Glossary · Economy
Recession
A recession is a broad fall in economic activity that lasts more than a few months: people spend less, companies produce less, and jobs are lost.
Also called: economic downturn, contraction
Real GDP growth (after inflation) to Q3 2026.
From 2 months to 18 months long (NBER dating).
The trough was in April 2020.
In plain words
An economy is all of us buying, selling, building and working. Most years it grows a little: more goods, more services, more jobs. A recession is when that machine goes into reverse across the board (shops sell less, factories cut output, companies stop hiring and start laying people off) and stays in reverse for months, not days.
A popular shortcut says a recession is two quarters in a row of falling GDP. In the United States the official call is made by a committee of economists at the National Bureau of Economic Research (NBER). It looks at jobs, incomes, spending and production together, and usually announces a recession months after it began.
Recessions are a normal part of the business cycle. Since 1945 the US has had 13 of them, lasting from 2 months to 18 months; the average was about 10 months.
Example
Spotting a recession in the GDP numbers
Suppose an economy produces goods and services worth $1,000 billion a quarter, after inflation.
- Next quarter: $995 billion. That is a fall of 0.5%. News reports usually quote it “at an annual rate”: 0.9954 − 1 ≈ −2.0%.
- The quarter after: $990 billion, another −0.5%. Two falling quarters in a row: by the popular rule of thumb, a recession.
- Meanwhile unemployment climbs from 4% to 5.5% and factories cut output. That broad decline, not just GDP, is what the official dating committee looks for.
In the latest quarter (Q3 2026), US real GDP changed by +3.4% at an annual rate.
One level deeper
Recessions start for different reasons: a financial crisis that freezes lending (2008), a shock that stops activity almost overnight (the pandemic in 2020), a central bank raising interest rates sharply to beat inflation (1981–82), or a burst bubble (2001). Once started, they feed on themselves: lost jobs mean less spending, which means more lost jobs.
Depth varies a lot. From the end of 2007 to its low in Q2 2009, US real GDP fell 3.8%. In 2020 it dropped 9.1% in half a year, the sharpest fall in the quarterly data that start in 1947, and then bounced back within about a year.
A depression is a recession that is very deep or very long. The Great Depression of the 1930s is the famous one.
US growth and recessions since 1948
Each bar is the change in US real GDP from the same quarter a year earlier. The bars below zero sit inside the shaded recessions or just after them (a change over a year lags), though not every recession pushed the yearly change below zero.
The numbers behind the chart
| Date | Real GDP, change from a year earlier |
|---|---|
| Q1 1948 | 2.6% |
| Q4 1950 | 13.4% |
| Q4 1960 | 0.9% |
| Q4 1970 | −0.2% |
| Q4 1980 | −0.0% |
| Q4 1990 | 0.6% |
| Q4 2000 | 2.9% |
| Q4 2010 | 2.8% |
| Q4 2020 | −0.9% |
| Q4 2022 | 1.2% |
| Q4 2023 | 3.4% |
| Q4 2024 | 2.6% |
| Q4 2025 | 2.0% |
| Q3 2026 | 2.1% |
Why it matters
Recessions are when most jobs are lost: the unemployment rate usually jumps by several points, and it can take years to come back down.
Stock markets often fall before and during recessions, but by very different amounts, and they usually start recovering before the economy does. That is why trying to time them is so hard.
Central banks and governments respond with lower interest rates, tax cuts and extra spending, so the end of one cycle shapes the next.
A common mistake
Myth: Two quarters of falling GDP is the official definition of a recession.
In fact: It is only a rule of thumb. In the US the NBER’s dating committee decides, looking at jobs, income, spending and production together. Its dates for the latest recession: a peak in February 2020 and a trough in April 2020, 2 months later.
Questions people ask
How often do recessions happen?
In the US there have been 13 since 1945, roughly one every 6 years on average. The gaps are uneven, from a couple of years to more than a decade.
Are we in a recession now?
The NBER dates recessions only afterwards, so watch the data. US real GDP changed by +2.1% over the four quarters to Q3 2026. It has been 6 years since the last recession ended, in April 2020.
What is the difference between a recession and a depression?
A depression is an extreme recession: much deeper, or lasting years. In the Great Depression, US output fell by about a quarter between 1929 and 1933 and unemployment passed 20%.
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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.