History of Recessions in the United States
Causes, Length, GDP, and Unemployment Rates
The history of recessions in the United States since the Great Depression show they are a natural, though painful, part of the business cycle. The National Bureau of Economic Research defines when a recession starts. The Bureau of Economic Analysis measures recessions using gross domestic product.
This recession lasted only eight months from February to October 1945. It seemed to last longer.
That's because GDP continued to fall until it reached -11.6 percent in 1946. This was a natural result of the demobilization from World War II. That happened when the huge demand for military weapons fell off. Government spending dropped, although business spending was robust.
This 11-month recession began in November 1948. It lasted until October 1949, when unemployment reached a peak of 7.9 percent. It was a mild adjustment as the economy continued adapting to peacetime production.
|GDP Growth||Q1 (Jan-Mar)||Q2 (Apr-Jun)||Q3 (Jul-Sep)||Q4 (Oct-Dec)|
Recession of 1953
This recession lasted 10 months from July 1953 to May 1954. It resulted from the demobilization after the Korean War. Unemployment didn't reach its peak of 6.1 percent until September 1954, four months after the recession ended. In 1953, GDP contracted 2.2 percent in Q3 and 5.9 percent in Q4. In 1954, it contracted 1.9 percent in Q1.
Recession of 1957
It lasted eight months from August 1957 to April 1958. GDP fell 4.1 percent in Q4 1957. It immediately plummeted 10 percent in Q1 1958. Unemployment didn't reach its peak of 7.1 percent until September 1958. The Fed's contractionary monetary policy caused it.
Starting in April 1960, the recession lasted 10 months until February 1961.
GDP was -2.1 percent in Q2, rose 2.0 percent in Q3, but was -5.0 percent in Q4. Unemployment reached a peak of 7.1 percent in May 1961. President Kennedy ended the recession with stimulus spending. His opponent, Richard Nixon, said the recession cost him the election. He had been vice-president so voters blamed the Republicans for causing it.
This recession was relatively mild, lasting 11 months from December 1969 to November 1970. GDP was -0.6 percent in Q1, then rose 0.6 percent in Q2, 3.7 percent in Q3, and -4.2 percent in Q4. Unemployment peaked at 6.1 percent in December 1970.
This recession lasted 16 months from November 1973 to March 1975. The Organization of the Petroleum Exporting Countries is blamed for quadrupling oil prices, but the OPEC oil embargo alone didn't cause such a deep recession. Several factors contributed.
Second, Nixon took the United States off of the gold standard in response to a run on the gold held at Fort Knox. That created inflation, as the price of gold skyrocketed to $120 an ounce and the dollar's value plummeted.
The result was stagflation and five quarters of negative GDP growth: 1973 Q3 -2.1 percent, 1974 Q1 -3.4 percent, Q3 -3.7 percent, Q4 -1.5 percent, and 1975 Q1 -4.8 percent. Unemployment reached a peak of 9 percent in May 1975, two months after the recession technically ended.
The economy suffered a double whammy of two recessions. There was one during the first six months, January to July, of 1980 and another that lasted 16 months from July 1981 to November 1982.
The Fed caused it by raising interest rates to combat inflation. That reduced business spending. The Iranian oil embargo aggravated it by reducing U.S. oil supplies. That constrained supply and drove up prices.
GDP was negative for six of the 12 quarters. The worst was Q2 1980 at -8.0 percent. Until the 2008-2009 recession, that was the quarterly decline since the Great Depression.
Unemployment rose to 10.8 percent in November 1982, the highest level of unemployment in any recession. It was above 10 percent for 10 months. President Reagan ended it by lowering the tax rate and boosting the defense budget.
This recession ran eight months from July 1990 to March 1991. The 1989 Savings and Loan Crisis caused it. GDP was -3.6 percent in Q4 1990 and -1.9 percent in Q1 1991.
The 2001 recession lasted eight months from March to November 2001. It was caused by the Y2K scare in 2000. This created a boom and subsequent bust in dot-com businesses. The 9/11 attack worsened it. The economy contracted in two quarters: Q1 -1.1 percent and Q3 -1.7 percent. Unemployment reached 5.7 percent during the recession, but rose even further to 6 percent in June 2003. This often happens in recessions, as unemployment is a lagging indicator. Most employers wait until they are sure the economy is back on its feet again before hiring permanent employees.
The Great Recession was the worst since the 1929 Depression. It was also the longest since the Depression, lasting 18 months from December 2007 to June 2009. The subprime mortgage crisis was the trigger. That created a global banking bank credit crisis.
The economy shrank in five quarters, including four quarters in a row. Two quarters contracted more than 5 percent. In Q4 2008, GDP was -8.4 percent, worse than any other recession since the Great Depression. The recession ended in Q3 2009, when GDP turned positive, thanks to the economic stimulus package.
The BEA revises its GDP estimates as it gets new data. It often recalibrates its estimates in July of each year. Here's the final estimate (made in July 2018) followed by the initial estimate (made one month after the quarter ended). This helps shows how difficult it is to correct a recession until it's already started. It also reminds you how difficult it is to time the market with your investments.
- Q1 The economy shrank 2.3 percent. Initially, the BEA thought it grew 0.6 percent.
- Q2 The economy rebounded 2.1 percent. The initial release said it grew 1.9 percent. Everyone thought the Fed's rescue of Bear Stearns ended the threat to financial markets.
- Q3 The economy shrank 2.1 percent, much more than -0.3 percent initial estimate.
- Q4 The economy collapsed, shrinking 8.4 percent. The BEA initially said it only shrank 3.8 percent, although that was bad enough.
- Q1 The economy shrank 4.4 percent. The initial estimate said it shrank 6.1 percent.
- Q2 The economy contracted 0.6 percent, better than the initial estimate of -1.0 percent.