2009 News of the Nation - Economy in Turmoil

Updated August 5, 2020 | Infoplease Staff

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The Recession Lingers

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An Economy in Turmoil Shows Improvement by Year's End

Bankruptcies and Unemployment Continue
The weak economy was at the forefront of most Americans' minds throughout 2009. Stories of mass layoffs, corporate bankruptcies, salary freezes, and mandatory furloughs were common in the first half of the year, and the employment rate continued to climb until November. The United States government predicts a 2010 budget deficit of a staggering $1.5 trillion.

In February, President Obama signed a $787 billion stimulus package into law, with the hope that the money would help to create 3.5 million jobs for out-of-work and underemployed Americans and help pull the U.S. out of recession. Job creation, however, proved elusive for much of the year. By October, the unemployment rate reached 10.2%, the highest level in 26 years, though a broader measure tracked by the Labor Department, which includes unemployed, underemployed, and discouraged workers, stood at 17.5%. The outlook improved by December, when the unemployment rate dipped to 10% and the number of jobs lost was just 11,000, down considerably from a January high of 741,000.

Incentives to Buy
To improve the financial stability and morale of the American people, the government offered a variety of perks, incentives, and tax breaks throughout the year, including the very popular "Cash for Clunkers" program. The car trade-in arrangement provided monetary incentives—a credit of $3,500 to $4,500—to car owners who replaced their existing vehicles with cars that had a better fuel efficiency. The government pledged $3 billion for the program, and that funding was depleted in just a few months; car sales in July of 2009, when the program was enacted, was 11% better than June.

First-time homebuyers were also given a purchase incentive in the form of an $8,000 tax credit. Homeowners who had been in their homes for at least five years were also entitled to a tax credit when buying a new house.

Meanwhile, an extension of unemployment benefits provided a boost to Americans who had been out of work for an extended period of time. Benefits to the unemployed were extended by 14 weeks across the country, and by an additional six weeks for those who lived in states with unemployment rates higher than 8.5%.

Despite these incentives, many Americans complained that the government was more focused on propping up Wall Street while those on Main Street continued to languish in the economic morass.

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