How Long Do Recessions Last? When Are They Over?

Key Takeaways

• Recessions happen when economic output, consumer demand, and employment are all negatively affected.
• Modern recessions typically last 10 months.
• The Great Recession lasted about 18 months, though its economic effects lasted for years.

In December 2007, the U.S. entered its worst economic slowdown since the Great Depression. Commonly known as the 2008 recession or the Great Recession, this event altered the course of millions of Americans’ lives.

The 2008 recession was a long one, but not as long as you might remember. Before we get into exact dates, it’s important to understand what constitutes an official recession.

How do economists determine we’re in a recession?

Economists look at three basic factors to determine if the economy is in a recession:

• Economic output.
• Consumer demand.
• Employment.

To evaluate each of these factors, they look at metrics like GDP (usually declines over two quarters are required), retail sales, nonfarm payrolls, the Industrial Production Index, and employment statistics.

How long is the average recession?

The length of the average recession varies depending on the time frame you’re considering. The National Bureau of Economic Research (NBER) places the average recession at 17 months if you look back to 1854.

However, if you only consider the post-WWII period, the average American recession has lasted 10 months.

Averages cannot be used to accurately predict the length of any given recession. For example, the 1981-82 recession lasted 16 months, which is close to the average recession if we use 1845 as a starting year, but longer than the 10-month average that considers only post-WWII recessions.

Anomalies can also happen. The COVID-19 recession of 2020 only lasted two months – not even long enough to count two quarters of GDP loss. But because it was so severe, the NBER classified it as a recession anyways.

How long did the 2008 recession last?

The 2008 recession, also known as the “Great Recession,” was a long one, stretching over 18 months. It started in December 2007, when the real estate market started showing signs of trouble. It officially ended in June 2009.

What caused the 2008 recession?

Subprime lenders had been lending money to people who couldn’t afford mortgages for some time and resold those subprime mortgages as Mortgage Backed Securities (MBS). Not only were mortgage payments unrealistic for these borrowers, but many of them came with ballooning adjustable rates.

Real estate prices were enjoying an unsustainable rally until the housing market bubble popped. Borrowers stopped paying on the mortgages they couldn’t afford. Because their bundled mortgages had been sold as securities, it didn’t just affect the real estate market. It affected the entire stock market.

Since that time Congress has passed laws like the Dodd-Frank Act, which provide more regulation and oversight of mortgage lenders, securities brokers, and hedge fund managers.

The Long Tail: Why did Americans still struggle after June 2009?

The effects of the Great Recession were felt for several years after 2009, both by Americans and by people across the globe. In the U.S., finding private sector employment was particularly difficult.

Young college graduates struggled to find any employment for several years, which skewed the overall career trajectory of many millennials. The echoes of this recession continue to affect this generation’s ability to purchase their own homes and start families.

Many who were able to stay in their homes found themselves owing more on the mortgage than the house was worth.

Yet in 2010, the NBER declared that June 2009 was the official end of the recession. They did so because that’s when the economy started expanding rather than contracting, even if the growth was slow and painful.

At this point, GDP had recovered to 70% of its pre-recession levels. Industrial production and sales had also regained significant ground.

Despite the fact that the average American household continued to struggle with limited employment opportunities, this was the point in time when things started to head in the right direction – however slowly.

The persistent effects of the covid recession

Even though the Covid Recession was only two months long, there is evidence of its long-term effects, just as there were with the 2008 recession.

The recession and circumstances surrounding the pandemic pushed at least 1.79 million women into unpaid caretaking roles. Even two years later, 100,000 American women remain displaced from the labor force.

The circumstances of the pandemic caused a rise in inflation, making basic expenses like rent increase dramatically compared to pre-pandemic price points. The cost of groceries continues to rise into Q3 of 2022. Average employees have not received a bump in pay commensurate with these inflationary prices. The gap between inflation and wage growth is expanding unsustainably.

These factors plus supply chain disruptions and geopolitical conflicts have some American consumers worried we may be headed into yet another recession. We’re not there yet, but there is historical precedent for it.

Double-dip recessions

After the NBER declared the 2008 recession over, some economists were worried we were headed right back into another one. Part of the reason for their anxiety was the fact that some of them had lived through another double-dip recession thirty years prior.

The 1981-82 recession was the worst recession since the Great Depression. It would later be outdone by the 2008 recession in terms of knock-on effects, but it was still devastating.

In fact, the unemployment rate was worse: 11% at its peak, while the 2008 recession only reached 10%. GDP only fell 1.8% in 1981-82, though, while it fell by 2.6% during the Great Recession.

There had been a relatively short recession about a year prior to the 1981-82 recession. After years of extreme inflation in the 1970s, in January 1980 the U.S. tipped into a recession. Inflation was 22%, GDP fell by 0.2%, and unemployment was 7.8%.

Officially the recession lasted six months – into June 1980. But it takes the NBER a while to make its final assessment, so the announcement wasn’t made until July 1981 – the same month the next recession was later deemed to have begun.

Luckily, economic growth continued after the 2008 recession, albeit at a frustratingly sluggish pace.

Could we be headed for another double-dip recession today?

Double-dip recessions are somewhat rare, and there’s no way of looking to the past to predict if we are indeed headed for another one.

That being said, the American economy is in a fragile state. Inflation is at 8.3%, GDP was down in Q1 and Q2 of 2022, and while more and more Americans are newly able to return to in-person work environments in a tight labor market, unemployment did just recently inch up for the first time since January.

There’s no way to predict for certain when we’ll see the next recession, but there are ways to prepare for it. Investment Kits powered by AI keep on top of the smartest investments in the current environment so you don’t have to. Plus, these kits come with opt-in Portfolio Protection, which helps protect your earnings and limit your losses should things go south.

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