Recession - What does that look like?

[Sid23]

So I'm hearing everyday about the "upcoming" recession...obviously I know there is no way to say with any certainty if we will actually experience one.

Being 30, I have not been through a recession before (or if I have, wasn't in tune with my finances so didn't care). How does daily life change for the masses? What does recession really mean? I've heard personal spending will drop dramatically and people will only spend on the necessities.

Can someone "paint a picture" of what a recession feels like and what it does to the economy?

I'm not FEARFUL or anything, just trying to become more informed.

Thanks,
SeanS

 

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[bflbob]

So I'm hearing everyday about the "upcoming" recession...obviously I know there is no way to say with any certainty if we will actually experience one.

Being 30, I have not been through a recession before (or if I have, wasn't in tune with my finances so didn't care). How does daily life change for the masses? What does recession really mean? I've heard personal spending will drop dramatically and people will only spend on the necessities.

Can someone "paint a picture" of what a recession feels like and what it does to the economy?

I'm not FEARFUL or anything, just trying to become more informed.

Thanks,
SeanS

According to most of the articles I Googled, the last ended in November 2001.
http://www.epinet.org/content.cfm/webfeatures_snapshots_archive_07302003

 

[Runum]

That's the big thing I see. We have been going through these monetary cycles since we were born whether we knew it or not and we all survived and maybe even thrived. But somehow, when the nightly news is yelling RECESSION in every other story it gets our little hearts to beating harder. That reaction is very difficult for me to ignore. I am now trying to appraoch this from an invetors point of view and it helps. I see more buying opportunities due to lower prices and less demand.

 

[JScott]

Just from my experience...

I think the biggest thing you'll notice among the "masses" is a lack of exuberance that you tend to see in the good times. People no longer spending money they don't have on toys, gadgets and things (like cars) that they can't afford. Not to say that there won't be plenty of people who still spend money on things they can't afford (or people spending money on things they don't need), but you'll see less of it.

Additionally, living in Silicon Valley during the last recession, the biggest thing I noticed was the ongoing concern over job security. People not looking for new jobs, companies not hiring nearly as much, and an overall feeling of "what if" thoughts going through people's heads. In the good times (around here, at leat), people don't care about job security, as they know there are literally thousands of other jobs just waiting for them if they need it, to be had on 2 weeks notice; in the bad times, it can be months or years before someone finds a new job.

During the 2000 recession, things got so bad around here that lots of people moved out of the area (cost of living is very high here). Over the course of literally 2 months, my commute to work was almost cut in half due to the fewer number of cars on the road.

Silicon Valley certainly isn't representative of the rest of the country, and I can imagine in other places things actually get much worse...

 

[Sid23]

According to most of the articles I Googled, the last ended in November 2001.
http://www.epinet.org/content.cfm/webfeatures_snapshots_archive_07302003

Thanks Bob.

In 2001, I was a 23 year old actor concerned with partying and girls.

 

[Sid23]

JScott, thanks for the reply. I'm in the same area as you.

 

[camski]

Well as one of the old farts here on the board (40) I have to tell you that we really havent had any hard times in america since the late 70's/early 80's. Basically the Carter years. Granted I was only a kid but i can remember the gas lines ( yeah people actually had to wait lin line for hours just to get gas) and they were rationed. Jobs were scarce, I dont mean good jobs, I mean jobs. People would take any job they could find.
But you have to keep everything in perspective, back then only rich people had credit cards and everyone paid cash for everything. People also did not eat out all the time (we ate out only on fridays) and everyone cooked at home. Back then we werent a disposable society. if things broke, a tlevision for instance, you took it to a repairman, you wouldnt think of just tossing it an buying a new one. A car was considered a MAJOR purchase and many families only had one vehicle.
Basically what I am saying is that it ihard to compare those times with now just because the world is so different. if you fell on hard times there was governmental assistance but nothing like we have today. Most assistance came from other people and churches and that sort of thing. Now like I said this is from my perspective a 10-12 year old boy in Indiana, but maybe others around my age remember it differently.

 

[Runum]

I was in DFW during the 70's. I remember the gas lines and rationing. I remember we had some decent defense jobs then. However, I remember if you had a good job you did what you could do not to lose it. I also remember that Carter froze our wages. Mom complained a lot about gas and food prices. You're right, we repaired everything we could or we did without.

 

[bflbob]

40 is old???

Pashaw!

I'm 50, and I remember those years, well, as well as senility permits.

I don't remember any big issue with jobs, but I was in a family business at the time.

As I recall, the gas shortages were more due to production issues than prices.
But I don't ever remember not being able to get gas.
I think it was something like certain people got it on even days, others on odd days.

Back then, our family owned a greenhouse and flower shop business.
We used to pay our suppliers (seeds, starter plants, supplies, etc.) ONCE PER YEAR.
Ditto with our fuel suppliers, at least as far as fuel oil was concerned.
The terms were "Net Due in Spring, 0% Interest".

When tough times hit, the terms went to "Pay Now, Borrow at 24% Interest".
I don't think we ever had a bank loan until then.
It pretty much put us out of business.

But other than that, I don't really remember times being that tough.

 

[hakrjak]

Being 30, I have not been through a recession before (or if I have, wasn't in tune with my finances so didn't care). How does daily life change for the masses? What does recession really mean? I've heard personal spending will drop dramatically and people will only spend on the necessities.

I'm about the same age as you, and in 2000 the crash and recession really wrecked me financially. I lost every penny I had, and went into debt over margin calls in the stock market, etc... Out of a department of 400 people in the IT Division I worked in, 398 of them were laid off. I was barely able to hang onto my job, and took a salary cut that I wouldn't fully recover for about 4 years. It was at that time that I decided that I could no longer be relying on a big company with benefits to take care of my family's future.

The dot-com-crash was so bad that it really felt more like a depression than a recession. Nobody could find a job. I knew IT guys working at Wallmart making $7/hr after making $75k a year the previous year. Something like that only happens maybe every 50 or 100 years, so I don't think this one will be nearly as bad. You'll probably see a slow down in consumer spending, increase in foreclosures (Creating a lot of opportunities for guys like us), and maybe even low mortgage interest rates for awhile which could spur a little real estate mini-boom by the time this is all said and done.

Best of luck to you all with weathering the storm -

- Hakrjak

 

[WheelsRCool]

From my understanding, the "recession" during the early 2000s was not technically a recession, it was actually just a slowing of the economy's growth. For a recession to occur, the economy must slow for at least two quarters straight. During the last recession, it slowed for one quarter, then rose up the next quarter, then slowed again.

However, some still do say this can qualify as a recession, but if you DO consider it a recession, it was the all-time smallest recession in the history of the nation.

The last real recession we had was the Volcker Recession during the early Reagan years.

As I recall, the gas shortages were more due to production issues than prices.
But I don't ever remember not being able to get gas.
I think it was something like certain people got it on even days, others on odd days.

The gas shortages were caused by price controls put on the gas by Nixon. Whenever you enact price controls on something, you will end up with surpluses and shortages. Price controls are why Iran, the 4th largest oil producer, has to import gas.

I believe what happened was because of the U.S. support of Israel during the Yom-Kippur War, OPEC cut the U.S. oil supply in half. This yanked up gas prices considerably.

Nixon knew that the price controls would absolutely not work, and would result in long gas lines and shortages, but the American people were demanding price controls, so he enacted them and people had to learn the hard way.

The bad effects price controls cause, however, can take awhile to start. It could take weeks, months, sometimes even years.

If the President tomorrow was to enact price controls lowering gas prices in America to $1 a gallon, all would be well for awhile, until the laws of supply and demand kick in.

When Nixon enacted them, everything was fruity and Nixon got re-elected by a huge margin. Then supply and demand kicked in and gas shortages started.

The price system is the crucial supplier of information for the economy, to determine supply and demand, if you interfere with it, the supply can never properly meet the demand.

The price controls were kept in place until Reagan, who ended them and the problem ended.

 

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[tbsells]

After reading the above posts by Jscott and Hakrjak its amazing to me how different things are in different parts of the country. I was selling real estate in southern Ohio in 2000. I didn't know there was a recession. I remember the year well because we had a baby and built our dream house. It was also a good year financially. My sales were very good. New homes were being built and sold everywhere. The labor supply for construction workers was tight, there was so much work that you had to wait on the good ones and their prices were high. Construction workers were a very independent group and they could afford to be. The IT industry may have been hard hit, I don't know. I just remember that it seemed like good times to me and the people I know. Most of my family works in real estate and most of my friends are medical professionals and we didn't have any trouble in 2000. The Cincinnati area is pretty diverse economically and that helps. I sure don't remember any big layoffs or job shortages.

 

[CoMp1eX]

How long do you all believe this recession will last?

 

[andviv]

I think it is how they say... recession is when your neighbor loses his job... depression is when you lose yours.

I do recall the negative mentality of the people around 2000, 2001 and parts of 2002. Interestingly enough, that was precisely when the RE market boomed and prices started going up accordingly as the interest rates dropped.

 

[tbsells]

Not only did interest rates drop, downpayments were eliminated or drastically reduced, underwriting guidelines dramatically loosened, appraisals pumped up, etc. We have yet to see the full effect of all that. But, really its all just part of a normal business cycle. Isn't it?

 

[hakrjak]

The real estate boom you guys are talking about in the early 2000's was caused by people taking their money out of Tech and IT stocks, and looking for a safer place to stash their cash. When people got really conservative because of how bad things were looking (People losing their whole 401k in company, stock, millions losing their jobs as compnies like HP who had never laid off a single employee, now laid off 10's of thousands -- etc) -- They started pulling money out of the stock market and putting it into their homes to lower their house payment, and make their lifestyle easier to sustain if 1 or both of the breadwinners would lose their job.

It's funny so many don't remember how bad it was. Do you guys remember the president having to authorize unemployment checks to be extended for up to a year after people lost their jobs? Nobody could find a job, so I knew several who used that whole 12 months to sit on the couch and play Playstation 2 while waiting to hear on one of their resumes. People who did find jobs accepted positions for a lot lower salary. Some guys I know couldn't support their families on the unemployment check, so they started selling furniture, tv's, anything they could liquidate for quick cash.

- Hakrjak

 

[camski]

I remember that being pretty much limited to tech though. For those of us in the heartland nothing really changed. Now in my area a lot of industry is tied to automotive, so right now people around here are struggling. A lot of plants closing and others struggling to stay alive (delphi, dana, GM just to name a few)

 

[camski]

This just came to mind because of one that is struggling in my state but the one thing to watch if the economy does slow dramatically will be the gambling/casino business. If disposable income drops i would look for that industry to tank quickly. some of you stock traders, I am curious what you think the casino business will do this year.

 

[andviv]

for what I understand, casinos do great during tough times. Same with lottery and anything related to 'luck'. Same with alcoholic beverages. But I may be wrong.

 

[phlgirl]

A little humor to offset the panic. I love Andy Rooney.... he cracks me up.

http://60minutes.yahoo.com/segment/11/andy_rooney?comment_offset=961