When Was the Great Recession?

Delve into the Great Recession’s timeline, an era of financial distress from December 2007 to June 2009. Understand the causes, including the 2007 housing bubble crash, and worldwide effects.

By Brad Nakase, Attorney

Email  |  Call (888) 600-8654

Have a quick question? I answered nearly 1500 FAQs.

The Great Recession is infamous in American history. It was a time of great economic turmoil that touched every American household, whether through unemployment, plummeting house prices, or rising prices. However you may be surprised at the answer to when was the Great Recession. The effects of the Great Recession lasted 4 years; however, the official dates of the Great Recession state it only lasted 18 months.

What Caused the Great Recession?

The main cause of the Great Recession was the housing bubble crash in 2007.

In the years leading up to 2005, financial institutions loosened the eligibility requirements for mortgages. However, some institutions took this a little far and issued bad mortgages. These bad mortgages were mortgages that were lent to borrowers with bad credit who were unlikely to be able to pay off the mortgage.

This availability of credit meant that many Americans were buying homes, driving up residential real estate prices. The values of homes increased to more than the homes were actually worth. When the housing bubble crashed, house prices plummeted, and many Americans were left with mortgages that cost far more than their home was worth.

At the same time, financial institutions went under as borrowers were unable to repay these bad mortgages and defaulted on their loans. Many of these financial institutions went under due to the sheer number of bad loans they held.

Many Americans lost their homes, either because they defaulted on their mortgage or because the financial institution that held their mortgage went under. This had a massive impact on consumer spending as the American public tightened their budgets.

The Great Recession was avoidable, and the Obama government instituted stricter regulations on mortgages to ensure that the housing bubble crash would not happen again.

When Was the Great Recession?

The Great Recession lasted 18 months, between December 2007 and June 2009. However, the official answer to when was the Great Recession undersells the long-lasting impact the Great Recession had, not just on the US economy, but the entire world. Unemployment rates, higher prices, and supply chain disruptions persisted long after the Great Recession had officially ended. It took four years for the US economy to return to normal following the Great Recession.

How Bad Was the Great Recession?

The Great Recession was one of the worst in US history. Some economists say that it is the second worst recession in America’s history. Others say that it would’ve been the absolute worst if not for the quick intervention of the government and Federal Reserve.

Millions of Americans lost their jobs during the Great Recession. It is estimated that the number of jobs in the US declined by 6.8% during the recession, and unemployment rates reached 10%. These are high in comparison to previous recessions in US history, however, it is even more dramatic considering that the housing bubble created jobs.

Another impact of the Great Recession was the liquidity crisis. Investment banks were hit hard by the bad mortgages and many of them were forced to declare bankruptcy, merge, or obtain private federal loans. The US government spent over $100 billion during the Great Recession bailing out investment banks and insurer AIG.

What Were the Global Impacts of the Great Recession?

The Great Recession was so bad that it had a global impact. However, the Great Recession did not hit the rest of the world as badly.

Europe was hit the worst because of its links with the US. Countries like Australia, China, Iran, and India avoided recessions, but their economies experienced some decline. They either did not decline enough to be considered a recession, or they did not decline for long enough to be considered a recession.

Latin America, Africa, and large parts of Asia were not impacted by the Great Recession.

In Europe, multiple countries implemented austerity programs and sovereign debt crises. Greece faced large public debts. Countries whose economies are deeply linked with the US were hit more than the other countries. For example, countries like Spain, Greece, Italy, Ireland, and the UK were hit hard by the Great Recession because of their banking links and business links with the US. However, their economies were not as badly impacted by the Great Recession as the US economy.

Were there Any Warning Signs for the Great Recession?

Recessions are notoriously difficult to predict because they require 6 consecutive months of economic decline. This means that economists cannot confidently declare a recession until we are a few months into the recession. That is why it feels like economists are always talking about recessions.

So, on one hand, there is no way to tell a recession has happened until it has been happening for a few months.

However, there were early warning signs of the financial crisis that caused the recession. The problem was there was no government oversight of financial institutions at that time. So, the government was not able to see it coming.

Also, these bad mortgages were packaged up into mortgage-backed securities and sold to investors and banks, so the people paying for the mortgages weren’t able to see that the mortgages were bad.

So, while the last recession in the US was preventable, in terms of government regulations, it should’ve been in place to prevent these bad mortgages. It was not preventable because there were no systems in place that could’ve identified the issue.

What Were the Great Recession Recovery Efforts?

Both the Federal Reserve and the US government intervened in the Great Recession and helped the economy to recover. The Great Recession is the longest recession in recent US history. It officially lasted 18 months, but the effects were felt for years to come. However, without intervention by the US government and the Federal Reserve, the recession would’ve been worse and lasted far longer.

Some of the things that the Federal Reserve and the US government did to help the US recover from the Great Recession include:

  • The Federal Reserve lowered its federal funds rate to promote liquidity.
  • The Federal Reserve issued $7.7 trillion in emergency loans to banks.
  • The US government introduced stimulus packages to encourage consumer spending.
  • Automatic stabilizers (like Unemployment Insurance, Medicaid, and SNAP) provided low-income households with emergency resources during the recession.

The stimulus packages were particularly useful in restoring consumer confidence and stimulating the economy. They provided US households with much-needed disposable income. Congressional approval of stimulus packages can take time, though, which is why automatic stabilizers are so important. They provide relief to the most vulnerable households until the stimulus packages can be implemented.

In Conclusion: When Was the Great Recession?

The Great Recession was the worst recession the US has seen since World War II. The Great Recession is officially recorded as lasting 18 months between 2007 and 2009. However, its effects were felt around the world, and it took economies years after the official end to fully recover.

Have a quick question? We answered nearly 2000 FAQs.

See all blogs: Business | Corporate | Employment Law

Most recent blogs:

How to Trademark Your Business Name

How to Trademark Your Business Name

Protect your business name with trademark registration to ensure exclusive rights and safeguard your brand identity from infringement. Follow our step-by-step guide to navigate the trademarking process effectively while avoiding common pitfalls.

Service Charge vs Tip: Is the service charge the same as a tip?

A service charge is mandatory, and a tip is at the discretion of the customer.  Under California law service charges are not considered tips.  Service charges are the amount a customer is required to pay in addition to the beverages and foods purchased at a restaurant.  Service charges belong to the restaurant and not to the employees.

When Is a W-9 Not Required?

A W-9 is not required when payments to a vendor are under $600 in a calendar year. Payments made through credit card processors or platforms like PayPal also do not require a W-9.

Is Small Business Loan Secured or Unsecured

A secured loan places the burden of risk on the borrower. An unsecured loan shifts the burden of risk more to the lender. A small-business loan is secured when backed by specific collateral, typically business assets, such as equipment, inventory or real estate. Secured loans, including those secured by the Small Business Administration (SBA), typically range from $50,000 to $5 million. 

Where Can I Cash a Business Check?

Business check may be cashed at a check-cashing service: Walmart Money Center, Payday Advance, Ingo Money, Moneytree, Money Mart, ACE Cash Express, Speedy Cash, etc.
What Does Net Income Mean for Businesses and Individuals

What Does Net Income Mean for Businesses and Individuals?

Net income, often called "the bottom line," measures financial health by showing the remaining profit after expenses and deductions. For individuals and businesses, net income is a critical metric influencing budgeting, performance assessment, and decision-making.
What Is a Business Plan Executive Summary

What Is a Business Plan Executive Summary?

An executive summary in a business plan outlines your company's mission, market positioning, and financial projections in a concise format. It highlights key points to capture investors' interest, acting as a compelling introduction to your business plan.

Average Revenue For Small Business

Small businesses with no employees have an average annual revenue of $52,000. The average small business owner makes $73,000 a year. In general, the average revenue is around $52,000 per year for a company with a single owner/employee.
What Is the Legal Definition of False Advertising

What Is the Legal Definition of False Advertising?

False advertising involves untrue or misleading claims about products or services, violating laws enforced by the FTC and state authorities. Companies face legal consequences like fines, lawsuits, and cease-and-desist orders for deceptive practices under statutes like the Lanham Act and California's False Advertising Law.

Payment Upfront Meaning & 5 Tips for Getting Upfront Payments from Customers

Upfront payments can be beneficial to many small business owners. Upfront payments protect the owner emotionally and financially. There is no fear of customers disappearing without paying for products or services. It is also a great method by which to build trust with customers. It can also help improve cash flow, thereby letting the business grow and flourish.

How to Calculate Business Profit

A business profit is revenue minus expenses. The profit formula in accounting calculates the net gains or losses incurred by the business for a period by subtracting the total expenses from the total income: Total Income – Total Expenses - Profit
What Are the Benefits of Using a DBA (Doing Business As)

What Are the Benefits of Using a DBA (Doing Business As)?

A DBA (Doing Business As) name allows businesses to operate under a different name, enhancing branding flexibility and privacy. It is essential for opening business accounts, expanding services, and improving public perception without creating a separate legal entity.
How Can You Place a Vending Machine at a Location

How Can You Place a Vending Machine at a Location?

Learn the strategies for securing profitable vending machine locations and key factors to maximize your vending business's success. Discover top site recommendations, legal steps, and tips for approaching property managers effectively.
What Is the Legal Definition of Estoppel

What Is the Legal Definition of Estoppel?

Estoppel prevents a party from contradicting prior statements or actions, ensuring fairness and consistency in legal agreements. Common types include promissory estoppel, equitable estoppel, and estoppel by deed, addressing various legal scenarios effectively.
What Does Business Acumen Mean

What Does Business Acumen Mean

Business acumen involves strategic thinking, decision-making, and understanding organizational dynamics to impact goals effectively. Essential skills include financial insight, stakeholder awareness, and navigating uncertainty for leadership at all levels.

Contact our attorney.

Please tell us your story:

5 + 3 = ?