Glossary · Economy
Business cycle
The business cycle is the repeating rise and fall of economic activity: an expansion, a peak, a recession, a trough, and expansion again.
Also called: economic cycle, boom and bust, trade cycle, expansion and contraction
Since the trough in April 2020, to Q3 2026.
12 finished expansions. Longest: 11 years.
13 recessions, from 2 months to 18 months.
In plain words
Economies do not grow in a straight line. They speed up for years (more hiring, more spending, rising profits), hit a peak, shrink for a while in a recession, bottom out at a trough, and start growing again. That repeating pattern is the business cycle.
It is called a cycle, but it is not regular like the seasons. In the US, expansions since 1945 lasted 5 years on average, while recessions were much shorter: 10 months on average.
In the US the turning points are dated by the National Bureau of Economic Research (NBER), a private research group, usually many months after they happen.
Example
One full cycle, 2009 to 2020
- Trough, June 2009: the end of the Great Recession, with unemployment near 10%.
- Expansion: 128 months of growth, the longest in the NBER’s records up to then; unemployment fell to 3.5%.
- Peak, February 2020.
- Recession, March and April 2020: two months, the shortest on record, but the steepest fall in output since the 1940s.
- Trough, April 2020, and a new expansion began.
Every phase had its own cause and length; that irregularity is why the cycle is so hard to forecast.
One level deeper
What drives it? Economists point to many things: swings in business investment and inventories, credit booms and busts, central banks raising interest rates to fight inflation, and shocks such as oil-price spikes or a pandemic. Confidence amplifies them: when people expect bad times, they spend less, which brings bad times.
Expansions have grown longer since the mid-1980s, a period economists call the Great Moderation, perhaps thanks to better monetary policy, better inventory control and a shift to services. The longest finished expansion ran from June 2009 to February 2020: 11 years.
Governments and central banks try to smooth the cycle, cutting rates and spending more in a downturn (fiscal and monetary policy) and leaning against booms. They can soften it, not abolish it.
How long US expansions lasted
Each bar is one expansion since 1945, from a recession’s trough to the next peak, in months. The last bar is still running.
The numbers behind the chart
| Months of expansion | |
|---|---|
| 1945–1948 | 37 |
| 1949–1953 | 45 |
| 1954–1957 | 39 |
| 1958–1960 | 24 |
| 1961–1969 | 106 |
| 1970–1973 | 36 |
| 1975–1980 | 58 |
| 1980–1981 | 12 |
| 1982–1990 | 92 |
| 1991–2001 | 120 |
| 2001–2007 | 73 |
| 2009–2020 | 128 |
| 2020–now | 77 |
Why it matters
It moves jobs, profits, stock prices and government budgets: almost every economic number rises and falls with it.
Knowing roughly where you are in the cycle helps businesses plan hiring and investment, though nobody can time the turns reliably.
Stocks tend to fall before recessions start and recover before they end, so markets and the economy are often out of step.
A common mistake
Myth: Expansions die of old age.
In fact: There is no fixed length: US expansions since 1945 lasted from about a year to more than a decade (11 years for the longest finished one). Recessions are set off by shocks, overheating or policy, not by the calendar.
Questions people ask
What are the four phases of the business cycle?
Expansion, peak, contraction (recession) and trough. The NBER dates the peaks and troughs by month.
How long does a business cycle last?
From one peak to the next, US cycles since 1945 averaged about six years, but ranged from under two years to more than a decade.
Where are we in the business cycle now?
The US economy has been expanding for 6 years since the trough in April 2020. Real GDP changed by +2.1% over the four quarters to Q3 2026.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- US recessions (NBER business cycle dates): National Bureau of Economic Research (NBER), Business Cycle Dating Committee: US Business Cycle Expansions and Contractions.
- Real gross domestic product: U.S. Bureau of Economic Analysis, National Income and Product Accounts, series GDPC1; retrieved from FRED, Federal Reserve Bank of St. Louis.
- This page explains a term. It is not investment advice.