Recession in the US: Impact on Economy & People - Essay Sample

Introduction

One of the most significant events that are likely to occur in the United States is the recession. It may be defined as an era when there is an overall economic decline in a country's economy. It is typically escorted by a decrease in the housing market and stock market as well as increasing the unemployment rate. Although it has lesser severe impacts compared to depression, it is primarily blamed on federal leadership either on the head of Federal Reserve, current president, or the whole administration. Thus, with the current leadership in the United States, there may be a recession in 2020. A key factor that may cause a recession is President Trump's initiated trade war between the United States and China. Entrepreneurs during the recession may have trouble obtaining the required capital to start and run their businesses. Besides, with the low disposable revenue rattling throughout the US economy due to recession, existing companies may be forced to close their operations. Those, however, that stay in operation may probably increase their activities or invest in new ventures. Although the real estate may decrease, monthly mortgage payments may remain constant. Individuals who lose their employment may also lose their houses. The stock market may collapse, ultimately causing chaos on retirement accounts and investment portfolios. Due to the current trade war between China and the United States, the US may experience a recession, an event that will affect Americans through a loss of employment, decrease in the housing market, and the stock market.

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Recession will happen where there exist two or more successive quarters of negative economic development. This denotes that the growth in GDP decreases. Besides, when an economy is experiencing a recession, company sales and revenues may decrease, causing them to cease their operations hence affecting their growth. Besides, as sales profits and income decrease, companies may try to reduce their overhead expenses, for example, through recruiting cheap labor or stopping the hiring process completely. Besides, to reduce the expenses further and enhance the bottom line, most companies may cease new product rollouts, purchase of new equipment, or reduce research and development. Additionally, the costs used for advertising and marketing may decrease. Therefore, with the projected recession that is likely to occur in 2020, it may lead to a reduction in expenses affecting not only big companies but also small firms that offer products and services utilized by big organizations.

The recession also functions by decreasing stocks and dividends. When there is a decrease in revenue, particularly presented in the quarterly revenue reports, the company's stock price in most cases also decreases. This, in turn, may cause dividends to fall or disappear completely. Organizations' stockholders may hence become disappointed which may force them together with the company's board of director to employ another company leadership after dissolving the previous management. For example, a company's advertising agency may be fired and a novel agent contracted. The company's internal marketing and advertising department may as well experience individual disturbance. Therefore, as the company's stock decreases while dividends decrease or cease entirely, the company's investors who forecast this trend, will shift and reinvest in better-performing stocks. This furthermore depresses an organizations' stock price. Therefore, as a result of recession company's stocks may fall while at the same time cause a decrease in dividends, something that is undesired by most Americans since it leads to loss of invested financial resources.

Recession may also function by causing bankruptcy and credit impairments for both the Americans and companies in the United States. It may furthermore damper most companies' accounts receivables. For instance, clients who owe businesses money may tend to make repayments at a slow rater and in some cases, may entirely fail to pay them. Thus, with decreased incomes, the affected firms may be driven to pay their bills also at a slow rate. They may also pay the expenses in lesser increments compared to the initially agreed credit requirement. Making delinquent or late repayment may decrease a company's bonds and debt valuation as its capacity to acquire finances from financial lending institutions. Indeed, the capacity of such organization may weaken simultaneously leading to defaults in debts and bonds. This additionally destructs the credit ratings of such companies. A regression, on the other hand, also functions by making an organization's debt to be refinanced or reconstructed which denotes that new terms and conditions would have to be discussed between the involved company and its creditors. Where an organization's debt may not be serviced nor repaid as agreed upon during the agreement, this introduces bankruptcy. Therefore, if a recession will occur in the United States, companies may be shielded from its creditors while at the same time, they may experience a reorganization, which may force firms to stop their operations entirely.

Recession may also function by causing worker's lay-offs and decrease in benefits. With a recession, companies reduce the number of workers, and the remaining employees may be forced to perform most of the organization's activities. Although the productivity of the remaining few workers may escalate, at some point, their morale will be negatively be affected. This is due to negative effects caused by long working hours, difficult tasks, and decreased chances of salary increase, as well as fear of their employment contract, is terminated. Therefore, where the expected recession increase in duration and severity, company's labor and management may hold meetings in future to deliberate and arrive at common concessions, for instance, to save both the job and the company. The concessions may furthermore encompass decrease in employee benefits and a decline in wages. However, where the organization is a manufacturing company, it will be required to shut down its production plants or stop its non-performing brands. For example, automobile producers, in the last recession that occurred in 2007 to early 2009, followed this strategy. Therefore, if a recession occurs in 2020, it will influence companies to hold deliberations with its employees top save themselves or stop the production of some of their brands.

Recession emerges as one of the most crucial events that are likely to happen in 2020. This has been attributed to President Trump's initiated trade war between the United States and China. It occurs when an economy experiences a decrease in GDP. This has been associated with negative effects being experienced in stocks and dividends, credit repayments, and employee lay-off and decreased benefits. These effects, in turn, have severe consequences that may see most Americans lose their jobs, credit repayments, abilities, and reduce motivation for the working class. Companies operating in America may also be forced to stop some of its operations and brands as well as stopping their hiring process and decreasing employee benefits. Therefore, because of the negative effects associated with a recession that may severely affect Americans if it occurs, the United States particularly President Trump should formulate measures aimed at preventing its occurrences such as solving the current trade war between the US and China.