GDP growth is the greatest factor in determining what constitutes a depression versus a recession. I know many feel this economic crisis is our generation’s depression but in economic terms, it is not.
The unofficial definition of a depression is broadly defined as a drop in 10% of the GDP. Between 1929 and 1933 the U.S. GDP dropped more than 30%.
The definition of a recession is when economic growth contracts for two quarters straight, with severity measured in actual decline and visible in real GDP, real income, employment, industrial production and wholesale-retail sales. The economy was slowing in 2007, and in early 2008, with severe declines later in 2008 and in early 2009. The 4th quarter of 2008 and the 1st quarter of 2009 were the first successive quarters since the Great Depression that sustained growth below -5.0%.
The definition matters to some. In reality, it is how you and yours are impacted by the economic crisis.
There is a better definition. It is a recession when you know someone who has lost their job. It is a depression when you have lost your job.
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