Recession vs. Depression
By the time we formally identify a recession, we're already pretty deep in it.
Key Takeaways
It’s considered a recession if a country's GDP goes down for at least two consecutive quarters.
A Depression is a very severe recession, one that lasts longer, and where indicators are disastrous, rather than just bad.
Recession doesn't have a universally accepted definition.
According economists, we identify a recession when a country's GDP goes down for at least two consecutive quarters. So for example, if the third quarter GDP is lower than the second quarter GDP, which itself was lower than the first quarter GDP, some countries like the United Kingdom and European Union nations track the inflation adjusted GDP instead. Both versions are what we would call lagging. In other words, by the time we formally identified the recession, we're already pretty deep in it. In the United States, the go-to definition tends to be a pretty broad definition provided by the National Bureau of Economic Research:
A recession represents a significant decline in economic activity, which lasts more than a few months and can be spotted in inflation adjusted GDP growth, personal income, employment, industrial production, and wholesale retail sales. 1
What's a Depression ?
A depression is basically a very severe recession, one that lasts longer and where indicators are disastrous, rather than just bad. So while an unemployment rate of 10% makes us think about a recession, a 22% unemployment rate would put us in depression territory.
In the US, the only depression pretty much everyone agrees on is the Great Depression of 1929. Needless to say, it can be considered that the weaker the country, the more prone it is to depressions.
https://www.nber.org/research/business-cycle-dating