Recession
Plain definition
A recession is a significant, widespread decline in economic activity lasting more than a few months, visible in real GDP, employment, incomes, industrial production, and retail sales. The common rule of thumb is two consecutive quarters of falling real GDP, though this is not the official definition.
In economics
Recessions are the contraction phase of the business cycle, and policymakers fight them with stimulus: central banks cut interest rates and governments increase spending or cut taxes. The official arbiter in the United States is the NBER's Business Cycle Dating Committee, which looks at the breadth and depth of decline across many indicators — meaning a recession can be declared without two straight quarters of falling GDP, or vice versa.
Example
In 2020, the U.S. entered recession in February and exited in April — only two months — because the COVID-19 shock caused an extremely deep but brief contraction. Despite the economy growing again in Q3, the NBER dated the recession by the depth and diffusion of the decline, not the two-quarter rule of thumb.
The two-quarters-of-falling-GDP rule is the most common confusion: it is a journalist's shorthand, not the official criterion. The NBER defines recession by a significant decline in activity spread across the economy lasting more than a few months. A recession is also not a depression — depressions are far deeper, longer, and rarer.