People feel anxious about the economy for a range of reasons, including times when their wages aren’t rising or their costs are increasing.
And then there’s the r-word: recession.
Some people use informal measures to say the economy is in a recession: when gross domestic product (GDP), or the economy’s output, declines for two fiscal quarters in a row. But while these things tend to go hand in hand, that’s not an official designation.
What is a recession?
There is only one official way to call a recession. That’s up to a committee at the National Bureau of Economic Research (NBER), a private, nonprofit research organization. The committee considers a wide range of economy-wide, monthly data points, but the NBER views GDP as “the single best measure.”
The committee calls a recession once there is a significant decline across these measures for more than a few months. The NBER’s official designation of a recession, then, doesn’t happen until there is several months of data, allowing it to be sure both that a recession happened and when exactly it started. In other words, the NBER looks backward, not at the present moment.
What have recessions looked like in the past?
The US has gone through 34 recessions since 1855. Thirteen of them happened after World War II.
From 1855 to 2020, recessions lasted an average of 17 months. In the 20th and 21st centuries, the average recession has decreased to 14 months.
The longest recession lasted 65 months — that’s more than five years — from October 1873 to March 1879. Looking to more recent times, the longest recession of the post-war period was the Great Recession. It officially began in December 2007 and ended June 2009, lasting 18 months. The shortest recession was during the COVID-19 pandemic, lasting from February to April 2020.
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Economic expansions take place any time the economy isn’t in a recession. Expansions are the “normal” state of the economy, according to NBER, and occur when the measures of the economy (GDP, production, employment, consumer spending, etc.) are rising. Before the 1900s, the average expansion lasted 27 months. Since 1900, that rose to 49 months. In other words, in the 20th and 21st centuries, economic expansions lasted longer and recessions were shorter.
Prior to the 2020 recession, the economy’s expansion lasted 128 months, the longest in recorded US history.
What are important indicators for a recession?
The NBER reviews various indicators, including how many people are employed, how much personal income Americans have, retail sales, industrial production, and GDP. Some of the most heavily weighed indicators are “real personal income less government transfers” and “nonfarm payroll employment.” Let’s take a minute to explain what those mean.
Real personal income excluding government transfers
Real personal income excluding government transfers (such as Social Security, food stamps, or unemployment) measures earnings without government intervention. The NBER calls this a strong indicator because it focuses on what people earn from their current employment. Real personal income dropped in eight of the nine recessions since 1960.
Nonfarm payroll employment
Nonfarm payroll employment is a measure of jobs among people who don’t work in agriculture, private households (a job such as a nanny or personal chef), the military or are self-employed (freelancers, small business owners). This is an important indicator because it reflects activities such as large rounds of layoffs that would have systematic risk to the economy. Nonfarm payroll employment declined in every recession since World War II.
During the 2020 recession, employment fell 14.4% — the biggest drop since data collection began in 1939. Employment steadily increased after that and reached pre-pandemic levels by June 2022.
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Page sources and methodology
All of the data on the page was sourced directly from government agencies. The analysis and final review was performed by USAFacts.