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The Current United States Recession - Research Paper Example

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THE CURRENT UNITED STATES RECESSION NAME INSTITUTION Objective 1 A recession is an interlude of the general economic decline that is defined as a decline in the GDP for two consecutive quarters. This is typically accompanied by a turn down in the stock market, an appraisal of unemployment and a decrease in the housing market…
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The Current United States Recession

Download file to see previous pages... If the GDP decreases, it is a clear indication that the economy is performing dismally. Other indicators include national and personal income, and if these reduce, it is an indication of a recession. The retail sales reflect the purchasing power of consumers, so if there is a decline in retail sales, the country is likely to witness a recession. Evidence of a recession can be witnessed from a decline in government taxes due to the fact they are obtaining less taxable income and buying fewer goods that can be taxed. In the construction industry, the effects of the recession are felt when the sales of the houses drastically reduce. The construction industry is a segment of the financial system that is prone to recession. In the event a recession occurs it will be manifested in this industry. The purchasing power of consumers diminishes. The active growth seems to be slowed down near stagnation. Construction work therefore slows down due to the slump in the sales of the houses (Roubini, 2008). This in turn renders a lot of workers jobless. Expansionary fiscal policies have tried to limit the damage in conjunction with bailouts and government funds. With the recession, it is quite evident that the construction sector will face an extremely demanding task and it also threatens to limit any construction activity in the near future. Even despite the fact that the government is enthusiastic on prioritizing some of the infrastructure projects the spending cuts limit the job security for most of the construction workers. Additionally, the house building activity is likely to be restricted by the weak housing market activity and low house prices. The recession forces the prices of the houses to decline due to low purchasing power. In the society as a whole, the labor market is likely to decrease due to the lack of employment; consumer confidence is likely to diminish as they will be uncertain if they will be able to pay for the house once they are jobless (Cline, 2005). Investors in the construction industry are likely to pull out for fear of losing their money. Consumer spending is down to 4% since the recession began and the retail sales volumes have remained resilient. The recession has taken its toll on the labor market as the employment rate has fallen to 70%, which is much lower than in the previous quarter. The long term jobs are expected to be subdued. Apart from the public housing sector, the private sector also felt the effect of the decline on the economy. Due to the house price uncertainties and strict mortgage lending there has been a reduction in the sales. Buyer are opting for the “wait and see” approach to see if the prices can be reasonable. Objective 2 With reference to the business cycle, economic growth is not a steady phenomenon; rather it follows a specific pattern. These include an expansion of above average growth, a peak, a contraction of below average growth and a low point. The troughs are followed by periods of expansion and the cycle generally repeats itself, though not in a usual manner (New York Times, 2010). The fluctuations in economic growth are regarded as the business cycle. The business cycle is related to the economic activity which is a popular indicator of the GDP. Economists generally consider two consecutive quarters of negative GDP growth to act as an ...Download file to see next pagesRead More
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