The National Bureau of Economic Research, the organization that makes the official calls on economic cycles, determined that the U.S. economy formally went into recession in early 2020 after the longest expansion dating back to WWII.
Typically, domestic recessions are precipitated by policy errors involving monetary or fiscal policy, but the current recession was brought on by an “exogenous shock,” an event outside the realm of our economic system that caused a disruption in output.
Real GDP fell at a seasonally adjusted annual rate of 5% in the first quarter of 2020, and then declined 31.7% in the second quarter, the largest quarterly drop since the Great Depression. The economy rebounded in the third quarter.
The outlook for recovery and its timing are a function of when an effective vaccine can be made available to the general public and its safety. Consumer fundamentals will be key in determining the path of expansion with recovery likely to commence sometime in 2021.
The lack of fiscal discipline at the state and local level continues to be an issue in Connecticut. The state now ranks No. 2 in the country in overall tax burden, according to the Tax Foundation.
Given a waning business cycle, high taxes, rising outmigration, and paid family leave initiatives, Connecticut’s business community is now facing major challenges in the worst recession dating back to WWII.
Don Klepper-Smith is chief economist and director of research at DataCore Partners LLC.
