A recession is a significant, widespread, and prolonged downturn in economic activity. It is generally agreed that a recession occurs when there is a period of reduced output and a significant increase in the unemployment rate. Here are some key points about recessions:
- A recession is a significant, pervasive, and persistent decline in economic activity.
- Economists measure a recessions length from the prior expansion's peak to the downturn's trough.
- Recessions may last as little as a few months, but the economy may not recover to its former peak for years.
- The National Bureau of Economic Research (NBER) Business Cycle Dating Committee—the official recession scorekeeper—defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months” .
- Many other indicators of economic activity are also weak during a recession. For instance, levels of household spending and investment by businesses are usually low. In addition, the numbers of households and businesses that are unable to pay back loans are unusually high, as is the number of businesses that close down.
It is important to note that there is no single definition of a recession, and views differ about how to best identify it.
