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Baraka Ntibonera
PPOG 502-Liberty University
Increased Unemployment rates during recession in the American economy led to higher levels of
mental health problems among individual.
4/7/2024
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Abstract
The purpose of this research is to discuss 2008 recession and how increased in
unemployment rate during recession led to higher level of mental health problems among
individuals. The research digs deep into the economy of the United States by first giving a
background information about the recession of 2008 and what was the cause of it. The research
will cover different economic theories like the price system, supply and demand, and government
intervention. All these factors are important when determining the health of the economy or how
the economy is doing. The research will dig deep into the 2008 recession which was the the
worst economy crisis in the history of the United States since the great depression. In 2023 there
was slightly growth in the economy of the United States, the research will not focus on the
recession but also the current economy status with the Biden administration. There have been
rumors that America is heading to another recession, this aper will include ways a recession can
be avoided. There are different factors that can cause recession which includes economic stocks,
the stock market and monetary policy. I will talk about why the market fails and why
government intervention in the market is important. Government intervention can revive the
economy or hurt the economy for a long time, the research will dig deep to the influence
government in the economy and finish with a biblical integration.
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Introduction
The 2008 recession impacted millions of people in the United Sates of America. It didn’t
just impact them financially, but also mentally due to the Unemployment rate. When a country is
experiencing a recession, there will be a high unemployment rate and terrible living conditions
among individuals; according to the research, this will negatively impact the population. There is
a big association between the economy and mental health. The research has proven that
economic recession and unemployment, debts have big impact on a person’s mental health, and it
may cause suicidal thoughts. 8.7 million jobs were lost according to the U.S Bureau of labor, and
19 trillion in net worth was lost to different households.
Causes of 2008 Recession and the great depression
The financial crisis of 2008 was the biggest economy failure in the United Sates
since the great depression. The recession went on for 18 months and the economy started to
recover slowly. The recession happened from the year 2007 to June 2009. A lot of people lost
their jobs during that season and until now they have never recovered, and their work system
changed. Millions of people were laid off from their employments, college graduates who just
finished school their career were distracted, this was not just a normal event, it was also
traumatic to individuals. “The fact that so many people took temporary jobs, often as contractors,
was pushed along by the downturn, in part because employers were so unsure about the future but also
because workers had no choice but to take them,” This caused a lot of stressed in households because
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employees were willing to take any job presented to them because they didn’t have any options. But
how did the great recession start and what caused it?
Recession started in between 2007 and 2009 and it was named the great recession, and the
recovery was very long and slow. This was named as. the word recession in the history of America.
At least 4.3%, the rate of unemployment jumped to 10%, prices of oh dropped down to 30% and S&P
500 went down completely for almost 57%. During the great depression a large amount of people lost
their jobs, according to the research almost six million households lost their homes. The real cause of
the great recession was the banks lending money to everyone without checking credits for
qualifications. It was easy to get a mortgage in the bank, repayment standards were not taken seriously
and easy accessibility to buying power, there was boom construction and prices went up. There was a
mortgage at that time that was introduced called subprime and this credit was easily accessible,
borrowers with bad credit score qualified, they had low down payment and monthly payments. “Most
subprime mortgages, in addition to having balloon payment features and subpar underwriting
standards, were also adjustable-rate mortgage.” (Duggan,2023). There have been 14 recessions
since the great recession, in every recession the economy will deteriorate, but not all of them are
the same because it different causes., COVID-19 recession was big but the shortest, and it only
lasted for two months. “But he gives more grace. Therefore, it says, “God opposes the proud but
gives grace to the humble.” (James 4:6, ESV). In this world we live by the grace of God, and he
is the only can save his people against any recession because he provides and protect.
Current Status of the American Economy
The current economy of the U.S is doing good. The consumer index in January showed
that there was drop price in gasoline, homes only experienced 0.4% increase in food prices,
which was the highest of the year. In May 2023 housing prices went up. However, gas prices
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dropped by 3.2% in January. The consumers are doing good compared to a year ago. There has
been an increase in wages of like 4.5% in the last year. According to the news and research as
2024 is beginning the economy is doing well the unemployment rate has dropped and the federal
reserve has announced that interest rate is stable. Professor of Public policy at the university of
Michigan, Justin Wolfers described it as “little engine that could” and believes 2024 will bring
American families back to a sense of normalcy (Family Compassion)
Future goals for American economy and plans to avoid another recession.
Recession is formed by back-to-back quarters of bad economic growth. This can be caused by
high oil prices or financial crisis. There are different ways a company can prepare when the
recession hit and during the great recession a lot of people learned different ways to get ready to
avoid it when it comes. When you’re ready you will not panic, and it will your mental state.
When recession there is a recession coming companies need to examine their debts, decision
making, workforce management and digital transformation. Companies need to be ready and
flexible to adjust in any circumstance. Number one rule is to always have money, so don’t run ot
cash and be able to manage your debts. Companies that have high level of debts usually struggle
during recession. The more debt you have, the more cash you need to make your interest and
principal payment” ( Frick,2019).
The federal reserve has been working on the interest rates to bring back stability and to
put the labor market into balance. There is a high demand for new hires which surpasses the
supply of workers available. In America the unemployment rate has dropped dramatically and
has added to higher inflation. “To help bring the economy back into balance, IMF analysis shows
that staying the course and keeping interest rates elevated this year will tame inflation”
(International Money Monetary)
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How Recession Impacted Mental Health
Recessions don’t affect only companies but also individuals’ wellbeing and mental health.
The rising of rent, cost of living and unemployment negatively affect people mentally. There is a
high stress that comes with unemployment and lack of getting social security benefits. This
contributes to an increase in suicide rate and can self-harm individuals. Many countries around
the world don’t have access to funds that help people with mental health issues, so it is very
difficult for them to survive. When prices go up continuously, people will stop buying products
and this will bring poverty. When this happens, companies will stop producing or reduce
production when there are no production employees will be laid off work. Another theory that
can bring recession is the economic shock. These are different events that can shake the
economy, they can affect the supply or demand of a product. For example, the COVID-19
season, and high prices of gas are examples of economic shock that leads to recession. During
the recession of 2008 the main cause of the depression and anxiety was the high unemployment
rate. According to the study recession really affects people mentally and it can lead to suicide.
This why when things get hard, God is the solution he always provides and protects. If you trust
in him, he will never put you to shame. “May the God of hope fill you with all joy and peace in
believing, so that by the power of the Holy Spirit you may abound in hope” (Romans 15:13
ESV).
Market Failures, government Intervention and economic theory
The role of the government should not change at any time. The reason why the
government is there is to help during difficult times. When the economy is doing great, the
government should be there; when it’s facing challenges, it should be there also. Government has
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a responsibility to bring work for the interests of the people. 1 Timothy 2:12, Paul’s talks about
why the government exists or the purpose of the government, this is when he told the church to
pray for kind and rulers. In economy it is the same analogy, the government should work hard to
make sure the economy is safe and stable, build a society that has access to jobs. The
government should establish a system that protects private property, make sure monetary is
stable, and not too much intervention of the government because this might cause the economy
not to grow. All of this will work if there is peace in the country and the society is stable. To
establish of establishing peace, justice, and freedom of commercial market, the government
needs to look at different steps. For example, if the if the demand is high for oil and the price
goes up this will allow less government intervention. Government needs to intervene to security
of the economy.
The government needs to intervene, because will not just sit down and the economy of
the country is falling apart. It will be bad if they don’t intervene. How ever in the middle of
recession there are often “do something policies” that are adopted. There will be a lot of pressure
among politicians and people to make it better. This is not a good way to response. There are
different difficult areas where the government needs to intervene. If the government intervenes
their goal must be to build space where the market will thrive again. It is very important to have
leaders who care about the people and the country and to have good ideas when they are needed.
According to (Ecclesiastes 3) talks about time for everything. During the recession is the time for
the government to show what they can do to support the economy.
The role of the government is to reduce or control where the country can or cannot go to
operate their businesses. The government should intervene and help those that need help. When
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there is a monopoly, I think the government should intervene because if it is not controlled very
well it might be bad for other businesses. “A monopoly exists when there is a firm that is the
only producer of a good or service for which there are no good substitutes” ( Gwartney et
al.2016,114). The government’s job is to help those who are in need and be able to intervene
anytime. Government or state can help in finance, public production, and income transfer
(Barr,2004,p.98). When there is an economic battle, the government comes to aid individuals or
businesses, and people who have lost their jobs by providing affordable insurance and
unemployment. Those who are claiming unemployment to the State should provide proof that
they are continuously applying for jobs and conducting drug tests. They must honor the code
established because people will use this as an opportunity to make free money. They will not put
effort into getting a job because they are getting unemployment easily. If the government
involves itself too much it will build dependency and it won’t help the people ( Galbraith,1969).
They are those who have found it very easy to receive unemployment checks and stuck on those
who passed the same cycle to their communities.
Some markets have already failed, and I think the government should not intervene. A
failed market won’t be good for the government if the industry is missing things like sales or a
lack of investors. It is the same as sports, a sports team can’t sign a player who did a terrible job
last year or tends to get injured every game. The leader of a company must make sure there is a
return on investment. A failed market is like gambling, you can invest a lot of money without
knowing what the return will be. The industry has already failed so why is wasting money?
Pettinger, (2016) described the free rider as when people love amazing services having to pay
anything to contribute something. Free things sometimes are not good because people will get
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used to them. The government should deliver public goods because people love free things, and
they do their best not to pay. The government also charges taxes on public goods. Private
companies object to making a profit so they might charge more.
Some laws control government intervention, like the Security Exchange Act of 1933
which laid out the SEC(SEC,2013). There are also regulations established by SEC, if there are
too many regulations it will ruin the business. All the politicians seeking an office job will need
to have.
Conclusion
In conclusion, economic recession, unemployment, and debts have a big impact on a
person’s mental health, and it may cause suicidal thoughts. 8.7 million jobs were lost according
to the U.S Bureau of labor, and 19 trillion in net worth was lost to different households during
the 2008 recession. The current economy of the U.S is doing good. The consumer index in
January showed that there was drop price in gasoline, homes only experienced 0.4% increase in
food prices, which was the highest of the year. In May 2023 housing prices went up. However,
gas prices dropped by 3.2% in January. The federal reserve has been working on the interest rates
to bring back stability and to put the labor market into balance. There is a high demand for new
hires which surpasses the supply of workers available. If you trust in God, he will fight for you
and he will never put you to shame. The role of the government should not change at any time.
The reason why the government is there is to help during difficult times. When the economy is
doing great, the government should be there; when it’s facing challenges, it should be there also.
Government has a responsibility to bring work for the interests of the people.
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