What happens in a recession
In: Economics
When the economy is growing, there is a cycle of things that take place;
People feel more financially secure -> people buy things -> businesses do well -> business expand -> businesses hire more workers -> demand for workers rise -> wages go up -> people feel more financially secure -> repeat.
In a recession, that cycle slows or reverses.
People feel less financially secure -> people buy less things -> businesses do poorly -> businesses contract -> layoffs -> demand for workers goes down -> wages slow -> people feel less financially secure -> repeat.
A slowing or reversal can happen for a lot of reasons. A shock like a natural disaster, or war. A few big companies makes a bad bet, lose a lot of money, and have to lay off workers. A problem in the banking sector puts a lid on companies’ ability to expand, and so on. It can happen suddenly or gradually. And they can simply occur naturally.
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