A report on Great Recession and Recession

World map showing real GDP growth rates for 2009; countries in brown were in a recession.
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A bank run at a branch of the Northern Rock bank in Brighton, England, on September 14, 2007, amid speculation of problems, prior to its 2008 nationalisation.
U.S. residential and non-residential investment fell relative to GDP during the crisis
U.S. households and financial businesses significantly increased borrowing (leverage) in the years leading up to the crisis
US household debt relative to disposable income and GDP.
U.S. Changes in Household Debt as a percentage of GDP for 1989–2016. Homeowners paying down debt for 2009–2012 was a headwind to the recovery. Economist Carmen Reinhart explained that this behavior tends to slow recoveries from financial crises relative to typical recessions.
Housing price appreciation in selected countries, 2002–2008
Securitization markets were impaired during the crisis.
Several major U.S. economic variables had recovered from the 2007–2009 Subprime mortgage crisis and Great Recession by the 2013–2014 time period.
U.S. Real GDP – Contributions to Percent Change by Component 2007–2009
Public Debt to GDP Ratio for Selected European Countries – 2008 to 2011. Source Data: Eurostat
Relationship between fiscal tightening (austerity) in Eurozone countries with their GDP growth rate, 2008–2012
Slovenian anarchist anti-fascist protest due to the great recession.
Sydney's financial district at night. Throughout the Great Recession, the Australian economy remained resilient and stable.
The anti-austerity movement in Spain, May 2011
Federal Reserve Holdings of Treasury and Mortgage-Backed Securities
Bank bailouts in the United Kingdom and in the United States in proportion to their GDPs.

The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred between 2007 and 2009.

- Great Recession

Thus, if the 2008 recession had followed the average, the downturn in the stock market would have bottomed around November 2008.

- Recession
World map showing real GDP growth rates for 2009; countries in brown were in a recession.

8 related topics with Alpha

Overall
Dorothea Lange's Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, age 32, a mother of seven children, in Nipomo, California, March 1936.

Great Depression

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Severe worldwide economic depression between 1929 and 1939 that began after a major fall in stock prices in the United States.

Severe worldwide economic depression between 1929 and 1939 that began after a major fall in stock prices in the United States.

Dorothea Lange's Migrant Mother depicts destitute pea pickers in California, centering on Florence Owens Thompson, age 32, a mother of seven children, in Nipomo, California, March 1936.
The unemployment rate in the U.S. during 1910–60, with the years of the Great Depression (1929–39) highlighted
The Dow Jones Industrial Average, 1928–1930
Money supply decreased considerably between Black Tuesday and the Bank Holiday in March 1933 when there were massive bank runs across the United States.
Crowd gathering at the intersection of Wall Street and Broad Street after the 1929 crash
U.S. industrial production, 1928–1939
The Great Depression in the U.S. from a monetary view. Real gross domestic product in 1996-Dollar (blue), price index (red), money supply M2 (green) and number of banks (grey). All data adjusted to 1929 = 100%.
Crowd at New York's American Union Bank during a bank run early in the Great Depression
Crowds outside the Bank of United States in New York after its failure in 1931
Power farming displaces tenants from the land in the western dry cotton area. Childress County, Texas, 1938
The Depression in international perspective
The overall course of the Depression in the United States, as reflected in per-capita GDP (average income per person) shown in constant year 2000 dollars, plus some of the key events of the period. Dotted red line = long-term trend 1920–1970.
A female factory worker in 1942, Fort Worth, Texas. Women entered the workforce as men were drafted into the armed forces.
An impoverished American family living in a shanty, 1936
Unemployed men march in Toronto, Ontario, Canada.
Adolf Hitler speaking in 1935
Benito Mussolini giving a speech at the Fiat Lingotto factory in Turin, 1932
Unemployed people in front of a workhouse in London, 1930
Unemployed men standing in line outside a depression soup kitchen in Chicago 1931.
Burning shacks on the Anacostia flats, Washington, D.C. put up by the Bonus Army (World War I veterans) after the marchers with their wives and children were driven out by the regular Army by order of President Hoover, 1932
Buried machinery in a barn lot; South Dakota, May 1936. The Dust Bowl on the Great Plains coincided with the Great Depression.
CCC workers constructing drainage culvert, 1933. Over 3 million unemployed young men were taken out of the cities and placed into 2,600+ work camps managed by the CCC.
The WPA employed 2–3 million at unskilled labor.
Black Friday, May 9, 1873, Vienna Stock Exchange. The Panic of 1873 and Long Depression followed.

By comparison, worldwide GDP fell by less than 1% from 2008 to 2009 during the Great Recession.

Passage of the Smoot–Hawley Tariff Act exacerbated what otherwise might have been a more "standard" recession (Both Monetarists and Keynesians).

Unemployment rate, 2017

Unemployment

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People above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the reference period.

People above a specified age (usually 15) not being in paid employment or self-employment but currently available for work during the reference period.

Unemployment rate, 2017
Unemployment in Mexico 2009
US unemployment rate, 1990—2022. The increase in unemployment during recessions (shaded) is called cyclical unemployment.
Short-Run Phillips Curve before and after Expansionary Policy, with Long-Run Phillips Curve (NAIRU). Note, however, that the unemployment rate is an inaccurate predictor of inflation in the long term.
Okun's Law interprets unemployment as a function of the rate of growth in GDP.
The Beveridge curve of 2004 job vacancy and unemployment rate (from the US Bureau of Labor Statistics)
Karl Marx, Theorien über den Mehrwert, 1956
Unemployment in Europe (2020) according to Worldbank
Unemployment rates from 2000–2019 for United States and Japan and European Union
Unemployment rate in the US by county in 2008
U1–U6 since 1950, as reported by the Bureau of Labor Statistics
A government unemployment office with job listings, West Berlin, West Germany, 1982
Migrant Mother, photograph by Dorothea Lange, 1936
Demonstration against unemployment in Kerala, South India, India on 27 January 2004
Unemployment rate in Germany in 2003 by states
In the Shapiro–Stiglitz model of efficiency wages, workers are paid at a level that dissuades shirking. That prevents wages from dropping to market clearing levels.
Supply-side economics proposes that lower taxes lead to employment growth. Historical state data from the United States shows a heterogeneous result.
Tax decreases on high income earners (top 10%) are not correlated with employment growth, but tax decreases on lower-income earners (bottom 90%) are correlated with employment growth.
Unemployed men outside a soup kitchen in Depression-era Chicago, Illinois, United States, 1931
The Depression of 1873–79: New York City police violently attacking unemployed workers in Tompkins Square Park, Manhattan, New York City 1874
WPA poster promoting the benefits of employment
Unemployment rate of Japan. Red line is G7 average. 15-24 age (thin line) is Youth unemployment.
US labor force participation rate from 1948 to 2021, by gender. Male participation Total labor force participation Female participation

the status of the economy, which can be influenced by a recession

A historic shift began around the end of the Great Recession as women began leaving the labor force in the United States and other developed countries.

Business cycle with it specific forces in four stages according to Malcolm C. Rorty, 1922

Business cycle

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Business cycle with it specific forces in four stages according to Malcolm C. Rorty, 1922
A simplified Kondratiev wave, with the theory that productivity enhancing innovations drive waves of economic growth
Economic activity in the United States, 1954–2005
Deviations from the long-term United States growth trend, 1954–2005
International product life cycle
10-year minus 3-month US Treasury Yields

Business cycles are intervals of expansion followed by recession in economic activity.

This was particularly true during the Golden Age of Capitalism (1945/50–1970s), and the period 1945–2008 did not experience a global downturn until the Late-2000s recession.

Keynes in 1933

John Maynard Keynes

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English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

English economist whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments.

Keynes in 1933
King's College, Cambridge. Keynes's grandmother wrote to him saying that, since he was born in Cambridge, people will expect him to be clever.
Keynes's colleague, David Lloyd George. Keynes was initially wary of the "Welsh Wizard," preferring his rival Asquith, but was impressed with Lloyd George at Versailles; this did not prevent Keynes from painting a scathing picture of the then-prime minister in The Economic Consequences of the Peace.
The Great Depression and its periods of worldwide economic hardship formed the backdrop against which the Keynesian Revolution took place. This image is Migrant Mother, taken by photographer Dorothea Lange in March 1936.
Caricature by David Low, 1934
Keynes (right) and the US representative Harry Dexter White at the inaugural meeting of the International Monetary Fund's Board of Governors in Savannah, Georgia in 1946
Prime Minister Clement Attlee with King George VI after Attlee won the 1945 election
Neo-Keynesian IS–LM model is used to analyse the effect of demand shocks on the economy
The economist Manmohan Singh, the then prime minister of India, spoke strongly in favour of Keynesian fiscal stimulus at the 2008 G-20 Washington summit.
Friedrich Hayek, one of Keynes's most prominent critics
Painter Duncan Grant (left) with Keynes in 1912
Lydia Lopokova and Keynes in the 1920s
46 Gordon Square, where Keynes often stayed while in London. Following his marriage, Keynes took out an extended lease on Tilton House, a farm in the countryside near Brighton, which became the couple's main home when not in the capital.
Blue plaque, 46 Gordon Square
Tilton House, 2021

Keynes advocated the use of fiscal and monetary policies to mitigate the adverse effects of economic recessions and depressions.

Although many economists, such as George Akerlof, Paul Krugman, Robert Shiller, and Joseph Stiglitz, supported Keynesian stimulus, others did not believe higher government spending would help the United States economy recover from the Great Recession.

The supply and demand model describes how prices vary as a result of a balance between product availability and demand. The graph depicts an increase (that is, right-shift) in demand from D1 to D2 along with the consequent increase in price and quantity required to reach a new equilibrium point on the supply curve (S).

Economics

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Social science that studies the production, distribution, and consumption of goods and services.

Social science that studies the production, distribution, and consumption of goods and services.

The supply and demand model describes how prices vary as a result of a balance between product availability and demand. The graph depicts an increase (that is, right-shift) in demand from D1 to D2 along with the consequent increase in price and quantity required to reach a new equilibrium point on the supply curve (S).
A 1638 painting of a French seaport during the heyday of mercantilism
The publication of Adam Smith's The Wealth of Nations in 1776 is considered to be the first formalisation of economic thought.
The Marxist critique of political economy comes from the work of German philosopher Karl Marx.
John Maynard Keynes (right) was a key theorist in economics.
Economists study trade, production and consumption decisions, such as those that occur in a traditional marketplace.
Electronic trading brings together buyers and sellers through an electronic trading platform and network to create virtual market places. Pictured: São Paulo Stock Exchange, Brazil.
An example production–possibility frontier with illustrative points marked.
A map showing the main trade routes for goods within late medieval Europe
Pollution can be a simple example of market failure. If costs of production are not borne by producers but are by the environment, accident victims or others, then prices are distorted.
Environmental scientist sampling water
A basic illustration of economic/business cycles
US unemployment rate, 1990–2021
List of countries by GDP (PPP) per capita in 2014
List of countries by GDP (PPP) per capita in April 2022.

Examples cited of such inefficiency include high unemployment during a business-cycle recession or economic organization of a country that discourages full use of resources.

The extent to which practice has improved since the early 2000s is contested: although economists have noted the discipline's adoption of increasingly rigorous modeling, other have criticized the field's focus on creating computer simulations detached from reality, as well as noting the loss of prestige suffered by the field for failing to anticipate the Great Recession.

The building in Cambridge, Massachusetts that contains the NBER main offices.

National Bureau of Economic Research

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American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community".

American private nonprofit research organization "committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community".

The building in Cambridge, Massachusetts that contains the NBER main offices.
The building in Cambridge, Massachusetts that contains the NBER main offices.

The NBER is well known for providing start and end dates for recessions in the United States.

In September 2010, after a conference call with its Business Cycle Dating Committee, the NBER declared that the Great Recession in the United States had officially ended in 2009 and lasted from December 2007 to June 2009.

Fig. 1: Robert Shiller's plot of U.S. home prices, population, building costs, and bond yields, from Irrational Exuberance, 2nd ed. Shiller shows that inflation-adjusted U.S. home prices increased 0.4% per year from 1890 to 2004 and 0.7% per year from 1940 to 2004, whereas U.S. census data from 1940 to 2004 shows that the self-assessed value increased 2% per year.

2000s United States housing bubble

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Real estate bubble affecting over half of the U.S. states.

Real estate bubble affecting over half of the U.S. states.

Fig. 1: Robert Shiller's plot of U.S. home prices, population, building costs, and bond yields, from Irrational Exuberance, 2nd ed. Shiller shows that inflation-adjusted U.S. home prices increased 0.4% per year from 1890 to 2004 and 0.7% per year from 1940 to 2004, whereas U.S. census data from 1940 to 2004 shows that the self-assessed value increased 2% per year.
A graph showing the median and average sales prices of new homes sold in the United States between 1963 and 2010.
Inflation-adjusted housing prices in the United States by state, 1998–2006.
Bank run on the U.K.'s Northern Rock Bank by customers queuing to withdraw savings in a panic related to the U.S. subprime crisis.

The impact of booming home valuations on the U.S. economy since the 2001–2002 recession was an important factor in the recovery, because a large component of consumer spending was fueled by the related refinancing boom, which allowed people to both reduce their monthly mortgage payments with lower interest rates and withdraw equity from their homes as their value increased.

Because of these remarks, as well as his encouragement of the use of adjustable-rate mortgages, Greenspan has been criticized for his role in the rise of the housing bubble and the subsequent problems in the mortgage industry that triggered the economic crisis of 2008.

10-year minus 3-month US Treasury Yields

Federal funds rate

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10-year minus 3-month US Treasury Yields
Inflation (blue) compared to federal funds rate (red)
Federal funds rate vs unemployment rate
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Between December 2008 and December 2015 the target rate remained at 0.00–0.25%, the lowest rate in the Federal Reserve's history, as a reaction to the Financial crisis of 2007–2008 and its aftermath.

The Federal Reserve has responded to a potential slow-down by lowering the target federal funds rate during recessions and other periods of lower growth.