Effects of Economic Recession on American Jobs - Research Paper Example

? 3 June, Effects of Economic Recession on American Jobs: Officially, recession in US commenced in December, 2007. Recession can be defined particularly as the decline of Gross Domestic Product (GDP) in three successive quarters. As per the record maintained by the National Bureau of Economic Research's Business Cycle Dating Committee, the recession was officially declared to have ended by June, 2009 (Reddy cited in Hall). There did occur a baby recession period in US in 2001, though the actual recession occurred in the years of 2008 and 2009. This was the most severe form of economic recession that US had experienced in decades. A vast majority of industries in US were affected by this economic recession. US could not find any way to escape the economic recession when the whole world had actually completely soaked in it. The circumstances took a fortunate turn in the last three months of 2009, and the economy began to grow and become strong, though the graph soon took a downward turn specifically in the later half of 2010 when the growth of GDP in US fell to 2 per cent. “The federal stimulus money that has added at least 1% but likely 2% or more to the GDP growth will be winding down and that could put at least as much of a drag on the economy as the boost it gave” (Hall). When the recession was at its apogee, the years were full of pain for a lot of Americans because they had lost jobs. According to an estimate, as many as three quarters of a million jobs were being lost on a monthly basis in US in the years of recession (Bureau of Labor Statistics”). The rate of unemployment in US reached 10.2 per cent by October, 2009. Since then, it has shown a slight decline and has reached 10 per cent. Before stabilizing, the unemployment rate in US is expected to go up till the end of 2011. A loop of negative feedback was introduced by the economic recession which is expected to keep dragging the US economy for a while in the near future despite the fact that the economic recession has largely declined. Some of the components of this loop are high rate of unemployment, inability of the unemployed to pay their mortgages and bills, and weakened wealth from loss of equity. People in US are suffering from lack of income. Their lowered financial status is causing them to save more and spend less. Owing to the tightness of the credit, people in US are finding it hard to purchase homes or establish new businesses. As a result of the declined consumer spending, businesses have lowered their production in an attempt to improve their efficiency. A lot of companies in US have downsized in the past two to three years and the rate of recruitment has declined accordingly. US government has shown a similar trend. The value of property has steadily gone down along with the property tax revenues. Accordingly, the sales have been lowered together with the sales tax revenues. Owing to the lowered incomes, and a lot of losses, income taxes have been lowered. On the other hand, US government is spending much more than ever before in order to cater for the needs of the unemployed. This has caused the US government to increase the payable fees as well as cut back services. As a result of this, governmental contracts and government employees have reduced in number. The Federal governments have plunged into the scenario in a very aggressive manner with a view to distorting the loop of negative feedback. The Federal governments aimed at minimizing the downfall of the global economy so that the loop of negative feedback would be reversed. However, as a consequence of the massive spending and increased involvement in economy, the US government now feels the need to retract itself so that the debt that has thus been incurred could be paid back. This can be easily achieved by if the US economy continues to grow like it did grow by 5 to 8 per cent after the end of economic recession. However, it is important to realize that the recovery of economy is not occurring in a V-shaped pattern. Instead, the economic recovery is likely to occur in a U shape or an L shape, thus making the process of recovery slower. “House prices fell between the fourth quarter of 2009 and the fourth quarter of 2010 in 98 of the 100 largest metropolitan areas” (Wial). Florida is among those states that has the worst property bubble in the US. Florida will take too long to have the housing market recovered. In the past, people used to let go of the house into foreclosure. This trend has become obscene now and people tend to go delinquent upon the mortgage before it can be negotiated upon by the bank. It is expected that the market of housing in Florida will be a considerable blow to the economy in the near future. In addition to that, several other factors are also there to weaken the economy that include but are not limited to the consumer credit, student loans and the real estate. The resulting weakening of economy will cause unemployment to rise and Florida will keep suffering from the consequences of the economic recession for quite some time in the future. Unemployment has greatly affected a common man. The unemployed people do not have the option of moving over to better cities. Most of the people have long kept the search of job, and have resorted to accept anything that has come in the way. Few people have established businesses of their own, though on a small scale. This is not consistent with the demand of the circumstances resulting from the economic recession. Therefore, many people had reverted to schools in order to increase their education and enhance their competence in the career. This has been seen as a viable option because it has both provided people with a nice justification for break from the job and has enabled them to be able to seek better jobs after the end of the economic recession. In addition to that, it fills the gap created by the lack of employment in the resume. This is a far better solution for most people than having a huge gap in their employment record that has be explained on a resume – including establishing that the missing time was not spent in rehab or as an incarcerated guest of the state. (Hall). People who have higher degrees are able to acquire better paying jobs as compared to others that terminate their education at a lower level. According to Mankiw, history gives evidence for an additional $10000 per year of education after graduation. In fact, many people do not manage to get jobs after completing their Bachelor’s degree. This is one reason why people continue their education after graduation. Some researchers like Sasso are of the view that the job market will be worse for the graduates in the next five years. For several years in the future, unemployment will sustain in US. Further training and education is the only viable solution for a lot of Americans that are suffering from the effects of economic recession, and are currently unemployed. The harsh reality is that every year that an individual loses job, it is essentially a loss of productivity of a man-year or a woman-year to the economy of US. Waiting to regain the lost job is not a wise option to go for. More jobs can be freed up by causing the baby boomers to withdraw. By the year 2020, the world will experience great shortages of labor as a result of the demographics of baby boomers. “The Great 2007–2009 Recession was the worst economic downturn since the Great Depression.” (Hughes and Seneca 1). The economic recession which started in December, 2007 has generally brought a lot of pains for many countries in the world in general, and for US in particular, though it has also done considerable good to the world in that it has dawned the loopholes of the conventional wasteful and obsolete business models upon people. It will allow the regulators to catch up with all of the people behaving badly; the wasteful and greedy unethical ones that helped fuel the bubbles that led to such a massive collapse of housing and complicated financial instruments based on over inflated asset valuations. (Hall 1). After the economic recession has worn away, the biggest issue that the companies as well as the government has to address is of sustainability. After the end of economic recession, efficiency and sustainable development have become the primary criteria of success. Businessmen face the challenge of establishing such businesses that would be sustainable as well as environment friendly. This is a big challenge specially when the market scenario has been greatly affected by the economic recession. Economic recession has caused a lot of trouble to a common man in America and the sufferings are expected to sustain for some time in the future. Works Cited: “Bureau of Labor Statistics.” United States Department of Labor. 2011. Web. 2 Jun. 2011. . Hall, Elmer. “Lessons of recessions: sustainability education and jobs may be the answer.” Journal of Sustainability and Green Business. N.d. Web. 2 Jun. 2011. . Hughes, James W., and Seneca, Joseph J. “Post-Recession America: A New Economic Geography?” Advance & Rutgers Report. 2010. Web. 3 June 2011. . Mankiw, N. G. Principles of Economics, 5th ed, Thomson/South-Western, 2009. Print. Sasso, M. “Florida jobless rate could stay high until 2018.” Media General News Service. 2009. Web. 3 Jun. 2011. . Wial, Howard. “March 2011 — MetroMonitor: Tracking Economic Recession and Recovery in America’s 100 Largest Metropolitan Areas.” 2011. Web. 3 June 2011. . Read More