A significant majority of economists agree that recessions are an inevitable part of the business cycle. So, even in boom times, the next economic recession may be just around the corner. But recessions come in many shapes and sizes. Learning the history of how recessions have affected the U.S. economy since the time of the Great Depression can help business leaders prepare their organizations for the next recession — whenever it comes and whatever form it takes.

What Is an Economic Recession?

In an economic recession, the economy shrinks. An economic recession is often defined as two consecutive quarters of negative economic growth, usually reported as a negative rate of gross domestic product (GDP).

However, the National Bureau of Economic Research (NBER), the organization that determines when a recession is taking place in the U.S., defines a recession differently. Besides GDP, it uses a range of monthly indicators of broad economic activity to determine when economic growth starts to slow. NBER says these include real personal income, employment, real personal consumption spending, wholesale-retail sales and industrial production. In addition, NBER measures a recession(opens in new tab) from the peak of the previous economic expansion — in other words, the point at which growth first begins to turn downward — to when the economy first turns upward from its lowest level. GDP growth can still be negative when the curve changes direction, but according to NBER, that’s when the recession ends and the economy starts to recover.

This article uses NBER’s definition of recession unless otherwise stated.

Also unless otherwise stated, all quoted statistics on GDP, unemployment, inflation and central bank interest rates (the Fed funds rate) are from the Federal Reserve Economic Data (FRED) database hosted by the Federal Reserve Bank of St. Louis, a member bank of the U.S. Federal Reserve. The appropriate chart is linked only on first reference. Data prior to the late 1940s — which is as far back as FRED goes — comes from other sources and is noted as such.

Key Takeaways

  • The deepest recession since the Great Depression was the COVID-19 recession of 2020. Real (inflation-adjusted) GDP fell by 31.4% and unemployment rose to 14.7%.
  • Rising oil prices have triggered several recessions.
  • Rising interest rates almost always precede recessions, but low interest rates can cause a recession by encouraging excessive borrowing.
  • Government tax increases and spending cuts can make recessions worse.
  • Stagflation is the combination of a shrinking economy, rising unemployment and high inflation.
  • Recessions involving housing market crashes tend to be deeper than other recessions, and recovery takes longer. The worst housing market crash since the Great Depression was a major cause of the Great Recession of 2008.

The History of Economic Recessions

Since the Great Depression of the early 1930s, there have been 14 U.S. recessions. They come around, on average, once every six or seven years. Sometimes the gap is longer — for example, there were 12 years between the Great Recession of 2008 and the COVID-19 recession in 2020. But sometimes the expansion between recessions is much shorter — there was only a year between the 1980 and 1981 recessions. Two recessions very close together are often called a “double dip,” or W-shaped, recession.

The economy shrinks in every recession, but not all recessions are the same. Most recessions since the Great Depression have been short-lived and the GDP decline relatively small. But sometimes the economy feels like it was hit by an asteroid, such as in the Great Recession of 2008.

Here’s a list of all U.S. recessions since the Great Depression, with descriptions of their causes and effects.

COVID-19 Recession (February - April 2020)

The COVID-19 recession is by far the deepest since World War II. It is also the shortest, lasting only two months from peak to trough. Real GDP fell by 31.2%(opens in new tab) in the second quarter of 2020, and unemployment peaked at 14.7% in April 2020(opens in new tab). But in the third quarter, there was a remarkable recovery: Real GDP rose by 33.8% and the unemployment rate fell to 7.9% by the end of September. For the rest of 2020 and 2021, real GDP continued to increase at a less dramatic rate of between 2% and 7%, and unemployment gradually fell. By April 2022, the unemployment rate was back to its prerecession level of 3.6%. However, real GDP growth turned negative in the first quarter of 2022, threatening the post-COVID recovery.

The enormous fall in GDP and employment in the second quarter of 2020 was a direct consequence of measures taken by public authorities to control the spread of the SARS-CoV-2 virus. SARS-CoV-2 originated in China in 2019 and quickly spread worldwide. The first U.S. cases were identified in January 2020, and the first deaths occurred in February. By March, the virus was all over the country, and the death toll was rising fast. On March 11, the World Health Organization declared COVID-19 a pandemic. Two days later, the White House declared a national emergency, unlocking federal funds to help fight the pandemic.

On March 18, California imposed a stay-at-home order, and other states soon followed suit. Service businesses, such as restaurants, gyms and hairdressers, were closed; all but essential transportation ceased; and people were ordered to stay in their homes. The staff of closed businesses were laid off with immediate effect, while companies that had not been ordered to close had to make immediate arrangements for their staff to work from home.

The impact of these measures was highly unequal. Business activity in sectors directly affected by the lockdown fell to zero, but ecommerce, health care and delivery services experienced a boom. Some households continued to be able to work from home through the pandemic, building up large savings as their transport costs fell to zero and normal discretionary spending, such as for holidays and meals out, became impossible due to government restrictions; other households suffered from sharply falling income due to unemployment. Furthermore, although many restrictions were quickly lifted, others remained in place for extended periods of time. And, as further waves of the virus spread, restrictions were selectively reimposed. So, although the recession was short-lived, its impact on some parts of the economy was severe and long-lasting.

Similar measures were enacted in countries from the Far East to Europe. As a result, global trade was severely disrupted, and commodity prices fell sharply. Supply chain disruption, commodity price rebound and the drawdown of excess household savings caused rising inflation as the economy reopened.

The Great Recession of 2008 (December 2007 - June 2009)

The Great Recession was the longest recession since World War II; it was also the deepest until the COVID-19 recession of 2020. Real GDP fell 8.5% in the fourth quarter of 2008, and unemployment reached 10% in October 2009. The recession hit the housing market(opens in new tab) particularly hard: House prices fell 30% from their peak in mid-2006 to their lowest point in mid-2009. Stocks, too, suffered a catastrophic collapse: The S&P 500 Index fell 57% between October 2007 and mid-2009.

The recession was caused by the collapse of the subprime residential mortgage-backed securities (RMBS) market, which had grown enormously in the years since the 2001 recession. The RMBS collapse started in April 2007 when the specialist subprime mortgage lender New Century Financial declared Chapter 11 bankruptcy and the Federal Home Loan Mortgage Company (“Freddie Mac”) announced it would no longer buy subprime mortgage loans or securities. A few months later, the American Home Mortgage company failed; the brokerage firm Bear Stearns liquidated two hedge funds that had invested in subprime RMBS; and the French bank BNP Paribas suspended redemptions on three of its mutual funds, announcing that it could not value the RMBS on its books. The resulting disruptions in financial markets brought down the British bank Northern Rock and caused numerous U.S. monoline insurance companies (i.e., insurers that specialize in providing credit insurance for specific RMBS products) to fail.

Disruptions in credit and capital markets continued for the rest of 2007 and into 2008, though the stock market soared, reaching an all-time high in October 2007. Early in 2008, the U.S. Federal Reserve cut interest rates and President George W. Bush signed into law the Economic Stimulus Act. But economic growth was already slowing.

In March 2008, Bear Stearns collapsed and was bought by J.P. Morgan Chase for $2 a share. And in July, the distressed subprime mortgage lender IndyMac was bought by the U.S. government. In August, the U.S. government took the failing, government-sponsored home loan enterprises Freddie Mac and Fannie Mae into conservatorship. This stream of bailouts and buyouts created an expectation that financial institutions that got into difficulty would not be allowed to fail. So, when 158-year-old Lehman Brothers, the fourth-largest U.S. investment bank, declared Chapter 11 bankruptcy on September 16, 2008, shock waves rippled around the world.

Lehman’s failure was followed by the collapse of the giant insurance company AIG, which was bailed out by the Fed. The money market mutual fund Reserve Primary “broke the buck” — i.e., fell below $1 per share — triggering runs on other money market funds. Banks around the world collapsed as the price of their holdings of subprime RMBS and their derivatives crashed. In the second week of October, a massive stock market crash wiped out the savings of millions of Americans. In November, the U.S. government bailed out Citigroup. And in December, concerned about rising unemployment, the government injected $80 billion into failing carmakers Chrysler and General Motors.

Although the U.S. economy was already in recession by the time Lehman Brothers failed, the shock of its failure significantly worsened the downturn. Despite exceptional stimulus measures by the U.S. government and unprecedented interest rate cuts by the Fed, real GDP began falling in the third quarter of 2008 (-2.1%), plummeted 8.5% in the fourth quarter and continued to fall until mid-2009. It took two years for the economy to recover its lost GDP, and a further six years for unemployment to fall to its prerecession level.

Many economists blame low interest rates and the deregulation of financial institutions in the early 2000s for the excessive growth of subprime mortgage lending in the years prior to the financial crisis. From mid-2005 onward, rapidly rising oil prices squeezed business and household expenditures, while Fed interest-rate rises increased the cost of borrowing. Demand for mortgages, therefore, fell, fatally destabilizing the overheated RMBS market.

The September 11 Recession (March - November 2001)

This recession is often called the “dot-com recession” because it started when the stock prices of internet companies crashed. The tech-heavy NASDAQ Composite Index fell from over 5,000 in March 2000, a year before the recession began, to just over 1,000 in October 2003 — nearly two years after the recession’s end — reversing all its late-1990s gains. Thousands of small internet companies failed, and even blue chip companies suffered a considerable reduction in their net worth. It took 15 years for the NASDAQ to recover its losses.

However, a stock market crash does not necessarily result in a recession. Economic growth had started to slow in the first quarter of 2000 but did not turn negative until the attack on the World Trade Center in September 2001. The NBER’s retrospective announcement of a recession starting in March 2001 includes the effect of the 9/11 disaster.

Despite the horror of the terrorist attacks, the recession was brief and relatively mild. It lasted nine months, peak to trough. Real GDP fell by 1.6% in the third quarter of 2001 but rebounded in the fourth quarter. Unemployment rose to 5.9% by April 2002 and continued to rise until mid-2003, probably because of ongoing job losses in the technology sector due to the dot-com collapse.

The Gulf War Recession (July 1990 - March 1991)

The Gulf War Recession was brief and mild: It lasted only eight months, and real GDP fell 3.6% in the fourth quarter of 1990. Unemployment continued to increase for some time after the end of the recession, eventually peaking at 7.8% in July 1992. But the economy then took a further five years to return to its prerecession level. The recovery from this recession is thus often described as a “jobless recovery”.

As in the 1973 and 1980 recessions, oil prices were a major factor in this recession. During the 1980s, oil prices fell from their 1980 high of $39.50 per barrel to less than $20 per barrel. This helped to fuel a multiyear economic expansion. But in August 1990, Iraq invaded its oil-producing neighbor, Kuwait. The resulting war caused oil production to fall and the price to rise to $22 per barrel. Although this was not as sharp a rise as occurred in previous recessions, it drove inflation higher and contributed to a fall in GDP growth.

Another factor was the residential mortgage market. This recession is also sometimes known as the Savings and Loan Recession because it was partly caused by the failure of thousands of savings and loan companies in the second half of the 1980s. As interest rates fell, these companies had extended cheap, fixed-rate mortgage loans to households. So, when the Fed raised interest rates to choke off inflation, their funding costs rose higher than the interest earnings on their mortgage loans. Bankruptcies in the savings and loan sector also impacted banks: Between 1980 and 1994, over a thousand failing banks were either closed by the Federal Deposit Insurance Corporation (FDIC) or sold to other banks. As a result of the savings and loan crisis, residential mortgage lending contracted; then, after the “Black Monday” stock market crash of 1987, other forms of lending did, too.

A third factor in this recession was the Fed’s monetary policy. As inflation started to rise toward the end of the 1980s, the Fed raised interest rates. By March 1989, the Fed funds rate(opens in new tab) was at nearly 10%, though it fell slightly thereafter to between 8% and 9%. This was sufficient to reduce inflation to 2.8% by October 1991(opens in new tab), but at the price of a significant fall in GDP and more bankruptcies in the savings and loan sector.

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

This was one of the harshest recessions of the post-war period, lasting 18 months, peak to trough. At its height in the first quarter of 1982, real GDP fell by 6.1%, and by December 1982, unemployment had risen to 10.8%, the highest since the Great Depression. Unlike the events of two previous recessions, inflation fell sharply, from 10.8% at the beginning of the recession to 4.5% by its end. Inflation continued to fall for some months after the recession ended, reaching a low of 2.4% in July 1983.

The background to this recession was the war that started in September 1980, when the oil-producing state Iraq invaded its oil-producing neighbor, the newly established Islamic state of Iran. Oil shortages due to this war kept oil prices high, squeezing the incomes of households and businesses and contributing to inflation.

But the immediate cause was the Fed’s monetary policy. Under the monetary framework adopted by Chairman Paul Volcker, the Fed focused exclusively on reducing inflation, ignoring economic growth and paying little attention to unemployment. After the end of the 1980 recession, inflation started to rise, so the Fed sharply tightened monetary policy. The Fed funds rate rose to 19% in January 1981, slipped to 15% in March, then rose back to 19% by June. This high, unprecedented level of interest rates is known as the “Volcker shock” because it was intended to shock the economy out of its inflationary equilibrium. It did succeed in bringing down inflation, but at the price of a deep recession and very high unemployment. Unemployment remained above 5% for the rest of the decade.

The Energy Crisis Recession (January - July 1980)

Triggered by a sudden rise in oil prices when the Shah of Iran was overthrown and an Islamic theocracy took power, this was a brief but deep recession. Oil production fell by 4%, causing supply disruptions and localized shortages, and oil prices doubled. The rise in oil prices drove up inflation, which climbed to 14.6% during the recession before falling back to 13% by the end. Real GDP fell 8% in the second quarter of 1980 and unemployment rose to 7.8%.

As with several other recessions, Fed monetary policy contributed to the fall in GDP. In an effort to control rampant inflation, the Fed raised interest rates sharply, beginning in March 1977. By January 1980, the Fed funds rate stood at over 13%. In October 1979, following Paul Volcker’s appointment as chairman the previous month, the Fed adopted a new monetary policy framework that sought to stabilize inflation by controlling the growth of the money supply, rather than relying on interest rates. However, interest rates continued to rise: The Fed funds rate touched 17.6% in April 1980 before falling back to 9% in July as inflation declined. President Jimmy Carter’s measures to restrict credit creation are credited with helping to reduce both inflation and interest rates.

The Oil Crisis Recession (November 1973 - March 1975)

A long, deep and painful recession, this one lasted nearly two years, peak to trough. Real GDP shrank by 3.4% in the first quarter of 1974, rebounded, then fell again by 3.7% in the third quarter, 1.5% in the fourth quarter and 4.8% in the first quarter of 1975. Unemployment hit 9% in May 1975. Unusually for a recession, inflation was high: It was 11% at the start of the recession and still over 9% when the recession ended. The combination of poor economic growth, rising unemployment and stubbornly high inflation is known as “stagflation”.

The roots of this recession’s stagflation went back to 1971, when President Richard M. Nixon suspended the dollar’s gold convertibility, effectively ending the 1944 Bretton Woods Agreement’s system of fixed exchange rates that had stabilized the international financial system since World War II. Without its gold anchor, the U.S. dollar’s exchange rate fell rapidly, causing inflation to shoot up.

In the same year, the Texan oilfields reached peak production, forcing the U.S. to relinquish control of the oil price to the Organization of Petrol Exporting Countries (OPEC). In October 1973, OPEC imposed an oil embargo on the U.S. because of its financial support for Israel in the “Yom Kippur” war, a conflict between Israel and a coalition of eight Arab states. The oil price rose from $4.31 to $10.11 a barrel by January 1974. The embargo was lifted in March 1974, but the price of oil continued rising until peaking at $39.50 in April through July of 1980.

The sharp increase in oil prices vastly increased household and business costs. Businesses passed on these costs to consumers in the form of higher prices, while households demanded higher wages to compensate for increased living expenses. A wage-price spiral developed, which kept inflation high despite rising unemployment and falling economic growth — and so the term “stagflation,” coined in Britain in 1965, came into the U.S. economic vernacular.

The Fed’s interest rate policy also contributed to the recession. Between February 1972 and August 1973, the Fed funds rate rose from 3.3% to 10.5%. GDP growth started to slow at the beginning of 1973. And in July 1974, the Fed raised rates to 12% percent to rein in inflation, causing growth to fall even more.

The Nixon Recession (December 1969 - November 1970)

The longest period of economic expansion in the 20th century was ended by the so-called Nixon Recession. The recession was relatively short, lasting only 11 months from peak to trough, and fairly mild: Real GDP fell by 4.2% in the fourth quarter of 1970 but immediately rebounded strongly, with growth of 11.3% in the first quarter of 1971. Unemployment peaked at 6.1% in December 1970, though it remained elevated for some time afterward.

The years preceding this recession were dominated by rising inflation, rapidly increasing government expenditure on the Vietnam War and increasing strain on the U.S. dollar’s peg to gold. In 1968, the London Gold Pool, which central banks used to manage the international gold price to maintain dollar-gold parity, was forced to close after the U.K. government devalued the pound. At the time, the pound was the second reserve currency (after the dollar) and an important anchor of the gold-based Bretton Woods exchange rate system. Following this, exchange rates became increasingly unstable. In an attempt to rein in rising inflation and a growing U.S. balance of payments deficit, the Fed rapidly raised interest rates: Fed funds rate rose from 4% in September 1967 to 9% by September 1969. And in 1969, President Nixon announced fiscal tightening sufficient to cut the government deficit from $19.8 billion to $8 billion in a single year. This combination of rapidly rising interest rates and sharp fiscal tightening caused economic growth to slow and unemployment to rise.

The “Rolling Adjustment” Recession (April 1960 - February 1961)

This was a short, mild recession lasting 10 months from peak to trough. Real GDP fell by 5% in the fourth quarter of 1960, and unemployment rose to 7.1% by May 1961, though this did not represent a large increase, as unemployment was still elevated from the Eisenhower Recession only two years before.

A “rolling adjustment” recession is one in which a slowdown in one economic sector has knock-on effects on other economic sectors, causing a general economic slowdown. In this case, the initial slowdown is thought to have occurred in the automotive industry, the result of Americans choosing to buy more imported vehicles.

However, not all economists agree that rolling adjustment due to increasing imports caused this recession. Some blame it on over-tight monetary policy. Fearful of inflation, the Federal Reserve raised interest rates from 1.75% in mid-1958 to 4% by the end of 1959 and maintained them at that level until June 1960, by which time bank lending was in freefall and the economy was in recession.

The Eisenhower Recession (August 1957 - April 1958)

The Eisenhower Recession lasted only eight months from peak to trough but was the most severe since 1945. Real GDP shrank by nearly 10% in the first quarter of 1958, and unemployment reached 7.4% by the official end of the recession in April, before peaking in July at 7.5%. Another name for this recession is the “Asian flu” recession because it was partly caused by an influenza pandemic that started in East Asia in April 1957 and spread worldwide, killing an estimated 1.1. million people. Asian flu eventually infected 20 million Americans, of whom 116,000 died.

The combination of the pandemic plus inflation control measures initiated in many industrial countries triggered a recession in world trade that caused American exports to fall sharply. At that time, the U.S. had an export-led economy, so a recession in world trade was in itself sufficient to trigger a reduction in GDP. However, many economists believe that the recession was worsened by President Dwight D. Eisenhower’s laissez-faire economic policies and the Fed’s focus on fighting inflation. This is why the recession is known as the “Eisenhower Recession”.

In the summer of 1957, the U.S. Council of Economic Advisers warned that a recession was imminent and advised the Fed to loosen credit conditions. But the Fed, concerned about inflation, tightened them instead. Then, in the fall, the president cut government spending, again against the council’s advice. By that time, the U.S. was already in recession, but the Fed did not cut interest rates until November 1957, and the president did not present an anti-recession program to Congress until March 1958.

The Post-Korean War Recession (July 1953 - May 1954)

This was a brief recession lasting only 10 months, peak to trough. In the fourth quarter of 1953, real GDP fell by 5.9%. Unemployment peaked at 6% in September 1954 — again, a few months after the official end of the recession (in May).

Most economists agree that this recession was caused by measures taken by the Fed and the U.S. government to control inflation and reduce the government’s budget deficit. During the Korean War, inflation rose to 10%, while the federal budget deficit(opens in new tab) increased from 0.4% of GDP in 1952 to 1.7% in 1953. To choke off rising inflation, the Fed raised interest rates, causing a sharp fall in bank lending, which contracted the money supply. Simultaneously, the Treasury embarked on debt management policies, such as refinancing at longer maturities, which also reduced bank lending by shrinking the pool of bank reserves. Furthermore, as the war came to an end, the government cut back spending on national security, and tax revenue from war-related activities also fell. The combination of tightening monetary and fiscal policy caused GDP to drop.

Demobilization after the Korean War contributed to unemployment, as employment in war-related manufacturing fell sharply. In ordnance and accessories production, employment plummeted by 36%, and there were double-digit employment declines in machinery, textiles, durable goods and transportation equipment manufacturing.

The Post-War Recession (November 1948 - October 1949)

This was a short recession, lasting only eight months from peak to trough. Real GDP fell by 5.4% in the first quarter of 1949, and there was a second dip of 3.3% in the fourth quarter of 1949. Unemployment peaked at 7.9% in October 1949.

Economists at the time regarded this recession as a good test of how well the U.S. economy had adapted to post-World War II conditions. The consumer credit boom that followed a sharp downturn in 1945 was fading, and inventories were increasing. Some economists called this an “inventory recession,” by which they meant that businesses were producing more than they were selling. They feared that businesses had expanded production too much and would now have to cut back sharply, causing another economic depression. Fortunately, their fears proved unfounded.

However, other economists identified contractionary monetary policy as the principal cause of the slowdown. Concerned about inflation, the U.S. Treasury had used a budget surplus to retire some government debt held by the Fed, thus forcing the money supply to contract. As a result, interest rates rose. Simultaneously, the Fed imposed credit controls, which caused a sharp reduction in bank lending to households for the purchase of durable items, such as cars.

A further factor in this recession was international trade. The U.S.’s trade surplus evaporated as production increased in European economies, and the strong dollar made it difficult for them to maintain imports from the U.S. Reduced export revenue was contractionary for the U.S. economy.

The Union Recession (February - October 1945)

The length and severity of this recession are disputed. NBER records it(opens in new tab) as lasting only eight months, from February to October 1945, but the U.S. Bureau of Economic Analysis (BEA)(opens in new tab) records real GDP falling by 11.6% in 1946 (shown in an Excel table that can be downloaded from the linked page), which suggests that the recession actually lasted at least a year. Unfortunately, the FRED database, which is the primary source for this article’s economic statistics, doesn’t go back past 1947 for real GDP.

Many economists had predicted a sharp downturn and very high unemployment at the end of the war, as economic production reoriented itself to peacetime activity, government cut war-related spending and servicemen returned to civilian employment. The sharp downturn certainly happened, but the U.S. Bureau of Labor Statistics (BLS) reports that unemployment peaked at only 4.9% in March 1946(opens in new tab), far lower than the double-digit unemployment predicted by many economists. Industrial production also fell sharply, partly because of a large increase in days lost due to union-related work stoppages(opens in new tab), according to a 1946 report from the U.S. Department of Labor. This is why this recession is sometimes called the Union Recession.

Because unemployment was so subdued, the Cato Institute dubbed this recession(opens in new tab) “The Depression that Didn’t Happen.” Cato argued that the sharp cut in government spending (from $84 billion in 1945 to under $30 billion in 1946) and subsequent budget surpluses to reduce government debt encouraged private sector investment, kickstarting recovery and increasing employment.

However, according to Cambridge University(opens in new tab), the real reason for the surprisingly low unemployment rate was a structural change in the labor force. As servicemen returned from the war, millions of women left their jobs to make way for them. The labor force shrank by 5.6 million between June 1945 and June 1946, according to a 1991 research paper published in The Review of Austrian Economics(opens in new tab), representing a fall in the labor force participation rate (i.e., the proportion of the total population that is either working or looking for work) of nearly six percentage points, from 64.2% to 58.4%.

The Roosevelt Recession (May 1937 - June 1938)

This was one of the deepest recessions of the 20th century, but its scale is often overlooked because it was immediately preceded by the Great Depression. Indeed, according to BLS, unemployment was still high (14.3%)(opens in new tab) at the time the Roosevelt Recession struck, though it had fallen considerably from its peak of 24.9% in 1933. Real GDP fell by 10%, industrial production fell 32% and unemployment rose to 20%, according to the Fed’s historical account of this recession(opens in new tab).

Many economists blame over-tight monetary policy for the Roosevelt Recession. For example, the economists Milton Friedman and Anna Schwarz, in their book “A Monetary History of the United States, 1867 - 1960(opens in new tab),” pinned the cause of the Roosevelt Recession on contraction of the money supply arising from the Fed’s tightening of reserve requirements and the Treasury’s “sterilization” of gold inflows. Sterilization, in this case, refers to Treasury hoarding gold coming into the country as payment for exports to prevent the inflow from expanding the money supply.

Between 1933 and 1936, excess reserves in the banking system (i.e., reserves in excess of the fraction of customer deposits that banks are required to hold) swelled from $500 million to over $3.3 billion. In 1936, concerned that banks might create an inflationary credit boom by using those reserves to expand bank lending, the Fed doubled reserve requirements. This forced banks to hold on to more reserves, thus reducing their lending capacity. As a result, lending to businesses and households abruptly fell.

Simultaneously, the Treasury started to “sterilize” incoming gold flows. After the U.S. re-pegged the dollar to gold in 1935, gold inflows from the U.S.’s large trade surplus supported broad money supply (called M2 by economists) growth of 12% per year. But in 1936, concerned that the pace of money supply growth could fuel inflation, the Treasury decided to keep the gold itself, rather than allowing it to go into the Fed’s coffers. The Fed was therefore forced to cut the rate of money creation. In 1937, the money supply stopped growing and started to fall(opens in new tab).

Other economists point to the U.S. government’s tax policy as a cause of the Roosevelt Recession. The Revenue Act of 1935 imposed “wealth taxes” of up to 75% on those with the highest incomes, and, in 1937, the Social Security payroll tax came into effect. In 1939, the chairman of the Federal Reserve, Marriner Eccles, blamed “too rapid withdrawal of the government’s stimulus” for the sharp contraction in economic activity in 1937, according to the Fed’s historical account.

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The history of U.S. recessions shows that there are many different kinds, with varying effects on the economy, though negative GDP growth and rising unemployment are common to them all. Recessions can occur at any time and are hard to predict. So, it’s wise to keep your business recession-proof. NetSuite Financial Management can help, by providing the kind of high-quality and up-to-the-minute financial data that business leaders need in order to develop recession-resistant strategies and tactics, and to make the best-informed decisions.


The clear lesson in this 85-year history of U.S. recessions is that whether recessions are truly inevitable in theory, or only in practice, the sad truth is that they are inevitable. Wars, supply-chain shocks, and human error, separately or together, will eventually occur and ripple through the economy until expansion halts and contraction begins. But the unavoidability of recessions sends an equally clear message to business leaders: You have no excuse for being unprepared for the next one.

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History of Economic Recessions FAQs

How do recessions affect the economy?

When there’s a recession, the economy shrinks. So, economic output falls — this is usually reported as negative GDP. People cut spending, sales revenues fall and, in response, businesses cut production and lay off staff, so unemployment rises. Businesses and investors also tend to reduce investments during a recession, preferring to wait for the economy to start recovering. And, oftentimes, house prices fall because people, likewise, delay purchases until times are better.

How often do economic recessions occur?

In the U.S., there’s a recession, on average, every six to seven years. But that’s just an average. The actual gap between recessions can be as little as a year, or it can be a decade or more. When two recessions occur very close together, they are sometimes counted as one W-shaped, or “double dip,” recession.

What is the main economic problem during a recession?

The biggest and most obvious problem in a recession is rising unemployment. When people are losing their jobs, their incomes are falling so they can’t spend as much as they used to, which feeds back into falling sales for businesses and more staff layoffs. Preventing such a feedback loop from developing is a primary concern of governments and central banks in a recession. If businesses and investors do cut back investment, recovery can take a long time, and the economy may never return to its previous growth path. So, governments and central banks also enact policies to encourage investment. The U.S. Federal Reserve’s quantitative easing (QE) program, begun to combat the Great Recession of 2008, is one such policy.

What is the biggest recession in history?

Strictly speaking, the Great Depression of 1929-33 is the biggest recession in U.S. history. GDP fell by 30% and unemployment reached 25% of the labor force. The biggest recession since the Great Depression is the COVID-19 recession of 2020. However, that one was short-lived and the economy recovered fast. The Great Recession of 2008 was less deep, and unemployment did not rise so high; but it lasted much longer, and the recovery took several years.

Is there a recession every 10 years?

No, unfortunately recessions can be like buses — none for ages, then two come along within a few months of each other. It’s not possible to predict exactly when a recession will happen. On average, they have occurred every six to seven years since World War II.

How many recessions have we had?

Since the Great Depression there have been 14 recessions in the U.S., according to the National Bureau of Economic Research. However, not all economists agree. The 1937-38 recession is considered by some to be a second dip of the Great Depression, and the 1980 and 1981-82 recessions are often regarded as a single W-shaped recession. Also, some economists do not believe there was really a recession in 1945-46, because unemployment did not rise much.

What years were there a recession?

Since the Great Depression, there have been U.S. recessions in the following years: 1937-1938, 1945-1946, 1948-1949, 1953-1954, 1957-1958, 1960-1961, 1969-1970, 1973-1975, 1980, 1981-1982, 1990-1991, 2001, 2007-2009 and 2020.