what is a recession 
a recession is a significant widespread and prolonged downturn in economic activity a common rule of thumb is that two consecutive quarters of negative gross domestic product gdp growth indicate a recession however more complex formulas are also used to determine recessions economists at the national bureau of economic research nber measure recessions by looking at nonfarm payrolls industrial production and retail sales among other indicators 1 nber also points out that there is no fixed rule about what measures contribute information to the process or how they are weighted in our decisions a downturn must be deep pervasive and lasting to qualify as a recession by nber s definition since some of these qualities may not be evident when a downturn first begins many recessions are called retroactively 2investopedia laura porterunderstanding recessionssince the industrial revolution most economies have grown steadily seeing few economic contractions however recessions are still common between 1960 and 2007 there were 122 recessions affecting 21 advanced economies according to the international monetary fund imf 3 in recent years recessions have become less frequent and shorter in duration declines in economic output and employment that recessions cause can become self perpetuating for example declining consumer demand can prompt companies to lay off staff which affects consumer spending power and can further weaken consumer demand similarly the bear markets that often accompany recessions can reverse the wealth effect suddenly making people less wealthy and further trimming consumption since the great depression governments around the world have adopted fiscal and monetary policies to prevent a run of the mill recession from becoming far worse 45 some of these stabilizing factors are automatic such as unemployment insurance that puts money into the pockets of employees who lose their jobs other measures require specific actions such as cutting interest rates to stimulate investment recessions are most clearly identified after they are over additionally investors economists and employees may have very different experiences in terms of when a recession is at its worst equities markets often decline before an economic downturn so investors may assume a recession has begun as investment losses accumulate and corporate earnings decline even if other measures of recession remain healthy such as consumer spending and unemployment conversely since unemployment often remains high long after the economy hits bottom workers may perceive a recession as continuing for months or even years after economic activity recovers 