|
To find the answer to this question, we headed to a dictionary for some definitions. Dictionary.com defines an economic recession as, "an extended decline in general business activity, typically three consecutive quarters of falling real gross national product." The same site defines an economic depression as, "a period of drastic decline in a national or international economy, characterized by decreasing business activity, falling prices, and unemployment." These definitions indicate that the main difference between a recession and depression is the magnitude of economic decline. A depression is simply a severe
recession. With that in mind, we searched on "recession," which led straight to Yahoo!'s Recession category. That's where we found the National Bureau of Economic Research (NBER) Recession Dating Procedure. The NBER is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. This group is considered the official arbiter of U.S. economic cycles, and recently the NBER declared that the U.S. has been in a recession since March 2001. According
to the NBER, a recession is "a significant decline in activity spread across the economy, lasting more than a few months, visible in industrial production, employment, real income, and wholesale-retail trade." Contrary to popular wisdom, recession is not tied directly to a decline in the gross domestic product. The gross domestic product is measured only quarterly and is continually revised (often years later), and the NBER prefers to use monthly indicators such as employment, personal income, and manufacturing sales. So that covers recession, but what about depression? The most relevant information we found about "depression" was Yahoo!'s category about the Great Depression that began in the U.S. in 1929. The Great Myths of the Great Depression page explains just how bad that depression was: Over the four years from 1929 to 1933, production at the nation's factories, mines, and utilities fell by more than half. People's real disposable incomes dropped 28 percent. Stock prices collapsed to one-tenth of their pre-crash height. The number of unemployed Americans rose from 1.6 million in 1929 to 12.8 million in 1933. One of every four workers was out of a job at the Depression's nadir, and ugly rumors of revolt simmered for the first time since the Civil
War. If it's any comfort, the NBER says that most recessions are brief, and they have been rare in recent decades.
|
