What is a Recession?



Charlie McGill
IHSS
Mr. Roddy
5/18/19

What is a Recession?

For my final blog for IHSS, I decided to look at the article titled, “What is a Recession?” This article interested me, because even though we went over economics in class, I still didn’t have a great understanding of what a recession really was. It’s a word you hear thrown around a lot these days, due to everyone's fear of the the economy collapsing, so I decided to give it a read.

The article defines a recession as when the economy declines significantly over the course of six months, or more. For the economy to drop in such a way, there needs to be a decline in these five economic indicators, real GDP, income, employment, manufacturing, and retail sales. Interestingly, a recession is usually underway when there are several quarters of slowing, but positive growth, followed by a quarter of negative growth. The article lists many ways to predict a recession, one of the best being manufacturing jobs. All forms of manufacturing receive their orders a few months ahead of time, and then they hire accordingly. If they don’t get enough orders, they stop hiring, which then affects other parts of the economy. Another main way to predict a recession, and another main factor in a recession, is consumer demand. When consumer demand slows, the economy tends to as well. This causes businesses to stop expanding, and not hire any new workers. At this point, we are already likely in the beginning of a recession.

Recessions create large amounts of unemployment, sometimes up to 10%. This creates a snowball effect, where then consumers can’t afford products, businesses then go out of business, and people lose their homes when they can’t afford the mortgage payment. That’s why even though recessions only last about nine to eighteen months, they are so damaging; they create long term issues that can stick with people their whole lives.

When I first read this article I immediately thought of the economic term dead cat bounce that we learned in class. A recession is similar to that. A dead cat bounce is when a stock greatly falls, and then recovers slightly, before falling even more. In a recession, the market slowly rises before falling. After this first fall, it usually has a small dead cat bounce, where it rises slowly before falling again. I thought this was super interesting, because even though dead cat bounces are associated with singular stocks, you can find them in the economy as a whole.

I’m really glad I read this article, and it was super interesting. To anyone looking to learn more about economics and recessions, click on the link.

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