Experts weigh in on what challenges young people will face in an increasingly gloomy economy.
After several years of prosperity, is the U.S. economy slipping into a recession?
Well, there's been a lot of talk about a possible recession starting in late 2007 or early 2008 — and for good reason. The declining value of the dollar globally, the country's housing-market correction and the subprime-mortgage crisis have all sparked fears among economists that we should, indeed, be anticipating a possible recession — one that could have a huge impact on the class of '08.
Like many students, Angie Guzman, who is a graduating graphic-design major at New York's Purchase College, may be forced to crash with the 'rents after she's handed her diploma in May — that is, if she can't find a gig soon.
"To think that my friends who'd graduated last May, that out of a class of 15 graphic designers, only three of them have full-time jobs right now, that scares me," Guzman said. "I'm graduating in May, and the statistics are kind of hard right now. It's a scary concept, recession, because I already knew that it was going to be difficult to get a job once I graduate, and it's just another obstacle I have to combat in order to get to where I need to go."
Guzman, who is finishing her last semester, working an internship, holding down a part-time job and applying for postgraduate jobs, said she expects she'll be mooching off her parents for the foreseeable future, because "I'm just not in the position to actually find a place to live. In order for me to pay rent, I'll probably end up having to get a job as a waitress, just to make ends meet. I think I'll be lucky if I find some part-time work and some freelance gigs on the side," she said. "I think in the face of all these obstacles and the recession, you have to remain optimistic, just for your own sanity. I think if you don't remain hopeful, you're battling against yourself as well. Trust in yourself, that it'll happen — if not now, tomorrow.
Economists aren't in full agreement about recession. Some believe the current slowdown may, at best, be a mild and brief recession, while others claim we're in the thick of one. In fact, just Monday morning (March 3), billionaire Warren Buffett said the U.S. economy is essentially in a recession, even if it hasn't met the technical definition of one yet.
"A recession is defined by a group of economists, who sit down and decide that we have a recession — and they always decide after a recession has happened that we have one," said Columbia University professor Christopher Mayer. "What it means, in practice, for people, is that it's pretty tough to get a job. People are getting laid off, salary increases aren't very good — those are real problems. The news generally isn't very good."
According to Mayer, if we do end up in a recession — or are blissfully unaware we're in one — then the housing boom is the likely cause. "People bought houses they couldn't afford, investors speculated on property, condominium developers built properties that there really wasn't any demand for," he said. "The real problems in the economy now are that things were too good — probably too good to be true."
Recessions, Mayer said, can last anywhere from six to 18 months. It's during this time that firms stop hiring people, and the unemployment rate soars. But there is a silver lining: "The economy and the country have always been stronger than we were when [we come out of recession]. The prospects for that continue to be good."
According to Nadira Hira, a writer for Fortune magazine, for young people, there's a stigma attached to living at home. But if suffering through six months on Mom and Dad's couch means you'll have time to find the best job possible, it's worth it in the long run.
"The young people who are graduating in May and hopefully entering the workforce in the fall can expect a couple of things to happen," explained Hira, who believes more and more graduating students, frustrated by a fruitless job hunt, will be applying for graduate programs. "It's going to be a lot harder for them to get credit. We really ran amok when it comes to credit in the last decade or so, particularly in the last few years, because you had a lot of young people who had no credit history and really no financial skills to speak of getting all kinds of credit cards and insane housing loans, and really taking on a lot of debt because we were in a boom market and it was easy to do that. Now, when you're coming out of school, you cannot just hop into the house and buy a huge home with your friends anymore. You also can't expect to run up a lot of credit-card debt and not have that really have consequences for you.
"The other thing is, it's a lot more important now that you're credit-worthy in the long term, and your credit score stays very high, so you've got to be a lot more careful than you could in the past about making sure that you are really credit-worthy," Hira continued, adding that those who'll be entering the workforce this summer and fall will likely start at lower salaries and receive fewer benefits than those who'd graduated just last year. "That particularly pertains to people with student loans. The average [college graduate] comes out of school now with about $20,000 in college debt, and if you're not really addressing that — you're letting the mail build up and you're not even paying attention to what it says — you're really going to find yourself in a pickle when the credit-reporting agencies have you delinquent."
So what does this all mean for college seniors? "The immediate problems are going to be for people who are looking for jobs, for people who are trying to buy houses and people who are trying to kind of do the sorts of things we normally do as Americans," Mayer said. "I think a lot of those things are going to be harder."
Mayer doesn't foresee anything going down in price. Food, he said, will likely be more expensive. Same thing goes for gas. Rent will come down, but pay raises will be few and far between. There will also be fewer jobs available and more people out there looking for them. Times could be tough for a while.
"I think young people need to have some perspective, which is pretty hard when you're 21 and you want to get going with your life and career," Mayer said. "Recognize that you're going to be working for 40 years and at the rate our government's going, it could be longer than that. I think it's a good thing for young people to try and use the opportunity to explore different things. If you can't get the job you wanted in one field, try something different. See how you like it. Maybe you'll like it, maybe you'll go back and do what it is you want to do."