recession

Example

“During the recession, unemployment rose to 10% and consumer spending dropped sharply.”

Memory Tip

RE-cession — the economy RECEDES (pulls back). Like the tide going out.

Why It Matters

Recessions directly affect your job security, investment portfolio, and borrowing costs. During these periods, companies often lay off workers, stock prices typically fall, and banks tighten lending standards, making it harder to get loans or mortgages at favorable rates.

Common Misconception

Many people believe a recession automatically means an immediate financial crisis or depression for everyone. In reality, recessions vary greatly in severity, and some individuals or sectors may experience minimal impact while others face significant hardship.

In Practice

During the 2020 COVID recession, the U.S. economy contracted sharply with negative GDP growth in the second quarter, yet unemployment peaked at about 14.7 percent while stock markets recovered relatively quickly. A person who kept their job during this period might have actually benefited from lower interest rates on their mortgage, even as their neighbor in the hospitality industry faced months of unemployment.

Etymology

From Latin 'recessus' meaning 'a going back, retreat' — the economy retreats.

Common Misspellings

Related Terms

More in economics

Other economics terms you should know

See Also