What exactly is a recession?

In school, we learned about the Great Depression of the 1930s. It was a period of severe worldwide economic depression that left many people unemployed, broke, homeless, and starving for food.

But a recession is not the same thing as an economic depression. A recession is an extended period of time in which there is a significant decline in economic activity. There are two consecutive quarters of negative economic growth. Recessions are usually characterized by weakened employment rates, falling real incomes, faltering confidence of consumers and businesses, and weakened sales and production.

Does any of this sound familiar to the current economic crisis?

Recessions often lead to heightened risk aversion from both investors and those who have a subsequent flight to safety. Investors try to sell riskier holdings and sustain safer securities, including government debt.

This might be scary, but on the bright side, recessions typically lead to economic recoveries sooner or later. However, that might not ease your nerves on what will happen when we’re in the middle of a recession. Who would this affect the most?

Who recessions affect the most

Certain parties will feel the effects of a recession more than others. Jill Schlesinger, a business analyst for CBS News, reports, “Here’s who’s gonna get hurt if there’s a recession: the people who lose their jobs, and the people who have a lot of debt.” This includes thousands of people from all generations.

A recession could make finding and keeping a job more difficult, especially for “millennials,” who already have the highest debt of any generation. If a recession hits the job market, employers will most likely lay off employees who haven’t worked at the business for very long or those who are in temporary positions.

“Recessions usually hit the people who are already most vulnerable in the economy or most kind of on the fringes,” said Kenan Fikri, director of research and policy development at Economic Innovation Group.

“So, millennials, especially younger ones who are still early in their careers, relatively new to their jobs, could be some of the first to be let go,” Fikri added.

That’s a scary thought

Credits: Finance101.com