People were taking out loans and balloon mortgage payments that they really could not afford. The problem began in late 2007, when housing prices began to fall and the system fell apart causing huge numbers of defaults on home loans and foreclosures. Currently, 5.6% of mortgages are delinquent, the highest rate in 21 years, and 2.5% of mortgages are in foreclosure, the highest rate ever (Fox 2). This has caused banks to lose huge amounts of money and as a result credit is becoming more difficult to get for consumers and businesses. With credit harder to get, consumers have cut back on their spending, which is very bad for the economy since around 72% of economic activity comes from consumers (Gross 2).
Most people are in debt, in late 2005 “wage growth was shortchanged because 46 percent of the growth of total income in the corporate sector was distributed as corporate profits, far more than 20 percent in previous periods.”(24) Household income had fallen five years in a row and was 4 percent lower. The average wages of Americans are low. The growth of the American population is expanding very rapidly; the job count compared to population growth is almost unrealistic. Only one point nine percent more jobs have come up since the beginning of the last recession. The unemployment rate is four point six percent That means that a lot of people do not have jobs; the percent of people that have a job was one point three percent, So that means that more people are not working than people with a job.
It’s a sad cycle and the only ones left winning are those that are unaffected by the recession. The recession has caused poverty to run rampant in communities throughout the nation. More than 2.6 million Americans now struggle to provide food for their families. “A new comprehensive economic survey shows that the recession has plunged 2.6 million more Americans into poverty, wiped out the household income gains of an entire decade and pushed the number of people without health insurance up to 46.3 million.”(Fleisher) Because of this increase in poverty, more Americans have been unable to afford to pay for their homes, thus resulting in foreclosures. Foreclosures have increased significantly.
This worst time period lasted from 1929 to 1939 and it began after the stock market crashed in 1929. The economic crisis caused many people to become unemployed and businesses and companies failing. Many banks failed and the majority of America's population had lost almost all of their money. This happened
Even then the recovery wasn’t high as they expected, it took time. The job losses meant family incomes were dropping, poverty had risen and no one had health insurance. It was tough during that time, and if U.S doesn’t watch what is being done ... ... middle of paper ... ...d to during the Great Moderation. Unemployment was greatly affected during and even after the Great Recession. During many people were getting dismissed from their jobs due to the U.S government to having enough money to pay the employees.
This economic downfall is making a turn for the worst and if it keeps up America is going to find itself in another great depression. Percentages of job loss are reaching large amounts and large numbers. According to the Bureau of Labor, in the past month the unemployment rate was at 9.7 percent. That number is rising mostly in the construction line of work because so many Americans work for the construction companies and when plans go wrong and projects don’t get built and or finished they start to lose jobs (“Employment”). They also say that the amount of unemployed people had reached around 14.9 million last month and those who were without a job who remained jobless for 27 weeks or higher was at 6.1 million.
Penalties were forced upon lending companies who refused to succumb to these destructive ideals, and we as a country entered into another Golden Age. Fast forward to 2009. The economy of the United States has failed dismally. Millions have lost their jobs, and many more have felt the pain as they watch their retirement funds plummet, and the cost of living skyrocket. In the first quarter of 2009, our GDP had dropped over 6%.
The foreclosure rate is still a big economic problem, not to mention the increasing unemployment rate. The unemployment rate has reached nearly 11% this year due to bank failures like AIG, JP Morgan, and Goldman Sachs, which have really hurt the economy. To add onto that, American car companies like Ford and General Motors have gone into bankruptcy which have depleted the number of jobs available in the United States. People are losing their jobs, have come up empty when it was time to pay the mortgages. Sadly, they are sunk in debt and can’t find work in order to support their families.
Desperate times lead to desperate measures. A man loses his job and has no money to feed his family. One might assume left with no other means the man might resort to stealing. The United States is currently in the midst of a recession so severe some speculate will last longer than the Great Depression. Various indicators of the economic health such as the unemployment rate and home foreclosures have reached their worst records in decades over the last several months.
Throughout this struggle we’ve seen cuts in education, public services, increases in taxes and spending cuts. This recession has affected businesses and residence raging from young to elderly. The federal government has stepped in to help by providing the American Recover and Reinvestment Act (ARRA) but this eventually will spiral down to its finish as well. Some reasons states found themselves in this position is because states are required to balance the budget each year, revenues fell and there was little money in reserve for each state in this emergency situation. With all of these issues unsolved and unchanging the state’s governments have gone through a tough time trying to dig themselves out of the financial down fall they have all experienced.