5 types of recession that could happen in the United States


The recession in the form of ‘L’ is the most feared by economists.

Photo: corlaffra / Shutterstock

Many specialists say that a recession could happen in the United States in the coming months. However, keep in mind that not all recessions are the same as they come in different forms, so to speak.

Here are the five types of recession we could face:

1–U-shaped recession

A U-shaped recession indicates a sharp decline, with a long battle to get the economy ahead at the bottom before there is a recovery.. These are recessions that last one or two years.

Simon Johnson, a former chief economist at the International Monetary Fund, likened this kind of recession to being stuck in a bathtub. “You come in. you stay inside The sides are slippery. You don’t get out of the tub for very long,” he said.

In this type of recession, the economy will need to slow down for a while before the workforce and unemployment return to a normal level, Tell said. When that finally happens, things will go back to normal, but it may be a few years.

2–V-shaped recession

A V-shaped recession is exactly what it sounds like: a sharp drop with a top at the bottom and then a sharp upward slope. This type of quick and complete recovery is considered the best case scenario when it comes to a recession. Mind you, sometimes the dip into recession is steeper than the rise into recovery, as reported on CNN.

3–’W’ Shaped Recession

The dreaded double dip recession. This occurs when an economy goes from a recession to a recovery and then falls back into another recession.. A W-shaped rally is particularly painful for investors who reinvest when they believe the market has rallied before plummeting to a new bottom.

Remember that in 1980, the economy had a brief six-month recession and recovery followed by another 16-month recession that lasted from mid-1981 to late 1982. If the Federal Reserve is not aggressive enough in raising interest rates, some analysts say, this could happen again.

4–’L’ shaped recession

An L-shaped or “hockey stick” recession is what economists want to avoid at all costs. It means a fall for a long time, and often this recession turns into depression. This generally means that large numbers of workers remain unemployed for significant periods of time and that capital assets are idle.

The Great Depression of the 1930s was ‘L’ shaped, and some economists argue that the Great Recession of the late 2000s was of the same type, it took six years after the crisis for GDP to return to 2007 levels.

5–’K’ shaped recession

A K-shaped recovery is what happens when separate communities recover from economic downturns at different rates. That is some sectors of society may experience growth while others continue to lag.

These changes generally occur because of industrial, wealth, and geographic differences.

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Source-eldiariony.com