Business cycle.
In plain English
The business cycle is the economy's recurring swing between growth and decline. An expansion is a stretch of rising output, hiring, and spending; it eventually peaks, turns down into a contraction or recession, hits a trough, and then recovers into the next expansion. In the United States, the National Bureau of Economic Research, a private nonprofit, is the recognized arbiter that dates the start and end of recessions, looking across a range of indicators rather than a single rule. Cycles vary in length and depth, so the pattern repeats but never on a fixed schedule.
01Why it matters
Where the economy sits in its cycle shapes jobs, wages, interest rates, and markets, so having a frame for expansions and contractions helps make sense of the economic news cycle without predicting its exact timing.
02The math, step by step
A long expansion sees hiring and spending grow, then conditions peak and slip into a recession where output and jobs fall, until a trough gives way to recovery. The NBER later marks the peak and trough dates by weighing many indicators together.
03What this is NOT
It is not a two-quarter rule in the U.S. That rule of thumb is common shorthand, but the NBER dates recessions by weighing many indicators, including jobs and income, not just two quarters of falling GDP.
04Receipts
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