The great depression was a period of economic downtown that affected North America, Europe and other industrialized countries between 1929 and 1933. It is noted to have started in America but spread faster to other parts of world. This is longest depression to affect the industrialized nations in the world history (Nelson, 2011). The depression started with collapse of the stock prices of New York stock exchange, prices of these stocks continued falling and by 1932 the value had dropped by about 20%. This fall in prices led to devaluation of the stocks portfolio held by the bank leading to many banks becoming insolvency. The effect affected all other sectors of the economy; by 1932 the US manufacturing output had fallen by 46% compared to 1929. This led to rise in the rate of unemployment to around 25-30% of the workforce. The effect of unemployment soon spread to other parts of world and Germany had an unemployment rate of 25% by 1932 (Nelson, 2011).
The impact on the supply and demand of labor on one sector of the labor market
The impact of this, led to nationwide loss of confidence, less spending, thus affecting other sectors of the economy. The demand in manufacturing output fell by over 40% leading to job loss and unemployment rate of up to 30%. This led to excess supply of labor force, leading companies to reduce their work force, thus leading to less demand of the labor force in that sector, (Nelson, 2011).
Factors that affected labor demand and supply in great recession
During the recession there was lot of job losses leading to unemployment rates in all those affected countries, this in turn led to a higher supply of workforce. The factors that led to low demand of workforce were low demand for manufactured goods (Smiley, 2008). This was caused by low consumer confidence after the collapse of banks and reduction in value of the Stocks market. The Governments of these respective countries introduced policies that worsened the situation of increasing tariffs on the imports reducing trades and lending to more job cuts and high supply of labor. The governments reduced their spending leading fall in consumer demands, the led to less buying and more labor supply. Intervention measures were sought by respective governments such as United States; President Roosevelt promised a new deal and introduced some short work to reduce the high number of the work force. With the recovery strategy the demand for labor increased and the supply eased, leading to relief in the economy.
In conclusion, the great recession had immense effects in all factor of production not only on labor only. This paper has discussed its effect on labor, by looking at the supply and factors contributing.