How Long Do Recessions Last? the Ultimate Tutorial

How Long Do Recessions Last? the Ultimate Tutorial

Recessions can last from a few weeks to several years, depending on the cause and government response. The average recession between 1854 and 2022 lasted 17 months, according to data from the National Bureau of Economic Research.J

Please read on for more detailed information.

How Long Do Recessions Last?

Recessions can last anywhere from a few weeks to several years, depending on the root cause and the response of the government.

The average length of a recession between 1854 and 2022 was 17 months, according to data from the National Bureau of Economic Research. However, the average recession only lasted 10 months if you restrict the time period to the period from World War II to the present.

Bear in mind that this is just an average, not a rule.

For instance, a 16-month long recession occurred in the early 1980s. The Great Recession that followed the burst of the housing bubble lasted from 2007 to 2009 for a total of 18 months.

The 2020 Covid-19 recession, on the other hand, was the shortest one ever observed, lasting only two months.

Recessions are a minor part of our economic history overall. The United States has changed significantly over the past 70 years. has spent under 15% of its time in an official recession. On the other side, the economy frequently roars back to life stronger than ever, even though they bring many people through difficult times.

How Long Do Recessions Last? the Ultimate Tutorial
How Long Do Recessions Last? the Ultimate Tutorial

What Factors Play into a Recession’s Length?

Recessions’ duration is influenced by a number of variables, including market conditions, the underlying cause, and the government’s response.

For instance, an overinflated housing bubble served as the catalyst for the global Great Recession. Millions of people either had their homes foreclosed upon or went into mortgage default when it finally burst. Over 4% of the GDP was lost, resulting in a gap of almost $1 trillion. Major banks, including Lehman Brothers, were meanwhile overwhelmed by subprime loans and eventually failed. Although it only officially lasted 18 months, the Great Recession’s effects on the economy continued for years.

In contrast, the Covid-19 recession began as a result of governments effectively shuttering significant portions of their economies in order to stop the spread of Covid. Due to their advantageous pre-Covid positions, many people recovered quickly when the world reopened. In some nations — the U.S. included – economic stimulus policies gave the economy the thrust it needed to hop back in the saddle.

However, Covid-19’s effects are still being felt. Despite a significant improvement in the job market, supply chain bottlenecks and rising corporate profits have caused sky-high inflation. As a result, over the past year, the Federal Reserve has gradually increased interest rates in an effort to reduce demand (and prices).

How Long Will This Recession Last?

There is, regrettably, no way to predict whether or when a recession will occur. For the time being, the majority of economists believe that a mild recession could last anywhere from a few months to more than a year. But until—and if—it does, we’ll just have to wait and see.

What Makes a Recession, a Recession?

An economy must experience at least two quarters of declining gross domestic product (GDP) to be considered in a recession, according to the commonly accepted definition. However, it’s not the whole story.

In reality, the National Bureau of Economic Research, or NBER, announces when a recession has officially begun. NBER defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

To wit, NBER considers changes to several key economic indicators like:

  • Real (inflation-adjusted) personal incomes
  • Payroll and self-reported employment numbers
  • Retail sales
  • Industrial production output
  • GDP fluctuations

However, not all data are equally weighted. Even if other segments of the economy continue to perform well, NBER may declare a recession if the economy is particularly hard hit in just one or two sectors.

For instance, the economy contracted for just two months in spring 2020, but the decline was so profound and pervasive that NBER still proclaimed a recession.

How Long Do Recessions Last? the Ultimate Tutorial
How Long Do Recessions Last? the Ultimate Tutorial

How Bad Will It Be?

A recession is regarded as a protracted downturn in the economy that typically lasts two quarters or longer and has an overall impact on the economy. The National Bureau of Economic Research, the arbiter of recessions, considers how deep the slowdown is, how wide spread it is and how long it lasts.

However, the NBER could declare a recession if any factor is significant enough. For instance, even though it lasted only a short time, the pandemic downturn in 2020 was so abrupt, sharp, and had a significant impact that it was classified as a recession.

“I’m hoping for a short, shallow one, but hope springs eternal,” said KPMG’s chief economist is Diane Swonk. “We should be able to quickly bounce back from it, which is good news. We do have sound financial standing, and once the Fed begins to ease, you might see a response in the form of lower interest rates. Recessions brought on by the Fed do not affect the balance sheet.”

The most recent economic forecasts from the Federal Reserve indicate that there won’t be a recession in 2023 and that the economy will expand at a 0.5% rate.

“We’ll have one because the Fed is trying to create one,” said Swonk. “when you claim that the unemployment rate will increase and growth will stagnate at zero… it’s clear the Although the Fed predicts a recession, they won’t say it.” According to the central bank, from its current level of 3.7%, unemployment could increase to 4.6% in the following year.

Keep Your Job If You Can — and Maybe Start Planning for Another

Fortune also advises against changing jobs at this time if at all possible. You might be stuck looking for work during a slowing job market if the recession starts earlier than expected. You will be the lowest on the totem pole at your new job and most susceptible to layoffs even if you manage to land a job before the downturn hits.

The good news is that today’s workforce is significantly more prepared than it was in 2008 to survive a challenging job market. Although the gig economy is now a powerful force, side hustle culture was still in its infancy. By starting a side business now, or at the very least making plans for one, you’ll have at least some stop-gap income to rely on in the event that you lose your job a few months from now so that you’re not forced to rely solely on your savings.

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