The Economy During The Recent Recession
March 15, 2013
A recession is defined as a decline in a country’s GDP (gross domestic product) or when the economic growth in negative, two or more consecutive quarters. The state of the economy during the most recent recession was the worst since the Great Depression. In 2008-2009, the economy decreased within five quarters, including four quarters consecutively. Two quarters showed a decrease more than 5% and Q2 in 2008 dropped 8.9%. This was the lowest drop in a recession since the Great Depression. In Q3 2009, the recent recession ended, because of economic stimulus spending. The recent recession ...view middle of the document...
In months prior to the recent recession, the number of job openings reached a pre-recession peak of
4.8 million in March 2007. Then a decline began even while employment continued to increase to 138 million in January 2008. Throughout the recession, employment declined 5 percent while at the same time job openings decreased 44 percent. Also, the recession caused mass layoffs. Once fifty claims are filed against an establishment for unemployment insurance within a consecutively 5-week period mass layoff will occur. According to the Mass Layoff Statics, in February 2009, there were 3059 mass layoff actions made by employers involving 326,392 workers making it the highest since the data series began. However, financial activities experienced a 3.9 percent decline in employment more than any other industries. The recent recession also affected the establishment births and deaths. As defined by the Business Employment Dynamics, an “establishment birth” is the opening of a new business; an “establishment death” occurs when a business closes. Within the last 3 months of March 2009, a loss of 235,000 establishment deaths and 172,000 establishment births in the private sector resulted in a net decrease of 63,000 establishments. This was the greatest decrease since the data series began in 1992. In comparison to 2010 dollars, the average amount of a consumer unit (“household”) was $46,119 in 1984, and in 2006 it peaked to $52,349. Since the recent start of the recession, on average consumer spending dropped from $52,203 in 2007 to 48,109 in 2010. (Consumer Expenditure Survey 1984-2010) During this recent recession consumer spending decreased in every major category (cash contributions, apparel and services, food away from home, entertainment, healthcare, food at home, personal insurance and pensions, and transportation and housing) except healthcare. During a recession, productivity is more likely to fall than in an economic expansion. Out of the 11 recessions 3 of them had their output fall more than their labor input it leads to a fall in the nonfarm business sectors. With any recession a reduction in the growth of wages and salaries are typical. The Employment Cost Index – which measures the change in the cost of labor, free from the influence of employment shifts among
occupations and industries- has been called a “lagging indicator” (www.bls.gov). During 2007-2009, the salaries and wages of private industry employees slowed to 1.3 percent which was far below the 3.6 percentage in March of 2007.
During the recession In the spring 2009, a decrease in US consumer demand caused the automobile industry, General Motors and Chrysler to go bankrupt. Both companies have remained stable due to an emergency loan proposed by President George W. Bush that was objected to by Congressional Republicans.
In October 2008, the U.S. Congress passed the Emergency Economic Stabilization Act of 2008, which then adopted the TARP (Trouble Asset Relief Program)....