History of Recessions in the United States. The Main Recessions
A recession is a decline in economic growth and activity. It is a decline in the per capita income and the decline in a country's Gross Domestic Product. In simple terms, it is a reduction in the consumer's purchasing power that is caused by loss of jobs, personal income and business profits. Caused by economic shock.
Through the history of the recessions in the United States, since the Great Depression, we can see that it is a difficult part of the business cycle.
Here we list out the major recessions in America.
1. The recession in 1937-1938
When the United States was trying to overcome the Great Depression, the government spend a great deal of money. In 1937, when the economy was in the process of recovering, the Congress wanted to balance out the budget and the government held back on spending and raised taxes instead. It was a shock that put the economy in a state of recession. There was a surge in unemployment levels and business profits as well investments declined at an accelerated rate.
2. The recession in 1973-1975
The recession in 1973-'75 was one of the worst in the United States, since the Great Depression. The recession started in November 1973 and lasted till March 1975, 16 months. There were a few causes to this recession,
- The drastic increase in gas prices which was caused by the Organization of Petroleum Exporting Countries, who quadrupled the oil prices.
- A Wall Street stock crash in !973-'74.
- The president at the time, Nixon, instituted the wage-price controls, which kept prices too high, to reduce demand. It further led to unemployment as companies had to pay their employees' high salaries and many of the employees were laid off.
3. Recession of 1949
It was an 11-month recession that began in November 1948 and lasted till October 1949. The GDP fell by 1.7% and unemployment reached a peak of 7.9%. Departmental stores sales fell by 22%. The wholesale price and cost of living index fell by 12 and 5 points. The recession started shortly after President Truman's Fair Deal economic reforms. One of the major cause for this recession was World War II and a substantial fall in fixed investments. Veterans from the War returned in large numbers and threatened the jobs that existed for civilian workers, that led to unemployment levels. The government was more focused on controlling inflation rather than unemployment at the time.
4. Recession of 1981-1982
Rise in interest rates to combat inflation. GDP was negative for six of the twelve quarters. It started in July 1981 and lasted till November 1982, 16 months. Unemployment rose to 10.8% in 1982. President Reagan ended it by lowering the tax and boosting the defense budget. The causes for the recession were-
- The regime changed in Iran for the distribution of Oil. They were the second largest producer at the time. They exported oil at inconsistent intervals and increased the rate.
- The U.S government enforces a strict monetary policy to combat inflation.
It was termed the Iran/Energy Crisis Recession.
5. the Great Recession 2007-2009
It lasted for about 18 months starting from December 2007 to June 2009. It was the longest recession and was worse than the 1929 Depression. The economic decline started when the Housing market in the US went from boom to bust and massive amounts of mortgage-backed securities and derivatives lost value. There was an increase in housing prices and mortgages. The early part of a decade, home prices skyrocketed and thousands of loan borrowers could not repay their debt. Wall Street sold financial instruments that were tied to loans that were of little value.