Every recession from U.S. history and how the country responded
U.S. quarterly gross domestic product dropped at an annualized rate of 32.9% in the second quarter of 2020 amid business closures and social distancing, with the overall economy down by 9.5% than the same time period in 2019. The dropoff is the largest since records began being kept in 1945, and more than tripling the previous 1958 record of 10%.
The sharp contraction proves the old adage that what goes up must come down, especially when it comes to the U.S. economy. Stacker looked at data from the National Bureau of Economic Research to get a sense of how the United States responded to recessions tracing back to 1785.
There are nearly 50 notable national economic declines in America’s financial past, some more detrimental than others. Not to be confused with an economic depression, a recession is the period of six months or two three-month consecutive quarters of real gross domestic product (GDP) decline. Other key factors that determine a recession, along with a GDP decline, are negative shifts in employment, manufacturing, retail sales, and income. Recession dates are defined by the National Bureau of Economic Research.
The reasons for America’s historic economic downturns are wide-ranging. Many were caused by the actions of the Federal Reserve as it tried to control for inflation, while others were the products of stock market crashes and corrections. One was even caused by a single man—Henry Ford—who closed his factories in the late 1920s to transition production from the Model T to the Model A. More than 60,000 workers lost their jobs during the six-month closure, putting a temporary halt to the otherwise “roaring” ‘20s.
The two greatest recessions in U.S. history, the Great Depression of the early 1930s and the Great Recession of the late 2000s, saw the stock market suffer tremendous losses and unemployment rise, reaching 24.9% during the Great Depression.
Included with each slide is information regarding what may have caused the dip, as well as what happened to help the economy recover. Adaptive fiscal policies, transitions from peace to war, and stimulus packages have been the primary factors in pulling the country out of recession.
Keep reading to learn more about every recession in U.S. history, and how the country responded.
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Panic of 1785
The economic boom that came on the heels of the American Revolution ended two years after the war’s final battle in Yorktown. The Panic of 1785 was caused by post-war deflation, an abundance of accrued debt, and overexpansion. Making the four-year recession worse was a lack of significant intercontinental trade and a fledgling country without credit or paper currency.
Copper Panic of 1789
When counterfeiters began circulating fake copper coins following the American Revolution, the value of real copper plummeted. Ultimately, the Copper Panic of 1789 led the U.S. to transition from coin to paper currency. The Bank of America in Philadelphia was the first institution to introduce a parchment banknote in place of low-quality coins, which quickly restored public confidence in U.S. currency.
Panic of 1796–97
The credit overexpansion begun in the early 1790s by the Bank of the United States led to low interest rates, inflation, and an investment bubble for things like infrastructure and real estate. That inflation affected the pricing of exports. Prices dropped, interest rates shot through the roof, and businesses folded. Deflation in the Bank of England exacerbated the economic distress.
Trade disruptions caused by pirates in 1801 inspired the First Barbary War. Meanwhile, the end of the French Revolutionary Wars in 1802 caused a slump in demand for wartime materials and supplies, and a significant dip in commodity prices.
[Pictured: Drawing of the USS Enterprise fighting the Tripolitan polacca during the First Barbary War, by William Bainbridge Hoff].
Depression of 1807
Amidst tensions with the U.K., President Thomas Jefferson signed The Embargo Act of 1807, a law passed by Congress that halted all American ships from trading in foreign ports.The plan caused a significant decline in product prices and trade measures, causing significant hardship for shipping industries in particular.
[Pictured: Cartoon of a merchant trying to smuggle goods out of the country during the Embargo Act. He is assaulted by federal authorities represented by a turtle. He exclaims "Oh, this cursed ograbme!" which is "Embargo" spelled backwards.]
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An economic downturn in 1812 was brought on by international trade restrictions and America’s expansion. The financial crisis was short-lived, as production for the War of 1812 infused the American economy with cash. As with many battles, the United States’ conflict with the United Kingdom promoted wartime profiteering, which enabled competitive pricing and higher trade volumes to boost the U.S. economy, under President James Madison’s administration.
[Pictured: A view of the U.S. Capitol of Washington before it was burnt by the British during the War of 1812].
Inflation followed the 1815 conclusion to the War of 1812, steeling the United States against a severe, six-year depression that was prolonged by the Panic of 1819. From the decline of cotton prices to faulty land speculation deals, the U.S. economy got hit from all angles, as banks produced more paper currency than their gold collateral and the U.S. credit system collapsed. This depression is considered the first “boom-bust” period in America’s financial history.
Just when America began to see some financial light after six years of depression, commodity prices capped, with nowhere to go but down. Trade took a turn for the worse, and employment declined. The United States got only a slight reprieve before the Panic of 1825, when a stock market crash devastated the economy.
[Pictured: Drawing of pedestrians on the street outside the Second Bank of the United States on Chestnut Street in Philadelphia, 1820s].
After Scottish investor Gregor MacGregor in 1822 duped American and British investors into believing in the imaginary country of Poyais, he collected hundreds of speculative bond investments for the Latin American land that didn’t exist. This money flowed alongside other investments throughout Latin America, leading to a bubble that inevitably burst in 1825 and caused an abrupt decline in stateside business activity. Many were left penniless, and British and American financial markets were severely disrupted. That same year, the Bank of England raised interest rates at the same time mining stocks fell, causing even more financial upheaval.
[Pictured: A Bank of Poyais "dollar", printed in Scotland].
When Britain banned American trade with its English colonies for a year, it caused an unexpected deficit. The trade decline, along with England’s credit issues at the time, caused a rise in unemployment and decreased personal consumption, inevitably causing further financial strain during President John Quincy Adams’ administration.
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President Andrew Jackson in 1832 demanded the Bank of the United States give up $10 million in federal funds and disperse them among state institutions. Within a couple of years, the president further instituted the Specie Circular, an executive order that stipulated federal land must be bought with silver or gold. That order, pursuant to the Coinage Act, resulted in severe credit restrictions for smaller financial institutions, precipitating the recession.
Outgoing President Andrew Jackson left the U.S. economy in shambles with the Panic of 1837, a time of high interest rates, little bank lending, and collapsing land speculations. Additionally, the price of cotton, which supported many U.S. southern states, suffered a 25% nosedive in February and March of 1937. This particular recession resulted in an extreme loss of public confidence in the U.S. currency system, which led to many bank runs, where consumers withdrew all their cash, in fear of losing it from institutional failure.
Late 1839–late 1843 recession
Following the Panic of 1837, alarm rose again when America broke into two distinct political parties that viewed the economy quite differently. With federal deposits barred from the national bank of the U.S., and species payments suspended, coin or bullion no longer held weight like paper currency. The money supply became a real concern as America slipped into one of the most sustained depressions of the 1800s. The severe economic deflation and debt default of the time has been studied by economists in an effort to avoid the same type of monetary downturn in the future.
When the railroad industry boom ended in Britain, the Commercial Crisis of 1847 overseas brought alarm to America, indirectly causing the Cleveland Trust Company Index to fall almost 20% within the year. A failed 1846 harvest exacerbated economic woes, as food prices fell sharply in 1847. More than 50 corn merchants folded in August and September of 1847, as did commercial investment firms underwriting the operations.
The California Gold Rush of 1849 turned the economic downturn up, giving the U.S. hope in its new West Coast wealth. Within the first three years of the flood of prized metal, approximately $2 billion in gold had been extracted.
[Pictured: Portsmouth Square, San Francisco, during the Gold Rush].
Not nearly as detrimental as other economic dips, the recession between 1853-1854 fell within the “Free Banking” Era of 1837 to 1863. Rising interest rates caused a dip in railroad investments, contributing to the significant loss in business activity during the time.
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Panic of 1857
The Panic of 1857 was largely influenced by a decline in the purchase of American agricultural products by Europe. An inflating railroad stock bubble, alongside a drop in the stock market and the folding of the Ohio Life Insurance and Trust Company, caused bank runs from Cincinnati to New York City. President James Buchanan urged state banks to follow federal guidelines to balance out banknotes and specie supply, specifically with the Independent Treasury, which allowed for federal funds to be placed in state banks.
[Pictured: The Run on the Seamen's Savings' Bank during the Panic of 1857].
Prior to the American Civil War, the U.S. economy slightly receded, with confederate notes creating issues between currency cost and money supply. Cotton prices peaked when the North and South began to battle.
At the conclusion of the Civil War, the U.S. economy began to deflate, as it had with most battles. The Reconstruction Era, along with the freedom of slaves, ushered in an era of some white men performing their own labor for the first time. Others forged deals with African American sharecroppers, effectively perpetuating slave labor. The banking system in the South suffered. With no hard cash needed, sharecropping began among landowners and freedmen, and with cotton at an all-time high, credit advancements were easily offered.
Financing the American Civil War and Reconstruction cost the United States and the Black Friday Gold Panic of 1869 caused by railroad moguls Jay Gould and Jim Fisk didn’t make matters any better. The ploy by the duo and collapse of the U.S. gold market pushed President Ulysses Grant to sell $4 million in federal gold, which caused the cost of gold to dive in a matter of minutes. Additionally, the slight recession was also fueled by a lack of consumerism and businesses not stockpiling.
Panic of 1873 and the Long Depression
In 1873, the largest bank in the U.S., Jay Cooke & Company, folded directly due to overextending itself in the construction of the Northern Pacific Railway, which inevitably led to the Great Railroad Strike of 1877. The Specie Payment Resumption Act, which allowed for the exchange of U.S. notes, also negatively affected the balance of currency cost and paper money supply. The six-year long depression was considered “the Great Depression” before the later, notorious financial failure in the 1920s and ‘30s.
[Pictured: A panicked crowd on Broad Street, New York City, after the closing of the stock exchange doors during the Panic of 1873].
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During this three-year downturn, the failures of Marine National Bank of New York City and the brokerage firm Grant and Ward caused the Panic of 1884 near the end of the recession, further exacerbated by a decline in the railway industry. The price depression at the time pushed the New York Clearing House to extend credit to failing banks, to avert even more financial loss.
Decreases of 14.6% in business activity and 8.2% in industrial action in this year's recession was partly due to the continued decline in the railroad system. Newfound electric street railways, the steel industry, and advanced communications continued to propel the U.S. economy forward. Advancements in lighting fuelled the oil market, and better business management kept the recession from being worse.
[Pictured: An editorial cartoon from New Orleans, advocating the switch from horsecars to electric streetcars].
The Panic of 1890 in England rippled overseas to America, causing a slight recession for ten months between July 1890 and May 1891. On the brink of bankruptcy due to risky Argentina investments, the near-collapse of Barings Bank in London caused a global financial distrust that other large banks, including Rothschilds, attempted to salvage. It was the last recession before the closing of the United States Reading Railroad, which would bring on the Panic of 1893 less than two years later.
Panic of 1893
The Panic of 1893 lasted for four years and led to the Free Silver Movement, which attempted to replace the former American gold standard. Additionally, the overextension of credit for the Philadelphia and Reading railroads caused even more economic downturn, as well as declining stock costs, hundreds of bank closures, and also the declining prices for wheat, which precipitated the panic.
Panic of 1896
The Panic of 1896 was somewhat milder than its predecessor, coming as the presidential election would determine the fate of America’s finances. Silver reserves dropped as dark horse candidate William Jennings Bryan became the Democratic candidate on a platform of abandoning the gold standard. William McKinley championed the gold standard, and his election would put an end to the silver movement and stabilize the economy.
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The Panic of 1901, followed by the first stock market crash, was set off by a fight over control of the Northern Pacific Railway that would create the Northern Securities Company. Those events, along with the assassination of President William McKinley in September 1901, set off a two-year recession. Northern Securities was sued by the federal government under the Sherman Antitrust Act, resulting in its dissolution.
[Pictured: Shocked man holding ticker-tape that shows stock symbols and numbers to convey information about trades, 1901].
Panic of 1907
The first global financial crisis of the century, the Panic of 1907—also called the Knickerbocker Crisis—was a three-week collapse of the stock market that caused a number of financial institutions to close their doors. A failed takeover attempt of United Copper by two speculators led to a run on Mercantile National Bank, the financier of the venture. The 13-month recession eventually led to the creation of The Federal Reserve system in 1913.
Panic of 1910–1911
The fallout from the Sherman Antitrust Act, which saw a number of major companies dissolved, including Standard Oil, helped set off the Panic of 1910-11. The two-year downturn saw commercial and industrial activity falter, and the national product grew by less than 1%. The country recovered in 1912, thanks to a good farming season accompanied by poor harvests in Europe.
The fallout from the panics of 1907 and 1910-11 set off another nearly two-year recession marked by income and production declines. The first Balkan War in 1912 put a strain on the world's economy and set the stage for World War I, with the consequences being felt in the U.S. a year later. The Federal Reserve was created in 1913 to control the country’s monetary system, and helped to stabilize the economy before the start of World War I.
Post-World War I recession
Production declined at the end of World War I, along with a surge in unemployment from soldiers returning home, creating a brief seven-month recession from 1918-19. The influenza pandemic of 1918 put a strain on the world’s economy as well, killing 675,000 people in the U.S. and 50 million worldwide. The U.S. ramped up natural resource production in 1919, doubling overall output in the next four years to help fill the needs of a war-ravaged Europe.
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Depression of 1920–1921
The economy limped into the Roaring Twenties, with 1920 representing the most deflationary year in American history. Prices fell nearly 37% and gross domestic product dropped 38%, as federal budget cuts made in an attempt to pay down war debt set off a deep financial depression. The tide turned as people began spending money on newer appliances like refrigerators, washing machines, and radios.
The Roaring Twenties took a 14-month break from 1923-24, as industrial expansion declined, helping set off a mild recession. The Revenue Act of 1924, a sweeping income tax reform proposed by Treasury Secretary Andrew Mellon and endorsed by President Calvin Coolidge, helped the economy recover by investing in businesses.
The recession that precipitated the Great Depression was brought on by Henry Ford ending sales of the Model T and laying off 60,000 workers while converting factories to produce the Model A. Demand for the Model A in 1927 quickly outpaced production, leading to increased hiring and economic stabilization.
The Roaring Twenties came to an abrupt halt, beginning with the Stock Market Crash of 1929, setting off the longest and deepest economic downturn in history. Dependence on the gold standard, droughts in the southeastern states, and increased tariffs pushed unemployment to a peak of 24.9% in 1933. Though it only officially lasted less than four years, thanks to the implementation of newly-elected President Franklin Roosevelt’s New Deal in 1933, the economy didn’t fully recover from the Great Depression until after World War II.
Recession of 1937–1938
The third-worst economic recession of the 20th century saw unemployment rise above 20% and real GDP to fall by 10%. Sharp cuts in federal spending to balance the budget, declines in production, gold sterilization, and stock market volatility helped spur the “Roosevelt Recession.” A reversal back to deficit spending, plus increased production leading up to World War II, helped spur economic recovery.
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Recession of 1945
The sharp decline in government spending after World War II caused a brief recession in 1945, although the unemployment rate was mostly unaffected. The transition to a peacetime economy saw gross domestic product fall nearly 13%. Policies enacted to help returning servicemen helped spur the auto and housing markets, helping to end the eight-month downturn.
Recession of 1949
The unemployment rate doubled to 7.9% from 1948 to 1949, as service members continued to return from war and enter the job market. Tightened monetary restrictions from the Federal Reserve and the announcement of President Harry Truman’s “Fair Deal” helped cause the short recession. The 11-month downturn came to an end as government spending began to increase during the lead-up to the Korean War.
Recession of 1953
Rising interest rates and decreased government spending at the end of the Korean War contributed to this brief, 10-month recession. Unemployment climbed from a post-World War II low of 2.7% in 1952 to 5.9% in 1954. The stock market remained strong however, as the S&P gained over 20%.
Recession of 1958
A sharp decline in new automobile sales, alongside high interest rates that stalled the housing market and tightened monetary policy, which was designed to curtail inflation, produced this eight-month downturn in the economy. The “Asian flu,” which caused 70,000 deaths in the U.S. from late 1957 to early 1958, also forced a slowdown in production and GDP. To ease the effects of the recession, the government relaxed mortgage rules, lengthened unemployment benefits, and accelerated construction projects.
Recession of 1960–1961
This 10-month economic slide was caused by the Fed tightening monetary policy, once again in hopes of mitigating inflation. The recession of 1960-61 preceded the third-longest period of growth in American history, lasting nearly nine years—shorter only than the economic growth in the 1990s and 2010s. Newly-elected President John F. Kennedy put an end to the recession with a 12-point stimulus plan that included a minimum wage, unemployment benefits, and widened social security benefits.
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Recession of 1969–1970
A push to balance the budget deficit from the Vietnam War, accompanied by the Fed tightening monetary policy to control inflation, ended the eight-plus years of growth the country had seen. The unemployment rate reached its peak at 6.1% in December 1970, one month after the mild recession officially ended. President Richard Nixon launched a series of policies that would temporarily put a stop to the downturn.
The 1973 oil crisis, during which time Arab nations in OPEC banned oil exports to the U.S., created a massive shortage that led the price of oil to quadruple. Inflation doubled to 8.8% from 1972 to 1973, with unemployment reaching 9%, resulting in the stock market crash of 1973-74, which cut the market nearly in half. Tax cuts in April 1975 helped spur spending and investment, leading the economy to grow for the remainder of 1975.
The Federal Reserve increased rates in the late 1970s in an effort to fight stagflation, leading to the 1980 recession. Declines in the construction and auto industries caused unemployment to climb to nearly 8% in 1980. The economy experienced a temporary recovery from the recession beginning in the summer of 1980, although the continued fight against inflation would spur another the following year.
Strict monetary policies aimed at reducing inflation produced the worst recession since the Great Depression. Manufacturing, auto, and construction industries suffered sharp increases in unemployment, which rose nearly 4% from 1981-82. Fed chairman Paul Volcker withstood pressure from Congress to loosen monetary policies, resulting in a 5% drop in inflation by October 1982, and the end of the recession.
Early 1990s recession in the United States
The Federal Reserve’s efforts to reduce inflation in the 1980s helped lead to a mild, eight-month recession from 1990-91. Other contributing factors included the savings and loan crisis of the late 1980s and a sharp rise in oil prices from Iraq’s 1990 invasion of Kuwait. Unemployment peaked at 7.8% in June 2002. The Gulf War helped stabilize oil prices, and the recovery was spurred further by the rise of the computer and technology industries, which saw family wealth and home ownership reach all-time highs.
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Early 2000s recession
The 2001 recession officially lasted from March through November 2001, although unemployment would continue to rise until June 2003. Following 10 years of growth in the U.S. economy, the crash of the dotcom industry after the Y2K scare and the events of 9/11 contributed to the eight-month recession. The Federal Reserve cut rates, and President George W. Bush signed extensive tax cuts to aid American families, which helped return the economy to growth in the fourth quarter of 2001.
The Great Recession of 2007-2009
Subprime mortgage lending, where banks extended home loans to those with poor credit, led to the Great Recession, which ran from December 2007 to June 2009, the longest economic downturn since the Great Depression. The Dow Jones Industrial Average, which eclipsed the 14,000 mark for the first time in October 2007, lost more than 7,000 over the next 18 months, reducing the average household wealth by 20%. In response, the Federal Reserve lowered interest rates to zero in an effort to spur investment, Presidents Bush and Obama each signed stimulus packages aimed to help citizens, while the auto and financial industries were given bailouts to prevent their collapse.
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2020 COVID-19 contraction
U.S. quarterly gross domestic product dropped at an annualized rate of 32.9% in the second quarter of 2020 amid business closures and social distancing, with the overall economy down by 9.5% than the same time period in 2019. The dropoff is the largest since records started being kept in 1945, more than tripling the previous 1958 record of 10%. President Trump on July 30 suggested the presidential election should be delayed as the economy, along with voting methods and overall safety during COVID-19, continued being debated. A second stimulus bill was still being worked on at the end of July as elements of the prior stimulus bill—including an evictions moratorium and enhanced unemployment benefits—expired.