Running Head: ECONOMIC CRISIS: EFFECTS ON THE ECONOMY 2 Abstract The United States is obviously in a state of economic despair. This essay has supporting facts that prove the economy is definitely not on the mend. The public has been led to believe that this downward spiral is almost over. What will be proven in this paper is that foreclosure rates are still dramatically increasing and that the total in unemployment rates is deceiving. Without more jobs, consumers won’t see the gains in income needed to encourage them to spend more.
The only thing that does seem to be on the rise is the amount of people seeking help for psychological distress which comes from losing their jobs. It is time for America to quit thinking about solutions to the economic crisis and start doing something about it. Running Head: ECONOMIC CRISIS: EFFECTS ON THE ECONOMY 3 Economic Crisis: Effects on Society We are in an economic crisis. These are words that all Americans have become increasingly familiar with these days.
Some would say that our economy is on the mend. However, the facts tell a different story.
Foreclosure rates are still dramatically increasing due to the number of unemployed individuals who remain displaced. Obviously consumers are spending their money more rationally; and, furthermore, the psychological state of these individuals affected is disheartening. It is time for America to quit thinking about solutions to the economic crisis and start doing something about it. The growing concern of foreclosure is on everyone’s mind and the signs are not encouraging. According to Rick Sharga, Senior Vice President of RealtyTrak Inc. , “The United States economy is currently not looking very good.
The biggest problems are in the real estate and mortgage markets” (p. 1). It is not a good sign for the economy when foreclosures are still dramatically increasing in 2010. American homeowners thought that the worst of the real estate crisis was behind them. They were wrong. Sharga(2010) also stated that“ Instead of declining, the number of foreclosed homes in the United States increased to a record 2. 8 million, a 21% rise over 2009” (p. 1). It could be due to the fact that the public was promised renegotiations on about 3 to 4 million loans and now banks are balking at rewriting mortgages t all. “In reality only about 400,000 loans have been renegotiated” according to (Wong, 2010). No matter what negotiations are made or not made, if the problem is not taken care of at the root it will continue to be an issue. So let’s take a look at why people are lapsing on their mortgage payments. RealtyTrak states that “unemployment has become the major reason for foreclosures” (Sharga, 2010, p. 1). Running Head: ECONOMIC CRISIS: EFFECTS ON THE ECONOMY 4 Unemployment is one of the major economic problems affecting our nation.
The United States, usually one of the most vibrant economies in the world, is currently suffering from a huge unemployment crisis with millions of people in the workforce without jobs. The government says that stimulus packages are there to help, but what people really need more than money in a big lump sum is a glimmer of hope for new jobs that would mean financial stability for the long term. One of the biggest issues Americans face today is that there are not enough jobs for all the people that need them. The number of people who have been unemployed for more than six months is about 7 million and millions more are believed to have just stopped looking”(Crawley,2010, p. 1). People are not finding work and therefore they are giving up all together. There are always varied beliefs on the issue of unemployment. Crawley states that according to Whitehouse economic advisor Larry Summers “Manufacturing is up. The private sector has added jobs for six consecutive months. Corporate earnings are rising and CEO’s are reporting greater confidence. Inflation is almost nonexistent” (2010, p. ). However, according to CNN money, “Job report numbers are worse than expected” and the U. S. labor department reported a net loss of 131,000 jobs in July (2010). More hardships are expected because the private sector is still hesitant to hire more people. Jeff Bater (2010) states that “The Wall Street Journal reported that the 71,000 private sector jobs added in July just wasn’t enough to keep up with the 143,000 temporary census workers that were let go”. (p. 1). This report also shows that 45% of unemployed Americans were out of work for more than six months in July.
With all that being said consumer spending has also taken a nosedive. American consumers and businesses are embarking on an era of thrift as the recession deepens, saving more money as they cut spending on unnecessary purchases. Jack Healy states that according to Joshua Shapiro, Chief United States economist “consumers are just being Running Head: ECONOMIC CRISIS: EFFECTS ON THE ECONOMY 5 rational. They respond to incentives and conditions, and right now the conditions and incentives are: spend as little as you can and pay down as much as you can” (2010, p. ). Without more jobs consumers won’t see the gains in income needed to encourage them to spend more and support economic activity. Even those with jobs may not feel confident enough to ramp up their spending, due to fear of losing their usually stable jobs. “If American consumers are less indebted, live within their means and have more money in savings, they are better positioned to spend on a sustainable basis for years to come” (Healy, 2010, p. 1). When you have an economy that is used to all the spending and borrowing and then you take it away, it is going to go through some pains!
When Americans spend less money companies cut jobs and cut back on their investments on equipment, software, and buildings to trim their costs. With the loss of productivity and the consequent economic downside, unemployment also has negative psychological implications and damaging effects on the individuals who face financial difficulties. During this economic downturn, there have been a huge number of layoffs, and even though that number is dropping, every day you are still hearing of job cuts. It is hard to measure the emotional effects this economic turndown has had on society.
A place that one can find a rough gauge is at the office of Crisis link, a suicide hotline. Since the recession has begun a not so strange thing has happened. The number of calls has shot up; suicide calls in particular are much higher than they were before the unemployment rate started to rise. Alex Spiegel states that according to Margaret Mathis, a manager at the hotline “The hotline used to get around 150 suicide calls a month; now it is closer to 270 – 77% higher than before the recession hit” (2010, p. 3).
The severity of the calls is also on the rise, crisis operator’s call in the police for help 40% more than they used to. Mathis also states that according to The National Suicide Prevention Running Head: ECONOMIC CRISIS: EFFECTS ON THE ECONOMY 6 Lifeline “Calls that concern primarily financial matters are up 40% and the numbers of calls they have gotten in the past year has risen 35 % (2010, p. 1). People often feel an intense sense of shame after losing a job and many will resist even confiding in family and friends.
In conclusion, Americans have been promised economic recovery and relief from worries about the effects of an economy in crisis. With this financial crisis the United States has been experiencing a slow economic recovery. The nation has shown signs of an economic rebound including an increase in private sector jobs, growth and manufacturing and low inflation. However, the signs of the troubled economy including sky rocketing foreclosures, high unemployment rates and severe psychological effects have led to an even bigger recession.
It is time for America to quit thinking about solutions to the economic crisis and start doing something about it. Running Head: ECONOMIC CRISIS: EFFECTS ON THE ECONOMY 7 References Bater, J. (2010, August 06). U. S. employers shed jobs. Wall Street Journal, p. 1. Retrieved from http://www. online. wsj. com Crawley, M. (2010) The good and bad economy. Times, 176 (4) Retrieved from Academic Search Premiere. Healy, J (2010, August 6) Consumers are saving more, spending less.
Times, 169 (6). Retrieved from Academic Search database Isidore, C. (2010). July jobs report: Economy still losing jobs,p. 1. Retrieved from http://www. CNNMoney. com Sharga, R. & Wong, V. (2010, July31). Foreclosures continue to increase dramatically in 2010. Retrieved from http://www. businessinsider. com/foreclosures-continue-to-increase- Dramatically-in-2010-2010-7 Spiegel, A. (2010). Unemployment takes emotional toll. p. 1. Retrieved from http://www. npr. org/templates/story/story. php? story
Cite this Economic Crisis: Effects on the Economy
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