US Economic Recessions: 1900 - 2008

Below we highlight the average duration of US economic recessions since 1900.  Given the recent string of weak economic reports and the freeze up in the credit markets, the question regarding the current period is no longer if we are in a recession, but when did it start.  Based on the recessions shown in the chart, the average length of US recessions is 14.4 months. Using the assumption that the recession began at the start of 2008 (using Industrial Production and Employment statistics), if the current period ends up just as an average contraction, we could expect the economy to bottom some time next spring. 

As shown in the chart, there is a clear dichotomy in recessions prior to WWII (red) and after WWII (blue). Pre WWII, the average recession lasted 19.1 months. Since then, though, the average duration has been nearly cut in half to 10.2 months. While the reason for the shorter duration is up for debate, we would argue that faster information flow has allowed companies to quickly adjust activity in order to compensate for shocks to the upside or the downside.

        

Comments

[j'adoube]

>>Using the assumption that the recession began at the start of 2008 (using Industrial Production and Employment statistics), if the current period ends up just as an average contraction, we could expect the economy to bottom some time next spring.<<

No. That's when the recession would end. That's not necessarily the same as the point that the economy bottoms.

[Jeff Bates]

The magnitude of an economic recession can be measured in 3 ways.
ECONOMIC DOWNTURN;
your next door neighbors brother has lost his job.
ECONOMIC RECESSION;
your next door neighbor has lost his job.
ECONOMIC DEPRESSION;
you have lost your job.