The definition of a recession

- A recession's a period of time when the economy's contracting. Joblessness usually goes up. The unemployment rate rises. Retail sales go down. People are spending less money. People are losing jobs, and some businesses will shut down. For the average person, a recession is a period where they might feel a bit more stressed about what's going on with their job, and if they don't lose their job, they might be forced to do more work to make up for people who may be laid off. It's also a time period where financial investments can lose money, and people are going to be a bit concerned about their retirement accounts or the education accounts for their children. Recessions are a normal part of what's called the business cycle, and the good part about recessions is that they're usually pretty short. Most of the time, the economy is expanding, and that's the bigger part of the business cycle, but after the economy's been expanding for a while, a few things happen. One, we find that companies have trouble making that next marginal dollar. Two, companies take on more debt and more risk, and three, even consumers and investors begin to invest in riskier assets, and at some point, there's a trigger, and the economy slows, financial markets go down, and we're in a recession, but again, the recession period is usually quite short, although quite painful compared to the longer expansionary period. Every recession is a little bit different, but as a former Fed Chairman, Ben Bernanke, once said, Business cycles don't die of old age. They get murdered, and there's always one cause that triggers that recession. In 2001, it was a tech bubble that burst. In 2007 and 2009, the trigger was the housing crisis and the financial crisis, and in 2020, it was a pandemic. So different things caused the recessions to happen, but what's going on in the background, the fact that you have more risk, that happens every time, and the fact that the cycle continues, that we go from recession back to expansion, that continues, as well. That cycle's likely to continue in the future. So while the causes are different, the cycle is likely to go on.