Many industries are downsizing or simply going out of business. Thousands of people are finding themselves with either reduced hours, reduced wages or simply without a job. You may hear the terms “economic recession” tossed around a lot by the media and politicians but what does that really mean to you. It is obvious that the world is experiencing some hard times, especially the United States, so gathering all the information you can about recessions is absolutely crucial. This article will cover some of the basics regarding recessions. It can answer many of your questions and give you a general knowledge about what a recession is and how you can better prepare yourself for the times ahead. Don’t count on a quick income shortcut to bring you cash. However, sometimes just knowing what is happening with the economy can give you peace of mind that eventually it will end and things will get better.
How is an economic recession identified?
Julius Shiskin in an article published in the New York Times in 1975 gave several indicators of when a nation was in an economic recession. Only one has really stuck around and that is when there are two quarters where the Gross Domestic Product (GDP) is down. Other economists will also point to a rise in unemployment of 1.5% over a year time. The National Bureau of Economic Research (NBER) is the organization within the United States, and also referred to across the globe, for broadcasting the dates of a recession such as when it began and when it will, hopefully, end. Their definition and indicators are slightly more defined and broad than Shishkin’s. They believe that it is more than just down quarters of Gross Domestic Product. Indicators are also people losing their jobs, income levels falling and businesses losing revenue and downsizing, going overseas for cheaper labor and pricing or closing their doors. This has to happen over a set amount of time and has to last for more than a few months.
What causes an economic recession?
There is no way to give reliable causes or predictors of an economic recession. However there are some things that people now know can lead to a recession. One of these is a significant stock market decline but you will also see the stock market decline after a recession so this is one of those predictors that may not be completely accurate. Another predictor can be when the yields on Treasury securities decline and become worth far less. But really the one cause you can see clearly is if there is a rise in unemployment. This is a good indicator that a recession could be looming because it means that businesses are cutting back on their workforce because they are not making a profit. As the unemployment rates go up, governments help programs become overburdened. It is a vicious cycle and one that is hard to get out of.
Is the United States considered to be in an economic recession right now and if so, when was the last time?
Yes, the United States is now considered to be in an economic recession. But it has not been the first time nor will it be the last time. Since 1854 there have been 32 economic recessions. The last one occurred between March 2001 and November 2001 which only lasted 8 months. Prior to this recession, since the 1980’s, there has only been one that has lasted longer than 8 months and that occurred during July 1981 and lasted until November 1982. So far the recession the United States is in right now has lasted 20 months. It started in December of 2007 and so far economists have not given a clear date that they expect it to end.
What are the effects of an economic recession on the average consumer?
The very first effects that you see are in regards to credit. As the price of things rise, more people will turn to credit. Then you will often see jobs being cut, moved overseas or people having their earnings cut. That means that they are no longer able to afford their credit payments which can lead to loss of earnings by the credit companies. More people will see that it is harder to obtain credit due to those that have been forced to declare bankruptcy. People will have to start tightening their belts just so they can pay for their basic necessities. And as businesses lose more customers this means they will have to start laying off more people. As you can see it is a vicious cycle.
Mail this post
