RECESSION? DEPRESSION? What's the difference?

[Jeffersons Ghost]

Recession? Depression? What's the difference?

Before the Great Depression of the 1930s any downturn in economic activity was referred to as a depression. The term recession was developed to differentiate periods like the 1930s from smaller economic declines that occurred in 1910 and 1913. A depression is simply a recession that lasts longer and has a larger decline in business activity.

A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in Gross National Product. A depression is any economic downturn where real Gross Domestic Product declines by more than 10 percent.

Gross Domestic Product (GDP) is the total amount of goods and services produced in the United States in a year and is calculated by adding together all final market values.

By this yardstick, the last depression in the United States was from May 1937 to June 1938, where real GDP declined by 18.2 percent.

The Great Depression of the 1930s was actually two separate events: an incredibly severe depression lasting from August 1929 to March 1933 where real GDP declined by almost 33 percent, followed by a period of recovery and another less severe depression of 1937-38. The United States hasn’t had anything even close to a depression in the post-war period. The worst recession in the last 60 years was from November 1973 to March 1975, where real GDP fell by 4.9 percent.

Data Trends

Following the 2001 recession, growth in real GDP increased in 2002, 2003, and 2004, reaching 3.9 percent in 2004. The annual rate of growth decreased slightly in 2005 and 2006 to 3.2 and 3.3 percent respectively. Growth in the first quarter of 2006 was rapid and slowed in the second, third, and fourth quarters 0f 2006. The rate of growth in the first quarter of 2007 is the lowest since the fourth quarter of 2002.

The rate of growth over the last twelve months has been slightly under 2 percent, the slowest of any twelve-month period since the end of 2002 and beginning of 2003. The actual rates for the last three quarters of 2006 were 2.6, 2.0, and 2.5 percent

The causes of the slowdown over the last twelve months are the lagged effects of a restrictive monetary policy (See the latest FOMC case study.), the lagged effects of the slowing growth in prices of homes and importance of that change for consumption spending, and a slowdown in investment spending on the part of businesses.

The particular slowing of growth in the first quarter comes from what are likely temporary factors. Businesses have reduced inventory investment during the quarter and that is viewed as a positive sign for future spending on the part of businesses. Even though we should remember that this is just one quarter of a year, growth this slow should be of some concern.

[thunder rising]

1. Obama is the difference! The economy is an illusion and hope props up the illusion.

[Jeffersons Ghost]

11. it's not hopeless but it IS spooky!

and easing interest rates represent a temporary solution.

[lligrd]

2. Depressions Are More Depressing Than Recessions

One means you can't afford an SUV. The other means you can't afford food.

[radfringe]

3. a recession is when you aint got money

depression is what you are when you aint got money

[MannyGoldstein]

4. A *Recession* Is When Your Neighbor Loses Her Job

A *depression* is when you lose your job.

[Captain Hilts]

5. FDR instigated the recession of '37-'38 with tight money policies. nt

[texastoast]

7. Was that better

than when he came into office?

A recession is better than a depression, as I recall from the stories I've heard. In a depression you have to save your lint because you can't afford cotton balls, much less Q-Tips. You recycle the buttons off your clothes. You save fabrics that happen to come your way to make blankets from You pray someone is growing a garden and has some extra produce you can trade for. You make mattresses from leftover fodder from the fields.

[Captain Hilts]

10. He waited until right after his 2nd inauguration to do it! nt

[leveymg]

6. If Bush's BLS ran the statistics during the 1930s, joblessness in 1931 would have been 4.9%.

If the economy falls and nobody counts it accurately, what's a Depression? What me worry?



(He looked so YOUNG then)

[Jeffersons Ghost]

8. some are counting accurately...

the U.S. Federal Reserve, the Bank of England and the Bank of Canada all started easing monetary policy late last year to fend off slowing growth.

[leveymg]

9. Funny, some of us saw this coming on November 15, 2000

Check out the date on that cover. Understatement.

We're years past monetary mechanisms as a fix.

[Warpy]

12. The consumer economy collapses in a Depression

as people buy barely enough food to keep themselves alive and use the rest of their income in a vain attempt at servicing their debt so they can stay in their homes. When the consumer economy collapses, all the jobs disappear. The service sector is basically no more. Manufacturing is already gone and office jobs are going, so when the service sector is gone, there will be nothing left.

Some professions, like teaching, keep their jobs, but just. Wages deflate quickly since competition for jobs, any job, is stiff. People try to sell or barter whatever they own just to stay alive for another day.

I hope we don't see one, but it's going to take courageous leadership willing to overthrow Reaganomics completely to decrease the very high probability that we will have one.

[Jeffersons Ghost]

13. yeah, I guess it didn't "trickle down" after all

[Warpy]

14. yeah, and Reagan's rising tide that lifted all boats

drowned those of us who didn't own yachts.

[Skittles]

15. recession is when you lose your house

depression is when I lose mine :o

[sutz12]

16. It's obvious....

Democrats.....(D) start depressions.

Republicans.....(R) start recessions.

What, you can't read?

[DemReadingDU]

17. morning kick