Recession

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In economics, a recession is a business cycle contraction when there is a general decline in economic activity. [1] [2] Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble. In the United States, it is defined as "a significant decline in economic activity spread across the market, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales". [3] In the United Kingdom, it is defined as a negative economic growth for two consecutive quarters. [4] [5]

The business cycle, also known as the economic cycle or trade cycle, is the downward and upward movement of gross domestic product (GDP) around its long-term growth trend. The length of a business cycle is the period of time containing a single boom and contraction in sequence. These fluctuations typically involve shifts over time between periods of relatively rapid economic growth and periods of relative stagnation or decline.

A financial crisis is any of a broad variety of situations in which some financial assets suddenly lose a large part of their nominal value. In the 19th and early 20th centuries, many financial crises were associated with banking panics, and many recessions coincided with these panics. Other situations that are often called financial crises include stock market crashes and the bursting of other financial bubbles, currency crises, and sovereign defaults. Financial crises directly result in a loss of paper wealth but do not necessarily result in significant changes in the real economy.

A supply shock is an event that suddenly increases or decreases the supply of a commodity or service, or of commodities and services in general. This sudden change affects the equilibrium price of the good or service or the economy's general price level.

Contents

Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply or increasing government spending and decreasing taxation

Monetary policy subclass of the economic policy

Monetary policy is the policy adopted by the monetary authority of a country that controls either the interest rate payable on very short-term borrowing or the money supply, often targeting inflation or the interest rate to ensure price stability and general trust in the currency.

Fiscal policy use of government revenue collection and spending to influence the economy

In economics and political science, fiscal policy is the use of government revenue collection and expenditure (spending) to influence a country's economy. The use of government revenues and expenditures to influence macroeconomic variables developed as a result of the Great Depression, when the previous laissez-faire approach to economic management became discredited. Fiscal policy is based on the theories of the British economist John Maynard Keynes, whose Keynesian economics indicated that government changes in the levels of taxation and government spending influences aggregate demand and the level of economic activity. Fiscal and monetary policy are the key strategies used by a country's government and central bank to advance its economic objectives. The combination of these policies enables these authorities to target the inflation and to increase employment. Additionally, it is designed to try to keep GDP growth at 2%–3% and the unemployment rate near the natural unemployment rate of 4%–5%. This implies that fiscal policy is used to stabilize the economy over the course of the business cycle.

Definition

In a 1974 The New York Times article, Commissioner of the Bureau of Labor Statistics Julius Shiskin suggested several rules of thumb for defining a recession, one of which was two consecutive quarters of negative GDP growth. [6] In time, the other rules of thumb were forgotten. Some economists prefer a definition of a 1.5-2 percentage points rise in unemployment within 12 months. [7]

<i>The New York Times</i> Daily broadsheet newspaper based in New York City

The New York Times is an American newspaper based in New York City with worldwide influence and readership. Founded in 1851, the paper has won 127 Pulitzer Prizes, more than any other newspaper. The Times is ranked 18th in the world by circulation and 3rd in the U.S.

In the United States, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER) is generally seen as the authority for dating US recessions. The NBER, a private economic research organization, defines an economic recession as: "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales". [8] Almost universally, academics, economists, policy makers, and businesses refer to the determination by the NBER for the precise dating of a recession's onset and end.

United States Federal republic in North America

The United States of America (USA), commonly known as the United States or simply America, is a country comprising 50 states, a federal district, five major self-governing territories, and various possessions. At 3.8 million square miles, the United States is the world's third or fourth largest country by total area and is slightly smaller than the entire continent of Europe. With a population of over 327 million people, the U.S. is the third most populous country. The capital is Washington, D.C., and the most populous city is New York City. Most of the country is located contiguously in North America between Canada and Mexico.

National Bureau of Economic Research American private nonprofit research organization

The National Bureau of Economic Research (NBER) is an American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community." The NBER is well known for providing start and end dates for recessions in the United States.

Real income is income of individuals or nations after adjusting for inflation. It is calculated by dividing nominal income by the price level. Real variables such as real income and real GDP are variables that are measured in physical units, while nominal variables such as nominal income and nominal GDP are measured in monetary units. Therefore, real income is a more useful indicator of well-being since it measures the amount of goods and services that can be purchased with the income.

In the United Kingdom, recessions are generally defined as two consecutive quarters of negative economic growth, as measured by the seasonal adjusted quarter-on-quarter figures for real GDP, [4] [5] with the same definition being used for all other member states of the European Union. [9]

United Kingdom Country in Europe

The United Kingdom of Great Britain and Northern Ireland, commonly known as the United Kingdom or Britain, is a sovereign country located off the north­western coast of the European mainland. The United Kingdom includes the island of Great Britain, the north­eastern part of the island of Ireland, and many smaller islands. Northern Ireland is the only part of the United Kingdom that shares a land border with another sovereign state, the Republic of Ireland. Apart from this land border, the United Kingdom is surrounded by the Atlantic Ocean, with the North Sea to the east, the English Channel to the south and the Celtic Sea to the south-west, giving it the 12th-longest coastline in the world. The Irish Sea separates Great Britain and Ireland. The United Kingdom's 242,500 square kilometres (93,600 sq mi) were home to an estimated 66.0 million inhabitants in 2017.

European Union Economic and political union of European states

The European Union (EU) is a political and economic union of 28 member states that are located primarily in Europe. Its members have a combined area of 4,475,757 km2 (1,728,099 sq mi) and an estimated total population of about 513 million. The EU has developed an internal single market through a standardised system of laws that apply in all member states in those matters, and only those matters, where members have agreed to act as one. EU policies aim to ensure the free movement of people, goods, services and capital within the internal market, enact legislation in justice and home affairs and maintain common policies on trade, agriculture, fisheries and regional development. For travel within the Schengen Area, passport controls have been abolished. A monetary union was established in 1999 and came into full force in 2002 and is composed of 19 EU member states which use the euro currency.

Attributes

A recession has many attributes that can occur simultaneously and includes declines in component measures of economic activity (GDP) such as consumption, investment, government spending, and net export activity. These summary measures reflect underlying drivers such as employment levels and skills, household savings rates, corporate investment decisions, interest rates, demographics, and government policies.

To invest is to allocate money in the expectation of some benefit in the future.

Economist Richard C. Koo wrote that under ideal conditions, a country's economy should have the household sector as net savers and the corporate sector as net borrowers, with the government budget nearly balanced and net exports near zero. [10] [11] When these relationships become imbalanced, recession can develop within the country or create pressure for recession in another country. Policy responses are often designed to drive the economy back towards this ideal state of balance.

A severe (GDP down by 10%) or prolonged (three or four years) recession is referred to as an economic depression, although some argue that their causes and cures can be different. [7] As an informal shorthand, economists sometimes refer to different recession shapes, such as V-shaped, U-shaped, L-shaped and W-shaped recessions.

Type of recession or shape

The type and shape of recessions are distinctive. In the US, v-shaped, or short-and-sharp contractions followed by rapid and sustained recovery, occurred in 1954 and 1990–91; U-shaped (prolonged slump) in 1974–75, and W-shaped, or double-dip recessions in 1949 and 1980–82. Japan’s 1993–94 recession was U-shaped and its 8-out-of-9 quarters of contraction in 1997–99 can be described as L-shaped. Korea, Hong Kong and South-east Asia experienced U-shaped recessions in 1997–98, although Thailand’s eight consecutive quarters of decline should be termed L-shaped. [12]

Psychological aspects

Recessions have psychological and confidence aspects. For example, if companies expect economic activity to slow, they may reduce employment levels and save money rather than invest. Such expectations can create a self-reinforcing downward cycle, bringing about or worsening a recession. [13] Consumer confidence is one measure used to evaluate economic sentiment. [14] The term animal spirits has been used to describe the psychological factors underlying economic activity. Economist Robert J. Shiller wrote that the term "...refers also to the sense of trust we have in each other, our sense of fairness in economic dealings, and our sense of the extent of corruption and bad faith. When animal spirits are on ebb, consumers do not want to spend and businesses do not want to make capital expenditures or hire people." [15]

Balance sheet recession

High levels of indebtedness or the bursting of a real estate or financial asset price bubble can cause what is called a "balance sheet recession". This is when large numbers of consumers or corporations pay down debt (i.e., save) rather than spend or invest, which slows the economy. The term balance sheet derives from an accounting identity that holds that assets must always equal the sum of liabilities plus equity. If asset prices fall below the value of the debt incurred to purchase them, then the equity must be negative, meaning the consumer or corporation is insolvent. Economist Paul Krugman wrote in 2014 that "the best working hypothesis seems to be that the financial crisis was only one manifestation of a broader problem of excessive debt—that it was a so-called "balance sheet recession". In Krugman's view, such crises require debt reduction strategies combined with higher government spending to offset declines from the private sector as it pays down its debt. [16]

For example, economist Richard Koo wrote that Japan's "Great Recession" that began in 1990 was a "balance sheet recession". It was triggered by a collapse in land and stock prices, which caused Japanese firms to have negative equity, meaning their assets were worth less than their liabilities. Despite zero interest rates and expansion of the money supply to encourage borrowing, Japanese corporations in aggregate opted to pay down their debts from their own business earnings rather than borrow to invest as firms typically do. Corporate investment, a key demand component of GDP, fell enormously (22% of GDP) between 1990 and its peak decline in 2003. Japanese firms overall became net savers after 1998, as opposed to borrowers. Koo argues that it was massive fiscal stimulus (borrowing and spending by the government) that offset this decline and enabled Japan to maintain its level of GDP. In his view, this avoided a U.S. type Great Depression, in which U.S. GDP fell by 46%. He argued that monetary policy was ineffective because there was limited demand for funds while firms paid down their liabilities. In a balance sheet recession, GDP declines by the amount of debt repayment and un-borrowed individual savings, leaving government stimulus spending as the primary remedy. [10] [11] [17] [18]

Krugman discussed the balance sheet recession concept during 2010, agreeing with Koo's situation assessment and view that sustained deficit spending when faced with a balance sheet recession would be appropriate. However, Krugman argued that monetary policy could also affect savings behavior, as inflation or credible promises of future inflation (generating negative real interest rates) would encourage less savings. In other words, people would tend to spend more rather than save if they believe inflation is on the horizon. In more technical terms, Krugman argues that the private sector savings curve is elastic even during a balance sheet recession (responsive to changes in real interest rates) disagreeing with Koo's view that it is inelastic (non-responsive to changes in real interest rates). [19] [20]

A July 2012 survey of balance sheet recession research reported that consumer demand and employment are affected by household leverage levels. Both durable and non-durable goods consumption declined as households moved from low to high leverage with the decline in property values experienced during the subprime mortgage crisis. Further, reduced consumption due to higher household leverage can account for a significant decline in employment levels. Policies that help reduce mortgage debt or household leverage could therefore have stimulative effects. [21] [22]

Liquidity trap

A liquidity trap is a Keynesian theory that a situation can develop in which interest rates reach near zero (zero interest-rate policy) yet do not effectively stimulate the economy. In theory, near-zero interest rates should encourage firms and consumers to borrow and spend. However, if too many individuals or corporations focus on saving or paying down debt rather than spending, lower interest rates have less effect on investment and consumption behavior; the lower interest rates are like "pushing on a string". Economist Paul Krugman described the U.S. 2009 recession and Japan's lost decade as liquidity traps. One remedy to a liquidity trap is expanding the money supply via quantitative easing or other techniques in which money is effectively printed to purchase assets, thereby creating inflationary expectations that cause savers to begin spending again. Government stimulus spending and mercantilist policies to stimulate exports and reduce imports are other techniques to stimulate demand. [23] He estimated in March 2010 that developed countries representing 70% of the world's GDP were caught in a liquidity trap. [24]

Paradoxes of thrift and deleveraging

Behavior that may be optimal for an individual (e.g., saving more during adverse economic conditions) can be detrimental if too many individuals pursue the same behavior, as ultimately one person's consumption is another person's income Too many consumers attempting to save (or pay down debt) simultaneously is called the paradox of thrift and can cause or deepen a recession. Economist Hyman Minsky also described a "paradox of deleveraging" as financial institutions that have too much leverage (debt relative to equity) cannot all de-leverage simultaneously without significant declines in the value of their assets. [25]

During April 2009, U.S. Federal Reserve Vice Chair Janet Yellen discussed these paradoxes: "Once this massive credit crunch hit, it didn’t take long before we were in a recession. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. Indeed, we have been in the grips of precisely this adverse feedback loop for more than a year. A process of balance sheet deleveraging has spread to nearly every corner of the economy. Consumers are pulling back on purchases, especially on durable goods, to build their savings. Businesses are cancelling planned investments and laying off workers to preserve cash. And, financial institutions are shrinking assets to bolster capital and improve their chances of weathering the current storm. Once again, Minsky understood this dynamic. He spoke of the paradox of deleveraging, in which precautions that may be smart for individuals and firms—and indeed essential to return the economy to a normal state—nevertheless magnify the distress of the economy as a whole." [25]

Predictors

The U.S. Conference Board’s Present Situation Index year-over-year change turns negative by more than 15 points before a recession. [26]

The U.S. Conference Board Leading Economic Indicator year-over-year change turns negative before a recession. [27] [28]

When the CFNAI Diffusion Index drops below the value of -0.35, then there is an increased probability of the beginning a recession. Usually the signal happens during in the three months of the recession. The CFNAI Diffusion Index signal tends to happen about one month before a related signal by the CFNAI-MA3 (3-month moving average) drops below the -0.7 level. The CFNAI-MA3 correctly identified the 7 recessions between March 1967–August 2019, while triggering only 2 false alarms. [29]


Except for the above, there are no known completely reliable predictors, but the following are considered possible predictors. [30]

Analysis by Prakash Loungani of the International Monetary Fund found that only two of the sixty recessions around the world during the 1990s had been predicted by a consensus of economists one year earlier, while there were zero consensus predictions one year earlier for the 49 recessions during 2009. [42]

Government responses

Most mainstream economists believe that recessions are caused by inadequate aggregate demand in the economy, and favor the use of expansionary macroeconomic policy during recessions. Strategies favored for moving an economy out of a recession vary depending on which economic school the policymakers follow. Monetarists would favor the use of expansionary monetary policy, while Keynesian economists may advocate increased government spending to spark economic growth. Supply-side economists may suggest tax cuts to promote business capital investment. When interest rates reach the boundary of an interest rate of zero percent (zero interest-rate policy) conventional monetary policy can no longer be used and government must use other measures to stimulate recovery. Keynesians argue that fiscal policy—tax cuts or increased government spending—works when monetary policy fails. Spending is more effective because of its larger multiplier but tax cuts take effect faster.

For example, Paul Krugman wrote in December 2010 that significant, sustained government spending was necessary because indebted households were paying down debts and unable to carry the U.S. economy as they had previously: "The root of our current troubles lies in the debt American families ran up during the Bush-era housing bubble...highly indebted Americans not only can’t spend the way they used to, they’re having to pay down the debts they ran up in the bubble years. This would be fine if someone else were taking up the slack. But what’s actually happening is that some people are spending much less while nobody is spending more — and this translates into a depressed economy and high unemployment. What the government should be doing in this situation is spending more while the private sector is spending less, supporting employment while those debts are paid down. And this government spending needs to be sustained..." [43]

Stock market

Some recessions have been anticipated by stock market declines. In Stocks for the Long Run , Siegel mentions that since 1948, ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months (average 5.7 months), while ten stock market declines of greater than 10% in the Dow Jones Industrial Average were not followed by a recession. [44]

The real-estate market also usually weakens before a recession. [45] However real-estate declines can last much longer than recessions. [46]

Since the business cycle is very hard to predict, Siegel argues that it is not possible to take advantage of economic cycles for timing investments. Even the National Bureau of Economic Research (NBER) takes a few months to determine if a peak or trough has occurred in the US. [47]

During an economic decline, high yield stocks such as fast-moving consumer goods, pharmaceuticals, and tobacco tend to hold up better. [48] However, when the economy starts to recover and the bottom of the market has passed, growth stocks tend to recover faster. There is significant disagreement about how health care and utilities tend to recover. [49] Diversifying one's portfolio into international stocks may provide some safety; however, economies that are closely correlated with that of the U.S. may also be affected by a recession in the U.S. [50]

There is a view termed the halfway rule [51] according to which investors start discounting an economic recovery about halfway through a recession. In the 16 U.S. recessions since 1919, the average length has been 13 months, although the recent recessions have been shorter. Thus, if the 2008 recession had followed the average, the downturn in the stock market would have bottomed around November 2008. The actual US stock market bottom of the 2008 recession was in March 2009.

Politics

Generally an administration gets credit or blame for the state of economy during its time. [52] This has caused disagreements about on how it actually started. [53] In an economic cycle, a downturn can be considered a consequence of an expansion reaching an unsustainable state, and is corrected by a brief decline. Thus it is not easy to isolate the causes of specific phases of the cycle.

The 1981 recession is thought to have been caused by the tight-money policy adopted by Paul Volcker, chairman of the Federal Reserve Board, before Ronald Reagan took office. Reagan supported that policy. Economist Walter Heller, chairman of the Council of Economic Advisers in the 1960s, said that "I call it a Reagan-Volcker-Carter recession. [54] The resulting taming of inflation did, however, set the stage for a robust growth period during Reagan's [ citation needed ].

Economists usually teach that to some degree recession is unavoidable, and its causes are not well understood. Consequently, modern government administrations attempt to take steps, also not agreed upon, to soften a recession.

Consequences

Unemployment

Unemployment is particularly high during a recession. Many economists working within the neoclassical paradigm argue that there is a natural rate of unemployment which, when subtracted from the actual rate of unemployment, can be used to calculate the negative GDP gap during a recession. In other words, unemployment never reaches 0 percent, and thus is not a negative indicator of the health of an economy unless above the "natural rate," in which case it corresponds directly to a loss in gross domestic product, or GDP. [55]

The full impact of a recession on employment may not be felt for several quarters. Research in Britain shows that low-skilled, low-educated workers and the young are most vulnerable to unemployment [56] in a downturn. After recessions in Britain in the 1980s and 1990s, it took five years for unemployment to fall back to its original levels. [57] Many companies often expect employment discrimination claims to rise during a recession. [58]

Business

Productivity tends to fall in the early stages of a recession, then rises again as weaker firms close. The variation in profitability between firms rises sharply. Recessions have also provided opportunities for anti-competitive mergers, with a negative impact on the wider economy: the suspension of competition policy in the United States in the 1930s may have extended the Great Depression. [57]

Social effects

The living standards of people dependent on wages and salaries are not more affected by recessions than those who rely on fixed incomes or welfare benefits. The loss of a job is known to have a negative impact on the stability of families, and individuals' health and well-being. Fixed income benefits receive small cuts which make it tougher to survive. [57]

History

Global

According to the International Monetary Fund (IMF), "Global recessions seem to occur over a cycle lasting between eight and 10 years." [59] The IMF takes many factors into account when defining a global recession. Until April 2009, IMF several times communicated to the press, that a global annual real GDP growth of 3.0 percent or less in their view was "...equivalent to a global recession". [60] [61] By this measure, six periods since 1970 qualify: 1974–1975, [62] 1980–1983, [62] 1990–1993, [62] [63] 1998, [62] [63] 2001–2002, [62] [63] and 2008–2009. [64] During what IMF in April 2002 termed the past three global recessions of the last three decades, global per capita output growth was zero or negative, and IMF argued—at that time—that because of the opposite being found for 2001, the economic state in this year by itself did not qualify as a global recession. [59]

In April 2009, IMF had changed their Global recession definition to:

By this new definition, a total of four global recessions took place since World War II: 1975, 1982, 1991 and 2009. All of them only lasted one year, although the third would have lasted three years (1991–93) if IMF as criteria had used the normal exchange rate weighted percapita real World GDP rather than the purchase power parity weighted percapita real World GDP. [65] [66]

Australia

The worst recession Australia has ever suffered happened in the beginning of the 1930s. As a result of late 1920s profit issues in agriculture and cutbacks, 1931-1932 saw Australia’s biggest recession in its entire history. It fared better than other nations, that underwent depressions, but their poor economic states influenced Australia’s as well, that depended on them for export, as well as foreign investments. The nation also benefited from bigger productivity in manufacturing, facilitated by trade protection, which also helped with feeling the effects less.

Due to a credit squeeze, the economy had gone into a brief recession in 1961 Australia was facing a rising level of inflation in 1973, caused partially by the oil crisis happening in that same year, which brought inflation at a 13% increase. Economic recession hit by the middle of the year 1974, with no change in policy enacted by the government as a measure to counter the economic situation of the country. Consequently, the unemployment level rose and the trade deficit increased significantly. [67]

Another recession – the most recent one to date – came in the 1990s, at the beginning of the decade. It was the result of a major stock collapse in 1987, in October, [68] referred to now as Black Monday. Although the collapse was larger than the one in 1929, the global economy recovered quickly, but North America still suffered a decline in lumbering savings and loans, which led to a crisis. The recession wasn’t limited to only America, but it also affected partnering nations, such as Australia. The unemployment level increased to 10.8%, employment declined by 3.4% and the GDP also decreased as much as 1.7%. Inflation, however, was successfully reduced.

United Kingdom

The most recent recession to affect the United Kingdom was the late-2000s recession.

United States

According to economists, since 1854, the U.S. has encountered 32 cycles of expansions and contractions, with an average of 17 months of contraction and 38 months of expansion. [8] However, since 1980 there have been only eight periods of negative economic growth over one fiscal quarter or more, [69] and four periods considered recessions:

For the past three recessions, the NBER decision has approximately conformed with the definition involving two consecutive quarters of decline. While the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth. [69]

Late 2000s

Official economic data shows that a substantial number of nations were in recession as of early 2009. The US entered a recession at the end of 2007, [72] and 2008 saw many other nations follow suit. The US recession of 2007 ended in June 2009 [73] as the nation entered the current economic recovery. The timeline of the Great Recession details the many elements of this period.

United States

The United States housing market correction (a consequence of the United States housing bubble) and subprime mortgage crisis significantly contributed to a recession.

The 2007–2009 recession saw private consumption fall for the first time in nearly 20 years. This indicated the depth and severity of the recession. With consumer confidence so low, economic recovery took a long time. Consumers in the U.S. were hit hard by the Great Recession, with the value of their houses dropping and their pension savings decimated on the stock market. [74]

U.S. employers shed 63,000 jobs in February 2008, [75] the most in five years. Former Federal Reserve chairman Alan Greenspan said on 6 April 2008 that "There is more than a 50 percent chance the United States could go into recession." [76] On 1 October, the Bureau of Economic Analysis reported that an additional 156,000 jobs had been lost in September. On 29 April 2008, Moody's declared that nine US states were in a recession. In November 2008, employers eliminated 533,000 jobs, the largest single-month loss in 34 years. [77] In 2008, an estimated 2.6 million U.S. jobs were eliminated. [78]

The unemployment rate in the U.S. grew to 8.5 percent in March 2009, and there were 5.1 million job losses by March 2009 since the recession began in December 2007. [79] That was about five million more people unemployed compared to just a year prior, [80] which was the largest annual jump in the number of unemployed persons since the 1940s. [81]

Although the US Economy grew in the first quarter by 1%, [82] [83] by June 2008 some analysts stated that due to a protracted credit crisis and "...rampant inflation in commodities such as oil, food, and steel," the country was nonetheless in a recession. [84] The third quarter of 2008 brought on a GDP retraction of 0.5% [85] the biggest decline since 2001. The 6.4% decline in spending during Q3 on non-durable goods, like clothing and food, was the largest since 1950. [86]

A 17 November 2008 report from the Federal Reserve Bank of Philadelphia based on the survey of 51 forecasters, suggested that the recession started in April 2008 and would last 14 months. [87] They project real GDP declining at an annual rate of 2.9% in the fourth quarter and 1.1% in the first quarter of 2009. These forecasts represent significant downward revisions from the forecasts of three months ago.

A 1 December 2008 report from the National Bureau of Economic Research stated that the U.S. had been in a recession since December 2007 (when economic activity peaked), based on a number of measures including job losses, declines in personal income, and declines in real GDP. [88] By July 2009 a growing number of economists believed that the recession may have ended. [89] [90] The National Bureau of Economic Research announced on 20 September 2010 that the 2008/2009 recession ended in June 2009, making it the longest recession since World War II. [91]

See also

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Comparisons between the Great Recession and the Great Depression explores the experiences in the United States and the United Kingdom.

Abenomics economic policies advocated by

Abenomics refers to the economic policies advocated by Shinzō Abe since the December 2012 general election, which elected Abe to his second term as Prime Minister of Japan. Abenomics is based upon "three arrows" of monetary easing, fiscal stimulus and structural reforms. The Economist characterized the program as a "mix of reflation, government spending and a growth strategy designed to jolt the economy out of suspended animation that has gripped it for more than two decades".

A balance sheet recession is a type of economic recession that occurs when high levels of private sector debt cause individuals or companies to collectively focus on saving by paying down debt rather than spending or investing, causing economic growth to slow or decline. The term is attributed to economist Richard Koo and is related to the debt deflation concept described by economist Irving Fisher. Recent examples include Japan's recession that began in 1990 and the U.S. recession of 2007-2009.

In economics, secular stagnation is a condition when there is negligible or no economic growth in a market-based economy. In this context, the term secular means long-term, and is used in contrast to cyclical or short-term. It suggests a change of fundamental dynamics which would play out only in its own time. The concept was originally put forth by Alvin Hansen in 1938. According to The Economist, it was used to "describe what he feared was the fate of the American economy following the Great Depression of the early 1930s: a check to economic progress as investment opportunities were stunted by the closing of the frontier and the collapse of immigration". Warnings of impending secular stagnation have been issued after all deep recessions since the Great Depression, but the hypothesis has remained controversial.

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