During a recession, unemployment rates rise as businesses shed their workforce due to decreased sales. Governments can offer tax breaks, funding, and incentives to encourage spending and hiring. The effects of a recession on unemployment vary, and unskilled workers often require public assistance. It takes time for the job market to recover, and some jobs may not return.
More often than not, the effect of a recession on unemployment causes the rate of those seeking unemployment benefits to rise, sometimes dramatically. As a recession hits, businesses stop making as much money and many have to shed part of their workforce. Unemployment rates continue to rise and fewer consumers have the discretionary income needed to fuel sales and allow businesses to recover. There are a number of things that governments can do to lower unemployment rates and encourage companies to hire, as well as pressure consumers to spend more of their money to boost the economy.
The effects of a recession on unemployment vary depending on how long the recession lasts and how deeply entrenched it has become. A recession is defined as three consecutive quarters of gross domestic product (GDP) that are negative. This means that there is no growth in the economy during this time. Many times these negative periods will be preceded by periods of very slow growth.
There are several ways that governments can lessen the effects of a recession on unemployment. Tax breaks will often be granted to businesses. Certain types of businesses can get government funding, and officials sometimes offer incentives to get consumers to spend money again. This can include tax cuts, offering public assistance programs or expanding existing ones, and giving stimulus money to certain groups of people.
Changing the effects of a recession on unemployment takes time. In many cases, it takes months before those who are still employed feel secure enough to start spending money again. When this occurs, companies gradually increase their workforce. Sometimes jobs that were previously available before a recession don’t return once it’s over.
An example of this changing job market relates to the US recession that began in 2007. When the housing market crashed, many developers and the crews that worked for them were out of work. Unfortunately, the market is unlikely to return to its pre-recession growth in terms of new homes being built. These workers will need to learn new skills to qualify for new jobs.
In many cases, unskilled workers bear the brunt during a recession. Since these people are often paid less, they are less likely to have savings to fall back on. Many end up requiring unemployment benefits, where available, as well as other public assistance programs. People with certain skills and education levels are often still in high demand, but there are often not enough workers to fill these roles. Financial assistance is also often available so workers can go back to school and learn new job-finding skills.
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