EFFECTS OF THE GREAT RECESSION ON THE US

 

The beginning of the great recession was marketed by bursting of housing bubble estimated at $8 trillion. Given the subsequent loss of wealth, consumer spending reduced dramatically. Together with financial market chaos, the loss in consumption due to the bursting of the bubble resulted in reduced business investment. As a consequence of the reduced business investment and consumer spending, many people lost their jobs. The United States labor market lost approximately 8.4 million jobs during the period between 2008 and 2009 (Hurd & Rohwedder, 2010). After the great recession, the economic growth has not been robust enough to compensate the lost. The financial crisis has had a wide range of effects, for instance, around 39% of households had been unemployed between November 2008 and April 2010. The unemployment led to the reductions in spending. During the great recession, the US experienced a drastic drop in the real Gross Domestic Product (GDP) because the unemployment caused reduction in spending (Connaughton, 2010).

 

This is evident in the graph below:

Accessed on October 16, 2016 from

https://staticseekingalpha.a.ssl.fastly.net/uploads/2010/11/1/saupload_realgdp3rd20073rd2010.png

The financial crisis resulted in manufacturing crisis; it resulted in the highest declines in industry production in economics that are export based. This is indicated by the graph below. A plunge in the volumes of exchanges is indicated by the second half of 2008.

 

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