Lessons to Learn From the Last Great Recession

While there's plenty of debate about the root cause of the Great Recession of 2008, the subprime mortgage crisis remains a key culprit. Regardless of the exact catalyst, the downturn devastated real estate, banking, and global markets. Now, over a decade later, we find ourselves in another economic crisis—this time triggered by the COVID-19 pandemic. But can we learn from past mistakes and navigate these challenges more effectively? Absolutely. By understanding history, identifying similarities, and developing a strategy, we can better prepare for the future.

The Recession: Then vs. Now

Unemployment During the Great Recession, the U.S. saw 8.8 million jobs lost, with 39.5 million unemployment claims between December 2007 and June 2009. The majority of these lost positions were mid-wage jobs earning between $14 and $21 per hour. Fast forward to 2020, and the pandemic caused 22 million job losses within mere weeks. A staggering 65% of these were in leisure and hospitality. Projections from the St. Louis Fed suggested that unemployment could reach 47 million lost jobs before recovery. Income Beyond job loss, the last recession had a massive financial impact. Between 2008 and 2009, the U.S. economy lost $650 billion in GDP, equating to an average income loss of $5,800 per household. Similarly, the COVID-19 pandemic brought widespread financial hardship. Reports showed that 17% of affected workers lost all income, while 19% lost over 50% of their earnings. As the pandemic unfolded, individual financial consequences became even more evident. Real Estate One of the primary drivers of the Great Recession was the subprime mortgage crisis, which inflated housing markets before the inevitable collapse. In total, the crisis resulted in $3.4 trillion in wealth losses, averaging $30,300 per U.S. household. COVID-19 also disrupted the real estate market. While homes remained on the market, 50% of agents reported decreased buyer interest. Commercial real estate fared worse, with 47% of commercial agents reporting negative impacts and businesses struggling to stay afloat despite low-interest rates.

International Impact Despite being U.S.-centric, the 2008 recession sent economic shockwaves worldwide. Many European countries defaulted on national debts, requiring bailouts and financial intervention. In contrast, COVID-19’s impact was immediate and global. Airlines cut flights, international attractions shut down, and tourism ground to a halt. The true global economic cost remains incalculable as the pandemic reshaped industries at an unprecedented scale. Environmental Impact Recessions have an unexpected side effect: temporary environmental relief. During the 2008 downturn, global greenhouse gas emissions fell by 3%, marking the most significant drop since the 1970s. Similarly, COVID-19 restrictions led to a 35% drop in NO2 levels in China and Italy, while New York City saw a 50% decline in carbon monoxide levels. Meanwhile, with fewer people outdoors, wildlife reclaimed urban areas—deer roamed Japan’s streets, mountain goats explored Welsh cities, and fish reappeared in Venice’s canals.

What Can We Learn?

Hope for the Best, Prepare for the Worst The 2008 recession and subprime mortgage crisis serve as cautionary tales. Economic booms don’t last forever. Building an emergency fund, planning ahead, and maintaining financial flexibility can prevent overexposure when downturns hit. Innovate and Adapt Businesses that evolved during COVID-19 had a better chance of survival. Gyms and yoga studios pivoted to online classes, while restaurants adopted takeout and delivery models. The key lesson? Adaptation is survival. When faced with uncertainty, creativity and flexibility are essential. Leverage Government Support Programs like the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDL) helped businesses stay afloat during COVID-19. Knowing and utilizing available financial aid can be a game-changer in surviving economic turbulence. As history repeats itself in new forms, the best we can do is learn, adapt, and prepare. Whether you're an individual, a small business, or a major corporation, the lessons of the past can guide us toward a more resilient future.