Employment in the United States  Index  105  105  100  100  95  95  90  90  85  85  80 0 4 8 12 16 20 24 28 32 36 Months since last pre-recession peak in employment  80 0 4 8 12 16 20 24 28 32 36 Months since last pre-recession peak in employment COVID-19 recession  1981–82 recession  COVID-19 recession  1981–82 recession  1990–91 recession  2001 recession  1990–92 recession  2008–09 recession  2007–09 recession  Sources: Statistics Canada, US Bureau of Labor Statistics and Bank of Canada calculations  Last observation: August 2022  A good example is the United States during the GFC, when a collapse in house prices left many indebted households and financial institutions over-leveraged or even in negative net wealth positions.
That set the scene for what’s known as a “balance sheet recession.” During this type of recession, key parts of the private sector are focused on rebuilding healthier balance sheets. That rebuilding process takes time. Paying down debt and accumulating savings may be good in the long term.