Chapter 30 — Key Takeaways
The four phases
Expansion → peak → recession → trough → expansion. The NBER officially dates U.S. recessions using multiple indicators, not just the "two-quarter GDP decline" rule.
Indicators
- Leading: stock prices, building permits, yield curve, consumer confidence (move before)
- Coincident: GDP, employment, industrial production (move with)
- Lagging: unemployment rate, corporate profits, inflation (move after)
What causes recessions
- Demand shocks: financial crises, confidence collapses, investment pullbacks
- Supply shocks: oil embargoes, pandemics, supply-chain disruptions
- Policy errors: too much or too little monetary/fiscal intervention
Two recessions compared
| 2008 Great Recession | COVID Recession | |
|---|---|---|
| Cause | Financial crisis | Pandemic shutdown |
| Depth | GDP −4.3%, unemployment 10% | GDP −10% (one quarter), unemployment 14.7% |
| Recovery | Slow (6+ years) | Fast (1.5 years) |
| Fiscal response | ~$800B | ~$5T+ |
Are recessions inevitable?
Yes, for large shocks (financial crises, pandemics). Policy can manage ordinary recessions but cannot prevent extraordinary ones.