What You Need to Know About Recessions — Including Whether We’re in One

US inflation is at a four-decade high, borrowing costs are surging and stocks have taken a beating. With the Federal Reserve going full steam ahead on an aggressive campaign to temper demand and tame prices, concerns are growing that its moves will tip the US into recession. There’s no shortage of opinions about whether a downturn is inevitable, when it might start and how bad it might be.

It’s often understood as a period when economic output contracts for two straight quarters. But the National Bureau of Economic Research’s Business Cycle Dating Committee, a group of academics whose determination is regarded as official in the US, defines a recession differently: as a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.” It looks at three criteria -- depth, diffusion and duration -- and considers factors such as employment, inflation-adjusted spending, industrial production and income. NBER says extreme conditions revealed by one criterion may offset weaker signals from another. For instance, the pandemic-driven recession of 2020 was broad-based and characterized by a sharp drop in economic activity, but it was extremely short, lasting just two months.