What we've learned about recessions as Americans brace for impact
Economic recessions may seem like a tidal wave: You can see them coming from a mile away — the problem is getting out of their path.
As Americans brace for another possible downturn, experts note that while they have common features, no two recessions are precisely alike. Some slumps, like the one that kicked off in 1973 as oil prices spiked, originate on the supply side. Others, like the Great Recession that followed the housing crash, are triggered by a sudden drop in demand that vaporizes consumer spending.
Today, the main threat is searing inflation, forcing consumers to tighten their belts and the Federal Reserve to jerk back on its main economic stick — interest rates — in a desperate bid to throttle inflation.
"Every recession is different," said Darrell Cronk, president of Wells Fargo Investment Institute.
In this case, Fed officials are borrowing a page from former Chairman Paul Volcker, who in the late-1970s was tasked with lowering the country's runaway inflation — even at the cost of causing a recession in 1980.
"We saw very steep increases in interest rates starting in late 1979 — and going through into the early 1980s — in Volcker's ultimately successful effort to bring inflation under control. But it took a while," Lawrence J. White, professor of economics at NYU Stern School of Business, told CBS News.
Tight monetary policy to combat inflation also led to a recession in 1981-82.
After the storm
One professor of economics compared bracing for a looming recession to preparing for a literal storm.
"We have to watch and we have to pay attention. And we have to say, 'Look, if there's a hurricane coming, we prepare for the hurricane, we prepare for the storm.' And then we wait it out," Fordham University economics professor Giacomo Santangelo told CBS News.
In the early 2000s, a U.S. recession occurred when stocks crashed after the collapse of the dot-com bubble.
The Great Recession of 2008 was also visible on the horizon long before it crashed down on U.S. housing prices and set off the most severe global financial crisis since the Great Depression.
"In 2006, we absolutely knew we were going into a recession. Everyone knew. It was a question of when it was going to occur," Santangelo said.
In 2020, it was COVID-19 that caused the shortest recession in U.S. history — two months — in March and April.
If there's another lesson to be learned in sifting through economic history, it is this: Eventually, the country bounces back, although recoveries can be slow and grinding.
"We had inflation this bad and worse than this back in the 1970s. Before that, we had it. So we'll have inflationary periods like this again in the future. We recovered in the '70s. We're going recover from this," Santangelo said.