Recessions are not uncommon; they are just a natural part of the economic life cycle. In fact, since 1854, the United States has had 33 recessions, according to the Bureau of Economic Research (NBER).
Many people are wondering what is going to happen as a result of COVID-19, as businesses close and unemployment numbers skyrocket. Our experts are diligently monitoring the situation and will be providing weekly updates on our weekly digest.
Read on to learn about the history of recessions in the United States, how long they lasted, and what caused them.
What’s the Difference Between a Recession and a Depression?
Before understanding the history of recessions in the United States, it’s important to realize that a recession is not a depression.
A recession is defined as two or more quarters of negative economic growth, or six months or more. It’s typically measured using the gross domestic product (GDP). In the United States, there are other indicators that are measured by the National Bureau of Economic Research (NBER), including unemployment, real incomes, retail sales, and industrial output.
A depression is much more severe and lasts for years. We have only had one depression in world history, the Great Depression, which began in 1929 and continued throughout the 1930s.
The Roosevelt Recession: 1937-1938
The Roosevelt Recession lasted for 13 months from May 1937 until June 1938, when the country stalled in its recovery from the Great Depression.
The stock market crashed in 1937, and businesses blamed the “New Deal,” which was a government program to create jobs through the Works Projects Administration (WPA) and Civilian Conservation Corps (CCC).
- GDP Decline: 3.4%
- Unemployment Rate: 19.1%
Post World War II Recession: 1948-1949
After World War II, there was a recession that lasted for an eleven-month duration, from November 1948 to October 1949.
The recession was triggered by all the veterans returning from the war and re-entering the workforce. There were numerous civilians, including women, who had entered the workforce during the war, and the new competition in the workforce caused a rise in unemployment.
- GDP Decline: 1.1%
- Unemployment Rate: 5.9%
The Oil Crisis Recession: 1973-1975
The Oil Crisis Recession lasted from November 1973 to March 1975 and lasted for 16 months. The prices of oil quadrupling triggered this long and harsh recession.
Although many people blame the OPEC oil embargo for causing this prolonged recession, there were other contributing factors. There was also a high level of government spending on the Vietnam War, which led to stagflation – a combination of high unemployment rates, stagnant economic growth, and high inflation.
- GDP decline: 3.6%
- Unemployment rate: 8.8%
Recessions of 1980-1982
In the early 1980s, there were two economic recessions back to back. This series of recessions was one of the deepest recessions in the history of the United States. The first one lasted for six months at the beginning of 1980. The second recession hit in July 1981 and lasted until November 1982.
The Federal Reserve triggered this recession by raising the interest rates to fight inflation, and businesses then significantly reduced their spending.
In addition to the Fed raising rates, United States oil supplies were low due to the Iranian oil embargo. The new regime in Iran believed that the United States supported the previous regime, and exported oil to the U.S. at much lower levels than it was previously receiving, forcing oil prices to be much higher.
- GDP Decline: 3.6%
- Unemployment rate: 10.8% in November and December 1982
The 1990 Recession
The Savings and Loan Crisis was the most significant bank collapse since the Great Depression of 1929. By 1989, more than 1,000 of the nation’s savings and loans had failed.
Additionally, there was a large increase in the price of oil after Iraq invaded Kuwait. The high surge of oil prices, and Savings and Loan Crisis was further exacerbated by manufacturing industries moving offshore after the North American Free Trade Agreement (NAFTA) became effective. Lastly, a stock market crash was triggered by a leveraged buyout of the huge corporation, United Airlines.
All of these factors basically created a perfect storm.
- GDP Decline: 1.5%
- Unemployment Rate: 6.8%
The 9/11 Recession
The 2001 recession lasted from March 2001 until November 2001.
When the terrible events of 9/11 happened, everyone worried that it would trigger a recession, but ironically the United States was already there. The recession was caused by a boom and bust in dot-com businesses, in which the Y2K scare exacerbated. Companies spent billions on new software because they feared their software from the ’90s wasn’t going to be sufficient as we entered the 2000s.
9/11 happened soon after and subsequently further contributed to the economic downturn.
- GDP Decline: 0.3%
- Unemployment Rate: 5.5%
The Great Recession (The 2008 Recession)
The most recent of US recessions that we all remember is the Great Recession, the worst financial disaster to hit the United States since the Great Depression. This severe recession was caused by the subprime mortgage crisis, and although it originated in the United States, it wreaked havoc on world financial markets.
Millions of people lost their jobs, their homes, and all of their savings.
- GDP decline: 4.3%
- Unemployment: 10%
Stay Educated and Informed to Protect Your Financial Health
Investors may be rightfully worried about a recession, but it’s important to remember that recessions are a normal part of the economic life cycle.
We may very well be in the midst of a recession now, but it too will run its course in due time. The decisions you make now could have a huge impact on your financial situation when the recession is over.
It’s important not to make any rash decisions led by your emotions or extreme worry.
As the COVID-19 pandemic continues to run its course, the best thing to do is to stay informed, and partner with a team of trusted professionals to help you make educated financial decisions during this uncertain time.
Contact us today for your complimentary consultation.