Recession ended in April 2020, making it shortest on record

WASHINGTON (Reuters) -The recession touched off by the coronavirus lasted only two months, ending with a “trough” reached in April 2020 just one month after the sharp drop in economic activity in March of that year, the U.S. Business Cycle Dating Committee announced Monday.

The committee, a group of macroeconomists who assign the start and end dates of U.S. business cycles, said that while the country had by no means gotten back to normal operating capacity at that point, indicators of both jobs and production “point clearly to April 2020 as the month of the trough,” with a rebound beginning in May.

Indeed, the resumption of growth was so rapid the committee said it was only “the unprecedented magnitude of the decline” that led members to consider what happened to be a recession in the first place, with a downturn typically requiring “depth, duration and diffusion” to qualify for the label.

Around 22 million jobs disappeared from company payrolls in March and April of that year, an event that sparked concern about a new Depression and led Congress and the White House to approve the first of several massive relief packages to keep firms and households afloat.

Amid what became a divisive national conversation over masks and lockdowns, during May 2020 2.8 million people were brought back to work, and over the next year about 15 million jobs were recovered.

Jobs “reached a clear trough in April before rebounding strongly the next few months and then settling into a more gradual rise,” with incomes rising as well, the committee said in a statement released through the National Bureau of Economic Research.

The announcement makes the pandemic recession by far the shortest on record, at two months only a third as long as the six-month downturn at the start of 1980. There have been several 8 month recessions, including the one that followed the collapse of the bubble in technology stocks in 2001.

But the hole it created in the U.S. job market remains substantial, and filling it a focus of the Biden administration and the U.S. Federal Reserve.

Nor is the battle over. Coronavirus infections are again increasing as the Delta variant takes hold and a national immunization drive stalls with only about 57% of those eligible having been fully vaccinated.

This year may still see the fastest expansion of economic activity in 40 years, but rekindled fears about the pandemic on Monday hit markets hard. The S&P 500 and the Dow Jones Industrial Average were both down more than 2% by midday, and U.S. 10 year Treasury yields fell to a 5-month low.

(Reporting by Howard Schneider; Editing by Nick Zieminski)

U.S. jobless claims dropping faster in states ending federal benefit

By Howard Schneider

WASHINGTON (Reuters) – Ongoing claims for U.S. unemployment insurance have dipped faster in recent weeks in states ending federal benefits this summer than in states keeping the $300 weekly supplement in place until the fall, according to government data through last week.

From the week ending May 1 through the week ending June 12, continuing claims for state unemployment benefits fell 17.8% in the 26 states ending benefits early, to 990,000, and by 12.6%, to 2.18 million, in the rest of the country, according to a Reuters analysis of weekly federal unemployment data.

The data do not yet answer the larger and arguably more important question of whether hiring will also accelerate in those states, the outcome an almost all-Republican group of governors says is the goal of cutting the benefits early.

Weekly data from small business time provider Homebase through the week ending June 20 in fact has shown no pickup in hiring in the states cancelling unemployment benefits. To the contrary the other states appear to have added jobs faster in recent weeks – a possible consequence of the fact that large Democratic-led states like California and New York have recently lifted most of the remaining restrictions put in place to fight the pandemic.

The states stopping benefits as a group have also pulled closer to their pre-pandemic levels of unemployment, suggesting less room for improvement.

The issue of how unemployment benefits are impacting the recovery of the U.S. job market has become a core concern among Federal Reserve and other policymakers as they try to determine how fast national employment might rebound to pre-pandemic levels, a judgment hard to make until the economy is fully reopened and benefit levels returned to normal.

Twelve states have already halted benefits in what has been a largely partisan split between Republican governors arguing that the pandemic emergency unemployment payments are now discouraging people from working, and Democratic governors who feel people still need support as the pandemic wanes.

The states stopping benefits early include the entire Deep South, where pandemic unemployment has fallen hard on the large Black population, but only one state, Louisiana, with a Democratic governor. Only two Republican-led states, Vermont and Massachusetts in the Northeast, plan to continue the payments until they end nationwide in September.

The data overall suggest “more downward momentum in initial and continuing claims over the next few weeks,” said Jefferies economist Thomas Simons. Sky-high unemployment claims have been a hallmark of the pandemic, topping 23 million at one point in the spring of 2020 as the coronavirus took hold, more than 10 times the level at the start of the year.

(Reporting by Howard Schneider; Editing by Andrea Ricci)