Volatility: Buckle Up
August 27, 2019
Recession Shapes
In Recovery
May 28, 2020
The question on everyone’s minds right now: when is the coronavirus recession going to end?
Recession recoveries tend to take one of several shapes: V, U, W, and L. The best is a V-shaped trajectory. It represents a steep economic decline followed by a quick recovery to its previous growth rate. With a U-shaped recovery, the recession lasts longer, but growth eventually returns to normal.
The W- and L-shaped recoveries are less desirable than the V or U. In a W scenario, the economy declines rapidly, recovers quickly, and then hits a second steep decline. The consecutive downturns can take a tough toll on people trying to get a handle on financial uncertainty.
The L-shaped recovery is the most difficult. It represents an extended period of high unemployment and stagnant growth, as was the case in the Great Depression of the 1930s and Great Recession of 2007 to 2009.
Learn more about recession shapes.
Notes on a Recession
- The unemployment rate peaked at 10% during the Great Recession. Within the first two months of the coronavirus crisis it reached 14.7%.
- People long for comfort during downturns, which is why foods like Hormel chili and Kraft mac and cheese were big sellers during the last recession.
- While it’s tough not to compare the Great Recession and the current crisis, there are silver linings. One is that banks are better prepared this time around, in large part due to regulations that were written into law to prevent a collapse like the one that happened in 2008.
