What characterizes a recession?

A recession is characterized by a significant decline in economic activity across the economy that lasts for an extended period, often visible in declining national income, employment, industrial production, and sales. Specifically, falling income is a key indicator, as it reflects the reductions in consumer spending and business investment that typically accompany a recession. When income levels fall, households have less money to spend, which can lead to a further decrease in demand for goods and services, perpetuating the economic downturn.

In contrast, increasing income, improved employment rates, and stable market conditions would typically indicate economic growth rather than a recession. During a recession, businesses may cut jobs and restrict production due to weakened demand, directly leading to lower employment rates and unstable financial conditions. Thus, falling income stands out as the defining characteristic of a recession, emphasizing the widespread economic struggles experienced during such periods.