The longest economic expansion the U.S. has ever seen may finally be over, thanks to the Coronavirus (COVID-19).
Even with U.S. hiring surging with a 273,000 gain right ahead of the virus, and the unemployment rate residing at 3.5%, the markets have seen steep declines these past weeks.
And, the data that was just released is based on job data from the 12th of February, before the virus started having a major impact on world events.
New research from M.I.T. suggests that the U.S. was vulnerable to a recession even before having the virus. In January, the chance of a recession in the next few months was about 70%.
If stocks give up all their gains that they’ve been enjoying for the past 12 months, the chance of a recession will grow to 80%, says Will Kinlaw, head of a research unit State Street Corp.
And, there were a few other signs a recession was close before the virus even hit. Industrial production was down 0.8% from last year, and the treasury yield curve was close to inversion in January. Inversion of the yield curve, where long-term interest rates are lower than short term ones, is a massive indicator of a recession.
Whether the recent pain in the markets is because of the virus, or the sign of something much bigger to come remains to be seen, but it’s likely the economic impact of COVID-19 will be felt for months to come.
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