What is the difference between a Depression and a Recession?

A recession is when your neighbor loses his job. A depression is when you lose your job.

A recession is general slow down in economic growth normally over at least two financial quarters. A depression is a prolonged and severe period of recession.

”So how can we tell the difference between a recession and a depression? A good rule of thumb for determining the difference between a recession and a depression is to look at the changes in GNP. A depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe.”

”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. If we use this method then the Great Depression of the 1930s can be seen as two separate events: an incredibly severe depression lasting from August 1929 to March 1933 where real GDP declined by almost 33 percent, a period of recovery, then 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. Countries such as Finland and Indonesia have suffered depressions in recent memory using this definition.”

Source

Thanks all, especially @Blackberry. I wondered if there was a real definition or if they were tricking us by calling it a recession when it’s a depression. Glad to know my fears were unfounded. I’m sure it doesn’t make any difference to those who have exhausted their unemployment benefits though.

@Judi You are right to wonder. The formal definition does not take into account that the indexes they use to determine the difference are fluid. In other words, they can be, and are, changed to fit the mood.

A depression is a prolonged recession. You can even picture it on a graph!

Also. The National Bureau of Economic Research is the definitive authority in the U.S. where one can find the official start and end dates for economic cycles (including recessions).

You can see those dates here.

From their FAQ:

The NBER does not separately identify depressions. The NBER business cycle chronology identifies the dates of peaks and troughs in economic activity. We refer to the period between a peak and a trough as a contraction or a recession, and the period between the trough and the peak as an expansion. The term depression is often used to refer to a particularly severe period of economic weakness. Some economists use it to refer only to the portion of these periods when economic activity is declining. The more common use, however, also encompasses the time until economic activity has returned to close to normal levels. The most recent episode in the United States that is generally regarded as a depression occurred in the 1930s. The NBER determined that a peak in economic activity occurred in August 1929, and that a trough occurred in March 1933. The NBER identified a second peak in May 1937 and a trough in June 1938. Both the contraction starting in 1929 and that starting in 1937 were very severe; the one starting in 1929 is widely acknowledged to have been the worst in U.S. history. According to the Bureau of Economic Analysis, real GDP declined 27 percent between 1929 and 1933, roughly five times as much as in the worst postwar recession. If the term Great Depression is used to mean the period of exceptional decline in economic activity, it refers to the period from August 1929 to March 1933. If it is used to also include the period until economic activity had returned to approximately normal levels, most economists would judge that it ended sometime in 1940 or 1941. However, just as the NBER does not define the term depression or identify depressions, there is no formal NBER definition or dating of the Great Depression.

@Adirondackwannabe That is exactly what my dad used to say!

A GDP loss in each quarter for 18 months is considered a depression, I think.
The thing is, no one will admit to it until it is over.

The technical definition of a recession would put the current recssion over. It ended in june of 2009. I doubt most people would consider this recession over. @laureth has the best definition I’ve seen and would think that most accounts of the Great Depression would peg the start in 1929 and the end 1940. It’s easy to get sidetracked with the technical definition even though the effects are much longer.

Well to me, recession is a made up word for politicians wanting to be voted for again.