A recession is generally defined as two consecutive quarters of a drop in GDP. A more modern definition of a recession is a significant drop in the economic activity across the economy lasting for a few months. The U.S. has seen several downturns since the Great Depression, but every downturn varied in intensity, i.e. the level of destruction it caused. If you want to know about the worst U.S. downturns, then detailed below are the ten biggest recessions ever since the Great Depression.
Ten Biggest Recessions Ever
At the time of a recession, there is an overall decline in the economic activity resulting in a drop in GDP, a rise in unemployment and inflation, stock market crash and more. However, one of the best ways to measure the severity of a downturn is to look at the peak unemployment level. Following are the ten biggest recessions ever on the basis of the peak unemployment level:
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The Union (5.2%)
This recession started in February 1945 and continued until October 1945. There are several reasons that triggered this recession, including a slow transition to civilian production, demobilization of military forces, and the after-effects of World War II. The high unemployment rate during the recession was primarily because veterans were re-entering the workforce. This recession was called the "Union Recession" because unions were starting to reassert themselves and the minimum wage was on the rise.
The Gulf War (6.8%)
This recession started in July 1990 and lasted through March 1991. The U.S. GDP rate during the period dropped by about 1.5%. After Iraq invaded Kuwait, the oil price surged drastically, leading to a drop in manufacturing trade sales. Also, the manufacturing moved offshore due to the provisions of the North American Free Trade Agreement (NAFTA). There was also a stock market crash, partly due to the leveraged buyout of United Airlines.
The "Rolling Adjustment" Recession (6.9%)
This downturn lasted for almost a year, starting from April 1960 and continuing until February 1961. The U.S. GDP dropped by 1.6% during the period. In a rolling adjustment recession, or rolling downturn, the slowdown affects only a few industries. And, after one industry recovers, the recession rolls-over to other industries. At the time of this recession, many U.S. industries, including the automotive industry, saw the "rolling adjustment."
This recession started in August 1957 and continued until April 1958. The GDP rate during this recession period dropped by 3.7%. Government policies were primarily responsible for triggering this downturn, especially a tightened monetary policy to curb inflation. Despite such policies, the prices in the U.S. continued to rise. Moreover, a strong U.S. dollar and the impact of the downturns on other countries resulted in a foreign trade deficit.
The Energy Crisis Recession (7.8%)
This downturn lasted for over six months, from January 1980 to July 1980. GDP rate during the period dropped by more than 2%, while inflation reached 11.1%. The Federal Reserve hiked the interest rate and slowed the money supply growth resulting in slowing the economy and increasing unemployment.
The Oil Crisis (8.6%)
This downturn started in November 1973 and continued until March 1975. The GDP rate dropped by about 3% during this period. High oil prices and massive government spending on the Vietnam War are the primary reasons triggering the recession. Additionally, Nixon's wage-price controls and the Federal Reserve's stop-go monetary policy also played a part in extending the recession.
The Great Recession (10%)
This recession started in December 2007 and carried until June 2009. The GDP dropped by more than 4% during the period. A major reason triggering the recession is the collapse of the housing bubble, which resulted in a financial crisis that affected many countries. This recession was bad for the oil industry as well, because the prices rose initially and then crashed.
The Iran/Energy Crisis Recession (10.8%)
This downturn started in July 1981 and lasted until November 1982. The GDP rate dropped by about 2.9% during this period. Regime change in Iran triggered this recession. This is because the country started exporting oil at lower volumes, pushing the prices up. As a result, inflation went out of control in the U.S., forcing the government to practice a tighter monetary policy. In 1981, the prime rate was over 21%.
This downturn started in February 2020 and is still ongoing. It is the worst health crisis that the world has ever seen. The pandemic forced many nations, including the U.S., to put in place travel restrictions, implement social distancing policies, and shutter businesses. The WHO declared COVID-19 a pandemic in March 2020, and in June, the National Bureau of Economic Research officially declared a downturn in the country. Moreover, this downturn is not over yet, and how long it will last, isn’t clear as well.
The Roosevelt Recession (20%)
This recession lasted for more than a year, from May 1937 to June 1938. During this period, the GDP rate dropped by 10%. Several reasons are believed to have triggered this downturn, including lack of investments from businesses, cuts in the WPA (Works Projects Administration) and more. The downturn period was accompanied by a stock market crash in late 1937.