What is a recession? What are its influences?


Whether you are a trader or not, you may have the impression that the media will bring up “recession” again after a while, and sometimes even “depression” will appear at a later time. So what exactly is recession?

What is recession?

Economic recession refers to a period of economic stagnation or negative growth. Different countries have different definitions of recession, but the United States has widely applied negative economic growth for two consecutive quarters to define a recession. In macroeconomics, it is usually defined as ” in a year, the growth of a country’s gross domestic product (GDP) has declined for two or more consecutive quarters.” However, this definition has not been widely accepted by countries worldwide.

The impact of the recession


Unemployment is especially high during recessions. Many classical economists believe that there is a natural index of unemployment that can be used to subtract the real unemployment rate to calculate negative GDP gaps during recessions. In other words, the unemployment rate will never reach 0%.
The impact of a full-blown recession on employment could last for several quarters in a row. The United Kingdom’s research shows that low-skilled, low-educated workers and youth are the most vulnerable to unemployment during a downturn. After Britain’s Recession in the 1980s and 1990s, it took five years for unemployment to fall back to where it was before. Many businesses have been observed to experience sequential increases in employment claims during recessions.


In the early stages of a recession, productivity tends to fall and then rise again, weaker business changes their strategies, and the company’s profitability will increase sharply. Recessions also provided opportunities for anti-competitive mergers but negatively impacted the overall economy: such as the period when competition in the United States wore off led to prolonging the Great Depression of the 1930s.

Social effect

People who live on wages and salaries are more affected by recessions than those who live on fixed incomes or benefits. Losing a job can negatively affect family stability and an individual’s health and well-being.

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