Recession

A recession is a broad-based decline in economic activity — falling GDP, rising unemployment, declining consumer spending, and shrinking business investment. The common rule of thumb: two consecutive quarters of negative GDP growth signals a recession.

The 2008 Great Recession was triggered by the US housing bubble collapse and subprime mortgage crisis. Global GDP fell by 2.1%, 8.7 million Americans lost jobs, and governments spent trillions in bailouts. The 2020 COVID recession was the sharpest but shortest — GDP plunged then recovered rapidly as economies reopened.

Governments fight recessions with fiscal stimulus (increased spending, tax cuts) and monetary easing (rate cuts, quantitative easing). Recessions are a normal part of the business cycle — the US has experienced 12 recessions since World War II. While painful, they also correct imbalances and clear out inefficient businesses.