Filed under: Uncategorized
Skittish employers slashed 533,000 jobs last month, the most in 34 years, which sent employment up to 6.7 percent nationwide. If that’s not proof we’re deeply in recession, I don’t know what else is.
These numbers were revealed Friday in a report by the Labor Department, giving many families a bitter dose of reality right before the holidays. According to the Seattle Times article, the numbers would have probably been even higher, but for the fact that around 433,000 people leaving the workforce – apparently many have abandoned their job searches out of sheer frustration with the situation.
This comes right after a panel of economic experts confirmed that we are indeed in a recession (shocker!), and have been in one since December of 2007. Since then, nearly 2 million jobs have been lost. Sadly, those same experts anticipated that we will continue to be in recession till the middle of 2009, at least. Unlike previous recessions, this time around pretty much all industries have been affected – including factories, construction companies, the financial industry and even the service industry.
UW graduate (class of ‘07) Lily Bower works for T-Mobile’s Bellevue office, but says she fears the higher-ups will start cutting jobs out of recession-related fears. While she is young and relatively cheap to the company, she said she has begun feeling increasingly paranoid about keeping her job. With around $400 per month in student loan payments – not to mention rent and all of her other bills, she says that unemployment would be catastrophic for her financially.
“I’d like to think that they’ll keep me on, but in today’s recession, nobody’s really completely immune to layoffs,” Bower said. “It could be any of us. All I can do in the mean time is keep my head down, work my ass off and hope and pray.”
Since its record high of almost $150 per barrel last July, oil prices have been continually plunging due to lowered demand in a floundering economy. We’ve seen our gas prices drop from nearly $5/gallon to slightly over $2 in the Seattle area.
With our economy in such bad shape – with constant job layoffs and a stock market that bounces up and down like a ping pong ball – Americans have had to tighten their belt in all respects, including using less fuel. The lowered gas prices, however, were one small ray of light for struggling drivers nationwide - instead of spending $75-100 to fill up the tank, it can now be done for around $50. However, that may soon change…
OPEC announced Friday that it plans on lowering supply for a third time by a million barrels, to prevent oil prices from sliding below $50 a barrel. OPEC supplies 40 percent of the world’s oil, so this is a pretty big deal. While I don’t claim to be an expert on the economics of oil prices, I do feel that this is probably a selfish move. As I said, lower oil prices have been one silver lining to the cloud of the failing economy, and if oil prices go up again it could be very detrimental for Americans.
Students are affected by this too. While UW students are fortunate in that a car isn’t necessary since the U pass is much cheaper and the bus system is relatively efficient and widespread, many rely on vehicles to get to their jobs. Liz Hampton, a senior who drives to work in kent every day says she goes through roughly 2 tanks of gas per week. Because of the poor economy, she has gone through most of her savings for necessary expenses. If gas goes back up again to over $3/gallon, Hampton says she doesn’t now how she’ll afford all the driving she does, AND make ends meet. Since she is paying her own way through school, she has to work at least 20 hours per week.
“They’re just not paying me enough to afford to fill up my tank twice a week at $75 a pop,” she said. “It’s a catch 22, really. I have to get to work and I need to drive, but if gas goes back to where it used to be, I won’t be able to pay my bills. It really is a big dilemma.”
Filed under: credit crunch
As I’ve discussed in previous posts, today’s uncertain economy has led to an environment where banks are tightening their belts and the credit card issuers are doing the same. In turn, consumers have adjusted to living in a manner more within their means, and are using their existing credit cards less than ever before. According to an article I found, they’re using debit cards at a record rate - and banks are scrambling to find ways to make these profitable.
Here’s a brief excerpt from the article:
“For consumers reeling from a series of economic body blows, debit cards are increasingly becoming the plastic of choice. Some use the cards, which pull money directly from a bank or other account, as a budgeting tool to limit spending. Others are embracing them out of necessity as banks clamp down on credit. All told, debit purchases are expected to climb 13 percent in 2008, to $1.2 trillion, according to The Nilson Report, an industry newsletter — compared with a 3 percent rise, to $1.9 trillion, for credit-card transactions. At Visa, the No. 1 card company, debit spending could surpass credit this year.”
This is true for students, also. Angela Gumm, a student at Whatcom Community College up in Bellingham, says she’s only using debit cards and cash, and stopped using her credit cards months ago.
“I can’t afford credit cards anymore,” Gumm said. ”The one i did have I had to close because it was getting too expensive. Now I can’t even get a credit card. I guess ultimately it’s a good thing – i think if i had the credit cards i would spend money i don’t really need to spend. Right now, with the economy the way it is, I’m paying for necessities and thats it.
However, this means banks are scrambling to find ways to make debit cards more profitable. While they don’t mount losses to the books like credit cards can, they don’t really bring in any money as they don’t charge interest. While they do charge retailers fees, they’re tiny in comparison to credit cards. So one thing they’re starting to do is ramp up overdraft fees, and push rewards and customer loyalties programs with other retailers more aggressively.
Debit cards are becoming ubiquitous, and banks and retailers are finding ways to accomodate this – and cash in on it. For debit card issuers, the approach is paying off- Visa’s shares rose 7 percent this quarter, despite the bad economy – based on increases in debit card usage.
According to an article I found on Drudge, once high flying Wall Street workers are leaving NYC in droves for a fresh start. Some of them are moving their families to places like Florida, Milwaukee, Chicago and even Asia, acknowledging New York City is not the kindest place to be during the current financial climate.
Corporate headhunters are saying this will lead to a permanent loss of talent for the Big Apple, as previous employees of now defunct firms like AIG (which is currently being bailed out by the Fed) and Lehman (which recently went bankrupt) leave the city to take jobs at smaller, boutique firms which could now become more competitive. After all, they would never have been able to lure these employees in the age of the large investment bank, with Wall Street’s status as the world’s financial capital.
The floundering economy has influenced UW business students also. Marc Fine, a senior majoring in finance said he once hoped to leave the Northwest for NYC, aspiring to take a job at Morgan Stanley (where he previously interned) or the now practically defunct Lehman. However, having watched the horror unfold over the past several months has made him dramatically reconsider his future.
“I almost wish I’d picked a different major now, but business is something I’ve wanted to do since I was in middle school,” Fine said.
Fine said he is considering applying to some of the smaller “boutique banks” discussed in the article, but is also thinking about applying to graduate schools for an MBA – hoping it’ll buy him time as the nation rides out the economic crisis. One factor holding him back: Taking on additional debt.
“I used to not be so afraid of student loans but today’s situation has changed everything in my eyes,” he said. “Who knows if we’ll ever go back to being as prosperous and confident as we were before – at least for a really long time. Right now, I’m between a rock and a hard place.”
Filed under: Uncategorized
In today’s shaky economic climate, savings have shrunk to an all-time low.
As once readily available sources of credit have dried up, Americans are learning to live within their means and are spending accordingly. The bare necessities – rent, groceries, credit card payments and other monthly bills – have all mostly increased due to inflation, but for the most part, middle-class incomes haven’t gone up at the same rate. Therefore, less money is available to put away for a rainy day.
Many Americans – whose savings were in the form of an increasingly volatile stock market – have watched their money disappear into thin air. This has happened with college savings, too.
This has affected students in the Seattle community, also, as many have had to live with much less parental support than they used to – using their earnings at part-time jobs for living expenses instead of saving it. Graduates who are still job searching – as the recession deepens – are finding it difficult to stay afloat, let alone put anything by.
Recent Seattle University graduate Megan Peter says she has used up about half of her savings since graduating last June for basic living costs. She works part time as a sales associate at upscale handbag store Coach, and said she would work full time if she could get the hours. However, because of the shaky economy, consumers aren’t buying as much, and labor is the first expense to be cut. She has stopped saving at all, and her paychecks now all go directly into her checking account for her monthly bills.
“I’m not even thinking about savings right now,” Peter said. “I’m just trying to make ends meet. If an emergency happens, I’m toast. And I hate that feeling, but what choice do I have right now?”
Filed under: credit crunch | Tags: college students, credit cards, credit crunch
When I arrived on campus as a freshman in September of 2005, one of the first things I noticed was that everywhere I turned, I was bombarded with credit card offers.
Fast forward three years, and I’m a senior. Today, I get rejected for every credit card I apply for. It’s not because I have bad credit – I actually have a respectable credit score of 740 – it’s because of the credit crunch. I’m not alone – across the country, millions of Americans have the same problem as myself – the inability to get a credit card anymore.
According to a recent article from NewsDay.com, consumers are feeling the pinch as credit card companies are on the defense.
This freeze on credit, however, deeply affects students such as myself. Textbooks – highly expensive and the prices rise far above the rate of inflation – are often a common item charged on credit cards since many students can’t afford to buy them right after making the tuition payment.
With credit cards near impossible to get – while in the meantime, students are feeling more squeezed than ever with the rising costs of fuel, rent, food and tuition – harsh repercussions will be felt. More students may have to choose between food, rent and textbooks. Emergency, unexpected expenses such as a car breaking down or necessary house repairs, will be harder to cover as students eat through their savings. Perhaps more students will be forced to take time off from school to work more and save. After all, the necessities of survival come first.
Hello Everyone!
This is my first official post for my Com 361 class blog.
It will be dedicated to economic themed blogging – and how the faltering economy and “credit crunch” that we are in affects myself and other students at the UW and in the Seattle area.
As we are reminded everyday when we open a newspaper, look up Drudge Report or turn on the evening news, the economy is rapidly floundering. Jobs are being slashed left and right, credit sources are drying up for the majority of non-wealthy Americans, and the Economic Bailout bill just passed – with Americans waiting with bated breath to see results. The days of yore when easy credit was a reality are long gone, and for the first time in a very long while, Americans are being forced by necessity to start living within their mines.
Another harsh reality of today’s economic climate is the investment banking industry’s implosion – as demonstrated by WaMu’s recent acquisition by JP Morgan Chase, Lehman’s bankruptcy (and recent deal for partial acquisition by Barclay’s ), and the Fed’s rescue of AIG as well as Fannie and Freddie. And from what we can predict, it’s only going to get worse from here. Families with mortgages to pay, mouths to feed and debt to pay off are suddenly finding themselves in crisis mode as layoffs are becoming rampant.
This also has a local impact right here in the U District. As tuition costs have soared faster than the inflation rates, students are finding themselves needing more and more loan assistance – but in today’s credit shy environment, they’re harder to get. Credit cards needed for emergencies or to buy books until the money is earned are no longer an option. (I have personally applied for 3 credit cards and a line of credit for overdraft protection at my bank, Bank of America, and was turned down, despite my good credit rating). Add that to the increased cost of food and housing and students are definitely feeling the pinch.
This quarter, I will focus on ordinary students such as myself – and their response to the hard economic times. I’ll also include some tips to save money and cut corners, which will be helpful to fellow college students. I’m not an economic expert by any means – I have simply taken introductory level college econ courses – but I will do my best to report on it.
Filed under: Uncategorized
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