In 1975 an article suggested that there were several rules for defining a recession. One of these rules eventually became a useful tool & the rest were eventually forgotten. That rule was “2 down consecutive quarters of GDP.” Some other economists liked to define a recession as a 1.5% rise in the unemployment rate in a 12 month period. In the United States the definition used by the National Bureau of Economic Research, which is known as the authority on the subject, is a significant decline in economic activity spread across the economy, lasting more than a few months. In America almost everyone refers to the determination of the NBER for official dating of the onset and end of a recession.
The housing market correction in America & the sub prime mortgage crises have contributed enormously to the most recent recession in their history. The recession recorded the first fall in private consumption in almost 20 years. Anyone who has lost their home to a mortgage default or moved due to other financial woes are well aware of the consequences of the recession. Unfortunately, because consumers have so little confidence in the economy the recovery will be slow. Consumers have been hit hard by this recession, seeing the stock market destroy much of their savings as well as their pensions & the housing market crashed costing some of them much more. This is all on top of raising unemployment. People no longer feel safe in their position & the economic recovery shows it.
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Economic data officially recorded a substantial number of countries were in recessions in 2009. The recession the United States entered in 2007 lasted halfway through 2009 & many countries followed right behind them. During these recessions business productivity falls during the early stages but rises after the fall of weaker businesses. There is always a sharp variation in the profitability of firms during these times & recessions tend to provide the chance for non-competitive mergers. This can have a negative effect on the overall recovery & could have contributed to the length of the great depression in the 1930’s. People who rely upon a fixed income such as social security or welfare are usually less effected by recessions than those who earn wages or a salary. Losing a job is known to have an impact on the psychological & physical well being of individuals as well as the stability of their family.
The trains of thought about recession recovery are many & varied. Most economists tend to feel that recessions are caused by not having enough aggregate demand in the economy. These people favor expansionary macroeconomic policies to be put in place during times of recession. Supply side economists might issue tax cuts to promote capital investment & Monetarists would likely favor using expansionary monetary policy. Keynesian economists may use increased government spending to spark the economic growth. The administration is almost always credited with a recession which has set off debates about the exact dates of recorded recession.