what causes recessions 
numerous economic theories attempt to explain why and how an economy goes into recession these theories can be broadly categorized as economic financial psychological or a combination of these factors some economists focus on economic changes including structural shifts in industries as most important for example a sharp sustained surge in oil prices can raise costs across the economy leading to recession some theories say financial factors cause recessions these theories focus on credit growth and the accumulation of financial risks during good economic times the contraction of credit and money supply when recession starts or both monetarism which says recessions are caused by insufficient growth in money supply is a good example of this type of theory other theories focus on psychological factors such as over exuberance during economic booms and deep pessimism during downturns to explain why recessions occur and persist keynesian economics focuses on the psychological and economic factors that can reinforce and prolong recessions the concept of a minsky moment named for economist hyman minsky combines the two to explain how bull market euphoria can encourage unsustainable speculation recessions and depressionsaccording to nber the u s has experienced 34 recessions since 1854 but only five since 1980 7 the downturn following the 2008 global financial crisis and the double dip slumps of the early 1980s were the worst since the great depression and the 1937 38 recession routine recessions can cause the gdp to decline 2 while severe ones might set an economy back 5 according to the imf a depression is a particularly deep and long lasting recession though there is no commonly accepted formula to define one during the great depression u s economic output fell 33 stocks plunged 80 and unemployment hit 25 8 during the 1937 38 recession real gdp fell 10 while unemployment jumped to 20 9the covid 19 pandemic and the public health restrictions imposed to stop it are an example of economic shocks that can cause a recession the depth and widespread nature of the economic downturn caused by the covid 19 pandemic in 2020 led the nber to designate it a recession despite its relatively brief two month length 10in 2022 many economic analysts debated whether the u s economy was in recession or not given conflicting economic indicators analysts with investment advisory firm raymond james argued in an october 2022 report that the u s economy was not in recession despite the fact that the economy met the technical definition of recession after two consecutive quarters of negative growth numerous other positive economic indicators showed that the economy was not in recession the report argued it cited the fact that employment continued to increase even as gdp contracted the report further pointed out that although real personal disposable income declined in 2022 much of the decline was a result of the end of the covid 19 relief stimulus and that personal income excluding these payments continued to rise 11data from the the federal reserve bank of st louis as of late october 2022 similarly showed that key nber indicators did not point to the u s economy being in recession 12on february 6 2023 janet yellen u s treasury secretary indicated she was not worried about a recession you don t have a recession when you have 500 000 jobs and the lowest unemployment rate in more than 50 years she said to good morning america 13