Recession vs depression: what is the difference?

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A recession has an official definition and official dates in the United States; a depression has neither. "Depression" is the word used for a slump so deep and so long that it stands apart, and the only US episode generally given that name is the Great Depression of the 1930s, when real GDP fell about 26% between 1929 and 1933.

What is the official definition of a recession?

In the US, recessions are dated by the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER). It defines a recession as "a significant decline in economic activity that is spread across the economy and that lasts more than a few months," and it names the month of the peak and the month of the trough. The decline has to pass three tests: depth, diffusion across industries, and duration. Our guide to what a recession is covers the indicators the committee uses and the popular two-quarter rule.

Recessions are a regular part of the business cycle. The NBER lists 12 since 1948, and they have averaged 10.3 months from peak to trough.

What is a depression?

There is no official definition. The NBER does not date depressions and gives no threshold for one. Its FAQ only says: "The term depression is often used to refer to a particularly severe period of economic weakness." It adds that the most recent US episode generally regarded as a depression occurred in the 1930s.

You will see rules of thumb online, such as a fall of 10% in GDP or a recession lasting several years. No US or UK statistical agency uses them. In practice, a depression is a recession that is much deeper, much longer, or both, and the label is applied by historians and economists looking back.

How did the Great Depression compare with ordinary recessions?

The gap is large on every measure. The NBER dates the main contraction from August 1929 to March 1933: 43 months, more than four times the postwar average. Annual BEA data on FRED show real GDP falling from about $1,191 billion in 1929 to about $877 billion in 1933 (chained 2017 dollars), a drop of 26.3%, and output did not regain its 1929 level until 1936. A second recession followed from May 1937 to June 1938.

Unemployment figures for the period are later estimates, because the government's household survey did not yet exist in its modern form. A 2026 review in the BLS Monthly Labor Review notes that the overall unemployment rate reached 25%, and the BLS estimate for 1933 is 12.83 million people out of work. Our page on the Great Depression covers the causes, from bank failures to the gold standard.

How do the Great Depression, the Great Recession and 2020 compare?

The two most recent US downturns are useful benchmarks because each was severe in a different way. The 2007-09 recession was long. The 2020 recession was extremely sharp and extremely short.

Sources: NBER; BEA real GDP and BLS unemployment rate via FRED (series GDPCA, GDPC1 and UNRATE); BLS Monthly Labor Review for the 1930s estimate.

The Federal Reserve's history essay on the Great Recession describes the 2007-09 downturn as the longest since World War II, with unemployment rising from 5% at the start to 10% in October 2009. That is why it earned the name "Great Recession": serious enough to be compared with the 1930s, but on a different scale. Real GDP fell about a sixth as much, and it regained its previous high within about three years.

The COVID recession shows the opposite problem with simple rules. In April 2020 unemployment hit 14.8%, the highest rate in the monthly series that starts in 1948, and GDP fell 9.1% in two quarters. On those measures it was deeper than 2007-09. Yet it lasted two months, and output was back above its old high by the first quarter of 2021. A slump that short is not called a depression, however steep the fall.

Why does the difference matter?

The labels shape how a downturn is remembered, but the measurements are what matter for policy and for households. Three of them separate an ordinary recession from a depression-scale event:

• Depth: how far output and employment fall. A few percent of GDP is a typical postwar recession; a quarter of GDP is the 1930s.
• Duration: how long the fall lasts and how long recovery takes. Postwar contractions have averaged about ten months.
• Financial damage: the worst slumps came with banking crises. More than 9,000 US banks failed in the four years before deposit insurance began in 1934, and the 2007-09 recession followed the 2008 financial crisis. Our page on bank runs explains how panics spread.

Stock markets do not follow the same labels. The 1929 crash came two months after the NBER peak, while the 2022 bear market happened with no recession at all.

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