Layoffs continue to force as many as 22 million American workers into unemployment, while businesses. Even if you are not personally affected, you may start to worry. That's why it's important to know what's really going on. 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, here's a look at what financial experts typically mean when they use terminology such as "recession" and "depression," as well asand the during this difficult time.
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.
The lesson to take home is that a recession cannot be defined until at least half a year has passed, and depression can hardly be diagnosed until it has happened.
So, what do we call the not so great economic state we are in? What can the government do to remedy this? Or individuals? And where do you go when you need financial help?
Let's zoom in on the current crisis and take a look.
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What is our current economic situation?
Technically, we are currently in an economic downturn, but that may change. Economic downturns are a normal, regular part of a healthy economy that ebbs and flows, with periods of growth followed by periods of contraction.
What makes this downturn different is that it is caused by the coronavirus, by the closure of non-essential businesses and high unemployment – not by a natural economic shift or cycle. Until it is considered safe enough to open businesses and factories, economic conditions are expected to deteriorate.
Leveling out the pandemic by either a SARS-CoV-2 vaccine or an effective treatment for COVID-19 (or both) may be the most obvious solution, and it will take time.
How the Government Is Trying to Strengthen the Economy and Prevent a Recession
The recent $ 2 trillion stimulus package represents the U.S. government's first attempt to thwart a recession, but we will see its impact for some time cannot measure. Economic Relief Law includes incentive payments of up to $ 1,200 for most U.S. taxpayers, as well as a loan program for businesses to continue paying their employees.
The Federal Reserve has recently indicated interest rates close to 0% in the near future, often resulting in more loans being encouraged, leading to more spending, and generally improving the economy.
Finally, doctors and scientists are trying to develop a SARS-CoV-2 vaccine, a COVID-19 treatment, 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.
What can I do to help?
It's easy to feel helpless, but there are ways to make a difference. My CNET colleague Katie Conner has some excellent recommendations on things you can do to help your local community and businesses, including free contributions such as volunteering online or donating blood, as well as ordering takeout 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 order orders and possibly even save on shipping costs by picking up curbs.
The best advice I've heard so far on how you can individually help support the economy is this: Spend your best and within your means.
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] What if I Needs Help?
If you have had financial problems as a result of the coronavirus pandemic, here are some resources you can get help with: