Recession: What does Recession mean and How to Survive it

A recession is a significant economic downturn with limited economic activities, including the decline of production outputs, consumer demands, and employment opportunities, that could last for months or even years. 

There are two ways to define recessions, one of which is to gauge the Gross Domestic Product (GDP) index. As long as GDP has declined for two consecutive quarters, it constitutes as a recession and that’s also what the media always depicts as a “technical recession”. 

As for another definition of recession, it depends on the economists from the National Bureau of Economic Research (NBER), a non-profit and non-partisan organization founded in 1920, to access whether an economy goes into recession based on these three criteria — depth, diffusion, and duration, which are interchangeable. Although each criterion needs to be met individually to a certain extent, one criterion may partially offset weaker indications from another in an extreme situation, according to NBER.

Despite recessions sound daunting, they are also considered to be a brief corrective phase of the business cycle, which consists of four stages: expansion, peak, contraction and trough. For example, the most recent recession began in February 2020, NBER concluded that the drop in activity had been so great and so widely diffused throughout the economy that the downturn should be classified as a recession even if it proved to be brief and the trough occurred two months after the peak in April 2020 only. Therefore, the recent recession is the shortest one in the history.

A recession will cause a "domino effect" across society. On the individual level, the economic downturn will dampen consumer sentiments since they tend to save money instead of savings. Therefore, if companies make fewer sales as a result of a struggling economy, then it will inevitably lead to massive layoffs and some may even close down businesses to increase the overall unemployment rates in addition to graduates and school leavers added to the job market annually. 

When people can't make ends meet, the over economic activities and productivity will be further reduced and stagnated. That way, the government can't receive more money in taxes, then it will increase taxes and spend lesser on benefits, public services, and government workers' wages, all of which will particularly affect benefit recipients and those with fixed incomes. 

In a nutshell, a recession affects all walks of life, making inequality across society more evident.

It depends! A recession can last for months or even years. As the largest economy in the world, the economic readings of the U.S., such as GDP, interest rate, Consumer Price Index (CPI), Producer Price Index (PPI), and beyond, are always in the spotlight. In other words, if the U.S. goes into recession, the entire global economy will follow suit. 

According to the NBER data, the average recession in the U.S. lasted 11 months from 1945 to 2009 compared with 21.6 months from 1854 to 1919, which showed an improvement over earlier. Over the past 30 years, the U.S. has gone through four recessions, including the Covid-19 Recession, the Great Recession, the Dot Com Recession, and the Gulf War Recession.

 For the Covid-19 Recession, it was the shortest recession in the history of the U.S. among other economic recessions as it began in February 2020 and lasted only two months. Whereas, the Great Recession was the longest U.S. recession since it lasted 18 months from December 2007 to June 2009, which was almost double the length of any recent recession in America. As you may wonder, the differences between “the Great Depression” and “the Great Recession”. The former took place from August 1929 to March 1933, which lasted 3.5 years while the latter lasted around 1.5 years. However, the lingering effects of the Great Depression” continued till the late 1930s. In comparison with the Great Depression, the Great Recession's duration and effects are relatively "mild".