If gross domestic product growth (or other economic indicators) are graphed against time, a “w” shape will appear if a double-dip recession is present. In many cases, this “w” shape is not symmetrical. Instead, the first half of the “w” is much steeper, with the first part of the recession hitting harder than the second part. The first upward slope also tends to be rather short, showing a recovery that is merely temporary.
In the history of the United States economy there are two clear examples of double-dip recessions. The first was during the recession of 1937, which occurred due to the government restriction on spending. The second was during the recession in the early 1980s, which was almost an intentional recession caused by the United States government’s anti-inflation policies that were created in response to increasing oil prices.
There are a few reliable determinants that allow economists to predict whether a “v-shaped” recession will become a “w-shaped” recession. These determinants rely on the time period during the first recovery. One determinant is investment; if businesses refuse to invest and upgrade their businesses during the recovery, it is likely the recovery will only be temporary. High unemployment rates also predict a double-dip. Finally, an increase in the dollar’s strength implies a second dip, as such an increase implies a stronger reliance on imports and lack of reliance on exports.
Less informative determinants can also give economists insight into whether a double-dip will occur. Production rates are somewhat useful predictors, although they are easily influenced by factors that are not entirely economic (such as population growth); a decrease in production rates implies a possible second dip. A general movement away from corporate bonds into safer government bonds also implies the coming of a second dip, although economists should also look at the yields offered by these securities in their analyses.