Essay on life in a recession

According to the National Bureau of Economic Research, the most prolonged economic recession, which started in 2007 in the United States, has been over since June 2009. Nevertheless, American people are still experiencing its damaging consequences. Ordinary people are far more concerned with their family economics, and are in the midst of a struggle for their well-being. As Barack Obama claimed, for millions of unemployed people, for those who have trouble paying their bills from day to day, recession is still very real.
After the official end of Great Recession, real GDP has increased only by 2. 9%, U. S household net worth fell by 1. 5 trillion dollars comparing to 2007, and unemployment rate continues to grow, reaching 9. 8% in November, 2010. Poverty rate has recently jumped to 14. 3%, rising to the highest level in the past 15 years.
Sir Ronald Reagan once said: “ Recession is when your neighbor loses his job. Depression is when you lose yours.” Even though the Great Recession did not reach its most severe form, depression has settled into the lives of today’s Americans like Sam. Samuel is a derivative manager, one of the 13 thousand employees, laid-off by Citigroup in the first quarter of 2007. He is married with one child, a man in his early forties, who lost his job and failed his family. During the first few months after it happened, Samuel was desperately trying to find a new job, but to no avail. A while later, all family savings were spent on apartment rent in Manhattan, health insurance, car and son’s private-school bills. A former breadwinner, who is currently unable to sustain his family, became a houseman. After over a year of failing efforts to find a suitable job, Sam became a sales man for Chrysler. He and his wife started spending less money and valuing every dollar earned. They canceled their sport club membership and stopped going out for dinners together.
Samuel’s story is typical in American society, since the recession has especially impacted the U. S. labor market, due to employers’ reaction to sales drop and unavailability of credit, which resulted in mass layoffs from 2007 to 2009. Banks and investment funds suffered colossal losses because of mortgage crisis. During the first year and a half multiple characteristics of economic recession were easy to trace: 7. 3 million workplaces have disappeared, Americans lost 21% of their wealth, total domestic production and consumer demand started decreasing.
When labor demand had decreased, the labor demand curve shifted left, resulting in unemployment rate increase. This unemployment represents one of the classic types called cyclical unemployment. Conceptual frameworks of the expenditure approach to computing GDP indicate, that recession phase of the economic cycle is distinguished by the deficiency of total personal consumption expenditures. When total demand for products or services decreases, employment drops, and unemployment rate rises. For this reason cyclical unemployment is also called demand-deficiency unemployment. In return, unemployment decreases economic well-being of people, lowering consumer and investment demand, and decreasing savings.
Furthermore, unemployment is interrelated to country’s production, namely GDP. According to Okun’s law, 1% increase in unemployment rate decreases GDP growth rate by 2%.