There have been 19 recessions in the United States since its founding. A recession is when the economy declines and businesses lay off workers. The National Bureau of Economic Research determines when a recession starts and ends. It usually doesn't declare a recession until after its had the chance to analyze the data and make sure it is over. The federal Bureau of Economic Analysis (BEA) measures growth using the gross domestic product (GDP). The federal Bureau of Labor Statistics reports on the unemployment rate which often peaks after a recession ends. It's a lagging indicator because most employers wait until they're sure the economy is back on its feet again before hiring new workers.
Since 1948, there has been on average one recession every six years. The average recession before 2007 lasted about 11 months. Expansions have lasted as little as one year to as long as a decade. The Great Recession lasted 18 months. The 2020 recession lasted just two months --the shortest on record., but also the most vicious.
Early Recessions
These recessions were brutal. The government couldn't stop them because there was no central bank.
- 1797: Land speculation caused the Panic of 1797. The First Bank of the United States and U.S. Treasury Secretary Alexander Hamilton caused it by expanded the money supply.
- 1857: Embezzlement at the Ohio Life Insurance and Trust Company's New York branch triggered a panic. Investors lost faith in paper money when a ship carrying gold to New York sank en route. Businesses couldn't make their payrolls and commerce ground to a halt.
- 1873: The construction of the national railway system created speculation that led to the collapse of the largest U.S. bank. The recession lasted until 1879.
- 1893: The Reading Railroad failed, leading to other railway failures and a stock market crash. Banks stopped cash payments. People began hoarding cash, and many banks failed.
20th Century Recessions
There were 12 recessions in the 20th century, including two that were during the Great Depression.
1907
The Panic of 1907 lasted from May 1907 to June 1908. Speculators' losses spread to trust companies which then collapsed. These firms acted like banks but didn't have enough reserves. Congress created the Federal Reserve System to prevent future collapses.
1929 to 1938 (The Great Depression)
The biggest economic crisis in U.S. history was two closely related recessions. Combined, they are known as the Great Depression. The first lasted between August 1929 and March 1933. The economy shrank 12.9% in 1932. The Fed raised interest rates in the spring of 1928. This caused a mild recession, which led to the 1929 stock market crash. The economy also suffered from a 10-year drought in the Midwest created the Dust Bowl, destroying agricultural production.11 The New Deal ended the first recession, boosting growth by 10.8%.
The second recession was between May 1937 and June 1938. Unemployment reached 24.9% in 1933 and remained in the double digits until 1945.10
| Year | 1930 | 1931 | 1932 | 1933 | 1934 | 1935 | 1936 | 1937 | 1938 | 1939 |
|---|---|---|---|---|---|---|---|---|---|---|
| Growth Rate | -8.5% | -6.4% | -12.9% | -1.2% | 10.8% | 8.9% | 12.9% | 5.1% | -3.3% | 8.0% |
| Unemployment | 8.7% | 15.9% | 23.6% | 24.9% | 21.7% | 20.1% | 16.9% | 14.3% | 19.0% | 17.2% |
After the success of the New Deal, Congress grew worried about the debt. It scaled back government spending too soon, causing the second recession in 1938. This didn't end until the drought did, and the government increased spending for World War II.13
1945
Demobilization after World War II caused this eight-month recession.
1949
This 11-month recession began in November 1948 and lasted until October 1949. Unemployment peaked at 7.9%.The Fed caused it by raising interest rates too quickly.
| GDP Growth | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 1949 | -5.4% | -1.4% | 4.2% | -3.3% |
1953
It lasted 10 months from July 1953 to May 1954. Demobilization after the Korean War, combined with higher interest rates, caused the economy to shrink too quickly. Unemployment hit a high of 6.1% in September 1954, four months after the recession ended. GDP contracted by 2.2% in the third quarter of 1953 and by 5.9% in the fourth quarter. It contracted by 1.9% in the first quarter of 1954.
1957
This recession took place from August 1957 to April 1958.14 GDP fell 4.1% in the fourth quarter of 1957, then it contracted to a low of 10.0% in the first quarter of 1958.20 Unemployment didn't reach its peak of 7.5% until July 1958.21 The Fed's contractionary monetary policy caused this economic slowdown.
1960
Starting in April 1960, this recession lasted 10 months until February 1961. GDP was -2.1% in the second quarter of 1960, then it rose by 2.0% in the third quarter but it was down by 5.0% in the fourth quarter. Unemployment reached a peak of 7.1% in May 1961. President John F. Kennedy ended the 1960 recession with stimulus spending. His opponent, Richard Nixon, blamed the recession for costing him the election.
1970
This recession was relatively mild, lasting 11 months from December 1969 to November 1970. Unemployment peaked at 6.1% in December 1970. The economy contracted by 1.9% in the fourth quarter of 1969 and by 0.6% in the first quarter of 1970. GDP rose by 0.6% in the second quarter of 1970 and 3.7% in the third quarter, but it fell by 4.2% in the fourth quarter. The economy recovered in the first quarter of 1971, increasing by 11.3%.
1973 to 1975
This recession lasted 16 months, from November 1973 to March 1975. The OPEC oil embargo is blamed for quadrupling oil prices, but actions taken by President Richard Nixon also contributed to the recession. Nixon first instituted wage-price controls. They kept prices too high, reducing demand. Wage controls made salaries too high and forced businesses to lay off workers. Then Nixon took the United States off the gold standard in response to a run on the gold held at Fort Knox. This led to inflation. The price of gold skyrocketed and the dollar's value plummeted.
That created stagflation where the economy shrank in five out of six quarters.
- 1973 Q3: -2.1%
- 1974 Q1: -3.4%
- 1974 Q3: -3.7%
- 1974 Q4: -1.5%
- 1975 Q1: -4.8%
Unemployment reached a peak of 9.0% in May 1975, two months after the recession ended.
1980 to 1982
The economy suffered a double whammy of two recessions in this period. There was one during the first six months of 1980. The second lasted 16 months from July 1981 to November 1982. The Fed caused this recession by raising interest rates to combat inflation. That reduced business spending. The Iranian oil embargo aggravated economic conditions by reducing U.S. oil supplies, which drove prices up.
GDP was negative for six of the 12 quarters. The worst was in the second quarter of 1980 at -8.0%. Unemployment rose to 10.8% in November and December of 1982. It was above 10% for ten months.
| GDP Growth | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 1980 | 1.3% | -8.0% | -0.5% | 7.7% |
| 1981 | 8.1% | -2.9% | 4.9% | -4.3% |
| 1982 | -6.1% | 1.8% | -1.5% | 0.2% |
1990 to 1991
This recession ran for nine months from July 1990 to March 1991. The Savings and Loan Crisis, higher interest rates, and Iraq's invasion of Kuwait caused it. The economy shrank 3.6% in the fourth quarter of 1990 and 1.9% in the first quarter of 1991. By June, unemployment had reached 7.8%.
21st Century Recessions
The 21st century experienced three recessions in its first decade. Each was worse than the one before but for different reasons.
2001
The 2001 recession lasted eight months from March to November.14 It was caused by a boom and subsequent bust in dot.com businesses. The Y2K scare partially created the boom in 2000. Companies bought billions of dollars worth of new software because they were afraid the old systems weren't designed to transition from the 1900s to the 2000s. Many dot-com businesses were significantly overvalued and failed.34
The 9/11 attack worsened the recession. The economy contracted in two quarters: in the first quarter by -1.3% and in the third quarter by -1.6%.19 Unemployment continued rising until it peaked at 6.3% in June 2003.35
2008 to 2009
The Great Recession was the longest contraction since the Great Depression, lasting between December 2007 and June 2009. It was caused by the subprime mortgage crisis that triggered a global bank credit crisis in 2007. The damage had spread to the general economy through the widespread use of derivatives by 2008.
GDP shrank in three quarters in 2008, including an 8.5% drop in the fourth quarter. The unemployment rate rose to 10% in October 2009, lagging behind the recession that caused it.3719
| Year | Q1 | Q2 | Q3 | Q4 |
|---|---|---|---|---|
| 2008 | -1.6 | 2.3 | -2.1 | -8.5 |
| 2009 | -4.6 | -0.7 | 1.5 | 4.3 |
The recession ended in the third quarter of 2009 when GDP turned positive, thanks to the American Recovery and Reinvestment Act.
2020 Recession
The 2020 recession was more severe than even the Great Recession. The economy shrank a record 31.2% in the second quarter after falling 5.1% in the previous quarter. An astonishing 20.5 million jobs were lost in April 2020, sending the unemployment rate skyrocketing to 14.7%. It remained in the double digits until August. Uncertainty over the pandemic's impact also contributed to the 2020 stock market crash. The Federal Reserve lowered the fed funds rate to basically 0% in March 2020 and Congress issued billions of dollars in aid. The economy grew 33.8% in the third quarter, but it wasn't enough to make up for earlier losses.
Sources:
- Johns Hopkins Institute for Applied Economics. "What Caused the Recession of 1797?"
- Library of Congress. "Today in History - August 24."
- Federal Reserve History. "Banking Panics of the Gilded Age 1863–1913."
- Federal Reserve Board. "Causes of Bank Suspensions in the Panic of 1893."
- Federal Reserve Bank of New York. "The Final Crisis Chronicle: The Panic of 1907 and the Birth of the Fed."
- Federal Reserve History. "The Panic of 1907."
- Federal Reserve History. "Recession of 1937–38."
- Federal Reserve History. "The Great Depression."
- Federal Reserve History. "The Second World War and Its Aftermath."
- Barron's. "The Bottom Isn't Here Yet for Stocks. A Look at the Last 800 Years of Economic Data Shows Why."
- Robert A. Margo. "Employment and Unemployment in the 1930s," Page 43. Journal of Economic Perspectives.
- Library of Congress. "The Dust Bowl."
- Bureau of Labor Statistics. "Table 1.1.1. Percent Change From Preceding Period in Real Gross Domestic Product,"
- National Bureau of Economic Research. "U.S. Business Cycle Expansions and Contractions."
- National Bureau of Economic Research. "Deep Recessions, Fast Recoveries, and Financial Crises: Evidence From the American Record," Pages 7-8.
- Bureau of Labor Statistics. "Unemployment Rate."
- Steven Ricchiuto. "Symptomatic to Systemic: Understanding Postwar Cycles and Financial Debacles," Chapter 2. Greenleaf Book Group Press, 2018.
- Federal Reserve Bank of St. Louis. "Real Gross Domestic Product."
- Bureau of Economic Analysis. "Gross Domestic Product."
- Federal Reserve Bank of Boston. "The 1990-91 Recession in Historical Perspective," Page 7.
- History.com. "How the U.S. Got Out of 12 Economic Recessions Since World War II."
- PBS. "Nixon, Price Controls, and the Gold Standard."
- Columbia Law School. "A 'Barbarous Relic': The French, Gold, and the Demise of Bretton Woods," Pages 1-2, 17.
- Federal Reserve History. "Oil Shock of 1978–79."
- Federal Reserve History. "Recession of 1981–82."
- The Regents of the University of California. "1990-92 Early 1990s Recession."
- Stanford University. "What Happened During the Downturn in the 2000s?"
- Federal Deposit Insurance Corporation. "The Subprime Credit Crisis of 07," Pages 3-4.
- Congressional Budget Office. "Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output in 2014."
- Board of Governors of the Federal Reserve System. "Policy Tools, Open Market Operations."
- Congressional Research Service. "General State and Local Fiscal Assistance and COVID-19: Backgroundand Available Data."
- Bureau of Labor Statistics. "The Employment Situation— April 2020," Page 1.
- Bureau of Labor Statistics. "Labor Force Statistics from the Current Population Survey."
- Committee for a Responsible Budget. "Covid Money Tracker."
- Federal Reserve Economic Data. "Unemployment Rate and Consumer Price Index." (See shaded eras for recessions.)
- International Monetary Fund. "Recession: When Bad Times Prevail."
- National Bureau of Economic Research. "Business Cycle Dating Committee Announcement July 19, 2021."
