The Reality Around Recessions

  1. Just since 1980, there have been six recessions, an average of one every seven years.
  2. The longest was that surrounding the Global Financial Crisis. It ran for a year and a half from December 2007 to June 2009; GDP declined 5.1% from peak to trough.
  3. The shortest was the COVID-19 shock recession. It ran from February to April 2020, and took GDP down 19.2%.
  4. The average duration of the six recessions was 10 months, and the average GDP decline was about five percent. (Without the Corona Crash, the average GDP decline was a little over two percent.)
  5. The total number of months from January 1980 through April 2022 was 508. The total number of months of decline in the six recessions was 58. That is to say that during this period the U.S. economy was expanding 88% of the time.
  6. According to the Federal Reserve, real (inflation adjusted) GDP per capita in the first quarter of 1980 was $30,174. For the fourth quarter of 2021, it was $59,553. During these four decades when the American economy was experiencing six recessions (every one of which was reported in medias to be The End of Economic Life As We Have Known It) U.S. real GDP per capita doubled.
  7. On January 2, 1980 (the first trading day of the analysis I’m performing here) the S&P 500 closed at 106. As I write it is around 4,020. The dividend in 1980 was $6.44; in 2021 it was $60.40. The average annual compound rate of total return of the S&P 500 in this period was 11.8% (quite significantly higher than the long-term (95-year) average of 10.5%).

A reasonable observer might conclude from these data that, if one has anything remotely like genuine long-term perspective, recessions are somewhere between a blip and a distraction.