What is Recession

Everybody’s feeling down everyday whenever the news about the economy is up. The economic struggle of the country is on a bad condition as it has practically affected everyone, especially the regular American. The real estate industry, even with the help from the federal government, is still on a slump and we see record breaking numbers lay-offs across the country. The worst part of those lay-offs is companies are actually folding some of its operations and not because of expansion or outsourcing. That means even large scale companies are also feeling the sting of the economic downturn. We are constantly reminded in different media outlets today’s economic comparison to the great depression of the 30s and in the recession during the later decades.

These thoughts and information that we see everyday has led us to ask: are we in recession?

Recession even by itself is a very big word. It has a lot of causes and most certainly thousands of effects not only in this country but worldwide. As USA is a very important country, USA’s recession will not only be felt by its citizens but also by the citizens in other countries. Everyone is looking at the decisions made not only by stock brokers and large business but also by the federal government as they react to the situation.

By definition, recession is a slow down of the country’s gross domestic product or GDP. When the country experiences continuous slowdown in GDP for two quarters or six months, the country is most likely to go in recession. However, GDP is not only the only factor that determines recession. Stock market, unemployment rate is constantly rising and other economic indicators are also important factors in determining recession.

To be more specific, the GDP during the recession could be lower than 3%. That number alone suggests that the country is going to experience recession. Even though recession could technically happen at least in six months only, the effects of recession will be felt longer than that. In a case when recession happened in only six months, the economic effects could felt in more than a year.

In USA, the National Bureau of Economic Research or NBER is the government arm that determines whether the country is in recession or in the brink of recession. There is also a time wherein NBER has announced that the country has just experienced recession. But as the freedom of speech is encouraged in this country, there are so many people mostly intellectuals, who are saying that the country is actually experiencing recession.

In the international setting, there is actually no formal definition in different countries about recession. However IMF or International Monetary Fund could estimate the cycle of recession not only in a country but in a global setting as well.

Recession is a dangerous and a bleak reality for most that are not prepared or doesn’t have enough financial preparation. But in reality, recession is just an economic cycle. That means when recession happens that means the economy has taken a big hit and will be adjusting itself so that everyone could have an opportunity to bounce back fast.