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U-Shaped Recovery

U-Shaped Recovery

What is a U-Shaped Recovery?

A U-shaped recovery is a type of economic recession and recovery that resembles a U shape when charted. A U-shaped recovery addresses the state of the chart of certain economic measures, such as employment, GDP, and industrial output. This shape occurs when the economy encounters a sharp decline in these metrics without a clearly defined trough but rather a period of stagnation followed by a relatively healthy rise back to its previous pinnacle. A U-shaped recovery is similar to a V-shaped recovery with the exception of that the economy invests a longer energy slogging along the lower part of the recession as opposed to immediately rebounding.

Understanding U-Shaped Recovery

A U-shaped recovery depicts a type of economic recession and recovery that charts a U shape, established when certain metrics, such as employment, GDP, and industrial output sharply decline and afterward stay depressed typically over a period of 12 to 24 months before they bounce back once more.

In April 2020, a 60% majority of CEO's surveyed by YPO, a global association of chief executives, said they were planning for a U-shaped recovery from the current recession. In a separate survey by Reuters, 55% of financial experts agreed on the prospect of a U-shaped recovery. In the event that these forecasts are right, they suggest a recession broadening well into 2021. Only the reality of the situation will surface at some point.

Common Recession Shapes

Recession shapes are shorthand concepts used by financial specialists to describe various types of recessions. Quite a few recession and recovery types may conceivably be charted, although the most common shapes include U-shaped, V-shaped, W-shaped, and L-shaped.

  • V-shaped recessions start with a lofty fall, but trough and recover quickly. This type of recession will in general be viewed as a most ideal situation.
  • W-shaped recessions start like V-shaped recessions, but turn down again after false indications of recovery are shown. Also known as double-dip recessions, because the economy drops twice prior to full recovery.
  • L-shaped recessions are worst-case scenarios, portraying recessions that fall quickly but fail to recover.

Examples of U-Shaped Recessions

Of the U.S. recessions charted beginning around 1945, approximately half have been portrayed by business analysts as U-shaped, including the 1973-5 recession and the 1990-91 recession.

1973-1975: Nixonomics, the Gold Window, and Stagflation

One of the most notable U-shaped recessions in U.S. history was the 1973-75 recession. The economy started to shrink in early 1973 and continued to decline or show only slight growth over the next two years, with the GDP dipping 3 percent at its most profound point before finally recovering in 1975. The roots to this recession lay in the inflationary policies of the former years to simultaneously finance the Vietnam War and the Great Society welfare state expansion under President Johnson, Keynesian deficit spending policies under President Nixon after him, and the resulting break of the last links between the U.S. dollar and gold.

The beginning of the recession was set apart by the 1973 oil crisis and increased oil prices as well as the 1973-74 stock market crash, one of the worst stock market downturns in modern history, which impacted all the major stock markets in the world. The recovery was set apart by persistently high unemployment and accelerating inflation that would portray the 1970's as the period of stagflation.

1990-1991: The Jobless Recovery

The deregulation of banks and savings and loans in the early 1980's started off a boom in commercial and residential real estate lending that really took off as the Fed loosened monetary policy and interest rates fell after the economy rose up out of recession in 1982. This boom would build into a debt bubble of dangerous mortgages and obscure banking rehearses that burst in the late 1980's in a debacle known as the S&L crisis. The resulting massive losses, debt deflation, and bank failures across the real estate and financial sector led to recession for the more extensive economy in mid 1990.

Though mild GDP growth reappeared the following year, job losses continued and unemployment rose through mid 1992, and total employment didn't recover its pre-recession level until 1993. Because of this, the recovery from the 1900-91 recession has been dubbed the Jobless Recovery, and can be viewed as an example of a U-shaped recovery.


  • U-shaped recoveries happen when a recession occurs and the economy doesn't immediately bounce back, but tumbles along the base for a few quarters.
  • A U-shaped recovery is purported because major measures of economic performance assume the state of the letter "U" during these periods.
  • Examples of U-shaped recoveries are the 1973-75 Nixon recession and the 1990-91 recession following the S&L crisis.