Is The Covid-19 Recession Over? A Comparison To The Great Recession

The Keys 

The two primary keys are personal income minus transfer payments and employment.

Curiously, the NBER seems to place little significance on GDP itself.

Personal Income Soars Over 21% on Third Round of Free Money

PCE, Personal Income, personal PCTR 2021-03 Detail

I discussed personal income this morning noting Personal Income Soars Over 21% on Third Round of Free Money

Life Support

Note that personal income minus transfer payments is barely above the pre-pandemic high while stimulus is through the roof.

And stimulus it has taken massive stimulus to keep PCE afloat, also just now above the pre-pandemic high.

What About Employment?

Every month I comment on the Jobs data which typically comes out the first Friday of every month.

On April 2, I noted the Economy Adds Over 900,000 Jobs Beating the Consensus By a Mile.

And the unemployment rate fell to 6.0%. But nonfarm payrolls tell another story.

Nonfarm Payrolls

Nonfarm Payrolls 2021-03

The above chart puts a much needed perspective on the recovery.

  • Jobs are up 13,959,000 from the low in April 2020.
  • Jobs are still 8,403,000 from the February 2020 pre-covid high.

Some losses are permanent due to a surge in work-at-home and online shopping (less office space and malls needed).

What Happens When the Stimulus Efforts Stop? 

That is the key question. Millions make more being unemployed than they did employed. 

Also long-term rates have risen and that will impact housing. 

The Fed inflated assets which have also propped up spending. Yet, despite a massive boom in housing and the stock market PCE has barely recovered. 

NBER Patience 

The NBER announced that the trough of the 2007-2009 recession occurred in June 2009 only on September 20, 2010. That was a lag of 15 months.

I do not know what the NBER will decide, but I do not expect a decision soon. There are too many issues and questions as well as a potential relapse as soon as the stimulus dries up.

Fed Says the Recent Jump in Inflation is Transitory

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