KEY POINTS

  • A recession begins in the month economic expansion peaks
  • Coronavirus first appeared in the U.S. in January but the seriousness wasn't evident until March when state and local governments began ordering lockdowns
  • The World Bank predicted the U.S. economy will contract 6.1% this year

The U.S. economy fell into recession in February, weeks before the seriousness of the coronavirus pandemic became evident and forced a virtual stop to business as usual, the National Bureau of Economic Research reported Monday as the World Bank predicted the recession will be the sharpest since World War II.

The coronavirus spread began in China late last year, making its first appearance in the U.S. in January, but was not declared a global pandemic by the World Health Organization until mid-March. At that time, President Trump declared a national emergency, as well.

The recession effectively ended the longest expansion on record at 128 months.

“The unprecedented magnitude of the decline in employment and production, and its broad reach across the entire economy, warrants the designation of this episode as a recession, even if it turns out to be briefer than earlier contractions,” NBER said.

The U.S. economy shrank 4.8% in the first quarter. NBER said the economy peaked in February, followed by a drastic drop as state and local governments ordered the closure of nonessential businesses to stem the spread of the virus.

The World Bank projected a 5.2% contraction in the world economy for 2020, with advanced economies seeing 7% shrinkage compared with 2.5% for developing economies. The U.S. economy is expected to contract 6.1%, with Europe shrinking 9.1%.

“The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing. While the magnitude of disruption will vary from region to region, all [emerging economies] have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development,” the World Bank said.

Ceyula Pazarbasioglu, vice president for equitable growth, finance and institutions, said the crisis is “likely to leave long-lasting scars.”