What Is a Double-Dip Recession?

A double-dip recession is when another 澳洲幸运5开奖号码历史查询:recession happens after a short-lived recovery from an initial recession. For whatever reason, after the initial recession has passed, the recovery stalls, and the second recession sets in just as, or even before, the economy has fully recovered from the losses of the 🧜initial recession.

One indicator of a double-dip recession is when 澳洲幸运5开奖号码历史查询:gross domestic product (GDP) growth slides ♓back to negative after a few quarters of positive growth.

A double-dip recession is also known as a 澳洲幸运5开奖号码历史查询:W-shaped recovery. 

Understanding Double-Dip Recessions

A double-dip recession occurs w🐬hen the economy suffers an initial recession and then begins to recover, but then something happens to disrupt the process of recovery. Major economic shocks, ongoing debt deflation, and new public policies that increase price rigidities or disincentivize investment, employment, or production can often lead to renewed rounds of recession before the economy can recover fully. 

There's also often a slowdown in the production of goods and services that brings 澳洲幸运5开奖号码历史查询:renewed layoffs and investment cutbacks from the previous downturn.

Some indicators of a double-dip recession include high or accelerating consumer price 澳洲幸运5开奖号码历史查询:inflation during the initial recession. During the interim recovery, sluggish job creation, signs of secondary 澳洲幸运5开奖号码历史查询:asset price bubbles yet to burst, and/or renewed rise in unemployment can occur.

Inflation Begets Recession: The Early 1980s

The last double-dip recession in the United States happened in the early 1980s, when the economy experienced back-to-back recessions. From January to July 1980, the economy shrank at an 8% annual rate. A quick period of growth followed, and in the first three months of 1981, the economy grew at an annual rate of a little over 8%. The economy fell back into a recession from July 1981 to November 1982.𝓀 The economy then entered a strong growth period for the remainder of the 1980s.

The seeds of a double dip recession were laid in the early 1970s when President Richard Nixon famously𒀰 “closed the gold window✨”, breaking the last link of the U.S. dollar to anything resembling a commodity standard. This converted the U.S. dollar into a full 澳洲幸运5开奖号码历史查询:fiat currency with zero physical constraints on the ability of the Federal Reserve to creat꧙e unlimited quantities of new money. 

This led to high and at times rapidly accelerating erosion of the dollar’s purchasing power throughout the 1970s, rising to 15% consumer price inflation per year by the end of the decade. Persistent inflation in the 1970s led to a situation known as 澳洲幸运5开奖号码历史查询:stagflation—high unemployment combined with high inflation—and there were fears that the dollar might collapse amid 澳洲幸运5开奖号码历史查询:hyperinflation or a 澳洲幸运5开奖号码历史查询:crack-up boom. 

In 1979, Pre🅰sident Jimmy Carter appointed Paul Volcker as Chair of the Federal Reserve. Volcker dramatically slowed the rate of growth in the U.S. money supply to bring price inflation under control. 

This provoked an immediate, but relatively short, recession through the first half of 1980. Through the second half of 1980 and into the end of 1981 the economy began to recover. Real GDP rose, but unemployment and inflation both remained stubbornly high at around 7.5% and 8.8% (respectively) through this period. 

With inflation again accelerating in late 1981, the Volcker Fed maintained its tight money/high interest rate policy and the economy re-entered recession. Unemployment rose to 10.8% by the end of 1982. During this time Volcker faced increasingly sharp criticism and even threats of impeachment from the U.S. Congress and Treasury Secဣretary Donald Regan. 

In the end, however, inflation was brought under control and the economy quickly recovered from the recession. Unemployment fell from its peak just as sharply as it had risen, in a V-shaped recovery, and the economy entered a new era of relatively stable growth, low unemployment, and mild inflation later known as the 澳洲幸运5开奖号码历史查询:Great Moderation. 

The Bottom Line

A double-dip recession occurs when a short-lived rec🐼overy after a recession is followed by another recession, preventing the economy from fully recovering from the initial drop in economic activity.

Economists have identified several causes for a double-dip recession, including ongoing inflation and public policies that disincentivize investment, employment or production of goods and services.