What makes a recession a depression? And what constitutes a recession in the first place?

Unfortunately, there's no simple answer.

The National Bureau of Economic Research (NBER) has declared a dozen economic recessions since World War II, the latest of which took place in early 2020. While there are a few rules of thumb to consider when labeling a recession, experts note that those rules can be broken.

"The bottom line is there's not really a concrete definition. Not only for depression, but even for a recession," said Gary Schlossberg, lead wealth investment solutions analyst at Wells Fargo. "It really is subjective."

What is a depression vs. recession?

According to the Federal Reserve Bank, there isn’t a standard answer.

A recession is often described by economists as a significant decline in economic activity that lasts more than a few months. Typically, this dip is visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

But Schlossberg noted that the rules aren't always hard and fast. NBER declared a recession in the early months of 2020, despite the economic slump lasting just two months ‒ much shorter than thetwo consecutive quarters of negative GDP growth that are often used to label a recession.

But that two-month slump was "so deep, and so pervasive, that the committee threw out the rulebook and said yes, this was a recession," Schlossberg said. "So you have to be careful about using that rule of thumb."

Meanwhile, there’s no standard definition for an economic depression, although it’s usually used to define a severe recession.

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At what point does a recession become a depression?

Most analysts say a recession becomes a depression when the GDP decline exceeds 10%. But Schlossberg said that's another rule that can "easily be broken."

For instance, that 2020 drop saw real GDP fall 9.6% from peak to trough ‒ close to the 10% benchmark. But Schlossberg said the dip was so short-lived that "nobody's talking about the 2020 experience as a depression, even though we came awfully close."

Was 2008 a recession or depression?

If we’re defining a depression as a period when the GDP falls more than 10%, no.

GDP in the U.S. fell 4.3% from peak to trough during the 2008 recession, according to a website maintained by the Federal Reserve Bank of St. Louis's economic research division.