A recession is a significant and sustained decline in the economy. Typically, a recession lasts longer than six months, but recovery from a recession can take a few years.
What Are Potential Signs of an Impending Recession?
The economy operates in a cycle of peaks and troughs, where economic conditions fluctuate between growth and contraction. These low points in the cycle are not necessarily recessions but become recessions when they are prolonged and serious.
A sustained reduction in Gross National Product (GDP), increased unemployment, or a decline in stock prices can all signal an impending recession. A recession in the United States is official when the National Bureau of Economic Research (NBER) declares the start—and eventually, end—of one. Their definition of a recession is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”
A common time frame used by economists and forecasters is two consecutive months of these conditions.
The United States has had a few memorable recessions. In recent memory, there was the two-month recession from the COVID-19 pandemic in early 2020. The memorable “Great Recession” lasted for 18 months from 2007-2009, caused mainly from the housing market crash.
In the beginning of the millennium, the dotcom bubble burst after the longest period of economic expansion in U.S. history and began an eight-month-long recession that ended with action from the Federal Reserve.
The most notable economic downturn in U.S. history, The Great Depression, was actually two particularly bad recessions back-to-back (1929-1933 and 1937-1938). The first was triggered by the Federal Reserve raising interest rates, the stock market crash, and bank failures, and eventually led to fiscal policy expansions such as President Franklin Roosevelt’s New Deal. The second recession was caused by Federal Reserve and Treasury action that contracted the money supply.
U.S. recessions go back to the Panic of 1797—a series of economic constrictions that also impacted Great Britain—and have occurred on a semi-regular basis ever since.Share