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How the US Got Out of 12 Economic Recessions Since World War II

April 29, 2020 in History

By Dave Roos

From post-war recessions to the energy crisis to the dot-com and housing bubbles, some slumps have proven more lasting—and punishing—than others.

A recession is defined as a contraction in economic growth lasting two quarters or more as measured by the gross domestic product (GDP). Starting with an eight-month slump in 1945, the U.S. economy has weathered 12 different recessions since World War II.

On average, America’s post-war recessions have lasted only 10 months, while periods of expansion have lasted 57 months. Some economists predict that the COVID-19 pandemic will put an end to the longest period of economic expansion on record, which ran 128 months—more than a decade—from mid-2009 to early 2020.

February to October 1945: End of WWII

World War II was an economic boon for the U.S. economy as the government infused tens of billions of dollars into manufacturing and other industries to meet wartime needs. But with the surrender of both Germany and Japan in 1945, military contracts were slashed and soldiers started coming home, competing with civilians for jobs.

As government spending dried up, the economy dipped into a serious recession with GDP contracting by a whopping 11 percent. But the manufacturing sector adapted to peacetime conditions faster than expected and the economy righted itself in a tidy eight months. At its worst, the unemployment rate was only 1.9 percent.

November 1948 to October 1949: Post-War Consumer Spending Slows

When wartime rations and restrictions were lifted after WWII, American consumers rushed to catch up on years of pent-up purchases. From 1945 to 1949, American households bought 20 million refrigerators, 21.4 million cars, and 5.5 million stoves.

When the consumer spending boom began to level off in 1948, it triggered a “mild” 11-month recession in which GDP shrunk by only 2 percent. Unemployment was up considerably, though, with all former GIs back in the job market. At its peak, unemployment reached 7.9 percent in October 1949.

July 1953 to May 1954: Post-Korean War Recession

This relatively short and mild recession followed the script of the post-WWII recession as heavy government military spending dried up after the end of the Korean War. During a 10-month contraction, GDP lost 2.2 percent and unemployment peaked around 6 percent.

The post-Korean War recession was exacerbated by the Federal Reserve’s monetary policy. As would happen in many future recessions, the Fed raised interest rates to combat …read more