Layoffs have become a frequently heard word in recent times. The venture capital flow has been reduced in companies. Macroeconomic conditions have forced the corporate world to let go of employees and freeze the new hires.
What is a recession?
A decline in the economy for consecutive quarters in a nation is when it’s called a recession. It means negative GDP growth for continuous quarters. There can be a number of factors causing recessions. It can be wars, pandemics, political instability, etc.
The economy is a cyclical thing. There are continuous expansions and contractions in an economic cycle. When the economy reaches its peak, it gradually starts declining with time.
Recession is a tough period for the economy. There are layoffs, hiring freeze, and dissolution of companies. During this period, it is difficult to enter the job market. For people in the job market, it is difficult to get raises and promotions.
Recession indicators
Gross Domestic Product
The very first and direct sign of recession is negative GDPs for two consecutive quarters. The GDP of a nation is dependent on consumer spending, private investments, state investments, and net exports. When there is a reduction in GDP growth, there is a decrease in one or more factors that contribute to it. It can eventually lead to the decrement of other factors.
Essentially, a negative GDP means lesser productivity of the nation and lesser amount of capital flowing into the economy.
Manufacturing growth
The net export is often heavily dependent upon manufacturing sectors. It naturally works on the principle of demand and supply. When there is a lesser demand the manufacturing sector, which gives employment to a huge number of people of all types – blue-collar and white-collar, contracts. This can lead to the lesser income or even loss of jobs.
Unlike services, manufacturing is a more important indicator because of the large number of blue-collar employees working in it. Especially for developing economies, blue-collar workers are significant in number. And a dip in the income of this mass leads to a weakening economic activity.
Retail and wholesale
With the slashing of incomes, the retail and wholesale markets declined in the recession. This dip again leads to a low demand from the market for manufacturers to produce their products.
Unemployment
Unemployment during a recession rises with all the above factors contributing. With less income at hand, people try to save more money. Hence, there is less demand from the market leading to a gloomy environment. This makes the manufacturers slow down the businesses which can lead to layoffs and hiring freezes.
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