Difference Between Recession and Depression

A recession is characterised as a period of negative economic growth for two consecutive quarters. In a recession, unemployment will rise, output fall and government borrowing increase.

A depression is a recession much more severe and long lasting. There is no agreed upon definition of a depression. But, generally a depression would have some of the following characteristics.

Decline in output for a prolonged period e.g. greater than 2 years.

A drop in output of 10% or greater.

Unemployment rate touching 20% (rather than the 10% rate associated with recessions)

One popular definition of the difference between recession and depression is:

. “A recession is when your neighbor loses his job; a depression is when you lose yours.”

It was first used in print by Teamsters Union President Dave Beck (1894-1993) It is widely attributed to Henry Trueman who began using it shortly after in 1954.

See also: Definition of Depression