The economy needs businesses to produce goods and services bought by consumers, other businesses and governments to thrive. When production slows, demand for goods and services shrinks, credit tightens and the economy enters a recession. People experience a lower standard of living due to employment uncertainty and investment losses. Recessions that last more than several months create long-lasting hardships for average people that affect all aspects of their lives.
Altered Work Life
Companies react to a drop in business by cutting expenses, including laying off workers, reducing their hours or eliminating jobs. Some employers delay annual increases and lower salaries. People have to adjust their budgets to survive on less take-home pay and have trouble finding new employment or second jobs because companies have less need to add to their payroll. Those fortunate to find new work often end up in jobs for which they are overqualified and underpaid. Employees who keep their jobs usually assume responsibilities once assigned to the eliminated positions, which adds stress and contributes to job dissatisfaction.
Changed Spending Patterns
Individuals with less money to spend due to a recession delay going on vacation and buying cars and things for their homes. They also save money by purchasing less-expensive brands, driving less and shopping at discount stores. Others economize by eliminating niceties such as cable or satellite television service and eating out; others opt for less-expensive phone, Internet and cable plans. Even folks who aren't affected by employer cutbacks watch their spending out of fear they may lose their jobs.
Different Family Dynamics
Unemployment and financial pressures brought on by a recession affect family relationships. Couples may delay having children or marrying. Adult children move back home to live with parents. Men unable to find work may become stay-at-home fathers so that their wives can be the breadwinners. People unable to provide for their families lose their sense of self-worth, adding depression to the anxiety and stress financial worries bring.
Home values fall during recessions, and individuals whose main asset is their home lose equity and have trouble selling if they need to raise cash. Stocks held for retirement in savings plans lose value, leaving workers with less retirement income. They either have to delay retirement or continue to work part-time after leaving the workforce. Retirees then compete with younger workers for available jobs.
- Federal Reserve Bank of San Francisco: What are Business Cycles and How Do They Affect the Economy?
- America's Recession: The Effects of the Economic Downturn; Corona Brezina
- Pew Research Center: Luxury or Necessity? The Public Makes a U-Turn
- Christian Science Monitor: How the Recession is Reshaping the American Family
- U.S. News & World Report Money: The Recession's Impact on Baby Boomer Retirement