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| {{for|the 2008 hip hop album|The Recession}} | |||
| In economics, the term '''recession''' generally describes the reduction of a country's ] (GDP) for at least two ].<ref>{{cite web |url= http://www.bloomberg.com/invest//glossary/bfglosr.htm|title= Financial Check epaper.timesofindia.com for more informationGlossary|accessdate=19 November 2008 |publisher= Bloomberg.com|year= 2000}}</ref><ref>{{cite web |url= http://www.businessdictionary.com/definition/recession.html|title= Recession definition|accessdate=19 November 2008 |publisher= BusinessDictionary.com|date= 2007-2008}}</ref> The usual dictionary definition is "a period of reduced economic activity", a ] contraction.<ref>{{cite web |url= http://www.merriam-webster.com/dictionary/recession|title= Recession|accessdate=19 November 2008 |publisher= Merriam-Webster Online Dictionary}}</ref><ref>{{cite web |url= http://encarta.msn.com/encnet/features/dictionary/DictionaryResults.aspx?refid=1861699686|title= Recession definition|accessdate=19 November 2008 |work= Encarta® World English Dictionary |publisher= Microsoft Corporation|year= 2007}}</ref> | |||
| The ]-based ] (NBER) defines ''economic recession'' as: "a significant decline in economic activity spread across the country, lasting more than a few months, normally visible in ] ] growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales."<ref>{{cite web |url= http://www.nber.org/cycles.html|title= Business Cycle Expansions and Contractions|accessdate=19 November 2008 |publisher= National Bureau of Economic Research}}</ref> The NBER's Business Cycle Dating Committee is generally seen as the authority for dating US recessions. Academic economists, policy makers, and businesses all usually refer to recessions as determined by the NBER. | |||
| == Attributes of recessions == | |||
| In macroeconomics, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year. Some economists prefer a more robust definition of a 1.5% rise in unemployment within 12 months.<ref name="Eslake"/> | |||
| In a 1974 New York Times article, ] suggested several rules of thumb to identify a recession, which included two successive quarterly declines in ] (GDP).<ref></ref> His other rules are usually ignored. | |||
| An alternative, less accepted, definition of recession is a downward trend in the rate of actual GDP growth as promoted by the business-cycle dating committee of the National Bureau of Economic Research{{Fact|date=February 2009}}. That private organization defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." | |||
| A recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment, and corporate profits. | |||
| A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an ], although some argue that their causes and cures can be different.<ref name="Eslake">http://clubtroppo.com.au/2008/11/23/what-is-the-difference-between-a-recession-and-a-depression/ "What is the difference between a recession and a depression?" Saul Eslake Nov 2008</ref> | |||
| == Predictors of a recession == | |||
| There are no completely reliable predictors. These are regarded to be possible predictors.<ref>{{cite web |url=http://www.mitpressjournals.org/doi/pdfplus/10.1162/003465398557320?cookieSet=1 |title=Predicting U.S. Recessions: Financial Variables as Leading Indicators |author=A Estrella, FS Mishkin |publishdate=1995 |publisher=MIT Press}} | |||
| </ref> | |||
| * In the U.S. a significant stock market drop has often preceded the beginning of a recession. However about half of the declines of 10% or more since 1946 have ''not'' been followed by recessions.<ref>Jeremy Siegel, ]</ref> In about 50% of the cases a significant stock market decline came only after the recessions had already begun. | |||
| * ],<ref> By Michael Hudson</ref> the model developed by economist Jonathan H. Wright, uses yields on 10-year and three-month Treasury securities as well as the Fed's overnight funds rate.<ref>Wright, Jonathan H., (March 2006). FEDs Working Paper No. 2006-7.</ref> Another model developed by Federal Reserve Bank of New York economists uses only the 10-year/three-month spread. It is, however, not a definite indicator;<ref></ref> it is sometimes followed by a recession 6 to 18 months later{{Fact|date=January 2009}}. | |||
| * The three-month change in the unemployment rate and initial jobless claims.<ref></ref> | |||
| * ] (includes some of the above indicators).<ref> January 21, 2008</ref> | |||
| ==Responding to a recession== | |||
| Strategies for moving an economy out of a recession vary depending on which economic school the policymakers follow. While ] economists may advocate ] by the government to spark economic growth, ] economists may suggest tax cuts to promote business ] investment. ] economists may simply recommend that the government not interfere with natural market forces. | |||
| Both government and business have responses to recessions. In the Philadelphia Business Journal, Strategic Business adviser ] has discussed precautions businesses take to prepare for looming recession, likening it to fire drill. First, he suggests that business owners gauge customers' ability to resist recession and redesign customer offerings accordingly. He goes on to suggest they use lean principles, replace unhappy workers with those more motivated, eager and highly competitive. Also over-communicate. "Companies," he says, "get better at what they do during bad times." He calls his program the "Recession Drill." <ref></ref> | |||
| ==Stock market and recessions== | |||
| {{globalize/USA|date=September 2008}} | |||
| Some recessions have been anticipated by stock market declines. In ], Siegel mentions that since 1948, ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months (average 5.7 months). It should be noted that ten stock market declines of greater than 10% in the ] were not followed by a recession<ref>Siegel, Jeremy J. (2002). Stocks for the Long Run: The Definitive Guide to Financial Market Returns and Long-Term Investment Strategies, 3rd, New York: McGraw-Hill, 388. ISBN 9780071370486</ref>. | |||
| The ] market also usually weakens before a recession<ref> Chris Ciovacco, September 19, 2006</ref>. However ] declines can last much longer than recessions{{Fact|date=January 2009}}. | |||
| Since the business cycle is very hard to predict, Siegel argues that it is not possible to take advantage of economic cycles for timing investments. Even the ] (NBER) takes a few months to determine if a peak or trough has occurred in the US<ref> by Allan Sloan, December 11, 2007</ref>. | |||
| During an economic decline, ] such as FMCG, pharmaceuticals, and tobacco tend to hold up better<ref> Shawn Tully, February 6 2008</ref>. However when the economy starts to recover and the bottom of the market has passed (sometimes identified on charts as a ] <ref></ref>), ]s tend to recover faster. There is significant disagreement about how health care and utilities tend to recover<ref> | |||
| Joshua Lipton 01.28.08</ref>. Diversifying one's portfolio into international stocks may provide some safety; however, economies that are closely correlated with that of the U.S. may also be affected by a recession in the U.S.<ref>Douglas Cohen, January 18, 2008</ref>. | |||
| There is a view termed the ''halfway rule'' <ref>http://online.wsj.com/article/SB122635740974515379.html NOVEMBER 11, 2008 Recession Puts Halfway Rule to the Test, By DAVID GAFFEN</ref> according to which investors start discounting an economic recovery about halfway through a recession. In the 16 U.S. recessions since 1919, the average length has been 13 months, although the recent recessions have been shorter. Thus if the 2008 recession followed the average, the downturn in the stock market would have bottomed around November 2008. | |||
| ==Recession and politics== | |||
| Generally an administration gets credit or blame for the state of economy during its time.<ref> 29 January 2008</ref> This has caused disagreements about when a recession actually started.<ref> Prepared by: Democrat staff, Senate Budget Committee,July 31, 2003</ref> | |||
| In an economic cycle, a downturn can be considered a consequence of an expansion reaching an unsustainable state, and is corrected by a brief decline. Thus it is not easy to isolate the causes of specific phases of the cycle. | |||
| The 1981 recession is thought to have been caused by the tight-money policy adopted by ], chairman of the Federal Reserve Board, before ] took office. Reagan supported that policy. Economist ], chairman of the ] in the 1960s, said that "I call it a Reagan-Volcker-Carter recession.<ref> Monday, Nov. 23, 1981 By GEORGE J. CHURCH</ref> The resulting taming of inflation did, however, set the stage for a robust growth period during Reagan's administration. | |||
| It is generally assumed that government activity has some influence over the presence or degree of a recession. Economists usually teach that to some degree recession is unavoidable, and its causes are not well understood. Consequently, modern government administrations attempt to take steps, also not agreed upon, to soften a recession. They are often unsuccessful, at least at preventing a recession, and it is difficult to establish whether they actually made it less severe or longer lasting.{{Fact|date=September 2008}} | |||
| ==History of recessions== | |||
| ===Global recessions=== | |||
| <!-- to become "Global recession" after administrator page move --> | |||
| There is no commonly accepted definition of a ], ] regards periods when global growth is less than 3% to be global recessions.<ref> Kenneth Rogoff, International Monetary Fund, Financial Times, April 5, 2002</ref> The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years. During what the IMF terms the past three global recessions of the last three decades, global per capita output growth was zero or negative.<ref> </ref> | |||
| Economists at the ] (IMF) state that a global recession would take a slowdown in global growth to three percent or less. By this measure, three periods since 1985 qualify: 1990-1993, 1998 and 2001-2002. | |||
| ===United Kingdom recessions=== | |||
| {{main|List of recessions in the United Kingdom}} | |||
| ===United States recessions=== | |||
| {{main|List of recessions in the United States}} | |||
| According to economists, since 1854, the U.S. has encountered 32 cycles of expansions and contractions, with an average of 17 months of contraction and 38 months of expansion<ref></ref>. However, since 1980 there have been only eight periods of negative economic growth over one fiscal quarter or more<ref name="autogenerated1">http://www.bea.gov/national/xls/gdpchg.xls</ref>, and four periods considered recessions: | |||
| * ]: 2 years total | |||
| * ]: 8 months | |||
| * ]: 8 months | |||
| * ]: over 13 months by the end of 2009<ref></ref> | |||
| From 1991 to 2000, the U.S. experienced 37 quarters of ], the longest period of expansion on record.<ref name="autogenerated1" /> | |||
| For the past three recessions, the NBER decision has approximately conformed with the definition involving two consecutive quarters of decline. However the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth.<ref name="autogenerated1" /> | |||
| ==Likely 2008/2009 recession in some countries== | |||
| {{further|]}} | |||
| Since 2007, there had been speculation of a possible recession starting in late 2007 or early 2008 in some countries. | |||
| In January 2008, the IMF predicted that 2008 global growth would fall from 4.9 percent to 4.0 percent (as measured in terms of ]), however 2 months later it was announced that this projection was not low enough.<ref></ref> | |||
| There was significant speculation about a possible U.S. recession in 2008. If such a recession happened, it was expected to have a global impact.<ref>January 22 2008</ref><ref> - UBS 08.24.07</ref><ref> February 12, 2008</ref> The U.S. represents about 21 percent of the global economy, and impact of a U.S. recession could spread through the following:<ref></ref> | |||
| *Less spending by U.S. consumers and companies reduce demand for imports.<ref></ref> | |||
| *The crisis of the U.S. ] market has pushed up credit costs worldwide and forced European and Asian banks to write down billions of dollars in holdings. | |||
| *Dropping U.S. stock prices drag down markets elsewhere.<ref></ref> | |||
| === United States === | |||
| The ] (a consequence of ]) and ] has significantly contributed to a recession. | |||
| The 2008/2009 recession is seeing private consumption fall for the first time in nearly 20 years. This indicates the depth and severity of the current recession. With consumer confidence so low, recovery will take a long time. Consumers in the U.S. have been hard hit by the current recession, with the value of their houses dropping and their pension savings decimated on the stock market. Not only have consumers watched their wealth being eroded – they are now fearing for their jobs as unemployment rises. | |||
| <ref> Dr. Richard J. Buczynski and Michael Bright, IBISWorld, January 2009''</ref> | |||
| U.S. employers shed 63,000 jobs in February 2008<ref>Job Loss Predictions</ref>, the most in five years. Former Federal Reserve chairman Alan Greenspan said on April 6, 2008 that "There is more than a 50 percent chance the United States could go into recession." <ref></ref>. On October 1, the Bureau of Economic Analysis reported that an additional 156,000 jobs had been lost in September. On April 29, 2008, nine US states were declared by ] to be in a recession. In November 2008 Employers eliminated 533,000 jobs, the largest single month loss in 34 years.<ref>http://www.nytimes.com/2008/12/06/business/economy/06jobs.html</ref>. For 2008, an estimated 2.6 million U.S. jobs were eliminated.<ref>http://www.statesmanjournal.com/article/20090110/NEWS/901100332</ref> | |||
| Although the US Economy grew in the first quarter by 1%, <ref></ref> <ref></ref> by June 2008 some analysts stated that due to a protracted credit crisis and "rampant inflation in commodities such as oil, food and steel", the country was nonetheless in a recession.<ref>, 16 June 2008, Newsweek.</ref> The third quarter of 2008 brought on a GDP retraction of 0.5%<ref></ref> the biggest decline since 2001. The 6.4% decline in spending during Q3 on non-durable goods, like clothing and food, was the largest since 1950.<ref></ref> | |||
| A Nov 17, 2008 report from the Federal Reserve Bank of Philadelphia based on the survey of 51 forecasters, suggested that the recession started in April 2008 and will last 14 months <ref>http://www.philadelphiafed.org/research-and-data/real-time-center/survey-of-professional-forecasters/2008/survq408.cfm?loc=interstitialskip Fourth Quarter 2008 Survey of Professional Forecasters Release Date: November 17, 2008</ref>They project real GDP declining at an annual rate of 2.9% in the fourth quarter and 1.1% in the first quarter of 2009. These forecasts represent significant downward revisions from the forecasts of three months ago. | |||
| A December 1, 2008, report from the National Bureau of Economic Research stated that the U.S. has been in a recession since December 2007 (when economic activity peaked), based on a number of measures including job losses, declines in personal income, and declines in real GDP.<ref>http://www.usatoday.com/money/economy/2008-12-01-recession-nber-statement_N.htm Text of the NBER's statement on the recession</ref> | |||
| === Other countries === | |||
| A few other countries have seen the rate of growth of GDP decrease, generally attributed to reduced liquidity, sector price inflation in food and energy, and the U.S. slowdown. These include the ], ], ], ], ], ], ] and the ]. In some, the recession has already been confirmed by experts, while others are still waiting for the fourth quarter GDP growth data to show two consecutive quarters of negative growth. In case of India, it suffers global economic slowdown only and not recession. The effect is more pronounced in exports imports, steel and toy industry. | |||
| {{further|]}} | |||
| ==See also== | |||
| *] | |||
| *] | |||
| *] - August 1929 to September 1939: longest (and deepest) recession of the 20th century | |||
| *] - A list of important recessions in the United States | |||
| *] | |||
| ===Causes of recessions=== | |||
| *] | |||
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| ===Effects of recessions=== | |||
| *]cies | |||
| *]es | |||
| *] (or ]) | |||
| *]s | |||
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| ==References== | |||
| {{reflist|2}} | |||
| ==External links== | |||
| * About.com | |||
| * The National Bureau Of Economic Research | |||
| * - American Institute for Economic Research (AIER) | |||
| * - Economic Recession Information & U.S. Recession History | |||
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