Recession
A recession is a significant, widespread and lasting decline in economic activity, typically visible in falling output, income, employment and spending.
A popular rule of thumb defines a recession as two consecutive quarters of falling real GDP. In the US, however, recessions are officially dated by the National Bureau of Economic Research (NBER), which looks at a range of indicators including employment, real income, industrial production and spending. NBER often announces the start of a recession months after it began.
Recessions usually bring rising unemployment, weaker corporate profits and more loan defaults. Central banks typically respond by cutting interest rates, and governments may increase spending or cut taxes.
Stock markets often fall before or during recessions, but they are forward-looking and have frequently started recovering before the economy itself improved. Bonds, especially Treasuries, have tended to hold up better as interest rates decline.
Since World War II, US recessions have generally lasted from a few months to about a year and a half. Warning signs that analysts watch include an inverted yield curve, falling leading indicators and rising jobless claims.