Recession is a slowdown or a massive contraction in economic activities. A significant fall in spending, generally leads to a recession. Such a slowdown in economic activities may cast for some quarters thereby completely hampering the growth of an economy. In such a situation, economic indicators such as GDP, employments, etc fall.
There are various causes of recession, for example, here in Nigeria, high interest rates of some banks can cause recession because they limit the amount of money available for investment.
Another cause is increased inflation. Inflation is the general rise in the prices of goods and services over a period of time. As inflation increases, the percentage of goods and services that can be purchased with the same amount of money decreases.
Reduced confidence is another factor that can cause recession. If people believe the economy is bad, they are less likely to spend money. Confidence is psychological, but have a real impact on an economy.
Reduced real wages is another factor, real wages refers to wages that have been adjusted for inflation. Falling real wages means that a person’s pay check is not keeping up with the inflation. The person might be making the same amount of money but his purchasing power has been reduced. Because of these causes of recession, the masses suffer if these problems leading to recession can be curbed, there would be no effect of recession on the masses.
Job loss and unemployment is usually high during recession as employers deploy rightsizing approach to cut overhead cost. Job lost destabilizes families, which may trigger other unintended consequences like depression and alcoholism that may have serious effect on wellbeing.
