The Interrelationships of Unemployment, Recessions, and National Economy

Many people don’t fully understand the economic circumstances that are directly linked to unemployment. Once the unemployment rate increases, a lot of us put the blame on huge organizations, the government, or other countries dominating the market competition within the country. If we are not fully knowledgeable on the basic economic conditions that affect unemployment, we may be putting the blame or understanding it wrongly.

There are specific state of affairs or business sector policies which may result to mismanagement and lead to serious effects to the society. When recessions first occurred in the early 2000’s the real estate industry have suffered several blows in their businesses due to unnecessary financing concept that eventually only lead consumers to huge debts and gave banking institutions slow returns on the approval of loans. Many bankruptcies were filed and layoffs were rampant. Many investments which could have generated more jobs were cancelled or postponed due to banking and lending institutions increasing loss in assets.

When unemployment rate increases, the number of times the term recession is spoken or heard also escalates. When a nation suffers from two or more consecutive quarters of declining gross domestic product then it suffers from recession. When better understood, people will automatically take into account how it affects trading in the stock market, influence unemployment rate, and disturb investments across several business sectors.

The country’s national economic output, also referred as its gross domestic product (GDP), is manifested by country’s status of employment, the supply and demand of goods and services, and the costs of such goods and services. The interrelationships between all these items measure a country’s GDP. Basically when GDP is high it may show an increase in available jobs so unemployment rate is low. Conversely, when GDP is low it may mean lesser available jobs for workers thereby causing an increase in the unemployment rate.