Learn about typical US recession lengths and influencing factors, noting recent trends with shorter durations averaging 10 months. Investigate how external factors and government decisions affect recession timelines, comparing historical data.
By Brad Nakase, Attorney
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A recession is a difficult time for everyone. People lose jobs, prices soar, and businesses slow down production to optimize costs. Economists agree that the US is headed for a recession, and soon. So it is natural to wonder how long will the recession last? Recessions don’t last forever, but let’s see what economists say about what we can expect.
The average recession duration throughout all US history is 17 months. However, the average duration of US recessions in the last 30 years is 10 months, so rest assured that recent recessions have been getting shorter. There are two recent outliers:
Aside from those, recent recessions have been quite close to the average recession duration of 10 months. Both the Federal Reserve and the US government are getting better at using policy to smooth the highs and lows of the business cycle, and therefore keeping the economy more stable. While some of these efforts can trigger a recession if they are mistimed, they can also mean that recessions are milder when they occur.
Recessions are a normal part of the business cycle. The economy fluctuates up and down, and sometimes those fluctuations cause a recession.
There are often external factors, like government policy, changes in the interest rate, supply chain disruption, or lack of consumer spending. When external factors are involved, they can often impact how long a recession lasts. How long it takes to resolve the factors involved in causing a recession can impact how long the recession will last.
Another factor that determines how long recessions last is the government’s response to the recession. Quick, effective action by the government and Federal Reserve to address both the recession and the factors that caused the recession will reduce how long the recession lasts. The government and Federal Reserve are both getting better at mitigating and reacting to recessions. They also have long-term strategies in place to address things that could cause big recessions for the US economy.
An example of this is the oil supply. The US government has been stockpiling oil and investing in domestic oil sources since two recessions were triggered by disruptions to the oil supply.
Let’s take a look at some of the most recent US recessions to see how long recessions last and what influences how long they last.
The Covid-19 recession is the shortest recession of recent times. It lasted 2 months, from February 2020 to April 2020. The recession disrupted both the supply chain and consumer demand due to people being confined in their homes during lockdown. It could’ve been one of the worst recessions of recent times due to the disruption to both the supply chain and demand; however, decisive action by the government and the Federal Reserve were responsible for the quick end of the recession. Some examples of the actions include:
The Great Recession is the longest recession of recent times. It lasted 18 months, from December 2007 to June 2009.
The Great Recession was caused by the housing market bubble burst due to a large number of bad mortgages being loaned during the housing boom. US financial institutions lent large amounts of money to homebuyers with bad credit. These mortgages were sold to high-quality investors by being bundled into mortgage-backed securities.
It all came to a head in 2007 when homebuyers with bad credit were unable to repay their mortgages. Financial institutions went under due to the sheer number of these bad loans, and the housing bubble burst. Homeowners, even the ones with good credit, saw their home values plummet, and many people lost their homes.
The government issued two stimulus checks, and the Federal Reserve reduced interest rates to get people to spend again. However, homeowners who bought during the housing bubble were paying mortgages that cost more than their home was worth. The Great Recession lasted for 18 months, but across the world, the world felt the effects of the recession for 4 years. When questioning how long will the recession last, it is important to remember that the effects of the recession often last longer than the official end of the recession.
After the economy recovered following the recession, the government also passed a policy to ensure that mortgages were better regulated.
The Dot Com Recession lasted 8 months, from March 2001 to November 2001. During the late 1990s, the internet resulted in a flood of innovation. Great sums of money flowed through the stock market as investors scrambled to get a piece of the action.
Millionaires and billionaires were being made almost overnight, so any technology stocks, no matter what the company was, were snapped up. This drove prices up, and many of the stocks were overvalued. As with the housing bubble, the prices couldn’t stay up forever, and the bubble burst, causing the NASDAQ (a tech-heavy index fund) to lose 77% of its value. This caused a recession, though there were exacerbating factors, like September 11.
The Gulf War Recession lasted 9 months, from July 1990 to March 1991. This recession was caused by a number of factors, not just the Gulf War. However, when people think of this recession, they think of the disruption to the oil supply. When Iraq invaded oil-exporting Kuwait, there were massive disruptions to the US’s supply of oil, which caused prices to rise dramatically, affecting the manufacturing and transport of all goods.
Another large contributor to the recession was the collapse of the savings and loans industry. This affected both the real estate and financial industries. During the Gulf War Recession, unemployment rose to 6.8%.
While there is no way of knowing how long a recession will last until it’s over, economists will consider the factors at play to determine how long the recession is likely to last. They will look at factors like:
Economists will also analyze historical data to see how the economy was affected by similar circumstances in the past. This will help them predict how that situation is likely to affect the economy based on past patterns. It is not 100% accurate, because there are usually a lot of factors at play, but it does give economists something to base their predictions for how long the recession will last on.
It is worth noting that unforeseen events can cause recessions or affect how long a recession will last. That is what happened during the Covid-19 pandemic. Nobody saw a global pandemic coming, but it affected the economy in a substantial way. The Gulf War Recession is an example of unforeseen events affecting how long an existing recession lasted.
Any predictions that economists make about how long the recession will last is an educated guess. There is no formula for getting an exact answer. There is no expert source of information. Economists can only look at historical data and the circumstances that might impact the economy and therefore how long the recession will last. This gives them an educated guess.
Even when the recession is over, the symptoms that affect everyday people can continue past the official recession end date. It can take a while for businesses to recover and start hiring people again, so unemployment rates can stay low for quite a while. It can take a while for consumer confidence to recover and for households to regain their disposable income, so it takes a while for consumer spending to return (and therefore business profits and production.) So, it is normal for businesses and individuals to feel like the economy is in recession long before the official dates of the recession (as decided by the NBER).
There is no concrete way to tell how long the recession will last. Even economists cannot give an exact answer. What they can do is look at the business cycle (economic fluctuations) for patterns of how the economy was affected by similar factors in similar circumstances in the past. For example, they may look at the response by both the government and the Federal Reserve to see how the recession recovery efforts are going.
The average length of a recession in recent years is 10 months, so many people use that as a measure of how long the recession is likely to last. However, the last two recessions were 2 months (the Covid-19 recession) and 18 months (the Great Recession), which were the shortest and longest recession of recent years, respectively.
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