What is the difference between a recession and a depression?

A recession is a significant decline in economic activity spread across the economy and lasting more than a few months. The popular shorthand, two consecutive quarters of falling GDP, is a rough rule of thumb rather than the official standard: in the United States, the National Bureau of Economic Research dates recessions using a broader set of indicators including employment, income, industrial production, and spending, which is why NBER declarations sometimes conflict with the two-quarter shortcut and always arrive well after the fact.

Depression has no formal or official definition, which is precisely why the word gets used loosely. It describes a downturn that is far deeper and longer than an ordinary recession, and in practice the reference point is the Great Depression, when US unemployment reached roughly 25 percent, output collapsed by nearly a third, and the effects persisted through most of the 1930s. Postwar recessions have generally lasted under a year and involved much smaller declines, including the sharp but brief contraction in 2020 and the severe 2007 to 2009 downturn, which was deep enough to be called the Great Recession without meeting any threshold for depression. The practical distinction is one of magnitude and duration, and the policy lesson drawn from the 1930s, that aggressive monetary and fiscal response prevents recessions from spiraling, is a large part of why the intervening downturns have been shorter.