Great Recession in the Americas

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North America was one of the focal points of the global Great Recession. While Canada has managed to return its economy nearly to the levels it enjoyed prior to the recession, [1] the United States and Mexico are still under the influence of the worldwide economic slowdown. The cost of staple items dropped dramatically in the United States as a result of the recession.

Contents

North America

U.S.

Number of U.S. household properties subject to foreclosure actions by quarter Foreclosure Trend.png
Number of U.S. household properties subject to foreclosure actions by quarter

The United States entered 2008 during a housing market correction, a subprime mortgage crisis and a declining dollar value. [2] In February, 63,000 jobs were lost, [3] a 5-year record. [4] In September, 159,000 jobs were lost, bringing the monthly average to 84,000 per month from January to September 2008. [5]

Federal reserve rates changes [6]
Date Discount rate changeNew primary discount rateNew secondary discount rate Fed funds rate changeNew Fed funds rate
Apr 30, 2008-.25%2.25%2.75%-.25%2.00%
Mar 18, 2008-.75%2.50%3.00%-.75%2.25%
Mar 16, 2008-.25%3.25%3.75%
Jan 30, 2008-.50%3.50%4.00%-.50%3.00%
Jan 22, 2008-.75%4.00%4.50%-.75%3.50%

Canada

Canada was one of the last industrialized nations to enter into a downturn. GDP growth was negative in Q1, but positive in Q2 and Q3 of 2008. The recession officially started in Q4. The almost 1-year delay of the start of the recession in Canada relative to the U.S. is largely explained by two factors. First, Canada has a strong banking sector [7] not weighed-down by the same degree of consumer-related debt issues that existed in the United States. [8] The United States economy collapsed from within, while the Canadian economy was being hurt by its trade relationship with the United States. Second, commodity prices continued to rise through to June 2008, supporting a key component of the Canadian economy and delaying the start of recession. In early December 2008, the Bank of Canada, in announcing that it was lowering its central bank interest rate to the lowest level since 1958, also declared that Canada's economy was entering in recession. [9] The Bank of Canada has since announced that it has two consecutive months of GDP decline (Oct -0.1% & Nov -0.7%). The country's unemployment rate could rise to 7.5% in the next two years, according to the latest OECD report. [10]

On July 23, 2009, the Bank of Canada officially declared the recession to be over in Canada. [11] However, the true economic recovery did not begin until November 30, 2009. [12] The Canadian economy would expand at an annualized rate of 6.1% in the first quarter (January–April) of 2010, surpassing analyst expectations and marking the best growth rate since 1999. [13] Economists had expected annualized GDP growth of 5.9% in the last quarter, up from 5% in last year's fourth quarter (September–December 2009). [13] The growth in the first quarter is the third straight quarter of economic expansion in Canada, coming on the heels of three consecutive quarters of contraction. [13] March growth came in at 0.6%, ahead of the 0.5% estimate. [13] 215,900 new jobs have been created in the winter and early spring months of 2010 alone - in the traditional period of time where the Canadian economy is at its most stagnant.

Canada was also in a recession during the first two quarters of 2015 average both a decline of 0.1 percent of GDP. [14]

Mexico

Despite the solid financial system of Mexico, the effects of the financial crisis originated in the United States impacted Mexico's export sector by a significant amount considering that 85% of the country's exports go to the United States. [15] Reduced demand, the highest unemployment rate in almost a decade and the depreciation of the Mexican peso caused analysts to revise growth estimates officially from 1.8% to somewhere closer to 0% for 2008. [16] [17]

The recession did not show up until 2009, but the recession already slowed down in 2008. The country had a positive growth of 1.5% in 2008 compared to a 3.3% in 2007, by 2009 the economy had shrunk by 6.5%, a percentage bigger than that of the 1994-1995 crisis [18] and the largest in almost eight decades and registering an inflation of 3.57% [19]

Economic recovery from the historic downturn started in the late 2009 with exports rising 22.8 percent. [20] The economic prospects for 2010 in the early 2009 were of a positive growth of 3.5 [21] and some saw a steady recovery by the second quarter of 2010. [22] At the end of 2010, the OECD revealed an estimated growth of 4.5 percent [23] while the Mexican government estimated a growth of over 5 percent [24] and the creation of 730 thousand jobs. [25]

The estimated growth for 2011 range from 3.9 to 4.8. [26] Despite the sustained growth in 2010, it was not enough to cover up the loss of 2009.

South America

As it mainly consists of commodity exporters, South America was not directly affected by the financial turmoil, even if the bond markets of Brazil, Argentina, Colombia and Venezuela have been hit. [27]

On the other hand, the continent experienced a tough agricultural crisis at the beginning of 2008. [28] Food prices have increased a lot, due to a lack of arable land. One of the main reasons for the loss of agricultural land was the high value offered by the production of biofuels. Food prices, rising since 2002, ascended from 2006, reaching a peak during the first quarter of 2008. In one year the average price of food rose by about 50%.

Then South American countries were affected by both the global slowdown and the decrease in food prices due to the declining demand. [29] In June 2008, the Economic Commission for Latin America and the Caribbean (ECLAC) declared it expected a 4% growth for 2009. However at the end of the year it predicted that the year 2009 would put an end to six years of prosperity during which Latin America has benefited from high raw materials prices. [30] Production in the region is likely to decline and unemployment to increase. [31] [32] However, the Center for Economic and Policy Research has estimated that the region may be able to cope with the global downturn with the right macro-economic policies, as these countries no longer depend on the U.S. economy. [33]

See also

Related Research Articles

In economics, a recession is a business cycle contraction that occurs when there is a general decline in economic activity. Recessions generally occur when there is a widespread drop in spending. This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale anthropogenic or natural disaster.

<span class="mw-page-title-main">Economy of South Korea</span>

The economy of South Korea is a highly developed mixed economy. By nominal GDP, the economy was worth ₩2.24 quadrillion. It has the 4th largest economy in Asia and the 14th largest in the world as of 2024. South Korea is notable for its rapid economic development from an underdeveloped nation to a developed, high-income country in a few generations. This economic growth has been described as the Miracle on the Han River, which has allowed it to join the OECD and the G20. It is included in the group of Next Eleven countries as having the potential to play a dominant role in the global economy by the middle of the 21st century. Among OECD members, South Korea has a highly efficient and strong social security system; social expenditure stood at roughly 15.5% of GDP. South Korea spends around 4.93% of GDP on advance research and development across various sectors of the economy.

<span class="mw-page-title-main">Economy of Spain</span>

The economy of Spain is a highly developed social market economy. It is the world's 15th largest by nominal GDP and the sixth-largest in Europe. Spain is a member of the European Union and the eurozone, as well as the Organization for Economic Co-operation and Development and the World Trade Organization. In 2023, Spain was the 18th-largest exporter in the world. Meanwhile in 2022, Spain was the 15th-largest importer in the world. Spain is listed 27th in the United Nations Human Development Index and 36th in GDP per capita by the World Bank. Some main areas of economic activity are the automotive industry, medical technology, chemicals, shipbuilding, tourism and the textile industry. Among OECD members, Spain has a highly efficient and strong social security system, which comprises roughly 23% of GDP.

<span class="mw-page-title-main">Economy of the United Kingdom</span>

The economy of the United Kingdom is a highly developed social market economy. It is the sixth-largest national economy in the world measured by nominal gross domestic product (GDP), ninth-largest by purchasing power parity (PPP), and twenty-first by nominal GDP per capita, constituting 3.1% of nominal world GDP. The United Kingdom constitutes 2.3% of world GDP by purchasing power parity (PPP).

An economic depression is a period of carried long-term economic downturn that is the result of lowered economic activity in one or more major national economies. Economic depression may be related to one specific country where there is some economic crisis that has worsened but most often reflexes historically the American Great Depression and similar economic status that may be recognized as existing at some country, several countries or even in many countries. It is often understood in economics that economic crisis and the following recession that may be named economic depression are part of economic cycles where the slowdown of the economy follows the economic growth and vice versa. It is a result of more severe economic problems or a downturn than the recession itself, which is a slowdown in economic activity over the course of the normal business cycle of growing economy.

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<span class="mw-page-title-main">Early 1980s recession</span> Global economic recession

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<span class="mw-page-title-main">Great Recession</span> Global economic decline from 2007 to 2009

The Great Recession was a period of marked decline in economies around the world that occurred in the late 2000s. The scale and timing of the recession varied from country to country. At the time, the International Monetary Fund (IMF) concluded that it was the most severe economic and financial meltdown since the Great Depression. One result was a serious disruption of normal international relations.

<span class="mw-page-title-main">Global recession</span> Recession that affects many countries around the world

A global recession is a recession that affects many countries around the world—that is, a period of global economic slowdown or declining economic output.

This article gives the timeline of the Great Recession, which hit many developed economies in the wake of the 2007–2008 financial crisis.

The European recession is part of the Great Recession that began in mid-2007. The crisis spread rapidly and affected much of the region, with several countries already in recession as of February 2009, and most others suffering marked economic setbacks. The global recession was first seen in Europe, as Ireland was the first country to fall into recession from Q2-Q3 2007 – followed by temporary growth in Q4 2007 – and then a two-year-long recession.

While beginning in the United States, the Great Recession spread to Asia rapidly and has affected much of the region.

The Great Recession in Oceania was the great recession of the late 2000s and early 2010s in Oceania. The Oceanic countries suffered minimal impact during this time, in comparison with the impact that North America and Europe felt.

<span class="mw-page-title-main">2008–2009 Ukrainian financial crisis</span> Economic decline caused by the Great Recession

Ukraine was hit heavily by the Great Recession, the World Bank expected Ukraine's economy to shrink 15% in 2009 with inflation having been 16.4%.

Recession shapes or recovery shapes are used by economists to describe different types of recessions and their subsequent recoveries. There is no specific academic theory or classification system for recession shapes; rather the terminology is used as an informal shorthand to characterize recessions and their recoveries. The most commonly used terms are V-shaped, U-shaped, W-shaped, and L-shaped recessions, with the COVID-19 pandemic leading to the K-shaped recession. The names derive from the shape the economic data – particularly GDP – takes during the recession and recovery.

The Great Recession in South America, as it mainly consists of commodity exporters, was not directly affected by the financial turmoil, even if the bond markets of Brazil, Argentina, Colombia and Venezuela have been hit.

In the United States, the Great Recession was a severe financial crisis combined with a deep recession. While the recession officially lasted from December 2007 to June 2009, it took many years for the economy to recover to pre-crisis levels of employment and output. This slow recovery was due in part to households and financial institutions paying off debts accumulated in the years preceding the crisis along with restrained government spending following initial stimulus efforts. It followed the bursting of the housing bubble, the housing market correction and subprime mortgage crisis.

<span class="mw-page-title-main">Abenomics</span> Japanese economic policy since the 2012 re-election of Shinzo Abe as Prime Minister

Abenomics refers to the economic policies implemented by the Government of Japan led by the Liberal Democratic Party (LDP) since the December 2012 general election. They are named after Shinzō Abe (1954–2022), who had been appointed as Prime Minister of Japan on his second term from 2012 to 2020. Abe was the longest-serving prime minister in Japanese history. After Abe resigned in September 2020, his successor, Yoshihide Suga, stated that his premiership would focus on continuing the policies and goals of the Abe administration, including the Abenomics suite of economic policies.

<span class="mw-page-title-main">2014 Brazilian economic crisis</span> Crisis that began during the presidency of Dilma Rousseff

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<span class="mw-page-title-main">COVID-19 recession</span> Economic downturn, primarily due to the COVID-19 pandemic

The COVID-19 recession, also known as the Great Lockdown, was a global economic recession caused by COVID-19 lockdowns. The recession began in most countries in February 2020. After a year of global economic slowdown that saw stagnation of economic growth and consumer activity, the COVID-19 lockdowns and other precautions taken in early 2020 drove the global economy into crisis. Within seven months, every advanced economy had fallen to recession.

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