With talk of major layoffs, bank closings and the stock market plummeting, many people are talking about economics and throwing around terms like recession and depression. The problem is that many people don't know what the terms actually mean or when to use them appropriately.
To some people, any time the economy seems bad, it is a recession. This is simply not the case. A recession, in economic terms, is a period of at least six months of negative growth of the gross domestic product.
Of course, to most people, that sounds like gibberish. What it means is that the economy can't just be slow, it has to actually be getting smaller. Despite the feeling nationally in the first half of 2008 that the economy was bad, it was not recessionary. The growth had slowed and the economy was stagnant, but it was not actually getting smaller.
The problem with the term recession is that it is measured based on the national economy and may not accurately reflect what is happening in a specific state. The same problem exists when talking about a depression. An economic depression is a period of economic shrinkage that lasts for several years.
Most Americans are familiar with the term because of the Great Depression beginning in 1929, but few people recall the details other than the stock market crash and the rush on the banks in October of 1929. What they fail to recall is that most of the 1930s saw massive unemployment, bread lines, and mass migration as people moved around the country looking for jobs, housing and food.
Another important factor about economic depression is that it tends to be on a much larger scale, afflicting several nations or even the whole world rather than just a small area. Within the United States, some areas, specifically the Rust Belt of Michigan and Ohio, have been experiencing recessionary symptoms for several years. Both areas have had massive job loss and declining production rates.