(Image Source: Dave Hoefler / Unsplash)
The National Bureau of Economic Research (NBER) convenes a Business Cycle Dating Committee that is charged with identifying the start and end of contractions and expansions in the business cycle. Contractions, or recessions, start at the peak of a business cycle and end at the trough, or low point, of a business cycle. Contractions are marked by at least two consecutive quarters of negative growth in real gross domestic product (GDP). Expansions start at the trough of a business cycle and end at the peak.
Since 1845, there have been 34 cycles, with an average contraction of 17.0 months from peak to trough, and an average expansion, from trough to peak, of 41.4 months. However, since the end of World War II, the average contraction has been getting shorter and the average expansion has been getting longer. Indeed, the longest expansion since 1845 was a record-breaking 128 months, which occurred from June 2009 to February 2020, and the shortest contraction on record was a brief 2-month recession, which occurred from February 2020 to April 2020, at the start of the Covid-19 pandemic. This month we have two questions:
Question 1. Since World War II, what has been the average length for a contraction period?
A. 10.3 months
B. 17.0 months
C. 41.4 months
D. 12.8 months
Question 2. Since World War II, what has been the average length of an expansion period?
A. 62.3 months
B. 117.2 months
C. 40.1 months
D. 64.2 months
Question 1 Answers: A & Question 2 Answers: D. Since World War II, contraction periods have lasted an average of 10.3 months, and expansion periods have lasted an average of 64.2 months.