"There have been indicating factors, such as the decline in the housing market and problems with the work force, that show the economy has definitely slowed and a recession could definitely occur," said Hassan Mohammadi, a professor of economics at Illinois State University. If a recession does occur in the next few years, it could have a great impact on the lives of students who are preparing to graduate from college.
For students who are not entirely sure of what a recession is, professor Catherine Schneider, associate chairperson of the economics department, defines a recession as "a significant, economy-wide decline in economic variables such as GDP, income, and employment, lasting six months or more."
While this is the standard textbook definition of what constitutes a recession, it is more complex in reality. Recessions affect different sectors of the economy in varying ways. This could be of vital importance to Boston College students as they prepare for graduation, since some of the fields they hope to enter may be more negatively influenced by the recession than others. For instance, BC graduates would have more to fear if the financial sector was hardest hit by the recession than if the recession led a decline in manufacturing and construction work.
Housing appears to be one of the main factors considered when examining the possibility of a coming recession.
"Without question, the real estate bubble has fueled this US economy in the last several years," said Emanuel Balarie, a senior market strategist for Wisdom Financial, Inc., to reporters.
People have used the increased value of their homes as equity in order to finance purchases. These new sales have helped the economy grow while the real estate market was in the midst of its bubble; however, this trend also has limited the amount of money that was being saved. Thus, spending "served to further fuel this bubble and send your typical consumer further and further into debt," Balarie said.
In a November 2006 report titled "Recession Looms for the U.S. Economy in 2007," Dean Baker, the co-director at the Center for Economic Policy and Research, said that "sales of existing homes have already fallen sharply in the first nine months of 2006." If this trend continues and spreads into a decline in the sales of new homes, the effect on the economy could be severe.
"Housing, along with businesses, the government and foreign buyers, is one of the four major players in our economy. When one suffers, as housing currently is, the chances of a recession become much greater," Mohammadi said to reporters.
Again, it is important to remember that a recession will most likely not have the same impact on all sectors of the economy. Christian E. Weller, writing for the Center for American Progress, told reporters at the beginning of August that there have been "job losses in retail and in residential construction" while "the financial sector also added about 27,000 new jobs in July."
This news is certainly welcome to students in the Boston area, many of whom plan on seeking jobs in the financial sector after graduation this spring; however, it might not be true.
"I suspect financial services, banking, insurance, real estate, and similar sectors may be recession sensitive," said professor Frank McLaughlin of the economics department. Whether or not this is true remains to be seen, but it certainly tempers Weller's good news about new jobs in the financial sector.
The last two recessions have hurt white-collar workers as much as blue-collar, especially during the recession that occurred after the dot-com bubble burst in 2001. A new recession could have a different impact on white-collar workers depending on which sectors are hardest hit.
"My guess is that another recession would be similar to the last two and have relatively important effects on white-collar workers as well as blue-collar workers," said professor Bob Murphy of the economics department.
The threat of facing a recession after graduation is enough to make students and their parents - who are paying thousands of dollars and often taking out loans to pay for the rising cost of college - extremely nervous as they look toward the future.
Some of these fears may be unfounded, said Marie Geary, the Career Center's associate director of employer relations. "There are people making arguments on either side as to whether or not this recession will happen," she said.
When asked what the impact of a possible recession could have on BC students, Geary replied, "On the BC campus, we have not seen an impact." Hopefully, this trend will continue into the spring when the class of 2008 graduates.
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