Sample Essay on Effects of Economic Recession Experienced in USA


United States that has created its image as a superpower country indeed plays a massive role in determining the world’s market and the economy at large. However, in the year 2007, the United States stepped to a crippling economic recession that was viewed as the worst economic downturn ever since the great Depression, that lasted to close to a decade from the year 1929. The recession had eventually casted its long shadows on the economic fortunes of a vast number of countries worldwide. This had ultimately led to a global economic crisis that resulted in a massive decline in the global market. When the global economic crisis began in 2007 to 2008, there was a sharp curtailment of the international trade. It includes a short-term decline in the value of the global agricultural trade (Mclean et al, p.7, 2011). Few erudite economists had anticipated this and the ‘great recession’ came as a big surprise to many economists. The great economic recession had led to the realignment of exchange rates and the ultimate resolution of the crisis. The purpose of this paper is to examine the impact of the recent economic recession on the global market as well as on the rates of unemployment and cost of living as a result of the recession.

Keywords: Economic recession, global market, economic crisis, unemployment

Effects of Economic Recession Experienced In USA


Economic recession has been conceptualized as a period of general economic down fall. It is simply the period of an economy where there has been a negative growth of the Gross Domestic product (GDP) for more than two-quarters (Brezina, p.1, 2011). Economic recession is usually accompanied by a drop in the stock market, a sharp escalation of the number of unemployed victims and a deterioration of the housing market. It is with no doubts that the recent global economic events have enlightened all of us as economists to reexamine the world we live in from several diverse aspects. This is because of the tough, exasperating and daunting economic times that have not only affected the vast companies and organization but also us as individuals.

In worse situations, the economic recession has been known to have its side effects on the entire global market. This has been witnessed by the occurrence of the worst economic recession in the year 2007 to 2008. The economic downfall that began in the United States had after that hastily spread to Europe and other diverse parts of the world thus affecting the entire global market. It is with this profound reason that I write this paper to examine the major causes of the economic recession in the United States and how this had affected the living standards of the citizens of the diverse nations. This paper also attempts to find out if there is any association between the 2008 global recession crisis and the increase in the rates of unemployment.

Literature Review

It is now seven years since United States experienced the worst economic crisis that eventually spread vigorously across nations. This great economic recession that began in the year 2008 had originated in the most advanced country; United States. It later on spread to other nations thus leading to the world’s economic crisis since both the emerging markets and the once global market was adversely affected. It was argued that the worst economic recession that was experienced in the United States came from the banks securitizing the mortgages.  What simply started as isolated turbulence in the subprime segment of the United States housing market had later on mutated into a full-blown recession in the by the end of the year 2007 (Michel et al, p. 88, 2009).  Indeed, the saying “the rest of the world sneezes when United States catches a cold” appeared to be vindicated. Systemically, vital economies in the European Union and Japan went collectively into an economic recession by mid-2008 (Nabli, p. 213, 2011).

By the end of 2008, a vast number of different countries inclusive of the vulnerable developing countries seemed to feel the pinch of one of the worst recessions that had been experienced in the United States.  A vast majority of the economists, policymakers, investors, academics and multilateral agencies had no anticipation of such a crisis, and many were surprised at its occurrence. America’s economic recession had led to a massive downfall of the global market in the year 2008. It led to high rates of unemployment, closure of some companies and high costs of living not only among the citizens of the United States but also among the citizens coming from their respective nations.

It was established that the economic recession had its roots in the 2006 collapse of the United States housing market that had been previously thriving. This crisis began once the mortgages were securitized, the buyers, in the secondary market assumed that the housing prices would never rising up. Therefore, the payments were not going to be very risky (.Brezina, p.298, 2011).  However, when the house prices began to decline, more victims who had taken mortgages at different financial institutions became delinquent. From that point forward, it was followed by a bubble in the economy of Unite States as the value of most assets was eroded away (Mclean et al., p.78, 2011).

Since most of the people who took the mortgages were unable to pay the monthly payments, these led to piling of debts that had a negative impact on the financial market. The defaults made by the borrowers had ultimately affected the financial market. This is because a vast majority of citizens of the United States with the advent of new loan programs offered by the banks to the people. The new programs offered by the banks made it easier for a vast majority of people to become homeowners as they were not required to make any substantial down payment when purchasing a home. This was thereby commonly referred to as subprime mortgages. The many defaulted payments resulted in an economic recession that greatly interfered with the common pattern of the global market. This also led to tougher times for the United States citizens who hardly purchased commodities due to their hiked prices. The prices of the commodities such as oil, food and raw materials began to escalate. The price of a barrel of oil had skyrocketed to a record high of more than $149 (Brezina, p.56, 2011).

The economic crisis in the USA eroded away the purchasing power of the people. The move led to a reduced aggregate demand for the real sector economy (Jenkins, p.87, 2011). The economic crisis that eroded the people’s purchasing power in USA affected many countries that according to the tradition used to export its goods to the United States. One of these countries is China, which was known to sell most of its final products to the United States. With the economic recession in the United States, the demand for the Chinese products shrank tremendously. Thus, it led to reduced mass production by China, who also ended up experiencing the side effects of the economic recession in the United States. This did affect not only China but also a wide range of many Countries thereby translating to global economic crisis. This has led to a massive number of unemployment which has thereby led to higher cost of living among the citizens of the many different affected nations. Nonetheless, after the global economic recession hit, the prices of the commodities that had previously skyrocketed, later on declined.


Two years after the global financial crisis experienced in 2008, unemployment rates have been fast paced rising in a great number of countries. This clearly indicates that the global economic recession is directly correlated with the rates of unemployment. The rates of unemployment are also directly correlated with the cost of living. To prove that this phenomenon was indeed true, several arrays of stellar methodologies were employed for this study.

One of the methodologies used involved interviews among a sample of people from different parts of the country and other countries such as China and Kenya, which represents the developing country. The study also employed the use of questionnaires among the different samples of people while also seeking help from the Recruitment and Employment Confederation (REC). REC is a body that takes the demographic figures of the employed and the unemployed victims while also measuring the rates of both unemployment and unemployment. Some of the vital data that was used to access the effects of the global economic recession to the unemployment rates and also access the cost of living among the people was getting data from the Bureau of Labor Statistics.

Empirical results

According to the Recruitment and Employment Confederation (REC), there had been a decrease in job vacancies. According to Recruitment and Employment Confederation (REC), it was found out that there had indeed been a sharp increase of unemployed victims in the year 2008 – 2009 during which the global economic recession was at its peak. The Recruitment and Employment Confederation (REC) also stated that there had been a skyrocketing demand for both part time jobs and permanent jobs amid the handful job opportunities available (Nabli, p.231, 2011).

Besides this, the few who were employed experience a great decline in their salaries during the global economic recession that affected the company’s profit gains. Most of the companies recorded the worst form of losses ever since they were first established. According to the interviews carried out, most of the people interviewed complained of the high cost of living that arose after the global economic recession. Many are unemployed and thus find it extremely difficult to fend for not only themselves but for their families as well.  The victims who were interviewed in China complained about the decrease in production of goods that was earlier on usually exported to the United States. However, after the global economic recession that originated from the United States, there was a sharp decrease in the number of purchases made towards the products that had been imported from the Republic of China (Brezina, p.59, 2011).

China temporarily terminated its export of its products to the United States. This led to various companies shutting down as they were no longer able to get returns and profits from the exported goods. It is with this that their unemployment rates in China escalated as the cost of living began to become so high as a result of the economic recession that had spread to the country of China. The developing countries were tremendously affected as a result of countries such as China failing to purchase the different raw materials from the country. It is for this reason that many of the developing countries experienced the side effects of the USA’s economic recession. Moreover, the economic recession that was faced in the United States limited the number of investors in the developing countries majority of who are the Americans. This had thereby affected the economy of Kenya as a developing crisis thus leading to most developing countries experiencing harsh economic times that resulted in an economic crisis. The America’s dollar also rose and, as a result, the Kenyan shilling became weaker thereby leading to an economic crisis in the year 2008 – 2009.

According to the United States’ National Bureau of Economic Research, the U.S recession that began in late December 2007 and ended in June 2009 recorded 5% increase in unemployment rates (Mclean et al, p.190, 2013). An average of 700,000 American workers lost their jobs each month thus contributing to the worst sustained decline in employment ever since the Great Depression (Nabli, p. 298, 2011). Those who had long-term jobs experienced harsher working conditions as they were forced to work for longer hours without any salary increment. Those who were lucky to secure their jobs during the economic recession had their salaries cut by a wider margin.

Data and Data analysis

Fig: 1.1:- A graph shows the change of employment to population ratio during the period of United States economic recession.


Fig: 2.1:- A graph showing the rate of unemployment as related to Gross Domestic Product (GDP) which has been affected by the economic recession in the United States

Fig: 3.1: A graph showing the approximate change in number of unemployed victims from the year 1992 to 1994 and how this related to the economic recession experienced in US.


It is evident that the United States experience in the worst economic recession greatly affected the employment rates and the global market that influenced the cost of living among people from different parts of the world. As the United States continues to face a formidable job gap, this study clearly elucidates the close relation between the economic recession and the unemployment rates. The economic recession experienced in USA in the year 2008 affecting the sales revenue of all major companies as the profits from retailer markets went down due to the reluctance of people spending money. Because of the low profits, most companies saw it fit to adapt to the strategy of cost cutting to tackle the economic crisis that resulted from the economic recession. As most of the organizations consider the employee’s wages as their major cost, a reduction in the wages paid could save some lump sum of money for the daily activities and sustainability of the organization. As a result, the few who luckily sustained their jobs had a reduction in their salaries whilst many were sucked so as for the organization to set aside some money that would at least sustain and maintain the organization during the harsh period of recession. It is with this profound reason that the phenomenon that states that the economic recession is directly correlated to unemployment rates has been proved to be indeed true.


In summary, this paper has explained the cause of the economic recession in United States in the year 2008 and how it as affected the wider global market. It has also been found that the economic recession had ultimately led to the global economic crisis experienced in both the many developed and developing countries. Moreover, it was found that the economic recession experienced in the United States greatly affected the cost of living for citizen from different nations and how the economic recession had led to a tremendous decline in the rates of unemployment.



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Brezina, C. (2011). America’s recession: The effects of the economic downturn.

Jenkins, S. P. (2013). The great recession and the distribution of household income. Oxford: Oxford University Press.

McLean, W. J., & Applegate, M. (2013). Economics and contemporary issues. Mason, Ohio: South-Western Cengage Learning.

Mishel, L. R., Bernstein, J., & Shierholz, H. (2009). The state of working America: 2008-2009. Ithaca, N.Y: ILR Press.

Nabli, M. K., & World Bank. (2011). The Great Recession and developing countries: Economic impact and growth prospects. Washington DC: World Bank.


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