What is a recession?

A recession is a broad decline in economic activity that lasts more than a few months. It is not one bad month, and it is not one weak industry. It shows up across output, employment, income and spending at the same time, which is what separates a recession from an ordinary soft patch.

Who actually decides

In the United States, a standing committee at the National Bureau of Economic Research dates recessions. Two things about that committee surprise people.

It is not part of the government. The NBER is a private non-profit, and its Business Cycle Dating Committee has no policy role at all.

And it is deliberately slow. It works from revised data and waits until the picture is settled, so a recession is normally declared long after it began, sometimes more than a year later. Nobody, including the committee, knows in real time that a recession has started.

The two-quarter rule is a rule of thumb

You will often hear that a recession is two consecutive quarters of falling GDP. That is a handy shorthand and it is not the US definition.

The committee weighs three things together: how deep the downturn is, how widely it spreads across the economy, and how long it lasts. A downturn can be severe enough to be dated a recession without two negative quarters, and an economy can post two weak quarters that are never dated as a recession at all. Treat the rule as a signal, not a verdict.

How long they last

Since 1945, the average US recession has run about 10 months, with a median of 10 across the 13 the NBER has dated. The shortest on record was 2 months in 2020. The longest since the war was 18 months, from January 2008 to June 2009.

The full record back to 1857 averages 16.5 months, which is a much higher figure and the wrong one to quote for anything current. Nineteenth-century downturns happened without a central bank, without deposit insurance and without automatic stabilisers, and several ran for years. Our recession length page shows every one with its duration.

What tends to come first

Most recession indicators confirm a downturn rather than predict one, which is a distinction worth holding onto. The Sahm Rule and the Chicago Fed activity index are built to identify a recession already underway, and tested against the last three recessions neither fired before one started.

The yield curve is the exception. It inverted 9, 23 and 10 months ahead of the 2001, 2008 and 2020 recessions, three for three. Our Recession Signal Index publishes those lead times alongside the indicators that never led, including the inversions that were not followed by a recession at all.

Recession is not the same as recovery

The NBER dates a recession from peak to trough. The trough is the month things stopped getting worse, not the month everything was fixed. Output, and employment especially, can take considerably longer to return to the previous peak. A recession officially ending is compatible with the economy still feeling bad for a long time afterwards.