How Long Do Recessions Last?
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A recession is marked by job losses, a shrinking economy and economic dislocation. In the U.S. today, soaring inflation, supply chain disruptions and geopolitical crises are making many people worry that the economy is heading for a recession.
It’s a frightening proposition for consumers, who bear the brunt of the negative impacts of a recession. The good news is that recessions don’t last forever. Let’s take a closer look at how long recessions last.
How Long Do U.S. Recessions Last?
In the U.S., the National Bureau of Economic Research (NBER) is the authority that defines the starting and ending dates of recessions.
According to NBER data, the average U.S. recession lasted about 17 months in the period from 1854 to 2020. In the post-World War II period, from 1945 to 2020, the average recession lasted about 10 months.
The NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months.” The decline is typically seen in gross domestic product (GDP) and measures of employment, income, industrial production, and wholesale and retail sales.
The business cycle is the periodic expansion and contraction of the economy, the circle of booms and busts that follow each other down through history. Recession is the bottom of the business cycle, the bust part of the wave.
How Long Have Recent Recessions Lasted?
Not all recessions are created equal. Some have lasted for years, while the most recent example—from February to April of 2020—was the shortest recession on record.
A look at the length and causes of recent recessions can help you better understand where the economy has been, and where it could potentially be heading now.
The Covid-19 Recession: February to April 2020
As the Covid-19 pandemic swept the U.S. in early 2020, authorities implemented nationwide lockdowns in an attempt to stop the spread. These measures confined most Americans to their homes for months and brought the economy to a complete standstill.
It was immediately obvious that the lockdowns would cause a recession, and many feared that the economic crisis could last for many months or years. They were only partially right.
The Covid-19 recession started in February 2020 and lasted just two months, ending in April. Unemployment reached a record high of 14.7% and GDP fell by 3.4%.
The Federal Reserve intervened by rapidly slashing interest rates to zero and implementing a variety of actions to limit the damage. The Congress passed three stimulus packages that made direct cash payments to help out Americans and offered a host of other emergency programs.
These decisive actions helped the Covid-19 recession end quickly, and was followed by rapid economic growth. Vaccines and creative adaptation by business also helped, although the roots of today’s brewing economic crisis can be found in the Covid-19 economy.
The Great Recession: December 2007 to June 2009
The Great Recession was the deepest and longest economic downturn since the Great Depression of the 1930s. Unemployment reached 10% and GDP fell as much as 2.6%.
The Great Recession was triggered in part by the bursting of the subprime mortgage bubble, as well complex securities created with those bad mortgages that permeated the financial system.
In the years leading up to the recession, financial institutions across the country pushed mortgages to borrowers with terrible finances and poor credit histories. The dodgy mortgages were bundled into mortgage-backed securities (MBS), which were sold as high-quality investments.
A massive, nationwide run-up in home values helped fuel more bad mortgages and the creation and spread of more MBS, which further inflated home prices.
In 2007, major subprime lenders began filing for bankruptcy as borrowers were unable to repay their mortgages, which burst the housing market bubble. Over the next year–and–a–half, stock markets tanked and major financial firms started going bankrupt, triggering a worldwide financial crisis and a recession.
The Fed cut interest rates to zero in an effort to encourage borrowing. Congress passed two stimulus packages, and later passed the Dodd-Frank Act to tighten financial market regulation and prevent a similar catastrophe in the future.
The Great Recession officially ended in June 2009, but its ripple effects were felt around the world for years later.
The Dot-Com Recession: March to November 2001
The late 1990s saw the first wave of internet technology companies. A frenzy of irrational exuberance saw massive amounts of money flow into ever less viable dot-com investments, driven in part by low interest rates.
As more and more money chased the latest tech initial public offerings (IPOs), stock prices got completely out of hand. The tech-heavy Nasdaq Composite became a completely overvalued bubble that burst when the Fed began raising interest rates in 1999 and 2000 to counter an economic slowdown.
With the easy money gone, thanks to the Fed, the Nasdaq ended up losing nearly 77% of its value. There was further economic damage from the September 11 terrorist attacks.
The resulting Dot-Com Recession lasted eight months, with unemployment reaching 5.5% and GDP falling by 0.95%.
The Gulf War Recession: July 1990 to March 1991
The recession of the early 1990’s was triggered by two events: The savings and loan (S&L) crisis and the First Gulf War.
S&Ls were a class of small, local banks designed to help Americans own homes. But as inflation took off in the 1970s and the Fed raised interest rates to fight higher prices, S&Ls experienced extensive losses. An ill-considered deregulation effort only worsened the problem, and the industry was in meltdown mode by the end of the 1980s.
Trouble in real estate and housing from the S&L crisis was exacerbated by Iraq’s invasion of Kuwait, a major oil producer. The ensuing First Gulf War caused oil prices to more than double. The resulting recession saw unemployment reach 6.8% and GDP decline by 0.1%.
The Stagflation Recession, Part II: July 1981 to November 1982
According to the Fed, the 1981-1982 recession was the worst economic downturn in the U.S. since the Great Depression. During this time, unemployment reached nearly 11% and GDP fell by 1.8%.
The recession was triggered by the Fed’s tight monetary policy plan to fight inflation in 1980. The resulting recession was inflamed by a global energy crisis, triggered by Iran decreasing its oil output, which inflated global oil prices.
The Stagflation Recession, Part I: January 1980 to July 1980
Following the turbulent 1970s, U.S. inflation peaked at 22% in 1980. Fed chair Paul Volcker famously promised to kill inflation by massively raising interest rates to curb ballooning prices.
Volcker’s plan led to an economic slowdown and a brief recession. During this time, unemployment reached 7.8% and GDP fell by 0.2%.
The Oil Shock Recession: November 1973 to March 1975
The Yom Kippur War of 1973 between a coalition of Arab nations and Israel hardly lasted more than two weeks. But the fallout caused major problems for the U.S., which had supported Israel during the war.
The Organization of the Petroleum Exporting Countries (OPEC) placed an oil embargo on the U.S. to punish it for supporting Israel. Oil prices quadrupled, pushing consumers to cut back on other spending in an effort to afford gasoline. The so-called oil shock was further exacerbated by poor policy choices implemented by President Richard Nixon in an effort to curb inflation, as well as a global stock market crash.
The recession lasted 16 months, with unemployment reaching 9% and GDP dropping by 0.5%.
Is the U.S. Heading for a Recession?
Two consecutive quarters of negative GDP is one sign that the U.S. may be in a recession. Data from the Bureau of Economic Analysis showed that U.S. GDP contracted by 1.6% in the first quarter of 2022, and the advanced Q2 data showed GDP down 0.9%.
Just remember, the NBER’s Business Cycle Dating Committee looks at a variety of data to determine when the U.S has entered a recession, not just GDP.
With the economy behaving in unusual ways, they have a difficult job. Inflation is soaring, but another characteristic typical of a recession isn’t occurring: High unemployment. Treasury Secretary Janet Yellen recently pointed to hiring numbers as proof that the economy isn’t in a downturn, but rather, a slowdown.
“We’ve got a very strong labor market,” Yellen said during an interview on July 23. “This is not an economy that’s in recession.”