One cause that fits all the key points of the slow economic recovery-not just the slow economic recovery itself-is that the average cost of production has risen sharply over the last decade. Higher demand, tighter supply, and lower efficiency all affect start-up companies more than more established businesses.
Because start-ups usually make all the net new positions in the market, job creation and investment are still quite slack even as the government and private sector are offering generous incentives to those who would like to start new businesses. In fact, a major factor that has contributed to the slow economic recovery is the slow rate at which new start-up companies are making new hires.
The other significant cause of the slow economic recovery that we are experiencing today is the fact that we have experienced an unprecedented number of start-up bankruptcies since the housing market crash. That's because many new businesses that were designed to provide service to the public have gone under, even when the products and services that they were supposed to provide had excellent sales records. A recent New York Times article documented the fact that start-up bankruptcies are on the rise again.
With the recent decline in start-up business, the question becomes how will the economic recovery continue to expand in spite of the slow growth of start-ups. We can expect continued unemployment, wage cuts, falling household budgets, rising costs of food and fuel, and higher prices for most consumer goods and services for a while, but eventually, the growth of the business will pick up and reach the levels that were seen during the previous boom in business growth.
The slowdown in new home construction is one reason why this trend is expected to continue, and it could actually be considered a positive sign. While there may be fewer homes being built as a result of the recession, the number of sales is still growing at a rapid pace. This growth is also expected to pick up when the economy rebounds. Many homeowners who are choosing to refinance their mortgages to take advantage of lower interest rates are doing so with hopes of gaining some relief from the higher costs and mortgage payments.
The slow economic recovery is also being felt by the country as a whole in many areas where the number of people filing bankruptcy filings is increasing. The number of bankruptcies is expected to keep increasing, but the increase in filing is expected to be slower and more gradual. As a result, unemployment will likely remain at or decrease only slightly over time.
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