US Recession

2.  Recession - decline in a country's gross domestic
product (GDP) growth for two or more
consecutive quarters of a year.
 GDP - Indicates health of a country’s economy.
 Calculation of GDP Value
GDP = C + G + I + NX
where, C - Sum of all private consumption
G - Sum of Government Spending
I - Sum of all country’s business spending
on capital
Nx - Nations total net exports, calculated as
total exports minus total imports

3.  US economy has suffered 10 recessions since the
end of World War II.
 The Great Depression - 1930 to 1939
- High Unemployment
- Low Profits and Low Prices of goods
- High Poverty
- Industries that suffered the most
includes agriculture, mining
- Unemployment 14.3 % in 1937
19.0 % in 1938

4.  After the Great Depression, the American economy
experienced robust growth.
 US recession 1982 to 1983
- Tight monetary policy to control inflation
- Sharp correction to overproduction.
 US recession October 1987 (Black Monday)
- Stock market collapse
 In 2001, US suffered the 9/11 attacks
- Employment dropped by 1.7 million
- GDP fell 1.5 per cent

5.  Biggest Economy in the world
 Constitutes 27% of the Global GDP
 World’s biggest debtor country
 Biggest importer of Oil 27% in 2007
 Worlds largest and most influential financial
markets

6.  The collapse of Bear Stearns and the resulting financial market
turbulence signalled that the crisis would not be mild and brief.
(Alan Greenspan – Ex-Chairman of the Federal Reserve)
 US relies upon a body called the National Bureau of Economic
Research to rule on the extent of any downturn.
 Economists said 28 states would be in recession, with 16 at risk.
The predictions were based on unemployment figures and
industrial production data.

7.  Great Depression or Long Recession (weakest
recovery)
 National Bureau of Economic Research
(NBER) dates the beginning of the recession as
December 2007 and the end was June 2009.
 8.7 million jobs were shed from February 2008
- February 2010.
 GDP contracted by 5.1%, worst since the
Great Depression

8.  Unemployment rose 4.7% in November 2007
10% in October of 2009
 Nearly 50 million Americans (16%) were in poverty.
 Governor David Paterson called an emergency
economic session
- To push a budget cut of $600 million
- 7 percent reduction in spending state
agencies

9. ‘‘An economy typically expands for 6-10 years and tends
to go into a recession for about six months to 2 years’’
 Decrease in demand for goods and services
 Decrease in production and Consumption
 Sharp rise in unemployment
 Business Investors spend less as they fear stocks values will
fall
 Raising Government Borrowing
 Lower Inflation
 Falling House Prices
 Decline in Sales
 Credit Crunch

10.  Unemployment rose to 5% in 2007
6.1% in 2008
10% in 2009
 Forecasting that unemployment could reach 12%
in 2010
 Net loss of 3.617 million jobs in 2007
5.052 million jobs in 2009

12.  The Federal Reserve, Treasury, and Securities and Exchange
Commission are the deciding authorities.
 Tax cuts - Bush government proposed a $150-billion in tax cuts.
 Barack Obama introduce a "rescue plan for the middle classes"
tax bill for everyone earning less than $200,000 reduced (includes
cutting road tolls and increasing loan guarantees that have been
offered to small companies)
 Spending to create more jobs and boost the manufacturing and
services sectors and to prop up the economy.
 Steps to help the private sector come out of the crisis.
 Drastic half point cut in interest rates.

13.  After the end of the recession, unemployment decreased
10.1% in October 2009
7.8% in September 2012
 The Federal Reserve has kept interest rates at a historically
low 0.25% since December 2008
 US gained 1.758 million jobs in 2010
2.083 million jobs in 2011
2.236 million jobs in 2012
2.220 million jobs in 2013
857,000 so far as of March 2014.
 GDP grew roughly 3% in 2010,
1.7% in 2011
2.2% in 2012
1.9% in 2013
 40% are high-paying jobs and 60% are low-paying jobs

14. ‘‘ Whenever the US sneezes,
the world catches a cold’’
Weakening of the American economy is
bad news, not just for India, but for the rest
of the world too.

15.  Indian companies have major outsourcing deals from the US.
 Service industry contributes about 52% to India's GDP growth.
 For the first time in five years, India’s export growth has turned
negative.
 The Sensex crashed by nearly 13% in just two trading sessions in
January 2009.
 IT companies were predicted a drop of 15% in growth from 30%
in BPO sector.

16.  Most people have sold the shares. People started to save money.
 IT industries, financial sectors, real estate owners, car industry,
investment banking ect… were confronting heavy loss due to the fall
down of global economy.
 The textile, garment and handicraft industry are worse effected.
Together, they have lost four million jobs by April 2009, according to the
FIEO survey.
 Indian banks were facing through a tough time of liquidity crunch.
 The worries for exporters started growing as rupee strengthens further
against the dollar.
 The sudden fall in the US economy reduced the growth of Indian IT
firms down by 2-3%.
 India certainly had some advantages in this financial crisis. The inflation
fell sharply, faster than expected.

18.  China Relies on exports to United States
 China’s GDP growth slows down from double
digit to 9%
 Faltering U.S Consumers who buys Chinese
goods china’s growth may slow down to 6 to 7 %

19.  China gets Timber and rubber from Indonesia and
Taiwan
 U.S recession leads to less Chinese demands for these
goods
 Taiwan and South Korea transports component parts to
mainland - assembled to finished products – shipped to
U.S
 Both Group of Exporters – Fall and Fall hard if a drop
in Chinese exporters

20.  Recession Arises – Fall in U.S Demand will mean lower
Exports by European countries
 Lower Sales and Lower Profits European Firms –
BMW, Unilever, etc…
 Weaker Dollar – Value in Euros – Major Capital Loss
 High Oil Price
 Deflation of Housing

21.  Japanese Economy in Borderline between Growth
and Recession
 Japans Economic Growth – driven by External
Goods and Services
 Domestic Private Consumption weak - Income and
Wages Growth remain flat
 Oil hovering at $100 a barrel will make it hard for
Tokyo

22.  Africa, Poland and Slovakia was not affected
because it is not integrated in the world market.
 Australia avoided a technical recession after
experiencing only one quarter of negative growth
in the fourth quarter of 2008, with GDP
returning to positive in the first quarter of 2009.

23.  With several insights on how the various industries
have been affected by this economic downturn,
some had opportunities to grow and some were
flattened.
 Thus the global economic crisis is inevitable till the
economy of the developed, developing countries
become stable and self sustainable.
 The effects of the economic downturn are a test to
check the financial stabilities in market and
regulations across the global economy.

24. 