Looking back at past recessions

Do you know how many recessions the United States has experienced since the Great Depression? This can come as a surprise, especially when you consider these incidents reported by the media as one-off terrorist incidents.

What is a recession?

The historical recession is defined as two consecutive quarters of decline in GDP, that is, the total value of all goods and services produced in the United StatesIt differs from gross national product (GNP) in that it does not include the value of goods and services produced by American companies abroad, nor the value of imported goods and services in the United States.

The more modern definition of recession used by the National Bureau of Economic Research (NBER) dating committee is “a significant decline in economic activity that has spread throughout the economy and lasted for more than a few months.”

In 2007, the Federal Reserve Board (FRB) economist Jeremy J. Nalewaik suggested that the combination of GDP and gross domestic income (GDI) to define a recession might be more accurate.Here are some of the biggest recessions in U.S. history.

Historical decline

Let’s look at some of these recessions based on some key characteristics.

  • Duration: How long did the official recession last?
  • GDP decline: How much has national income dropped?
  • Peak unemployment rate: What is the proportion of the unemployed labor force?
  • Reasons and reasons: What unique historical environment contributed to the development of this recession?

As the United States fell into recession during the coronavirus pandemic, the National Bureau of Economic Research officially announced the end of economic expansion in February 2020.

Roosevelt’s economic recession: (May 1937 to June 1938)

  • Duration: 13 months
  • GDP decline: 10%
  • Peak unemployment rate: 20%
  • Reasons and reasons: The stock market crashed in late 1937.Companies blamed the “New Deal”, a series of government-funded infrastructure work projects through the Works Projects Administration (WPA) and the Civil Conservation Corps (CCC).These projects have provided jobs for more than 250,000 people.The government blamed the “capital strike” (lack of investment) on companies, while “new dealers” accused of cutting WPA funding.The social security insurance deductions for the first four years were out of circulation at this time.

Federal recession: (February 1945-October 1945)

  • Duration: eight months
  • GDP decline: 10.9%
  • Peak unemployment rate: 5.2%
  • Causes and reasons: The end of World War II, the beginning of the demobilization of the army, and the slow transition to civilian production, marked this period. War production has practically ceased, and veterans have just begun to re-enter the labor market.It is also referred to as “union decline” because unions are beginning to re-establish their status. The minimum wage is rising and credit is tight.
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Economic recession after the war: (November 1948 to October 1949)

  • Duration: 11 months
  • GDP decline: 1.7%
  • Peak unemployment rate: 5.7%
  • Reasons and reasons: As a large number of returning veterans re-entered the labor market and competed with existing civilians who entered the labor market during the war, the unemployment rate began to rise. The government’s response was minimal because it was more worried about inflation than unemployment at the time.

Recession after the Korean War: (July 1953-May 1954)

  • Duration: 10 months
  • GDP decline: 2.7%
  • Peak unemployment rate: 5.9%
  • Reasons and reasons: After the inflationary period after the Korean War, more U.S. dollars were used for national security.In 1952, the Federal Reserve tightened monetary policy to curb inflation. The drastic changes in interest rates have led to an increase in pessimism about the economy and a decline in aggregate demand.

Eisenhower Economic Recession: (August 1957-April 1958)

  • Duration: eight months
  • GDP decline: 3.7%
  • Peak unemployment rate: 7.4%
  • Reasons and reasons: Compared with the years before the recession, the government tightened monetary policy to curb inflation, but prices in the United States continued to rise in 1959.The sharp decline in the global economy and the strengthening of the U.S. dollar have led to a foreign trade deficit.

“Rolling adjustment” recession: (April 1960 to February 1961)

  • Duration: 10 months
  • GDP decline: 1.6%
  • Peak unemployment rate: 6.9%
  • Reasons and reasons: This recession is also known as the “rolling adjustment” of many major industries in the United States, including the automotive industry. Americans began to switch to compact and foreign-made cars, and the industry reduced inventories. Gross national product (GNP) and product demand decline.

Nixon Economic Recession: (December 1969-November 1970)

  • Duration: 11 months
  • GDP decline: 0.6%
  • Peak unemployment rate: 5.9%
  • Reasons and reasons: Increasing inflation has led the government to adopt very strict monetary policies. The structure of government spending has exacerbated the contraction of economic activity.

The recession of the oil crisis: (November 1973-March 1975)

  • Duration: 16 months
  • GDP decline: 3%
  • Peak unemployment rate: 8.6%
  • Reasons and reasons: This long and severe recession was caused by the quadrupling of oil prices and the government’s high expenditures in the Vietnam War. This leads to stagflation and high unemployment.In May 1975, after announcing the end of the recession, the unemployment rate finally reached 9%.
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Energy crisis recession: (January 1980-July 1980)

  • Duration: six months
  • GDP decline: 2.2%
  • Peak unemployment rate: 7.8%
  • Causes and causes: Inflation has reached 11.1%, the Fed has raised interest rates, the growth rate of the money supply has slowed, the economy has slowed down, and the unemployment rate has risen. Energy prices and supply are at risk, leading to a crisis of confidence and inflation.

Iran/Energy Crisis Recession: (July 1981-November 1982)

  • Duration: 16 months
  • GDP decline: 2.9%
  • Peak unemployment rate: 10.8%
  • Reasons and reasons: This long and deep recession was caused by the change of regime in Iran. As the world’s fourth-largest oil producer at the time, the country overthrew a government backed by the United States.The “new” Iran exports oil at inconsistent intervals and in lower quantities, forcing prices higher.The U.S. government has implemented a tighter monetary policy to control the rampant inflation caused by the previous two oil and energy crises.The prime interest rate reached 20.5% in 1981.

The Gulf War recession: (July 1990-March 1991)

  • Duration: eight months
  • GDP decline: 1.5%
  • Peak unemployment rate: 6.8%
  • Reasons and reasons: Iraq invaded Kuwait. This led to a spike in oil prices in 1990, which led to a decline in manufacturing trade sales.Coupled with the impact of the transfer of manufacturing overseas after the North American Free Trade Agreement (NAFTA) terms come into effect. In addition, United Airlines’ leveraged buyout triggered a stock market crash.

9/11 Economic Recession: (March 2001 to November 2001)

  • Duration: eight months
  • GDP decline: 0.3%
  • Peak unemployment rate: 5.5%
  • Reasons and reasons: The bursting of the Internet bubble, the 9/11 attacks, and a series of accounting scandals by major US companies have led to a relatively mild contraction in the US economy. In the next few months, the GDP returned to its previous level.

Great Recession: (December 2007 to June 2009)

  • Duration: Eighteen months
  • GDP decline: 4.3%
  • Peak unemployment rate: 10.0%
  • Reasons and reasons: The real estate bubble burst in the 2000s, and the resulting foreclosure records and financial crisis plunged the global market into chaos.By mid-2008, oil prices soared to record highs and then plummeted, destroying the US oil industry.
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Covid-19 recession (February 2020-continuous)

  • Duration: in progress
  • Decline in GDP: According to the GDPNow survey of the Federal Reserve Bank of Atlanta, the generally expected median GDP for the second quarter is -53.8%.
  • Peak unemployment rate: 13.0% in May 2020
  • Reasons and reasons: The actions taken by the United States and other countries in the world to contain the spread of the new coronavirus in 2019-restricting travel, closing non-essential businesses and implementing general social distancing policies-the virus has been officially declared a pandemic The World Health Organization announced in March 2020 that it had caused serious economic consequences. On June 8, 2020, the National Bureau of Economic Research officially announced that the US economy has entered a recession. Despite a lot of speculation, it is not yet clear what the form of this recession will be, and the duration of the Covid-19 recession can only be known with hindsight.

Bottom line

So what do all these very different recessions have in common? In many cases, the single most important factor is the period of expansionary monetary policy in the years preceding the recession, sometimes to help fund government war spending, or to re-stimulate the economy after the previous recession.

Once the resulting debt bubble bursts or the end of the war leads to a reduction in monetary expansion, years of over-expansion, debt-based investment, and improper investment will often disappear in a relatively short period of time in the process of debt deflation. This will cause the unemployment rate to soar and drag down GDP.

In addition to underlying currency trends, actual economic shocks often help trigger turning points in economic recessions. On the one hand, oil price fluctuations seem to be a consistent and frequent historical harbinger of the US economic recession.Of the 12 economic recessions after World War II, 10 occurred before or at the same time as oil prices soared.This highlights that while global economic integration that allows more effective cooperative efforts between governments has increased over time, integration itself has brought the world economy closer together, making them more susceptible to foreign issues.


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