The economic lockdown caused a Recession starting in March 2020 with US GDP falling 10%. But the Recession lasted only 2 months, unusually short, though very sharp. Since then ALL the stages of the cycle have been unusually short too and in July 2022 we are already in the Slowdown Stage with a Recession looming, probably very soon.

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The rise in output from May 2020 took the US into the Recovery stage of the cycle which gave way to the Early Upswing stage in Q1 2021 I would judge.

The Early Upswing stage starts when the upswing is definitely confirmed. By March 2021 I think it was clear that new lockdowns would be very limited in the US, and confidence had substantially recovered. In Q2 2021 GDP regained the pre-pandemic level (Q4 2020).

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Unemployment came down very quickly and inflation surged - partly due to special factors linked to Covid (supply chain constraints and very strong demand for goods) but also because of rising energy costs and accelerating wages. By end-2021 the US was entering the Late Upswing stage I think, the period when the Fed and markets worry about inflation and the Fed starts tightening. 

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Normally the Early and Late Upswing stages each can last several years but not this time. The excessive economic stimulus from the government and Fed in 2020-21, combined with the inflationary surge, exacerbated by the energy shock from the invasion of Ukraine have dramatically accelerated the process. Since March, the Fed's aggressive tightening has done the same, with confidence declining rapidly. 

 

Today we are in the Slowdown stage where the economy is slowing rapidly and there is uncertainty whether a recession is about to start. The Conference Board's leading indicator index suggests it might be. The 6-month change has turned sharply negative.

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Last updated 25 July 2022  

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