How long do recessions last?

According to the NBER, the average recession since 1854 has lasted about 17 months. However, recessions have been much shorter since World War II, with the typical economic downturn lasting approximately 10 months in the U.S. They can be much longer than that -- the Great Recession lasted 18 months -- or very short -- the COVID-19 recession of 2020 only lasted two months.

What happens in a recession?

Every recession is a little bit different. The typical definition of a recession is a reduction in economic activity. So, recessions often see negative GDP growth, reduced spending by businesses and consumers, and increased unemployment and loan defaults. The government will likely step in to stem the damage of the recession, and the stock market may decline.

Do things get cheaper during a recession?

The prices of many goods and services may decline during a recession due to reduced consumer spending. As demand drops, basic economics dictates that the price of a good or service will have to come down. However, some goods will go up in price because a recession increases demand as consumers cut back on spending. Other items may increase in price due to supply constraints.

Who benefits from a recession?

While a recession can be a difficult time for many by stressing their finances, there are some people who can emerge stronger. People and businesses with big cash reserves will likely be able to put them to work and buy assets at lower prices. For example, someone who was diligently saving for a house before the recession may suddenly find many good deals.

Recessions: Definition, Causes & More

Recessions: Everything You Need to Know

By Adam Levy – Updated Oct 7, 2026 at 12:19 PM EST | Fact-checked by Frank Bass

Key Points

Negative GDP growth frequently marks a recession, impacting consumer and business spending.
An inverted yield curve is a common, though not infallible, predictor of upcoming recessions.
Tips for recession preparation include maintaining an emergency fund and avoiding high-interest debt.

Many economists and investors are worried about a forthcoming recession, but what does that mean exactly? In this article, we'll take a closer look at what a recession is, what to expect, and signs that might indicate a recession is coming. We'll also discuss some of the ways you can prepare for a recession -- and navigate through the depths of even a deep recession -- while coming out of it just as financially strong when the dust settles.

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A graphic showing 6 signs that a recession may be coming, including an elevated inflation rate and inverted yield curve. — Image source: The Motley Fool.

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What is a recession?

A recession is generally defined as a sustained decline in gross domestic product (GDP) for two or more consecutive quarters. However, this isn't a perfect definition; having two quarters of negative GDP growth doesn't necessarily mean that we're in a recession.

In addition to weak economic growth, a recession is typically accompanied by widespread job losses, a tighter job market, and the need for relief programs such as stimulus checks or targeted funding for certain types of businesses. It is also often accompanied by declines in the stock market.

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Signs a recession is coming

Perhaps the most widely used recession indicator is an inverted yield curve, which occurs when the 10-year Treasury yield falls below the two-year Treasury yield. In a healthy economy, Treasuries with longer maturities have higher yields.

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Yield Curve

The yield curve shows the relationship between interest rates and bonds. Learn how it’s used to predict the course of the economy.

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Here's an important point: Every recession since the 1970s has been preceded by an inverted yield curve. However, an inverted yield curve occurred in 1998, and wasn't followed by a recession. Likewise, the yield curve inverted in 2022 and 2023, but no recession materialized. So the presence of an inverted yield curve doesn't automatically mean a recession is coming, but it generally has been a reliable sign.

It's also worth noting that even with an inverted yield curve, there is no way to know the timing of a recession. Generally, an inverted yield curve suggests a recession won't occur for more than a year.

There are a few other economic indicators that can signal a recession, such as an elevated inflation rate. When inflation is high, the Federal Reserve generally tightens monetary policy to lower the inflation rate, which can trigger a recession. Interest rate increases were a big driver of the major 1980s recession.

Other popular economic indicators that a recession might be on the horizon include the consumer confidence index, real income growth, manufacturing indexes, and retail sales data. But, like the inverted yield curve and elevated inflation rates, none is perfectly reliable for predicting a recession.

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Economic Indicators

Measurements that help economists and financial professionals better explain and understand how the economy is behaving or will behave.

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What causes recessions?

No one thing causes recessions, aside from the generalization of "reduced economic activity." But here’s a list of the five most recent U.S. recessions and the short version of what caused each one:

COVID-19 recession (February to April 2020): The onset of the COVID-19 pandemic led to widespread lockdowns, which resulted in 24 million people losing their jobs in just three weeks and economic activity plunging at the fastest rate in history.
Great Recession (December 2007 to June 2009): Irresponsible and predatory lending practices led to a near-collapse of the U.S. housing market and triggered ripple effects across the financial system. Home equity plunged, and access to credit tightened, leading to a dramatic drop in consumer spending. Technically, the Great Recession lasted 18 months.
Dot-com recession (March to November 2001): A speculative bubble in tech stocks fueled by the widespread adoption of the internet burst in the early 2000s, and the Sept. 11 attacks created additional economic shocks.
Early 1990s recession (July 1990 to March 1991): A combination of consumer pessimism, rising debt levels, and a 1990 oil price shock led to a recession following the 1980s boom.
Early 1980s recession (July 1981 to November 1982): Out-of-control inflation in the late 1970s and early 1980s led to aggressive tightening of monetary policy by the Federal Reserve. This, combined with a spike in oil prices caused by the Iranian Revolution, created a relatively long recession.

Tips to survive a recession

Recessions can be scary times for investors. But, as we find out every time the stock market declines, there are two types of investors when it comes to recessions and general economic turbulence: Those who are ready for it and those who aren’t. Here are some steps you can take to make sure you are well-positioned to not only survive a recession but to come out even stronger on the other side.

Be financially prepared for a recession

One of the smartest things you can do to survive a recession, whenever it comes, is to think defensively when it comes to your personal finances. This mentality can help you prepare for a recession before it arrives.

It’s important to keep an emergency fund. Most financial planners suggest that saving six months' worth of expenses is a good target, but you don't necessarily need to get there to have a valuable level of protection. Remember, recessions are typically accompanied by elevated unemployment and tight labor markets. An emergency fund can help you survive a job loss without needing to tap into your retirement savings or use credit cards for day-to-day expenses.

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Cost Cutting

Cost cutting is a set of actions a company takes to lower expenses. Usually, the goals of cost cutting are to improve profitability and conserve cash.

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It's also a smart idea to consider cutting expenses, either proactively or when a recession hits. It can be a useful exercise to identify how much money you're spending on things you don't need. Try printing out the past two months of your bank and credit card statements and highlighting any expenses you could potentially cut.

Finally, paying off high-interest debt before a recession hits can be a smart way to recession-proof your personal finances. In recessions, we typically see loan default rates spike as people lose their jobs and can't pay their bills. As a general rule, the lower your debt level, the better prepared you’ll be for a recession.

Don't cash out of the stock market

It's common knowledge that the central goal of investing is to buy low and sell high, whether you're talking about long-term investments like a 401(k) or a stock trading strategy. We invest because we hope to sell whatever we buy for more money in the future. However, our instincts tell us to do the exact opposite when times get tough. When the stock market plunges, it's a natural reaction to wonder, "Should I sell and cut my losses before things get any worse?"

With that in mind, it's important to emphasize that cashing out during a recession or market downturn is one of the worst moves a long-term investor can make. For example, if you had cashed out of an S&P 500 index fund when the market first dropped by 20% in the 2007-09 recession, you would have avoided another 30 percentage points of losses before the market reached the bottom. However, you also would have missed out on a subsequent 300% gain. If stock fluctuations stress you out, stop checking your stock portfolio every day and focus on the long term.

The bottom line on recessions

Recessions are a natural part of the economy. There will always be a future recession, but there is no reliable way to predict when it will occur. The best thing you can do as an investor is to know what a recession is and how to prepare and react to one.

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FAQs about recessions

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About the Author

Adam Levy is a contributing Motley Fool stock market analyst covering technology, consumer, and financial stocks and how policy, economic, and consumer trends shape personal finance, Social Security and retirement savings. Before The Motley Fool, Adam was a financial advisor at Edward Jones. He studied finance and electrical engineering at Carnegie Mellon University.

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Recessions: Everything You Need to Know

Key Points

What is a recession?