So Ends the Lengthiest Expansion

Typically, recessions sneak up on us, like a cat in the night. As an example, the Great Recession began in December 2007, but it wasn’t until December 1, 2008, that the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) formally declared that a recession had begun.

But the current economic downturn announced itself with the roar of a lion. It may seem strange that economists have already concluded that a recession has begun given that a common definition encompasses the notion of a downturn lasting for at least two consecutive quarters.

It wasn’t until March 9, 2020, that the stock market took notice of COVID-19. That day, the Dow Jones slipped by 2,018.43 points, its worst drop in absolute terms on record. Even then, many analysts blamed the decline on a dispute between oil production titans Saudi Arabia and Russia as opposed to COVID-19.

But since that time, analysts have come to appreciate just how dire circumstances have become and how lengthy the crisis is likely to be. Many economists are now predicting a 25 percent decline in Q2:2020 GDP and unemployment rising meaningfully above 15 percent.

According to a recent University of Chicago study, approximately a third of American jobs can be done from home, including more than three-quarters of jobs in professional, scientific, and technical services. But construction services generally cannot be delivered from home, which renders construction among the more vulnerable segments along with jobs at hotels, restaurants, and retailers. Such is the economics of social distancing.

Construction activity, especially infrastructure-related activity, serves as a bulwark of stability during the early stages of a downturn when contractors generally enjoy substantial backlog; backlog accumulated over the course of the prior expansion and that can be worked down for many months even as a recession sweeps through the balance of the economy.