10 Worst Recessions in U.S. History, Listed Chronologically

Before the creation of the Federal Reserve System (often shortened to simply "the Fed"), with its network of Federal Reserve Banks that lend to commercial banks, this financial crisis was caused by bank failures and injurious credit expansion.

The crisis nearly collapsed the New York banking system and led to major financial reforms, including the eventual establishment of the Fed.

The Great Depression remains the worst economic downturn in U.S. history. Triggered by the 1929 stock market crash on the New York Stock Exchange, GDP fell by nearly 30 percent and unemployment peaked at around 25 percent.

Thousands of banks failed before the creation of the Federal Deposit Insurance Corporation (FDIC), and the Federal Reserve's tight monetary policy deepened the crisis. This era influenced Federal Reserve history and prompted major reforms in economic policy and federal spending.

As World War II ended, the transition from a wartime to a peacetime economy caused a sudden drop in government spending and a recession in the fourth quarter of 1945.

The Bureau of Economic Research recorded a significant decline in GDP growth, though this economic crisis was brief compared to other historical recessions.

Following the Korean War, government spending dropped and consumer demand fell, leading to an economic contraction. GDP declined, and unemployment rose to 5.9 percent. This period was short but marked a clear break in the economic expansion that followed World War II.

This period was shaped by the energy crisis, triggered by OPEC's oil embargo. Soaring oil prices led to inflation, falling GDP and rising unemployment. The recession caused chaos across financial markets and hurt consumer confidence.

The U.S. economy struggled with stagflation — a mix of stagnant growth and inflation — throughout this recession.

This recession was caused by the Federal Reserve raising interest rates sharply to curb inflation. Under Chair Paul Volcker, the Fed Funds Rate soared to nearly 20 percent, leading to a contraction in industrial production and the housing sector.

The unemployment rate reached 10.8 percent, the highest since the Great Depression. Some economists contended that the economic pain was necessary to break the back of inflation that plagued the 1970s.

Triggered by high oil prices during the Gulf War and a slump in consumer and business confidence, this recession caused declines in GDP and a spike in unemployment.

Banking and real estate sectors suffered as lending tightened. The Congressional Research Service (CRS) tracked the slowdown as part of a broader international economic malaise.

Often called a mild recession, this downturn followed the bursting of the dot-com bubble and was exacerbated by the September 11 attacks on the World Trade Center.

The housing market remained stable, but GDP dipped and unemployment rose. The Federal Reserve responded by cutting interest rates to stimulate economic growth.

Sparked by the collapse of the housing bubble and the resulting credit crisis, the Great Recession saw the fall of major financial institutions like investment bank Lehman Brothers. Unemployment peaked at 10 percent, and GDP fell by more than 4 percent.

The crisis triggered sweeping interventions by the Federal Reserve (FRB) and the federal government. The National Bureau of Economic Research marked it as the deepest recession since World War II.

Though not traditionally included in long-term rankings, the COVID-19 recession saw an unprecedented GDP contraction in the second quarter of 2020 and the highest unemployment rate since the Great Depression.

Prompted by lockdowns and a sudden halt in business activity, it was met with aggressive federal spending and monetary policy interventions from the Federal Reserve and central banks worldwide.

In the current economic system, growth is considered normal and necessary. Broadly speaking, a recession occurs when the economy, as measured by gross domestic product (GDP) shrinks instead of grows, across a set period of time (the standard is six months or more).

There is no such thing as an average recession; while these periods are all defined by overall economic shrinkage, the factors causing them, and their effects on the general population, are varied.

Recession are caused by everything from mismanagement of the money supply, financial markets, energy prices, wars and — increasingly in the era of global climate breakdown — ecological crisis.

We created this article in conjunction with AI technology, then made sure it was fact-checked and edited by a HowStuffWorks editor.