jobs needs to be a mere start. It doesn't mean that our newly-declared economic recession has already hit its trough, and given the level of decline that we've seen, we won't be close to the 2019 "normal" for a long time. And that'll especially be true if TrumpWorld and other GOPs decide that May's small recovery of massive losses means that things will fix themselves on their own, with little need for the government to keep helping.