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Does Two Down Quarters of GDP Mean Recession?

With real GDP falling again in Q2 2022 after declining in Q1 2022, many will likely conclude that we’re in recession. In fact, the data show that, over the past 75 years, there’s been a U.S. recession every time real GDP has fallen for two consecutive quarters (in Q2 1947 and Q3 1947, real GDP did decline without a recession).

Over those 75 years there have also been two recessions without back-to-back declines in real GDP, namely the 1960-61 and 2001 recessions.

Nevertheless, pundits and policy makers still cling to over-simplified definitions of recession. It's a dangerous misconception that we wrote about in a CNN op-ed during the onset of the Great Recession. Regardless of revisionist history, most people were confused about what was happening to the economy at the time.

The official determination of the recession's start date will have to await a wider variety of upcoming data releases, because a recession is a vicious cycle of cascading declines in output, employment, income and sales that then feed back into a further drop in output, and so on.

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