What would happen if the US economy were to experience another recession similar to the scale of the Great Economic Depression, 1929? Wouldn’t your life change dramatically? The unemployment rate would rise from 9% to 25%, economic output, as measured by the Gross Domestic Product (GDP) would drop by 25%, from $14 trillion to $10 trillion.
Instead of inflation at 2%, deflation would cause prices to plummet by 10%! The entire World trade would shrink 65%. Can you imagine surviving through such a recession at a time when you’re just recovering from the previous downturn?
Could this happen again? Well, more than 50% economists are of the opinion that the United States is sleepwalking into yet another recession within the next 12 months.
Reasons that make the Americans worried about another economic depression
Economists are still not sure about the certainty of yet another economic depression soon after the economy started recovering from the last one. While there are some signs that point to a downturn, there are some that indicates to a pick up. Here are some reasons why most people in the US believe that there is another recession round the corner.
* Stocks: The stock prices fell by 2000 points in the last three weeks including July, August and September. Almost 500 million shares were traded in the month of August, 2011 but volatility is spooking the stock market investors as the industrial average of Dow Jones fluctuates by 400 points up and down in a particular day.
* Unemployment rate: There is no sign of the unemployment rate budging here and there. In the US, around 15 million people are looking for a job and almost 40% of them are searching for jobs for the last 6 months. Apart from this, an 8.3 million are working as part-time workers simply because they can’t find full-time jobs. A 2.8 million people are totally disgusted with the sluggish labor industry and they’ve surrendered. With such eye-popping statistics, the economy is certainly falling off the cliff.
* The housing prices: The housing prices fell to a new low of $158,100 in the month of February, 2011 and this is also down by a huge level. Foreclosures make up almost 35% of all the home sales and most homeowners are upside down on their home mortgage loans and can’t sell their homes in this sluggish market.
* Business credit: Enough business credit is not available presently. It seems that the banks are sitting on the cash are not willing to lend cash as they doubt the repayment ability of all the borrowers. However, the Americans are looking for a return from the $700 billion bailout.
Recession busting statistics – Knowing the contradictions of this report
Despite the financial pundits parading in front of the media claiming that the US economy is headed for another recession, there are some others who don’t see that reflecting in the data. Here are some compelling statistics that will let you know how the last week of October may prove pivotal in the recession debate.
* Automakers hit the accelerator: In the beginning of October, 2011, the new car manufacturers offered some indications that consumer spending is improving with time. General Motors reported a 20% improvement in US sales and Volkswagen checked in with 35%growth in sales.
* Retail registers improving: It is not only the cars that the US people are spending their money on, according to the US Census Bureau, the monthly sales report revealed an 8% increase and this is also a positive sign.
* Industrial production shows 3 year highs: The Federal Reserve is of the opinion that the manufacturing output is also improving and this is just another recession-buster stat.
In a nutshell, though there are economists who feel that a recession is imminent and some others how think that it is a distant memory, if the positive statistics persist throughout the last week of October, 2011, the thoughts of yet another recession can certainly be put to bed. However, consumers need to check their expenses so that they can keep their head off the sand during worse times.
Steven Robert is a contributory writer associated with the DebtConsolidationCare.Com and has written several articles for various financial websites. His expertise is in the Debt industry and he has made significant contributions through his various articles.