An economic recession is defined by a negative growth in gross domestic product for two consecutive quarters. In other words, the gross domestic products are decreasing in production. Recession is a national or world even regional event.
Economic recession lasts from six months until a year or two, which could be the worst time frame for a recession. Based on the experience of the United States with its last three recessions, the labor- market recession would last between three to four years. (Schmitt and Baker, 2008) with the actual recession only happening for more than a year and a half. The effects of a recession could be felt longer than the actual span of the recession itself.
There are several telltale signs that a nation or region is experiencing economic recession. MarketWatch lists seven things to watch out for to be full-warned for an economic recession event.
Accoding to MarketWatch, it is important to look at the increase of interest rates in the credit market. Lenders are tightening lending policies because of market troubles. Companies not making any profits is another sign of a recession.
Skyrocketing oil prices are also indicators of a recession. Oil prices have big effect on the economy, especially if the economy is experiencing little growth. Oil is not the only one increasing their prices. Prices of essential commodities are
also increasing. But the stocks and property prices are going down but nobody is purchasing them.
Housing problems and foreclosures are also clear indicators. Foreclosures happen when people and consumers are unable to pay mortgage and finance homes. Borrowers are failing to pay back loans for homes, vehicles, businesses and credit cards. Even banks and credit unions are missing out payments for their financial obligations due to borrowers unable to repay their loans.
There is also a relative increase of people truing to pay their bills with credit cards. Credit card purchase is increasing. This means that people are having problems paying cash. Using credit card to pay for loans despite excessive interest rate shows desperation.
Consumer spending or making sure that the money from the consumers return to the economy is also something to check. Government intervention in economic crisis resulting to fruitless efforts can also be a warning.
There is also a relative increase of unemployed people. During an event of a recession, companies tend to release workers due to low production demand. Low production demand means lesser income for the company owners. Companies and firms are then obliged to release employees to reach the target income. For the last seven years, unemployment has been rising steadfast in the United States. Overall employment, which is still high is historical terms, is declining since the start of 2008.
So how can ordinary people foresee recession?
AOL listed some interesting real life indicators that we are experiencing economic recession. People are stealing not only the whole car but different car parts from vehicles in parking lots. An example is a catalytic converter, which helps the car’s emissions. Meanwhile, inside retail stores, lesser people are shopping for merchandises. They are now opting for wholesale store membership.
Personal and family affairs, like weddings, are also being regulated in terms of guests and food. While corporations are cutting back on country club memberships and out of town travels.
Car companies are having difficulties getting buyers even with lots of incentives. Suddenly, the most popular restaurants in town does not have any waiting list at all. Small and local business are closing because they can’t keep up with the expenditure.
There can be countless ways of figuring out if a nation is suffering from a setback like an economic recession. But if these signs can be immediately detected and can give us a hint on our economic and financial future, then we should be better learn how to read the signs. Or we might not have the future.