A cyclical period of serious decline in the national economy, characterized by temporarily decreased levels of business activity across most economic sectors, and consequently by decline in Gross Domestic Product, relatively higher levels of unemployment, rising numbers of business bankruptcies and (at least in the most severe instances) a falling general price level (deflation). A general business slump of somewhat less severity and shorter duration is typically referred to as a recession. There is no precise dividing line that is generally recognized by economists to distinguish a recession from a depression, and incumbent policy-makers since World War II have almost always resisted describing their contemporaneous economic situation as a depression, preferring the milder sounding term "recession." The term "recession" has largely replaced the older and more emotion-laden term "depression" in most economic literature as well, except in referring to such catastrophic slumps of the past as "The Great Depression" of the 1930s.

In the United States, there is a highly respected private academic research foundation called the National Bureau of Economic Research that is the uncontested leader in the collection and analysis of extremely detailed data measuring multitudinous aspects of business activity. The NBER, after exhaustive research, periodically decrees the definitive dating of the latest periods of decline and recovery in the business cycle -- but unfortunately NBER's procedures are so elaborate and so painstaking that recessions are nearly always clearly over by the time that NBER officially verifies that they have begun. Consequently, the NBER declarations are very useful for historians and economic theory-builders but definitely not for time-pressured policy- makers and journalists. While everyone is waiting for a definitive ruling by the NBER, there is a quick-and-dirty rule of thumb for identifying the onset of recessions that is almost universally employed by professional economists as a first approximation for policy purposes:

If inflation-adjusted Gross Domestic Product (or, alternatively, the closely related measure called Gross National Product) declines for two successive quarters (i.e., six months in a row), a recession has begun, and when inflation-adjusted GDP subsequently rises for two consecutive quarters, the recession has ended and recovery is under way.

[See also: business cycle, Gross Domestic Product (GDP), deflation]