By Diane Swonk, chief economist, Grant Thornton

The U.S. economy grew at a 4% pace in the fourth quarter of 2020 after surging 33.4% during the third quarter. That marks two consecutive quarters of gains, which many use as a rough rule of thumb to declare the economy in a recovery instead of a recession. This is despite the fact that the economy was still down 3.5% for all of 2020, the weakest pace since 1946 when the end of WWII brought a halt to defense spending and millions of soldiers home from abroad. That definition of a recovery begs the question: With recoveries like this, who needs recessions?

Unemployment fell to 6.3% in January but that is an undercount. It does not include the unprecedented drop in participation in the labor force since February. Close to four million people have stopped looking for work entirely, mostly women of color who were forced to quit working to care for children who are now learning online instead of in school. The actual unemployment rate when those workers are added back into the mix is closer to 9%.

This is why the National Bureau of Economic Research (NBER), the official arbiter of the timing of business cycles, has not yet declared an end to the COVID recession. The process is much more nuanced and requires more certainty about the course of the economy than we are currently seeing.

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