A recession is a period of economic decline typically defined as two or more consecutive quarters of negative GDP growth. It involves a slowdown in economic activity, rising unemployment, and reduced consumer spending, but usually lasts less than a year or up to around a year. Recessions are relatively common and considered a normal part of the business cycle

. A depression is a much more severe and prolonged economic downturn. It is characterized by a sustained and dramatic decline in economic activity lasting several years, often defined as a recession lasting longer than three years or involving a decline of at least 10% in annual GDP. Depressions feature very high unemployment rates, significant drops in wages and production, widespread bankruptcies, deflation or very low inflation, and a sharp fall in consumer confidence and investment. Depressions are rare; the Great Depression of 1929–1941 is the most notable example in modern history

Key Differences

Aspect| Recession| Depression
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Duration| Several months to about a year| Several years (3+ years)
GDP Decline| At least two consecutive quarters negative| 10% or more annual GDP decline
Unemployment| Moderate increase| Very high; e.g., 25% during the Great Depression
Severity| Mild to moderate economic contraction| Severe and widespread economic contraction
Frequency| Common (multiple since 1850 in the U.S.)| Rare (only one major in U.S. history)
Economic Impact| Localized or national| Often global and long-lasting

In summary, a depression can be seen as an extreme, long-lasting recession with far more severe economic and social consequences