What is a Recession? 10 Facts You Need to Know

Fears of an economic downturn are once again on the rise, but what is a recession, exactly? We tackle this and other questions here.

Shut down store fronts in Rockaway, Queens, New York City
(Image credit: Getty Images)

Despite more than 18 months of warnings on the part of economists, strategists and other market pros, the U.S. economy has thus far avoided falling into a recession. 

True, the economy may not feel that great to the legions of folks struggling with persistently high inflation – but both official and unofficial measures confirm that we're not currently in a downturn. If anything, the U.S. economy has been remarkably resilient.

And yet poll after poll shows that Americans have serious doubts about the health of the economy. Given this disconnect between economic realities and the nation's general mood, it's fair to ask: if this isn't a downturn, then just what is a recession, anyway?

Well, for one thing, a recession is the scariest creature in the average investor's closet of anxieties. There's little wonder why. People fear recessions because they can mean lower home prices, lower stock prices – and, of course, unemployment.

It's also not very reassuring that any number of things can cause or exacerbate a recession: an exogenous shock, such as the COVID-19 crisis or the Arab oil embargo of 1973; soaring interest rates; or ill-conceived legislation, such as the Smoot-Hawley Tariff Act of 1930.

The bottom line, however, is that recessions a a fact of life. As highly unpleasant as they may be, they are inevitable occurrences in any dynamic economy. And if you're prepared for the next recession, there will be plenty of opportunities when that downturn ends. Thus, the more you know about recessions, the better.

Here are 10 must-know facts that help answer the question, What is a recession?

Dan Burrows
Senior Investing Writer, Kiplinger.com

Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.

A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.

Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.

In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.

Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.

Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.