The History of Recessions in the United States

The history of recessions in the United States since the Great Depression show they are a natural, though painful, part of the business cycle. Note: On July 31, 2009 the Bureau of Economic Analysis BEA revised all GDP statistics from 1929. Revised stats are given below, with the original stats in parentheses.

2008-2009 Recession

The worst recession since the Depression. The economy shrank for five quarters. Two quarters shrank more than 5%. 2008

• Q1 -.7% (.9%)
• Q2 1.5% (2.8%)
• Q3 -2.7% (-.5%)
• Q4 -5.4% (-6.3%)

2009

• Q1 -6.4% (-5.5%)
• Q2 -1.0%

The recession began in Q4 2007. Growth was 2.1% (-1%). It was caused by the Subprime Mortgage Crisis, which then led to a global banking credit crisis. A National Association of Business Executive survey predicts the 2010 economy will contract 1.9%, and unemployment will rise to 9%. (Source: Bloomberg, U.S. Recession Worst in Three Decades, Business Economists Say, February 23, 2009)

2001 Recession

It lasted eight months (March-November 2001). It was caused by the Y2K scare, which created a boom and subsequent bust in Internet businesses. It was aggravated by the 9/11 attack. The economy contracted in two quarters: Q1 -1.3% (-.5%) and Q3 -1.1% (-1.4%). Unemployment reached 5.7% during the recession, but rose even further to 6% in June 2003. This often happens in recessions, as unemployment is a lagging indicator. Most employers wait until they are sure the economy is back on its feet again before hiring permanent employees.

1990-1991 Recession

This recession was eight months (July 1990 to March 1991). It was caused by the Savings and Loan Crisis in 1989. GDP was -3.5% (-3%) in Q4 1990 and -1.9% (-2%) in Q1 1991.

1980-1982 Recession

This was technically two recessions: the first six months of 1980 and 16 months from July 1981 - November 1982. It was partially caused by the Iranian oil embargo, which reduced U.S. oil supplies driving up prices. The Fed raised interest rates to combat inflation, reducing business spending. GDP was negative for six of the 12 quarters. The worst was Q2 1980 at -7.9%(-7.8%), the worst quarterly decline since the Great Depression. In Q1 1982, it was nearly as bad, plummeting 6.4%. Unemployment rose to 10.8% in November 1982, the highest level of unemployment in any recession. It was above 10% for 10 months.

1973-1975 Recession

This recession lasted sixteen months (November 1973-March 1975). OPEC is blamed for quadrupling prices for a few months in 1973. It alone didn't cause such a deep recession. Several factors contributed. First, the U.S. went off of the gold standard and printed more money. This created inflation, as too many dollars chased too few goods. Second, President Nixon instituted wage-price controls. This kept prices too high, reducing demand. Wage controls made salaries too high, which forced businesses to lay off workers. The result was stagflation and three consecutive quarters of negative GDP growth: 1974 Q3 -3.9% (-3.8%), Q4 -1.6% (-1.6%), 1975 Q1 -4.8%(-4.7%). Unemployment reached a peak of 9% in May 1975, two months after the recession technically ended.

1970 Recession

This recession was relatively mild, lasting 11 months. GDP was down for two quarters:Q1 -.7%, Q2 .7%, Q3 3.6%, Q4 -4.2%. Unemployment peaked at 6.1% in December 1970.

1960 Recession

Starting in April 1960, the recession lasted 10 months. GDP was -1.9% (-2%) in Q2 and -5% (-5.1%) in Q4. Unemployment reached a peak of 7.1% in May 1961.

Recession of 1957

It was eight months (August 1957-April 1958). GDP was - 4.2% in Q4 1957 then immediately plummeted 10.4% in Q1 1958. Unemployment didn't reach its peak of 7.1% until September 1958. It was caused by a contractionary monetary policy.

Recession of 1953

Beginning July 1953, this recession lasted 10 months, a result of the end of the Korean War. Unemployment didn't reach its peak of 6.1% until September 1954, two months after the recession ended. GDP was down 6.2% in Q4 of 1953.

1949 Recession

This 11 month recession began in November 1948 and lasted until October 1949, when unemployment reached a peak of 7.9%. GDP fell .5% for the year. This was another natural down cycle, caused by the economy adjusting to peace-time production.

1945 Recession

This recession lasted only eight months, between February and October 1945. However, it was nasty, with GDP plummeting 11% in 1946. This was a natural result of the demobilization from WWII, as the huge demand for military weapons were no longer needed. (Source: NBER, Business Cycle Expansions and Contractions)