Late 2000s recession in the Americas
Encyclopedia
As one of the most developed regions in the world, the late 2000s – early 2010s recession in the Americas is seen as one of worst disaster areas of all the world. While Canada has managed to return their economy nearly to the levels they enjoyed prior to the recession, the United States and Mexico are still under the influence of the worldwide economic slowdown. The cost of staple items have dropped dramatically in the United States as a result of the recession. This can be seen in restaurant and department store prices from 2009 to 2010. However, prices are schedule to rise between January 2010 and December 2011 according to the United States Consumer Price Index.
, a subprime mortgage crisis
and a declining dollar value. In February, 63,000 jobs were lost, a 5-year record. In September, 159,000 jobs were lost, bringing the monthly average to 84,000 per month from January to September 2008.
, in announcing that it was lowering its central bank interest rate to the lowest level since 1958, also declared that Canada's economy was entering in recession. The Bank of Canada has since announced that it has two consecutive months of GDP decline (Oct -0.1% & Nov -0.7%). The country's unemployment rate could rise to 7.5% in the next two years, according to the latest OECD report.
On July 23, 2009, the Bank of Canada officially declared the recession to be over in Canada. However, the true economic recovery did not begin until November 30, 2009. The Canadian economy would expand at an annualized rate of 6.1% in the first quarter (January–April) of 2010, surpassing analyst expectations and marking the best growth rate since 1999. Economists had expected annualized GDP growth of 5.9% in the last quarter, up from 5% in last year's fourth quarter (September–December 2009). The growth in the first quarter is the third straight quarter of economic expansion in Canada, coming on the heels of three consecutive quarters of contraction. March growth came in at 0.6%, ahead of the 0.5% estimate. 215,900 new jobs have been created in the winter and early spring months of 2010 alone - in the traditional period of time where the Canadian economy is at its most stagnant.
Even with the steps taken to create jobs in the Canadian economy, its recovery remains fragile and job cuts can still be seen in areas that specialize in manual labor. For example, Bick's Pickle
is closing down its tank farm in Delhi
, Ontario
on November 2011. One hundred and fifty full-time jobs will be lost by this move in addition to secondary industries and retailers.
The recession did not show up until 2009, but the recession already slowed down in 2008. The country had a positive growth of 1.5% in 2008 compared to a 3.3% in 2007, by 2009 the economy had shrunk by 6.5%, a percentage bigger than that of the 1994-1995 crisis
and the largest in almost eight decades and registering an inflation of 3.57%
Economic recovery from the historic downturn started in the late 2009 with exports rising 22.8 percent. The economic prospects for 2010 in the early 2009 were of a positive growth of 3.5 and some saw a steady recovery by the second quarter of 2010. At the end of 2010, the OECD revealed an estimated growth of 4.5 percent while the Mexican government estimated a growth of over 5 percent and the creation of 730 thousand jobs.
The estimated growth for 2011 range from 3.9 to 4.8. Despite the sustained growth in 2010, it was not enough to cover up the loss of 2009.
On the other hand, the continent experienced a tough agricultural crisis
at the beginning of 2008. Food prices have increased a lot, due to a lack of arable land. One of the main reasons for the loss of agricultural land was the high value offered by the production of biofuels. Food prices, rising since 2002, ascended from 2006, reaching a peak during the first quarter of 2008. In one year the average price of food rose by about 50%.
Then South American countries were affected by both the global slowdown and the decrease in food prices due to the declining demand. In June 2008, the Economic Commission for Latin America and the Caribbean (ECLAC) declared it expected a 4% growth for 2009. However at the end of the year it predicted that the year 2009 would put an end to six years of prosperity during which Latin America has benefited from high raw materials prices. Production in the region is likely to decline and unemployment to increase. However, the Center for Economic and Policy Research
has estimated that the region may be able to cope with the global downturn with the right macro-economic policies, as these countries no longer depend on the U.S. economy.
U.S.
The United States entered 2008 during a housing market correctionUnited States housing market correction
A United States housing market correction is a market correction or "bubble bursting" of a United States housing bubble; the most recent began following a national home price peak first identified in July 2006. Because realty trades in illiquid markets relative to financial assets such as common...
, a subprime mortgage crisis
Subprime mortgage crisis
The U.S. subprime mortgage crisis was one of the first indicators of the late-2000s financial crisis, characterized by a rise in subprime mortgage delinquencies and foreclosures, and the resulting decline of securities backed by said mortgages....
and a declining dollar value. In February, 63,000 jobs were lost, a 5-year record. In September, 159,000 jobs were lost, bringing the monthly average to 84,000 per month from January to September 2008.
| Federal reserve rates changes | |||||
| Date Calendar date A date in a calendar is a reference to a particular day represented within a calendar system. The calendar date allows the specific day to be identified. The number of days between two dates may be calculated. For example, "24 " is ten days after "14 " in the Gregorian calendar. The date of a... | Discount rate Discount rate The discount rate can mean*an interest rate a central bank charges depository institutions that borrow reserves from it, for example for the use of the Federal Reserve's discount window.... | Discount rate Discount rate The discount rate can mean*an interest rate a central bank charges depository institutions that borrow reserves from it, for example for the use of the Federal Reserve's discount window.... | Discount rate Discount rate The discount rate can mean*an interest rate a central bank charges depository institutions that borrow reserves from it, for example for the use of the Federal Reserve's discount window.... | Fed funds | Fed funds rate |
|---|---|---|---|---|---|
| Primary | Secondary | ||||
| rate change | new interest rate | new interest rate | rate change | new interest rate | |
| Apr 30, 2008 | -.25% | 2.25% | 2.75% | -.25% | 2.00% |
| Mar 18, 2008 | -.75% | 2.50% | 3.00% | -.75% | 2.25% |
| Mar 16, 2008 | -.25% | 3.25% | 3.75% | ||
| Jan 30, 2008 | -.50% | 3.50% | 4.00% | -.50% | 3.00% |
| Jan 22, 2008 | -.75% | 4.00% | 4.50% | -.75% | 3.50% |
Canada
Canada was one of the last industrialized nations to enter into a downturn. GDP growth was negative in Q1, but positive in Q2 and Q3 of 2008. The recession officially started in Q4. The almost 1-year delay of the start of the recession in Canada relative to the U.S. is largely explained by two factors. First, Canada has a strong banking sector not weighed-down by the same degree of consumer-related debt issues that existed in the United States. The United States economy collapsed from within, while the Canadian economy is being hurt by its trade relationship with the United States. Second, commodity prices continued to rise through to June 2008, supporting a key component of the Canadian economy and delaying the start of recession. In early December 2008, the Bank of CanadaBank of Canada
The Bank of Canada is Canada's central bank and "lender of last resort". The Bank was created by an Act of Parliament on July 3, 1934 as a privately owned corporation. In 1938, the Bank became a Crown corporation belonging to the Government of Canada...
, in announcing that it was lowering its central bank interest rate to the lowest level since 1958, also declared that Canada's economy was entering in recession. The Bank of Canada has since announced that it has two consecutive months of GDP decline (Oct -0.1% & Nov -0.7%). The country's unemployment rate could rise to 7.5% in the next two years, according to the latest OECD report.
On July 23, 2009, the Bank of Canada officially declared the recession to be over in Canada. However, the true economic recovery did not begin until November 30, 2009. The Canadian economy would expand at an annualized rate of 6.1% in the first quarter (January–April) of 2010, surpassing analyst expectations and marking the best growth rate since 1999. Economists had expected annualized GDP growth of 5.9% in the last quarter, up from 5% in last year's fourth quarter (September–December 2009). The growth in the first quarter is the third straight quarter of economic expansion in Canada, coming on the heels of three consecutive quarters of contraction. March growth came in at 0.6%, ahead of the 0.5% estimate. 215,900 new jobs have been created in the winter and early spring months of 2010 alone - in the traditional period of time where the Canadian economy is at its most stagnant.
Even with the steps taken to create jobs in the Canadian economy, its recovery remains fragile and job cuts can still be seen in areas that specialize in manual labor. For example, Bick's Pickle
Bick's Pickle
Bick's Pickle is a pickle producer in Canada originally based out of Scarborough, Ontario. The brand is now sold in Canada by U.S.-based The J.M. Smucker Co.....
is closing down its tank farm in Delhi
Norfolk County, Ontario
Norfolk County is a rural city-status single-tier municipality on the north shore of Lake Erie in Southwestern Ontario, Canada. Bloomsburg is a small town located in Norfolk County and is the hometown of David Slater. The county seat and largest community is Simcoe...
, Ontario
Ontario
Ontario is a province of Canada, located in east-central Canada. It is Canada's most populous province and second largest in total area. It is home to the nation's most populous city, Toronto, and the nation's capital, Ottawa....
on November 2011. One hundred and fifty full-time jobs will be lost by this move in addition to secondary industries and retailers.
Mexico
Despite the solid financial system of Mexico, the effects of the financial crisis originated in the United States impacted Mexico's export sector by a significant amount considering that 85% of the country's exports go to the United States. Reduced demand, the highest unemployment rate in almost a decade and the depreciation of the Mexican peso caused analysts to revise growth estimates officially from 1.8% to somewhere closer to 0% for 2008.The recession did not show up until 2009, but the recession already slowed down in 2008. The country had a positive growth of 1.5% in 2008 compared to a 3.3% in 2007, by 2009 the economy had shrunk by 6.5%, a percentage bigger than that of the 1994-1995 crisis
1994 economic crisis in Mexico
The 1994 Economic Crisis in Mexico, widely known as the Mexican peso crisis, was caused by the sudden devaluation of the Mexican peso in December 1994....
and the largest in almost eight decades and registering an inflation of 3.57%
Economic recovery from the historic downturn started in the late 2009 with exports rising 22.8 percent. The economic prospects for 2010 in the early 2009 were of a positive growth of 3.5 and some saw a steady recovery by the second quarter of 2010. At the end of 2010, the OECD revealed an estimated growth of 4.5 percent while the Mexican government estimated a growth of over 5 percent and the creation of 730 thousand jobs.
The estimated growth for 2011 range from 3.9 to 4.8. Despite the sustained growth in 2010, it was not enough to cover up the loss of 2009.
South America
As it mainly consists of commodity exporters, South America was not directly affected by the financial turmoil, even if the bond markets of Brazil, Argentina, Colombia and Venezuela have been hit.On the other hand, the continent experienced a tough agricultural crisis
2008 global rice shortage
In March to May 2008, some national governments began restricting export of rice and some retailers began rationing sales, due to fears of insufficient global supplies of the grain, thus becoming another key aspect to the 2007–2008 world food price crisis...
at the beginning of 2008. Food prices have increased a lot, due to a lack of arable land. One of the main reasons for the loss of agricultural land was the high value offered by the production of biofuels. Food prices, rising since 2002, ascended from 2006, reaching a peak during the first quarter of 2008. In one year the average price of food rose by about 50%.
Then South American countries were affected by both the global slowdown and the decrease in food prices due to the declining demand. In June 2008, the Economic Commission for Latin America and the Caribbean (ECLAC) declared it expected a 4% growth for 2009. However at the end of the year it predicted that the year 2009 would put an end to six years of prosperity during which Latin America has benefited from high raw materials prices. Production in the region is likely to decline and unemployment to increase. However, the Center for Economic and Policy Research
Center for Economic and Policy Research
The Center for Economic and Policy Research is a progressive economic policy think-tank based in Washington, DC, founded in 1999. CEPR works on Social Security, the US housing bubble, developing country economies , and gaps in the social policy fabric of the US economy.According to its own...
has estimated that the region may be able to cope with the global downturn with the right macro-economic policies, as these countries no longer depend on the U.S. economy.