America’s roaring recovery might carry lessons for future recessions

A COMMITTEE OF eight prominent economists made it official on July 19th. The covid-19 recession, America’s deepest since the Depression, was also its shortest, spanning just March and April 2020. That tests the very definition of a recession, which the National Bureau of Economic Research describes as “a significant decline in economic activity that is spread across the economy and lasts more than a few months”. A recession it was judged nonetheless, given its breadth and extraordinary depth. The plunge in output in the second quarter of 2020 was more than three times the second-largest quarterly drop in America’s post-war history.

The rebound in GDP, thankfully, has been comparably dramatic. The 33.8% annualised rate of growth notched in the third quarter of 2020 was about twice as fast as the second-best quarterly performance in the post-war era. As the Bureau of Economic Analysis reported on July 29th, output overtook its pre-pandemic level in the second quarter of this year. Though unique in some ways, this unfolding recovery resembles past recoveries in other important respects. It may prove similar enough to help economists gain a better understanding of what policy can achieve in the face of hardship.

Recent American recoveries have tended to be “jobless”, meaning that labour markets have taken far longer to...