The US economy is declining due to falling GDP last quarter, according to data released by the Bureau of Economic Analysis on July 28. In the second quarter of 2022, GDP fell 0.9% after decreasing 1.6% in the first quarter.

When GDP declines for multiple quarters in a row, it raises concerns over a possible recession. But determining when the economy is in a recession is more complicated than looking at a single data set such as GDP.

What is a recession?

A general way to measure recessions is two consecutive quarters of negative gross domestic product (GDP) growth. However, according to the Bureau of Economic Analysis (BEA), this is not an official designation.

Determining when the economy is in a recession is up to a committee of experts at the National Bureau of Economic Research (NBER). The committee officially designates recessions by monitoring a variety of economic indicators, including GDP. It also uses payroll employment, personal income, industrial production, and retail sales in the effort.

So the official definition of a recession is a slip in the economy as defined by the NBER, after considering a wide range of data points.

When is a recession declared?

Economists, politicians, and other public figures will often talk about a recession or the fear of one, especially when GDP is declining for multiple quarters.

But the official designation from NBER of when a recession starts or ends doesn’t happen until months after the recession is over. In other words, NBER looks backward, not at the present moment.

What have recessions looked like in the past?

The US has gone through 34 recessions since 1857. Thirteen of those recessions occurred after World War II.

From 1857 to 2020, recessions lasted an average of 17 months. In the 20th and 21st centuries, the average length of a recession decreased to 14 months.

The longest recession lasted 65 months, from October 1873 to March 1879. The shortest recession was the most recent, lasting two months from February 2020 to April 2020.

Economic expansions are the opposite of a recession. The average expansion lasted an average of 41.4 months. In the 20th and 21st centuries, this average increased to 48 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. This was the longest economic expansion in recent history.

The US went through 34 recessions since 1857.

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How does NBER measure recessions? How have the indicators changed over time?

NBER states that in recent decades, the committee has placed the most weight on personal income and nonfarm employment when determining a recession.

Personal income, without including government transfers, increased at an average rate of 3% annually from 1930 to 2021. Annual declines in personal income occurred during 11 of the 15 recessions since 1930, the earliest data available.

There were no annual losses in personal income for the recessions of 1960–1961, 1969–1970, 1981–1982, and 2001.

During the 2020 recession, personal income dropped 0.5% compared with 2019. The largest monthly decrease in 2020 occurred from March to April, at 5.6%.

The largest monthly decrease in personal income occurred from December 2012 to January 2013, however, no recession was declared around that time.

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Since 1939, nonfarm employment increased at an average rate of 2% a year. Annual declines in nonfarm employment occurred during 10 of the 13 recessions since World War II.

There were no annual losses in employment for the recessions of 1969-1970 and 1980. In the case of the 2001 recession, declines in employment followed for two years after the end of the recession.

During the 2020 recession, employment decreased 13.6% from March to April. This was the biggest drop in employment since 1939, the earliest data available. Employment has steadily increased since and is approaching pre-pandemic levels.

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Keep tabs on all the key economic indicators at the USAFacts Recovery Hub.

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