Whats the difference between a recession and a depression?
What’s the difference between a recession and a depression? There are people whose entire careers are spent tracking and detecting the presence of recessions and depressions. These people look at a whole array of economic indicators — from the Bureau of Labor Statistics’ employment reports to the National Association of Home Builders’ number of new homes being built. While there are lots of organizations dedicated to sniffing out recession, the National Bureau of Economic Research (NBER) is the group whose opinion on the matter is most widely relied upon. In other words, if the NBER says we’re in a recession or a depression, we’re probably in one. Recession Image Gallery Although the word can strike fear in the hearts of
Severity. One widespread definition of a recession-the one used by newspapers-is a decline in the gross domestic product for two or more consecutive quarters. The term depression, by contrast, commonly refers to a grave, prolonged recession during which the GDP declines by more than 10 percentage points. Most economists, however, quibble with these lay characterizations since they don’t take into account the unemployment rate or consumer confidence. The National Bureau of Economic Research, for example, defines the term recession as a “significant decline” distributed across the economy lasting more than a few months, usually visible in the numbers for GDP, employment, industrial production, and wholesale-retail sales. Understood as a natural part of the business cycle, a recession is the period between when activity has reached its peak and when it reaches its low point or “trough.” There is no corresponding NBER definition of a depression, nor can economists agree on an official divi
