This information is related to the effects of the
Great Recession
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
that happened worldwide from 2007 to 2012.
Overview
The Great Recession was the worst post-
World War II
World War II or the Second World War, often abbreviated as WWII or WW2, was a world war that lasted from 1939 to 1945. It involved the vast majority of the world's countries—including all of the great powers—forming two opposin ...
contraction on record:
* Real gross domestic product (GDP) began contracting in the third quarter of 2008, and by early 2009 was falling at an annualized pace not seen since the 1950s.
* Capital investment, which was in decline year-on-year since the final quarter of 2006, matched the 1957–58 post war record in the first quarter of 2009. The pace of collapse in residential investment picked up speed in the first quarter of 2009, dropping 23.2% year-on-year, nearly four percentage points faster than in the previous quarter.
* Domestic demand, in decline for five straight quarters, is still three months shy of the 1974–75 record, but the pace – down 2.6% per quarter vs. 1.9% in the earlier period – is a record-breaker already.
Trade and industrial production
![World trade 2000-2010](https://upload.wikimedia.org/wikipedia/commons/e/ea/World_trade_2000-2010.png)
In middle-October 2008, the
Baltic Dry Index
The Baltic Dry Index (BDI) is a shipping freight-cost index issued daily by the London, England, London-based Baltic Exchange. The BDI is a composite of the Capesize, Panamax and Supramax Timecharter Averages. It is reported around the world as ...
, a measure of shipping volume, fell by 50% in one week, as the credit crunch made it difficult for exporters to obtain
letters of credit
A letter of credit (LC), also known as a documentary credit or bankers commercial credit, or letter of undertaking (LoU), is a payment mechanism used in international trade to provide an economic guarantee from a creditworthy bank to an exp ...
.
In February 2009, ''The Economist'' claimed that the financial crisis had produced a "manufacturing crisis", with the strongest declines in industrial production occurring in export-based economies.
In March 2009, Britain's ''Daily Telegraph'' reported the following declines in industrial output, from January 2008 to January 2009: Japan −31%, Korea −26%, Russia −16%, Brazil −15%, Italy −14%, Germany −12%. Some analysts ventured that the world was going through a period of
deglobalization
Deglobalization or deglobalisation is the process of diminishing interdependence and integration between certain units around the world, typically nation-states. It is widely used to describe the periods of history when economic trade and investme ...
and protectionism after years of increasing economic integration.
Sovereign funds and private buyers from the Middle East and Asia, including
China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
, are increasingly buying in
on stakes of European and U.S. businesses, including industrial enterprises. Due to the global recession they are available at a low price. The Chinese government has concentrated on natural-resource deals across the world, securing supplies of oil and minerals.
Retail
Mall museums are a new global development resulting from the 2007-2010 global recession, where museums take over large spaces within shopping malls, making beneficial use of empty space, drawing shoppers, and leveraging the foot traffic of the malls to bring more people into museums, exhibits and other educational venues.
Pollution
According to the
International Energy Agency
The International Energy Agency (IEA) is a Paris-based autonomous intergovernmental organisation, established in 1974, that provides policy recommendations, analysis and data on the entire global energy sector, with a recent focus on curbing carb ...
man-made
greenhouse gas emissions
Greenhouse gas emissions from human activities strengthen the greenhouse effect, contributing to climate change. Most is carbon dioxide from burning fossil fuels: coal, oil, and natural gas. The largest emitters include coal in China and lar ...
will decrease by 3% in 2009, mainly as a result of the financial crisis. Previously emissions had been rising by around 3% per year. The drop in emissions is only the 4th to occur in 50 years.
Unemployment
The
International Labour Organization
The International Labour Organization (ILO) is a United Nations agency whose mandate is to advance social and economic justice by setting international labour standards. Founded in October 1919 under the League of Nations, it is the first and o ...
(ILO) predicted that at least 20 million jobs will have been lost by the end of 2009 due to the crisis — mostly in "construction, real estate, financial services, and the auto sector" — bringing world
unemployment
Unemployment, according to the OECD (Organisation for Economic Co-operation and Development), is people above a specified age (usually 15) not being in paid employment or self-employment but currently available for Work (human activity), w ...
above 200 million for the first time. The number of unemployed people worldwide could increase by more than 50 million in 2009 as the global recession intensifies, the ILO has forecast.
In December 2007, the
U.S. unemployment rate was 4.9%. By October 2009, the unemployment rate had risen to 10.1%. A broader measure of unemployment (taking into account marginally attached workers, those employed part-time for economic reasons, and some (but not all)
discouraged worker
In economics, a discouraged worker is a person of legal employment age who is not actively seeking employment or who has not found employment after long-term unemployment, but who would prefer to be working. This is usually because an individua ...
s) was 16.3%. In July 2009, fewer jobs were lost than expected, dipping the unemployment rate from 9.5% to 9.4%. Even fewer jobs were lost in August, 216,000, recorded as the lowest number of jobs since September 2008, but the unemployment rate rose to 9.7%. In October 2009, news reports announced that some employers who cut jobs due to the recession are beginning to hire them back. More recently, economists announced in January 2010 that economic growth in the U.S. resumed in the fourth quarter of 2009, and some have predicted that limited job growth will begin in the spring of 2010.
The average numbers for European Union nations are similar to the US ones. Some European countries have been hit by recession very hard, for instance
Spain
, image_flag = Bandera de España.svg
, image_coat = Escudo de España (mazonado).svg
, national_motto = ''Plus ultra'' (Latin)(English: "Further Beyond")
, national_anthem = (English: "Royal March")
, i ...
's unemployment rate reached 18.7% (37% for youths) in May 2009 — the highest in the
eurozone
The euro area, commonly called eurozone (EZ), is a currency union of 19 member states of the European Union (EU) that have adopted the euro (€) as their primary currency and sole legal tender, and have thus fully implemented EMU policies ...
. In the UK, youths bore the brunt of unemployment during the recession.
The rise of advanced economies in Brazil, India, and China increased the total global labor pool dramatically. Recent improvements in communication and education in those countries has allowed workers in those countries to compete more closely with workers in traditionally strong economies, such as the United States. This huge surge in labor supply provided downward pressure on wages and contributed to unemployment. So many people's professional careers have been down to frozen level at this time. There was also change at the management level of the several organisations and due to this there was a huge employee turnover. In brief it can also be described as the collapse of the entire management system of any organisation. It has also been noted that there was an increase in the NPAs of lending by banks.
Health
In the United States, the public health workforce decreased by at least 40,000 jobs (about 1/5 of its workforce) between 2010 and 2013, following the Great Recession. As of 2023, it had not recovered.
Although it has been argued that recessions can benefit health, for example through reductions in road traffic accidents when car use reduces due to unemployment, there is a lot of evidence that the Great Recession did widespread damage to health. According to a study of 54 countries, there has been an increase in suicide deaths as a result of the recession. The study cites that there were an estimated 5,000 additional deaths resulting from suicide in the year 2009 alone. In Iceland rates of low birth weight were found to increase after the start of the recession in 2008, although no differences in preterm birth were found. In England, exposure to the Great Recession during pregnancy was associated with financial hardship, and both of these were associated with increased odds of continuing to smoke during pregnancy.
Financial markets
For a time, major economies of the 21st century were believed to have begun a period of decreased
volatility, which was sometimes dubbed
The Great Moderation
The Great Moderation is a period in the United States of America starting from the mid-1980s until at least 2007 characterized by the reduction in the volatility of business cycle fluctuations in developed nations compared with the decades befor ...
, because many economic variables appeared to have achieved relative stability. The return of commodity, stock market, and currency value volatility are regarded as indications that the concepts behind the Great Moderation were guided by false beliefs.
January 2008 was an especially volatile month in world stock markets, with a surge in
implied volatility In financial mathematics, the implied volatility (IV) of an option contract is that value of the volatility of the underlying instrument which, when input in an option pricing model (such as Black–Scholes), will return a theoretical value equ ...
measurements of the US-based
S&P 500
The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 large companies listed on stock exchanges in the United States. It is one of the most commonly followed equity indices. As of D ...
index, and a sharp decrease in non-U.S.
stock market
A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...
prices on Monday, January 21, 2008 (continuing to a lesser extent in some markets on January 22). Some headline writers and a general news columnist called January 21 "
Black Monday
Black Monday refers to specific Mondays when undesirable or turbulent events have occurred. It has been used to designate massacres, military battles, and stock market crashes.
Historic events
*1209, Dublin – when a group of 500 recently arriv ...
" and referred to a "global shares crash," though the effects were quite different in different markets.
The effects of these events were also felt on the
Shanghai Composite Index
The SSE Composite Index also known as SSE Index is a stock market index of all stocks ( A shares and B shares) that are traded at the Shanghai Stock Exchange.
There are also SSE 180, SSE 50 and SSE Mega-Cap Indexes for top 170, 50 and 20 compa ...
in China which lost 5.14 percent, most of this on financial stocks such as
Ping An Insurance
Ping An Insurance known also as Ping An of China (), full name Ping An Insurance (Group) Company of China, Ltd. is a Chinese holding conglomerate whose subsidiaries provide insurance, banking, asset management, financial, healthcare services. Th ...
and
China Life
China Life Insurance Company Limited (short China Life, ) is a Beijing-headquartered China-incorporated company that provides life insurance and annuity
In investment, an annuity is a series of payments made at equal intervals.Kellison, Step ...
which lost 10 and 8.76 percent respectively. Investors worried about the effect of a recession in the US economy would have on the Chinese economy.
Citigroup
Citigroup Inc. or Citi (Style (visual arts), stylized as citi) is an American multinational investment banking, investment bank and financial services corporation headquartered in New York City. The company was formed by the merger of banking ...
estimates due to the number of exports from China to America a one percent drop in US economic growth would lead to a 1.3 percent drop in China's growth rate.
There were several large Monday declines in stock markets worldwide during 2008, including one in January, one in August, one in September, and another in early October. As of October 2008, stocks in North America, Europe, and the Asia-Pacific region had all fallen by about 30% since the beginning of the year. The
Dow Jones Industrial Average
The Dow Jones Industrial Average (DJIA), Dow Jones, or simply the Dow (), is a stock market index of 30 prominent companies listed on stock exchanges in the United States.
The DJIA is one of the oldest and most commonly followed equity inde ...
had fallen about 37% since January 2008.
The simultaneous multiple crises affecting the US financial system in mid-September 2008 caused large falls in markets both in the US and elsewhere. Numerous indicators of risk and of investor fear (the
TED spread
The TED spread is the difference between the interest rates on interbank loans and on short-term U.S. government debt ("T-bills"). TED is an acronym formed from ''T-Bill'' and ''ED'', the ticker symbol for the Eurodollar futures contract.
Init ...
,
Treasury yields, the dollar value of gold) set records.
Russian markets, already falling due to declining oil prices and political tensions with the West, fell over 10% in one day, leading to a suspension of trading, while other emerging markets also exhibited losses.
On September 18, UK regulators announced a temporary ban on short-selling of financial stocks. On September 19 the
U.S. Securities and Exchange Commission
The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
(SEC) followed by placing a temporary ban of short-selling stocks of 799 specific financial institutions. In addition, the SEC made it easier for institutions to buy back shares of their institutions. The action is based on the view that short selling in a crisis market undermines confidence in financial institutions and erodes their stability.
On September 22, the Australian Securities Exchange (
ASX
Australian Securities Exchange Ltd or ASX, is an Australian public company that operates Australia's primary securities exchange, the Australian Securities Exchange (sometimes referred to outside of Australia as, or confused within Australia as ...
) delayed opening by an hour after a decision was made by the Australian Securities and Investments Commission (
ASIC
An application-specific integrated circuit (ASIC ) is an integrated circuit (IC) chip customized for a particular use, rather than intended for general-purpose use, such as a chip designed to run in a digital voice recorder or a high-efficien ...
) to ban all short selling on the ASX. This was revised slightly a few days later.
As is often the case in times of financial turmoil and loss of confidence, investors turned to assets which they perceived as tangible or sustainable. The price of gold rose by 30% from middle of 2007 to end of 2008. A further shift in investors' preference towards assets like
precious metals
Precious metals are rare, naturally occurring metallic chemical elements of high economic value.
Chemically, the precious metals tend to be less reactive than most elements (see noble metal). They are usually ductile and have a high lustre. ...
or
land
Land, also known as dry land, ground, or earth, is the solid terrestrial surface of the planet Earth that is not submerged by the ocean or other bodies of water. It makes up 29% of Earth's surface and includes the continents and various islan ...
is discussed in the media.
In March 2009, Blackstone Group CEO
Stephen Schwarzman
Stephen Allen Schwarzman (born February 14, 1947) is an American billionaire businessman. He is the chairman and CEO of The Blackstone Group, a global private equity firm he established in 1985 with Peter G. Peterson, former chairman and CEO of ...
said that up to 45% of global wealth had been destroyed in little less than a year and a half.
Travel
According to
Zagat
The ''Zagat Survey'', commonly referred to as Zagat (stylized in all caps; , ) and established by Tim and Nina Zagat in 1979, is an organization which collects and correlates the ratings of restaurants by diners. For their first guide, covering ...
's 2009 U.S. Hotels, Resorts & Spas survey, business travel has decreased in the past year as a result of the
recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various ...
. 30% of travelers surveyed stated they travel less for business today while only 21% of travelers stated that they travel more.
Reasons for the decline in business travel include company travel policy changes, personal economics, economic uncertainty and high airline prices. Hotels are responding to the downturn by dropping rates, ramping up promotions and negotiating deals for both business travelers and
tourists
Tourism is travel for pleasure or business; also the theory and practice of touring, the business of attracting, accommodating, and entertaining tourists, and the business of operating tours. The World Tourism Organization defines tourism mo ...
.
[ Volume 6, Issue 3]
According to the
World Tourism Organization
The World Tourism Organization (UNWTO) is the United Nations specialized agency entrusted with the promotion of responsible, sustainable and universally accessible tourism. Its headquarters are in Madrid, Spain. UNWTO is the leading internati ...
, international travel suffered a strong slowdown beginning in June 2008,
[ Volume 6 No. 2] and this declining trend intensified during 2009 resulting in a reduction from 922 million international tourist arrivals in 2008 to 880 million visitors in 2009, representing a worldwide decline of 4%, and an estimated 6% decline in international tourism receipts.
[ Volume 8 No. 1] The decline caused by the recession was further exacerbated in some countries due to the outbreak of the
AH1N1 virus.
[
]
Insurance
A February 2009 study on the main British insurers
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
showed that most of them do not plan to raise their insurance premium
Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
s for the year 2009, in spite of the prediction of a 20% raise made by ''The Daily Telegraph
''The Daily Telegraph'', known online and elsewhere as ''The Telegraph'', is a national British daily broadsheet newspaper published in London by Telegraph Media Group and distributed across the United Kingdom and internationally.
It was fo ...
'' and ''The Daily Mirror
''The'' () is a grammatical article in English, denoting persons or things already mentioned, under discussion, implied or otherwise presumed familiar to listeners, readers, or speakers. It is the definite article in English. ''The'' is the m ...
''. However, it is expected that the capital liquidity will become an issue and determine increases, having their capital tied up in investments yielding smaller dividends, corroborated with the £644 million underwriting losses suffered in 2007.
Countries most affected
The crisis affected all countries in some ways, but certain countries were vastly affected more than others. By measuring currency devaluation
In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national curren ...
, equity market
A stock market, equity market, or share market is the aggregation of buyers and sellers of stocks (also called shares), which represent ownership claims on businesses; these may include ''securities'' listed on a public stock exchange, as ...
decline, and the rise in sovereign bond
A government bond or sovereign bond is a form of bond issued by a government to support public spending. It generally includes a commitment to pay periodic interest, called coupon payments'','' and to repay the face value on the maturity dat ...
spreads, a picture of financial devastation emerges. Since these three indicators show financial weakness, taken together, they capture the impact of the crisis.[Financial Transmission of the Crisis: What’s the Lesson?](_blank)
Shimelse Ali, Uri Dadush
Uri Dadush is a non-resident scholar at Bruegel, based in Washington, DC and a Senior Fellow at the OCP Policy Center in Rabat, Morocco. He is also Principal of Economic Policy International, LLC, providing consulting services to the World Bank a ...
, Lauren Falcao, "International Economics Bulletin The ''International Economics Bulletin'' is a bi-monthly publication published by the Carnegie Endowment for International Peace. Edited by Uri Dadush, the publication draws on the expertise of Carnegie's global centers to provide a view of the ec ...
, June 2009. The Carnegie Endowment for International Peace
The Carnegie Endowment for International Peace (CEIP) is a nonpartisan international affairs think tank headquartered in Washington D.C. with operations in Europe, South and East Asia, and the Middle East as well as the United States. Founded in ...
reports in its International Economics Bulletin The ''International Economics Bulletin'' is a bi-monthly publication published by the Carnegie Endowment for International Peace. Edited by Uri Dadush, the publication draws on the expertise of Carnegie's global centers to provide a view of the ec ...
that Ukraine
Ukraine ( uk, Україна, Ukraïna, ) is a country in Eastern Europe. It is the second-largest European country after Russia, which it borders to the east and northeast. Ukraine covers approximately . Prior to the ongoing Russian inv ...
, as well as Argentina
Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country in the southern half of South America. Argentina covers an area of , making it the second-largest country in South America after Brazil, th ...
and Jamaica
Jamaica (; ) is an island country situated in the Caribbean Sea. Spanning in area, it is the third-largest island of the Greater Antilles and the Caribbean (after Cuba and Hispaniola). Jamaica lies about south of Cuba, and west of His ...
, were the countries most deeply affected by the crisis. Other severely affected countries were Romania
Romania ( ; ro, România ) is a country located at the crossroads of Central Europe, Central, Eastern Europe, Eastern, and Southeast Europe, Southeastern Europe. It borders Bulgaria to the south, Ukraine to the north, Hungary to the west, S ...
, Ireland
Ireland ( ; ga, Éire ; Ulster Scots dialect, Ulster-Scots: ) is an island in the Atlantic Ocean, North Atlantic Ocean, in Northwestern Europe, north-western Europe. It is separated from Great Britain to its east by the North Channel (Grea ...
, Russia
Russia (, , ), or the Russian Federation, is a List of transcontinental countries, transcontinental country spanning Eastern Europe and North Asia, Northern Asia. It is the List of countries and dependencies by area, largest country in the ...
, Mexico
Mexico (Spanish: México), officially the United Mexican States, is a country in the southern portion of North America. It is bordered to the north by the United States; to the south and west by the Pacific Ocean; to the southeast by Guatema ...
, Hungary
Hungary ( hu, Magyarország ) is a landlocked country in Central Europe. Spanning of the Carpathian Basin, it is bordered by Slovakia to the north, Ukraine to the northeast, Romania to the east and southeast, Serbia to the south, Croatia a ...
, the Baltic states
The Baltic states, et, Balti riigid or the Baltic countries is a geopolitical term, which currently is used to group three countries: Estonia, Latvia, and Lithuania. All three countries are members of NATO, the European Union, the Eurozone, ...
. By contrast, China
China, officially the People's Republic of China (PRC), is a country in East Asia. It is the world's most populous country, with a population exceeding 1.4 billion, slightly ahead of India. China spans the equivalent of five time zones and ...
, Japan
Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...
, Brazil
Brazil ( pt, Brasil; ), officially the Federative Republic of Brazil (Portuguese: ), is the largest country in both South America and Latin America. At and with over 217 million people, Brazil is the world's fifth-largest country by area ...
, India
India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
, Iran
Iran, officially the Islamic Republic of Iran, and also called Persia, is a country located in Western Asia. It is bordered by Iraq and Turkey to the west, by Azerbaijan and Armenia to the northwest, by the Caspian Sea and Turkmeni ...
, Peru
, image_flag = Flag of Peru.svg
, image_coat = Escudo nacional del Perú.svg
, other_symbol = Great Seal of the State
, other_symbol_type = Seal (emblem), National seal
, national_motto = "Fi ...
and Australia
Australia, officially the Commonwealth of Australia, is a Sovereign state, sovereign country comprising the mainland of the Australia (continent), Australian continent, the island of Tasmania, and numerous List of islands of Australia, sma ...
were "among the least affected."
Gendered effects
American popular media labeled the Great Recession the "mancession" because of the many male dominated industries affected (e.g., construction) although many more men were hired than women during the recovery period. By the end of 2009 the unemployment rate for men was 10.7%, while women's unemployment peaked at 8.4%. This trend of the "mancession" was seen in other countries as well; in 2008 605,000 of the 891,000 who lost their jobs in the United Kingdom were men.
The stress of unemployment affects men and women differently. Some studies have concluded that men and blue-collar workers experience the most mental distress when they are involuntarily unemployed This has been attributed to the greater structural vulnerability of blue collar workers in US economy as well as constructions of masculinity.[ Men may feel pressure to fulfill their socially constructed role as "breadwinners" and may feel ashamed if they are not able to contribute financially to the household.]
A study of mental health data in America from directly after the 2008 financial crisis that led to the Great Recession, however, found that women experienced more stress than men because they were more likely to be the financial managers of the household and therefore felt the impact of the recession on household budgets more. In Greece women also reported poor mental health, more so than men, upon losing their jobs. This has been attributed to higher rates of long term unemployment, poor housing and nutrition, debt, and discrimination, which all generally affect women more.
References
{{DEFAULTSORT:Effects Of the Great Recession
2000s economic history
Great Recession