The current economic climate in the United States may leave you feeling uneasy. Inflation is hitting record highs, mortgage interest rates have been on the rise, and the repercussions of the global pandemic are starting to rear their faces. This might leave you wondering, are we headed into a recession? And the even more important question, how long do recessions last?
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What is a recession?
A recession is determined by multiple factors within our economy. Without getting too technical, a recession is official once The National Bureau of Economic Research defines an official start and end date. A recession is essentially a period of time for six months or more when the economy is not growing at the previous growth rate.
Influential past recessions
The best way to learn about future recessions is by studying the past. There are many U.S. recessions that are considered influential. Some important to note include:
1) The Pandemic Recession (duration: 2 months) – COVID-19 lockdowns were the cause of this incredibly short yet dramatic recession.
2) The Great Recession (duration: 18 months) – High rates of home foreclosures due to risky home loans was the cause
3) The Great Depression (duration: 48 months) – Caused by the 1929 stock market crash
4) The 1920-1921 Depression (duration: 18 months) – The end of wartime production for WWI made inflation skyrocket and made joblessness soar
5) The Long Depression (duration: 65 months) – European economic issues combined with rapid railroad growth negatively affected the largest bank in the U.S.
Since WWII, recessions have on average lasted about 10 months each (obviously with some outliers listed above).
How long do recessions last?
As you can see from influential past recessions, the amount of time a recession lasts varies widely. The economy is comprised of multiple layers and factors, which all come together to create a healthy (or unhealthy) economic environment.
Data shows that on average 10 months is how long recessions last, but this is an average, and it is not a hard and fast rule. Look at The Pandemic Recession, for instance. This was the shortest recession in U.S. history, but also extremely destructive (we are still feeling the repercussions of these two months today).
It’s difficult to predict how long a recession will last, as no recession is the same as the previous downturn. One thing is for sure; recessions are part of a healthy, working economy. There is always going to be some economic uncertainty. We hope you feel reassured that even if a recession is approaching, the U.S. economy will recover. Some things you can do to help prepare for a recession include:
- Work to save and spend less
- Increase your household income (get a side hustle!)
- Decrease debt
- Have a financial plan for your future
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