What Is a Recession?
A recession is a significant decline in economic activity, spread across the economy, lasting more than a few months. Who decides when one happens in the US, why the dates come late, and what investors watch.
In one sentence
Recession. A significant decline in economic activity, spread across the economy, that lasts more than a few months. US recessions are dated by the NBER.
How it's defined
In the US, recessions are dated by the Business Cycle Dating Committee of the National Bureau of Economic Research. It defines a recession as "a significant decline in economic activity that is spread across the economy and lasts more than a few months," and weighs how deep the decline is, how widespread it is, and how long it lasts. It looks at measures such as employment, real personal income, spending, and industrial production, along with GDP.1
The popular rule of two quarters of falling GDP isn't the official definition.
The dates come late
The committee waits for enough data to be sure. It announced on December 1, 2008 that a recession had begun in December 2007, and on June 8, 2020 that one had begun in February 2020.2
| Yield curve | Inversions have come before past recessions, with false alarms |
|---|---|
| Sahm rule | Flags a rise in unemployment, usually after a recession has begun |
| Building permits | Housing often turns early |
| Weekly jobless claims | The fastest data on layoffs |
Leading Indicators and Recession Signals looks at each one's record.
Learn it properly
- Business Cycles and RecessionsPart 6: Strategy, Behavior, Accounts, and Taxes
Notes and sources
- National Bureau of Economic Research. Business Cycle Dating. Checked 2026-10-06. Back to text
- National Bureau of Economic Research. Business Cycle Dating Committee Announcements. Checked 2026-10-14. Back to text