Recessions are often associated with downturns in the gross domestic product (GDP) of countries. The current recession, which affects most of the world, was sparked by events in Asia, but has since included many other nations in its effects. Despite this, the American economy continues to grow at a modest but steady rate. This research considers the effect of the recession on future unemployment in the United States by evaluating the negative and positive effects of the recession on American business.
Negative Effects of Recession on American Business
American auto manufacturers have been particularly affected by the recession; Chrysler, in particular, suffered severely as a result of the downturn in Asia. Exports to Japan (in particular) and Asia and general suffered as Asian distributors cancelled orders for Chrysler products. This resulted in excess demand and a slowdown in production at American manufacturing plants. At its Toledo Jeep plant, for example, Chrysler cancelled all overtime in early 1998.
When the recession started in Asia, auto manufacturers in those countries (such as Toyota and Nissan) increased their exports to Canada, Europe and Latin America where the recession was not yet being felt. This move was undertaken in order to gain market share in these regions and increase profits. This brought additional pressure and competition to American auto manufacturers in these areas, and put a damper on sales for American manufacturers as a result.
Although Chrysler suffered significantly as a result of the downturn in Asia, other American car makers, including Ford and General Motors, suffered less because they have more plants located abroad. This means that they export fewer of the cars manufactured in the United States; as a result, when there is a downturn in demand overseas, these companies are able to cut production at their overseas facilities rather than at the domestic facilities. In this rega...