What Is a Recession?
How Long Do Recessions Last?: Lessons From History
Two consecutive quarters of decline in national GDP typically lead to a recession. Economists find it common when a recession begins at the peak of the expansion and ends at the low point of the following downturn. Some indicators generating insights into this economic phenomenon are nonfarm payrolls, industrial production, and retail sales.
‘How long do recessions last?’ has been one of the main concerns for those who are in the middle of chaos. It arouses curiosity about the reasons, effects, and possible solutions. This article walks you through the history of recessions to see what we can learn to better the present and potentially unpleasant economic downturns.
A recession refers to a prolonged downturn lasting at least six months. It has profound and widespread effects on the economy, such as drops in economic output, consumption, and employment.
Is Recession Good or Bad?
Here are the top 12 common causes of a recession.
The Removal of Essential Safeguards
Numerous factors, not only economic ones, contribute to a recession but also finance and psychology. Some experts concentrate on economic changes, such as the shifts in structure in industries. For instance, a sharp and ongoing surge in oil prices can lead to a rise in costs across the economy. Or, the Covid-19 epidemic and the public health restrictions created a shock to not only our health but also the economy. This pandemic accelerates a recession as the whole world freezes under its influence.
Falling Prices of Housing and Sales
Lack of Faith in Investment and the Economy
What Causes a Recession?
Ups and downs in the market happen all the time. So, do all the downturns mark a recession?
Rising Interest Rates
The Crash of Stock Market
Bad Business
The Controls of Wage and Price The Effects After War Asset Bubbles Deflation
How Long Do Recessions Usually Last?
What Do Past Recessions Teach Us?
The National Bureau of Economic Research (NBER) has the authority to determine the periods of recessions in the U.S. According to its data, the average U.S. recession lasts around 17 months from 1854. Yet, it shrinks to about 10 months from 1945 to 2020. The longest recession was the Great Depression (1929 1933) with a length of 43 months. The shortest recessions include the stagflation recession (1981 1982), dot-com recession (2001), gulf war recession (1990 1991), etc. Each of them lasted eight months.
How Long Does the Average Recession Last?
How long do recessions last on average? A recession has averaged around 11 months since World War II. The longer a recession lasts, the more negative the effects are on the gross domestic product (GDP). There are multiple factors impacting or triggering recessions, such as high-interest rates, the slowdown of production, an asset bubble burst, credit crunches, etc.
The ‘dot-com’ name indicates the rise of Internet technology from the late 1990s. It led to massive amounts of money flowing into ever less viable dotcom investments with low-interest rates.
We will walk you through past recessions to see how long they lasted, why they happened, and how we made it back to the balance. As a result, we can draw valuable insights that help us not repeat the same mistakes and accelerate the rally.
The Great Recession: 18 Months (Dec 2007 to Jun 2009)
One of the most notorious recessions in history is the Great Recession with more than 18 months. The unemployment rate was at 10% and GDP dropped to 2.6%.
The Dot-Com Recession: 8 Months (Mar to Nov 2001)
Covid-19 pandemic was the time when the whole world seemed to have a break but with anxiety and fear. As an infectious disease without a comprehensive treatment then got involved.
The Covid-19 Recession: 2 Months (Feb to Apr 2020)
What Would A Recession Look Like?
The Gulf War Recession: 8 Months (Jul 1990 to Mar 1991)
The crisis of savings and loans (S&L) and the First Gulf War were two events triggering the recession of the early 1990s.
The oil shock by quadrupling prices led to inflation and an international stock market crash. The unemployment rate got 9% and GDP got the bottom of 0.5%.
The Oil Shock Recession: 16 Months (Nov 1973 to Mar 1975)
Review of Past U.S. Recessions
The Stagflation Recession: 16 Months (Jul 1981 to Nov 1982)
The turbulence of the 1970s led to the U.S. inflation peak of 22% in 1980. The Fed chair’s plan caused an economic slowdown and a brief recession through a huge rise in interest rates. The rate of unemployment reached 7.8% while GDP declined to 0.2%.
The fallout of The Yom Kippur War of 1973 was the main cause behind the major problems for the U.S. The Organization of the Petroleum Exporting Countries (OPEC) placed an oil embargo on the U.S. due to their support for Israel in the war.
The recession lasted until 1982 and became the worst economic downturn in the U.S., according to the Fed. Unemployment climbed to around 11% and GDP dropped by 1.8% throughout this time.
‘How long do recessions last?’ might not be the only question that people ask amidst the crisis. It comes along with why it happens and how it recovers. We can learn from our history as many recessions happened, including the most terrible ones.
Source: Investopedia
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