Economies do not grow in a straight line. They expand, slow, contract, and recover, then do it all again. This recurring pattern is the business cycle, and it has been documented for centuries. No two cycles look exactly alike, but they share a rhythm.

The cycle has four rough phases. Expansion brings rising output and employment. A peak marks the high point before things turn. Contraction, or recession, brings falling output and layoffs. A trough is the bottom, where recovery begins. Some cycles are mild, barely a blip in the data. Others are brutal, wiping out years of progress.

What causes the turning points? Economists argue about this constantly. Some blame shifts in credit and interest rates. Others point to shocks like oil price spikes or pandemics. Still others emphasize swings in business confidence and investment. In practice, several forces usually combine. Governments try to soften the blows with fiscal and monetary policy, though their success varies.

Phases at a glance

• Expansion: growth, hiring, rising incomes
• Peak: maximum output before slowdown
• Contraction: falling GDP, rising unemployment
• Trough: the low point before recovery