The Oil Embargo Recession (nov 1, 1973 – mar 1, 1975)

Description:

Duration: 16 months
GDP decline: 3%
Peak unemployment rate: 8.6%
Reasons and causes:

This long, deep recession began following the start of the Arab Oil Embargo, which would quadruple crude prices. That tipped the balance for an economy struggling with the devaluation of the dollar amid high U.S. trade and budget deficits and slipping domestic crude output.29 The collapse of the Bretton Woods Agreement fixing currency exchange rates contributed to a rise in U.S. inflation from 2.4% in August 1972 to 7.4% a year later, causing the Fed to double the federal funds rate to 10% between late 1972 and mid-1973.1930 After increasing the federal funds rate to 13% in the first half of 1974, the Fed cut it to 5.25% in under a year.28 Inflation and unemployment remained elevated after the recession ended, ushering in stagflation. Unemployment reached 9% in May of 1975, after the declared end of the recession.17

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