What are they and when do they happen? : NPR

New prices from the Trump administration on goods imported from countries around the world have shaken consumers, stretched up a trade war, disrupted global markets and fueled general concerns about the prospect of a recession, in the United States and the world.

In the days following President Trump announced that the radical and “reciprocal” reference prices, research on Google for the term “recession” has increased and economists in significant investment banks have indicated that increased chances of a recession occur.

In a Sunday note to customers, Goldman Sachs increased the probability of an American recession from 35% to 45% – and this assumes that the prices are canceled. If the prices specific to the country take effect on Wednesday as expected, the cabinet says: “We would revise our forecasts to include a recession.”

In a research report last week entitled “There will be blood”, JP Morgan increased its risk of global recession to 60%, against 40% before the price announcement.

His CEO Jamie Dimon doubled on Monday, writing in his annual letter to investors that prices “will probably increase inflation” and encourage “much to consider a greater probability of recession”.

“Whether the price menu causes or not a recession remains in question, but that will slow growth,” wrote Dimon.

There are growing calls to Trump to delay or reduce prices from express Wall Street, Capitol Hill and around the world. Administration officials said on Sunday that more than 50 countries had contacted negotiations – but also said that the prices would not be postponed.

In an interview with “Meet The Press” by NBC on Sunday, the Treasury Secretary Scott Bessent minimized concerns about a recession, saying: “We are going to hold the course”. Highlighting the better than expected March of March, he said he saw “no reason we have at prices in a recession”.

“There must not be a recession,” he added. “Who knows how the market will react in a day, in a week. What we look at is to build the long -term economic fundamentals of prosperity.”

With all these speeches on a potential recession, it is worth taking a look at what the term really means – and which decides when it applies.

What is a recession?

A recession refers to a period of drop in economic activity. It is one of the four stages of the economic cycle: growth, peak, contraction (or recession) and hollow.

Some analysts use an approximate basic rule to identify recession: two consecutive quarters of decline in gross domestic product (GDP) of a country – the widest measure of economic activity.

But the National Bureau of Economic Research (NBER) – The non -partisan non -profit research organization which has become the semi -official referee of recessions – uses a somewhat more waxed definition. He calls for a recession a “significant drop in economic activity which is spread through the economy and which lasts more than a few months”.

Who declares a recession?

The work of documentation of economic cycles, including recessions, does not fall to the federal government.

Instead, the NBER economic cycle of the economic cycle – made up of better American economists – declares the start and end of cycles since its creation in 1978 (the Nber itself is older).

There is no fixed rule over the duration of the NBER to identify a recession after the start of a drop. He indicates on his website that past determinations have taken four to 21 months.

“We wait long enough for the existence of a peak or a hollow to be in doubt, and until we can assign a specific peak or hollow,” explains Nber.

For example, he announced in June 2020 that the United States had officially entered a recession induced by the pandemic of months earlier, in February. He announced more than a year later that the 2020 recession ended in April after only two months, making it the shortest American recession ever recorded.

What’s going on in a recession?

An economy in narrowing can cause a cascade of effects against stressful undulations, including a drop in employment, a deterioration in stock market results and higher borrowing costs for consumers and businesses, according to Fidelity.

For example, people may not want to spend as much, which can have an impact on the companies they would support otherwise, which can lead to layoffs and in turn harm the performance of stock markets on the stock market – further supplying the cycle.

Mark Zandi, chief economist at Moody’s Analytics, said last week at NPR that consumer confidence and discretionary expenses were already down. He said that the possibility of even wider rates – which were announced the next day – could accelerate the path of a recession.

“It is the consumer who first feels the weight, and for reason,” he said. “But … The way you arrive at the recession is that companies see the weakening of their sales, and if they start to dismiss workers, then we are finished. We are going in a recession.”

To what extent are recessions rare?

Various factors can shake the economy into a recession, unexpected events (such as pandemics and wars) with bubbles of active inflation or excessive deflation.

The United States has experienced 34 recession since 1857, according to NBER data.

They varied considerably in length, from two months (2020) to more than five years (the panic of 1873, which sparked the “long depression”).

Since the Second World War, the average duration of a recession has been 11.1 months, according to the commercial publication Kiplinger. The United States after the Second World War have an average recession every 6.5 years, he adds.

The longest recession in the Second World War was the great recession, which lasted 18 months from December 2007 to June 2009 and was launched when the US housing bubble broke out. The most recent was the brief recession COVVI-19 in 2020. While the economy experienced two quarters of negative GDP growth in early 2022, feeding fears of a recession, the NBER did not declare one.

The depressions are much more serious and rare: Merriam-Webstier says that they are characterized by generalized unemployment and major breaks in economic activity. The NBER does not specifically identify depression, but says that the United States is generally considered to have experienced one last time in the 1930s.