A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale-retail trade. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country's gross domestic product (GDP); although the National Bureau of Economic Research (NBER) does not necessarily need to see this occur to call a recession.
Recession is a normal (albeit unpleasant) part of the business cycle; however, one-time crisis events can often trigger the onset of a recession. The global recession of 2008-2009 brought a great amount of attention to the risky ...view middle of the document...
This loss of consumption, combined with the financial market chaos triggered by the bursting of the bubble, also led to a collapse in business investment. As consumer spending and business investment dried up, massive job loss followed. In 2008 and 2009, the U.S. labor market lost 8.4 million jobs, or 6.1% of all payroll employment. This was the most dramatic employment contraction (by far) of any recession since the Great Depression. By comparison, in the deep recession that began in 1981, job loss was 3.1%, or only about half as severe.
The job loss during the Great Recession has meant that family incomes have dropped, poverty has risen, and adults as well as children have lost health insurance. The bursting of the housing bubble and the drop in the stock market has meant that family wealth has dropped dramatically, as well. This feature highlights the impact of the Great Recession on the labor market and on working families.
More than 170,000 small businesses in the U.S. closed between 2008 and 2010, according to analysis by the Business Journals of U.S. Census Bureau data. There were 6.79 million small businesses in the U.S. in 2010, down from 6.96 million in 2008, according to the Business Journals.
Entrepreneurship plunged during the recession. The number of self-employed Americans fell 4 percent to 9.8 million between November 2007 and June 2009, according to U.S. Census Bureau data cited by the Federal Reserve Bank of Cleveland. Twelve percent more businesses shut down in 2009 than in 2007.
Many who were laid off during the recession started small businesses because they had no other choice. Eighteen percent of entrepreneurs that launched their own business in the last 12 months have done so after losing their jobs, which is double the rate before the recession, according to a recent poll by Wave Accounting.
But many of these small businesses are not exactly thriving. Nearly four in five businesses have no employees at all, and they make an average $45,000 per year, according to the U.S. Census Bureau. Meanwhile, the share of new startups that employ workers continues to fall, according to the Kauffman Index of Entrepreneurial Activity.
Factors That Cause Recessions:
* High Interest Rate: High interest rates are a cause of recession because it limits liquidity, or the amount of money available to invest.
* Increased Inflation: Inflation refers to a general rise in the prices of goods and services over a period. As inflation increases, the percentage of goods and services that can be purchased with the same amount of money decreases.
* Reduced Consumer Confidence: If consumers believe the economy is bad, they are less likely to spend money. Consumer confidence is psychological but can have a real impact on any economy.
* Reduced Real Wages: Real wages refers to wages that have been adjusted for inflation. Falling real wages means that a worker's paycheck is not keeping up with inflation. The worker might be...