Layoffs continue to push as many as 33 million American workers into unemployment, while. Even if you are not personally affected, you may start to worry. That is why it is important to know the terminology. What do "recession" and "economic depression" actually mean – both for the economy and for your own wallet? How we define the growing economic crisis affects how we respond to it, from government leaders and bank CEOs to individuals like you and me.
To help put the current economic climate into perspective, let's see what financial experts typically mean when they use terminology like "recession" and "depression". Read on forand the during this difficult time. Note that this story is intended to provide an informative overview, not to serve as financial advice. It is regularly updated as the situation develops.
What is our current economic situation?
Technically, what we see now is widely regarded as an economic downturn, but with a fiscal quarter of negative economic growth already under our belt, we are just months away from what could turn into a bona fide recession (keep reading for the full definition). Economic downturns can be a normal, regular part of a healthy economy that ebbs and flows, with periods of growth followed by periods of contraction.
What makes this recession different is that it is caused by our response to the coronavirus pandemic and not by a natural economic shift or cycle.the closure of non-essential businesses and the rapidly rising have led to reduced consumer spending in almost every category except groceries.
A leveling of the pandemic by a SARS-CoV-2 vaccine or an effective treatment for(or both) may be the most obvious solution, . Meanwhile, as states and countries some analysts expect a rapid reversal of the current downward economic trend due to company reopening and restrictions on home.
Recession versus Depression: What's the Difference?
Recession : Most experts agree that a recession occurs when the economy shrinks for at least two fiscal quarters in a row – in other words, six months. This is measured by gross national product or GDP, which is a number representing the total value of goods and services produced in a country – every car built, every burger sold, every lawn mown, and so on. A recession is then a period of at least six months in which that number falls instead of up. When GDP returns to the level of prior needs, the recession is over.
Depression : Depression is much more unusual and lasts longer. For example, there have been 33 recessions and only one depression in the past 166 years. Think of depression as two or more recessions associated with no intermediate economic recovery. The Great Depression of the 1930s is the most recent and best known example. Economic depressions in recent years instead of months.
How the government is trying to strengthen the economy and avoid a recession
Theadopted in March as part of the CARES Act represents the first attempt of the US government to thwart a recession, but we will not be able to measure its impact for some time. The Economic Lighting Act includes for most US taxpayers, as well as a loan program for businesses to continue paying their employees.
The Federal Reserve has recently indicated that it intends to keep interest rates close to 0% for the foreseeable future, which often results in more loans being taken out, leading to more spending, which generally improves economy. There is even talk of a second round of incentive financingalthough it is still too early to develop in one way or another.
Finally, doctors and scientists are trying to develop a SARS-CoV-2 vaccine, treatment with COVID-19 or both. Trials with a potential vaccine in humans will begin in mid-May, but it may take another year or more for something to be approved for widespread use. The development of a coronavirus vaccine is rapid and the details change daily.
What can I do to help?
It's easy to feel helpless, but if you're feeling financially secure or have time to give, there are ways to make a difference. My CNET colleague Katie Conner has some excellent recommendations forincluding free contributions such as online volunteering or blood donation, as well as order pickup or delivery, and buying gift certificates for restaurants.
Other local businesses, such as bookstores, garden centers, toy stores and boutiques, may have a website where you can support them if they remain closed.
The best advice I've heard so far on how you can individually help support the economy is this: Spend as best you can and within your means.
What if I needs help?
If you have suffered financial difficulties as a result of the coronavirus pandemic, here are some resources you can turn to for help:
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