Companies normally lay off staff to preserve profit margins. The staff who’ve been laid off often spend less on discretionary purchases, similar to buying recent cars or travelling.
Recessions are a component of the economic cycle, which, when the economy is booming, also has periods of expansion.
Invariably, nevertheless, the expansion period peaks and a period of contraction—called a recession—follows.
What causes a recession?
Recessions will not be attributable to anyone single factor and could be triggered by various circumstances. Because of this, there isn’t a reliable technique to predict precisely when a recession will begin. There are, nevertheless, common causes. These include:
- Global pandemics like COVID-19
- Geopolitical events that increase stock market volatility
- High rates of interest
- Low confidence within the markets and the economy
- Market bubbles
- Natural disasters that deliver large scale economic shock
- Sharp declines in consumption and demand
The duration of any given recession relies on the aspects leading as much as it. For instance, the Great Recession, which began in 2007, lasted for about 18 months. That recession was triggered largely by the subprime mortgage market crisis, which led to a housing market crash.
