Unemployment and Other Manifestations of Recessions

A high level of unemployment rate is evident whenever a country suffers from recession. When we speak or a recession, it refers to an economic condition in which a country suffers from two or more consecutive quarters of dwindling national economic output. This means that only a few people have buying power to purchase available goods and services supplied by manufacturers, producers, and business owners from different sectors of business.

Unemployment is one manifestation during a recession. As consumption of goods and services fall lower than the available of supply, then some businesses will naturally cut down on costs to help combat expected losses from large production costs which cannot be balanced off by the consumers who are expected to buy those goods. One measure is to dismiss some workers in order to save on overhead costs. With some businesses closing down as well and investors fearing for failure on return of investment should they engage in new investments, then new jobs won’t be available for millions of people looking for jobs.

Decrease in stock market investments will also be observed. When companies closing down become rampant, many investors will postpone betting their money on the stock market fearing that the returns are low or nothing at all. Shareholders may also be motivated to sell their shares at higher rates to avoid future losses, which may be deemed impossible due to the recession with fewer people aggressive enough to invest on high priced stocks.

Eventually, investments on other sectors will also decline. When recessions recently occurred in the United States, it was inevitable for the real estate, banking, and automotive industries to experience the most tremendous blows caused by recession. Financing of houses or cars through loans led to foreclosures which in turn caused slow returns of money on financial institutions, which prompted them to file for bankruptcies and execute layoffs.