Money

History of U.S. Recessions

Data & Guides Money History of U.S. Recessions

Recessions are prolonged periods of economic downturn caused by events like financial crises, natural disasters, or the bursting of economic bubbles. As global economies usually grow steadily, recessions can significantly impact a country’s economy.

The U.S. has experienced 34 recessions since the earliest records from 1857, each caused by varying factors and lasting different amounts of time. This article will look back over the history of U.S. recessions including why they happened and which periods of recession had the most impact. [1] Federal Reserve, “NBER based Recession Indicators for the United States” https://fred.stlouisfed.org/series/USREC

Key statistics

• Between 1857 and 2024, the U.S. has experienced 34 economic recessions.
• The longest recession in U.S. history started in October 1873 and lasted a total of 65 months (over five years).
• The shortest recession in U.S. history lasted just two months, from February to April 2020, during the start of the COVID-19 pandemic.
• Recessions in the U.S. have lasted an average of 17 months, while the five most recent recessions lasted an average of 10.4 months.
• The average peak unemployment during recessions since 1945 was 7.8%, with the highest unemployment rate occurring in April 2020 during the COVID-19 recession (14.8%).
• In total, 13 of the U.S.’s recessions have lasted under one year, while 21 have lasted more than a year.

What is a recession?

While there is no official definition for a recession, it is generally regarded as a period of decline in economic activity. Most economists use two consecutive quarters of decline in a country’s inflation-adjusted gross domestic product (GDP) as a practical definition of a recession. However, the National Bureau of Economic Research (NBER) in the U.S. refers to a recession as “A significant decline in economic activity that is spread across the economy and lasts more than a few months.” [2] IMF, “Recession: When Bad Times Prevail” https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Recession [3] NBER, “Business Cycle Dating” https://www.nber.org/research/business-cycle-dating

U.S. recession history chart

Check out the chart below to see the full history of U.S. recessions from 1857 to 2024.

Source [1] Federal Reserve, “NBER based Recession Indicators for the United States” https://fred.stlouisfed.org/series/USREC

U.S. Recessions (1857-2024)

The average length of a U.S. recession

When looking at all 34 U.S. recessions that occurred between 1857 and 2024, the average length of these recessions was 17 months. The average length of recessions since the Second World War is 10.2 months, and the average length of the most recent five recessions is 10.4 months. [1] Federal Reserve, “NBER based Recession Indicators for the United States” https://fred.stlouisfed.org/series/USREC

The longest U.S. recession lasted over five years

Since records began in the 1850s, the longest U.S. recession lasted 65 months (5 years, 5 months) from October 1873 to March 1879. This period of economic downturn was referred to as ‘The Long Depression’ and started as a result of ‘financial panic’ following the American Civil War.

This happened partly due to a stock market crash in Europe which led to investors selling off their American investments, specifically in railroads which were a new invention at the time. Railroad companies began borrowing money using bonds, but eventually then ran out of lenders and many went bankrupt alongside banks who had invested in them.

This brought on a panic whereby people rushed to withdraw their money from struggling banks, leading to the failure of more than 100 banks nationwide. [4] U.S. Treasury, “Financial Panic of 1873” https://home.treasury.gov/about/history/freedmans-bank-building/financial-panic-of-1873

Average peak unemployment during recessions

Across all of the post-war U.S. recessions, the average peak unemployment rate was 7.8%. The highest peak unemployment during a recession was 14.7% during the COVID-19 recession in April 2020, this is also the highest U.S. unemployment rate on record.

Note: Data on unemployment figures was only available from 1940 onwards.

Sources [5] Federal Reserve, “Unemployment Rate for United States (1940-1946)” https://fred.stlouisfed.org/series/M0892BUSM156SNBR [6] Federal Reserve, “Unemployment Rate” https://fred.stlouisfed.org/series/UNRATE

A history of post-war U.S. recessions (1945 to 2024)

Let’s take a look at a detailed history of the 13 U.S. recessions that have occurred since the Second World War.

February 1945 - October 1945: The Union Recession

Duration: 8 months

The Union Recession was a relatively short period of economic downturn that occurred in 1945 alongside the end of the Second World War. During this recession, GDP declined by 1.3% and unemployment rose from 1.9% to 5.2%.

The main cause of this recession was the demobilization of the U.S. military and the decrease in demand for wartime goods and services. This meant that factories producing military supplies had to lay off workers or even shut down entirely.

Another contributor to the Union Recession was investors who took excessive risks during the strong wartime economy. When the economy began to slow down, these investments in real estate, stocks, and consumer goods led to losses, further contributing to the recession.

The government implemented policies including tax reductions, the extension of unemployment benefits, and the Employment Act of 1946 which aimed to promote employment, and the recession eventually ended in October 1945. [7] Trend Spider, “The Union Recession (1945)” https://trendspider.com/learning-center/the-union-recession-1945/

November 1948 - October 1949: The Post-War Recession

Duration: 11 months

Prior to the 1948 recession, the U.S. economy had seen a period of growth due to government spending on technological advancements and manufacturing for the war effort. When the war came to an end, millions of soldiers returned home seeking jobs, manufacturing of military equipment declined, and women in the wartime workforce faced unemployment.

This change from a wartime economy to a peacetime one led to higher consumer spending as rationing was lifted. As consumers spent more, prices increased and inflation increased, which then caused a reduction in spending, and contributed to the economic downturn.

The employment rate rose from 3.8% in 1948 to a peak of 7.9% in 1949, real GDP declined by 1.7%, and industrial production dropped by 15% from its peak in 1948.

The government implemented a number of fiscal policies aimed at stimulating economic growth, including the Revenue Act of 1948, the Veterans Emergency Housing Program (VEHP), and the Housing Act of 1949. Following these policies, the recession came to an end less than a year later in October 1949. [8] Trend Spider, “The Post-War Recession (1948-1949)” https://trendspider.com/learning-center/the-post-war-recession-1948-1949/

July 1953 - May 1954: The Post-Korean War Recession

Duration: 10 months

Following the end of the Korean War in July 1953, the U.S. government reduced military spending by $14 billion, and the demand for war-related products declined. This caused a 10% reduction in industrial production, a rise in unemployment in the defense sector, and following that, an economic recession.

As a result of this recession, real GDP declined by 2.2%, the unemployment rate increased from 2.5% in June 1953 to 6.1% in September 1954, and consumer spending decreased by 1.5%.

The government responded to this recession by implementing increased government spending and tax cuts. The Revenue Act of 1954 reduced personal income taxes and corporate taxes, aiming to stimulate the economy. The federal funds rate was also brought down from 2.8% to 1.2% to make borrowing more accessible and to encourage people and businesses to spend and invest more. The recession ended after 10 months in May 1954. [6] Federal Reserve, “Unemployment Rate” https://fred.stlouisfed.org/series/UNRATE [9] Trend Spider, “The Post-Korean War Recession (1953-1954)” https://trendspider.com/learning-center/the-post-korean-war-recession-1953-1954/

August 1957 - April 1958: The Eisenhower Recession

Duration: 8 months

Also known as the Eisenhower Recession, the 1957-58 recession followed a period of significant growth referred to as “The Golden Age of Capitalism” throughout the 1950s. The economy had expanded due to factors like the post-World War II boom, low unemployment, and high levels of consumer spending.

Rising inflation led the Federal Reserve to increase the federal funds rate, making borrowing more expensive and decreasing consumer spending and business investment. Another factor that contributed to the recession was a downturn in the housing and automobile industries due to shifting consumer preferences and competition from manufacturers in Europe.

During this recession, unemployment rates rose to a peak of 7.5% in July 1958 from 4.1% in 1957. Real GDP contracted by 3.7%, industrial production declined by 14%, and the S&P 500 index fell by over 20%.

To tackle the recession, President Eisenhower’s government enacted the Federal Aid Highway Act of 1956 which invested $25 billion into the construction of the Interstate Highway System, ultimately stimulating the economy and creating jobs. The government also introduced the Temporary Unemployment Compensation Act to provide financial assistance to unemployed workers for 13 weeks. In another effort to address the economic crisis, the Federal Reserve dropped the federal funds rate from 3.5% in 1957 to 1.75% at the end of 1958. [10] Trend Spider, “The Eisenhower Recession (1957-1958)” https://trendspider.com/learning-center/the-eisenhower-recession-1957-1958/

April 1960 - February 1961: The Rolling Adjustment Recession

Duration: 10 months

The Rolling Adjustment Recession came following the Post-War Economic Boom, a period of economic growth throughout the 1950s. This growth happened as a result of things like industrial expansion, increased consumer spending by a growing middle class, and government-funded programs for veterans.

At the end of the 1950s, the economy began slowing down, unemployment and inflation rates rose, and the manufacturing industry experienced stronger competition from other countries. The Federal Reserve raised the federal funds rate from 1.98% in 1958 to 4.03% in 1960 in an effort to slow down inflation, but this ultimately slowed economic growth and was a contributing factor in the recession. [11] Trend Spider, “The Rolling Adjustment Recession (1960-1961)” https://trendspider.com/learning-center/the-rolling-adjustment-recession-1960-1961/

December 1969 - November 1970

Duration: 11 months

The country entered a recession in December 1969, eight years after the previous recession in 1961. Military spending in the U.S. had increased throughout the 1960s due to the country’s involvement in the Vietnam War, and unemployment reached a peak of 5.9% in November 1970.

Stagflation occurred during the 1970s, an economic phenomenon that combined uneven economic growth with high unemployment and high inflation. [6] Federal Reserve, “Unemployment Rate” https://fred.stlouisfed.org/series/UNRATE [12] Investopedia, “Stagflation in the 1970s” https://www.investopedia.com/articles/economics/08/1970-stagflation.asp [13] CRS, “The Current Economic Recession” https://www.everycrsreport.com/files/20020110_RL31237_3dfa2a994f8c6dc60ab14bb2daab081a32bfed92.pdf

November 1973 - March 1975: The Oil Shock Recession

Duration: 16 months

The recession beginning in late 1973 was triggered by a sharp rise in oil prices which led to rising inflation and a peak unemployment rate of 8.6%. This happened as a result of the oil embargo implemented by the Organization of Petroleum Exporting Countries (OPEC) in October 1973. Following this, oil became four times as expensive, rising from $3 per barrel to $12 per barrel by January 1974.

Real GDP fell by 2.1% in 1974 and by 0.2% in 1975, and the annual inflation rate reached 12.3% in 1974, compared to 3.4% in the previous year. Eventually, oil prices began to stabilize, and the government implemented policies such as interest rate increases, tax cuts, and measures to diversify energy sources. Once these policies had taken effect, the economy recovered and the recession ended in April 1975. [6] Federal Reserve, “Unemployment Rate” https://fred.stlouisfed.org/series/UNRATE [14] Trend Spider, “The Oil Shock Recession (1973-1975)” https://trendspider.com/learning-center/the-oil-shock-recession-1973-1975/

January 1980 - July 1980: The first part of a double-dip recession

Duration: 6 months

The recession in the first half of 1980 occurred following mounting levels of inflation. This was a result of economists in the 1960s and 70s believing they could reduce unemployment rates through higher inflation, a concept referred to as the Phillips Curve.

Paul Volcker was appointed the chair of the Federal Reserve in August 1979, and the Federal Funds Rate increased from 10.5% to 17.5% by April 1980. Eventually, this short recession subsided when the Fed dropped the funds rate in August 1980, although inflation remained high. [13] CRS, “The Current Economic Recession” https://www.everycrsreport.com/files/20020110_RL31237_3dfa2a994f8c6dc60ab14bb2daab081a32bfed92.pdf [15] Federal Reserve History, “Recession of 1981-1982” https://www.federalreservehistory.org/essays/recession-of-1981-82

July 1981 - November 1982: The second part of a double-dip recession

Duration: 16 months

Like the previous recession in 1980, the 1981-82 recession was triggered by the government’s strict monetary policy which sought to bring down rising inflation. Before the 2007-2009 recession, the economic downturn in 1981-82 was the worst since the Great Depression. High interest rates heavily impacted sectors like manufacturing and construction, and employment peaked at 10.8% in November 1982. [6] Federal Reserve, “Unemployment Rate” https://fred.stlouisfed.org/series/UNRATE [15] Federal Reserve History, “Recession of 1981-1982” https://www.federalreservehistory.org/essays/recession-of-1981-82

July 1990 - March 1991: The Gulf War Recession

Duration: 8 months

The recession of 1990 - 1991 was closely linked to the Gulf War, a conflict that began in August 1990 when Iraq invaded Kuwait, leading to a spike in oil prices, with oil barrels doubling in price from $20 to $40. Other factors that impacted this recession included the Federal Reserve’s monetary policy of higher interest rates and the burst of the real estate bubble of the late 1980s. [16] Trend Spider, “The Gulf War Recession (1990-1991)” https://trendspider.com/learning-center/the-gulf-war-recession-1990-1991/

March 2001 - November 2001: The Dot-Com Recession

Duration: 8 months

The recession of 2001, also known as the Dot Com Recession, occurred due to the collapse of the “dot-com bubble”. During the 1990s, the expansion of the Internet and digital technologies led to a rise in investment in internet-based companies, referred to as dot-coms. This bubble eventually burst and many investors faced significant losses, leading to the Dot Com Recession.

This recession lasted eight months in total, with GDP slowing to 1.3% in Q3 of 2001, and unemployment increasing to 6.3% in June 2001 from 3.9% in December 2000. [17] Trend Spider, “The Dot Com Recession (2001)” https://trendspider.com/learning-center/the-dot-com-recession-2001/

December 2007 - June 2009: The Great Recession

Duration: 18 months

The Great Recession of 2008-2009 was caused by a downturn in house prices in the U.S. which led to a global financial crisis. During this time, home prices fell roughly 30% on average, the S&P 500 index dropped by 57% between October 2007 and March 2009, and the combined net worth of the nation’s households and nonprofit organizations fell from $69 trillion to $55 trillion.

Real GDP fell 4.3% from Q4 of 2007 to Q2 of 2009, the largest decline since World War II. Unemployment rates rose to a peak of 10% in October 2009, compared to 5% in December 2007.

The government responded by implementing stimulus programs involving government spending and tax cuts, including the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009. This recession eventually subsided in June 2009. [18] Federal Reserve History, “The Great Recession of 2007-2009” https://www.federalreservehistory.org/essays/great-recession-of-200709

February 2020 - April 2020: The COVID-19 Recession

Duration: 2 months

At the beginning of the COVID-19 pandemic between February and April 2020, restrictions to prevent the spread of the virus meant businesses had to close. During this time, unemployment rates rose from 3.5% in February 2020 to 14.7% in April 2020 (the highest rate on record). [6] Federal Reserve, “Unemployment Rate” https://fred.stlouisfed.org/series/UNRATE

Despite only lasting two months, the NBER still determined that this period of economic decline was a recession. [19] NBER, “Business Cycle Dating Committee Announcement July 19 2021” https://www.nber.org/news/business-cycle-dating-committee-announcement-july-19-2021

Sources

• ^[1] Federal Reserve, “NBER based Recession Indicators for the United States” https://fred.stlouisfed.org/series/USREC
• ^[2] IMF, “Recession: When Bad Times Prevail” https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Recession
• ^[3] NBER, “Business Cycle Dating” https://www.nber.org/research/business-cycle-dating
• ^[4] U.S. Treasury, “Financial Panic of 1873” https://home.treasury.gov/about/history/freedmans-bank-building/financial-panic-of-1873
• ^[5] Federal Reserve, “Unemployment Rate for United States (1940-1946)” https://fred.stlouisfed.org/series/M0892BUSM156SNBR
• ^[6] Federal Reserve, “Unemployment Rate” https://fred.stlouisfed.org/series/UNRATE
• ^[7] Trend Spider, “The Union Recession (1945)” https://trendspider.com/learning-center/the-union-recession-1945/
• ^[8] Trend Spider, “The Post-War Recession (1948-1949)” https://trendspider.com/learning-center/the-post-war-recession-1948-1949/
• ^[9] Trend Spider, “The Post-Korean War Recession (1953-1954)” https://trendspider.com/learning-center/the-post-korean-war-recession-1953-1954/
• ^[10] Trend Spider, “The Eisenhower Recession (1957-1958)” https://trendspider.com/learning-center/the-eisenhower-recession-1957-1958/
• ^[11] Trend Spider, “The Rolling Adjustment Recession (1960-1961)” https://trendspider.com/learning-center/the-rolling-adjustment-recession-1960-1961/
• ^[12] Investopedia, “Stagflation in the 1970s” https://www.investopedia.com/articles/economics/08/1970-stagflation.asp
• ^[13] CRS, “The Current Economic Recession” https://www.everycrsreport.com/files/20020110_RL31237_3dfa2a994f8c6dc60ab14bb2daab081a32bfed92.pdf
• ^[14] Trend Spider, “The Oil Shock Recession (1973-1975)” https://trendspider.com/learning-center/the-oil-shock-recession-1973-1975/
• ^[15] Federal Reserve History, “Recession of 1981-1982” https://www.federalreservehistory.org/essays/recession-of-1981-82
• ^[16] Trend Spider, “The Gulf War Recession (1990-1991)” https://trendspider.com/learning-center/the-gulf-war-recession-1990-1991/
• ^[17] Trend Spider, “The Dot Com Recession (2001)” https://trendspider.com/learning-center/the-dot-com-recession-2001/
• ^[18] Federal Reserve History, “The Great Recession of 2007-2009” https://www.federalreservehistory.org/essays/great-recession-of-200709
• ^[19] NBER, “Business Cycle Dating Committee Announcement July 19 2021” https://www.nber.org/news/business-cycle-dating-committee-announcement-july-19-2021