Economy’s downturn raises questions: Jobs? Loans?

by Steph Mostaccio

Senior Heather Jantz, a psychology major, is worried about finding a job after she graduates.

Her ideal position would be one that applies to her major, but she fears that accomplishing this task might be difficult because of the current economic state. Jantz expects that she will need to lower her standards when searching for employment.

“I just hope that I will still be able to get a job and not be unemployed or forced to get a job that is not applicable to my major due to the lack of hiring,” she said.

Other students could soon be joining Jantz in her anxiety.

Many analysts predict a bleak future for the U.S. economy. According to a National Association for Business Economics (NABE) survey released on Monday, 45 percent of the economists surveyed foresee a recession in 2008. In September, only 25 percent of economists said a recession would be likely during the year.

A recession will likely have a negative effect on the number of available jobs, impacting both graduating and continuing students.

The forecasters have also projected that economic growth will slow significantly in 2008. According to predictions, real gross domestic product (GDP) growth will be 1.8 percent this year. In November, economists estimated a 2.5-percent growth.

In order for a recession to occur, there would need to be two consecutive quarters of falling GDP. According to Herbert Gishlick, professor of economics, the U.S. has not yet met that criterion.

“We still have very slow growth in the fourth quarter of 2007,” he said. “We don’t know what this quarter is going to be until April. And if this quarter [was] negative, technically speaking, the quarter from March to June would also have to be negative.”

Effects of the slow rate of growth can already be seen. Gov. Jon Corzine proposed on Tuesday reducing the state budget by $500 million to $33 billion. The proposed cuts include decreasing state aid to colleges and universities by $76 million, or 4 percent. The budget does increase funding for need-based student assistance programs by $6.3 million. Yet, at the same time, it also reduces funding for other non-need-based student aid programs by $5.7 million.

According to Jamie O’Hara, vice president of Enrollment Management, Rider will not be hit too hard by these changes. In fact, he noted that although the University will be increasing tuition for next year, it will also increase the financial aid budget. The amount of the increases will be finalized by the beginning of April.

O’Hara also pointed out that Rider’s tuition and financial aid budget increases are not a direct result of the weakening economy. However, the economic status will impact the depth of the escalations.

“Every year, we review financial aid and tuition,” he said. “Every year, we’re also taking into account what’s going on campus and in society. It’s not tied to the economy; it’s tied to our annual review process. But it always has to take in every economic indicator.”

Rider will be sensitive to economic factors when determining the changes to tuition and financial aid, according to O’Hara.
Lending institutions are experiencing a more direct impact. Many of them are revising their policies, and in most cases, reducing the amount of aid they offer.

For example, the Pennsylvania Higher Education Assistance Agency, one of the largest student loan institutions, said Wednesday it would postpone making federal-guaranteed loans starting next month. Sallie Mae, the largest student lender, has also restricted its lending operations.

However, The New York Times reported yesterday that Education Department officials do not expect students to have difficulty obtaining a federal loan.

According to O’Hara, students who presently have federal loans should not be affected.

“If a current student has been receiving a guaranteed federal student loan, whether it’s subsidized or unsubsidized, that is not going to change,” he said.

State funding to the New Jersey Knowledge Initiative has also already been lowered. As a result of this cut, access to the Initiative’s EBSCO host databases, which Rider subscribes to, could end today. These databases include Academic Search Premier, school & public library access only; Business Source Premier; Business Source Corporate; CINAHL; MEDLINE; Biomedical

Ref-erence Collection Comprehen-sive; and Nursing & Allied Health Comprehensive.

Corzine’s proposed budget would also cut the state’s work force by 5,000 people. Joyce Tyler, director of Career Services, does not see these cuts as having a significant impact on students. She noted that the reductions in state jobs usually do not last long.

“They’ll lay off and realize they can’t function without those people and end up having to hire again,” she said.

Tyler added that the National Association of Colleges and Employers projects that employers will hire 16 percent more new college graduates in 2007-2008 than they did last year. One reason for this increase, according to Tyler, is the large number of retirees who need to be replaced.

Yet, unemployment levels have already risen as a result of the weakening economy. The unemployment rate for January was 4.9 percent, compared to an average rate of 4.6 percent in 2007. According to the NABE survey, the average unemployment rate for 2008 will be 5.2 percent.

Gishlick said the current unemployment level is nothing to worry about.

“It’s right around what we consider to be full employment,” he said. “That five percent number is what we often consider the full employment rate of unemployment.”

According to Bruce Mizrach, associate professor of economics at Rutgers University, there is a good chance that the number of those without a job will continue to climb.

“I’m pretty confident [unemployment] will rise because even if we don’t go into a recession, I expect that economic growth will not be sufficient for the unemployment rate to fall,” he said.
The unemployment rate is usually a lagging factor, which means that it will continue to rise even as the economy grows.

The waning economy has also already led to a significant decline in the number of new jobs. In fact, Mizrach pointed out that new jobs are being created at the slowest pace in the past five years, which he said would affect college seniors who will be graduating in a few months.

“It could be the case that they don’t have as many jobs to choose from,” he said. “Maybe last year a student had two or three job offers. Now, he or she might only have one.”

Gishlick agreed that students might have fewer job opportunities if the economy continues to slow. However, he noted that it should not be impossible for students to find a job.

“If I were a young person with the willingness to be somewhat flexible, I wouldn’t worry about my prospects this summer,” he said. “If I don’t get a job in June, I will probably find one come September.”

Anne Mandel, associate director of Career Services, also said students who are looking for jobs should have plenty of opportunities to explore. She noted that recruiters in need of interns and candidates for co-ops and full-time positions are still very active on campus.

Mandel also does not foresee the economic slowdown affecting entry-level positions.

“My belief is that international companies, like Johnson & Johnson or Lehman Brothers, will still need people to perform basic functions, and our students will fulfill that need,” she said.

Senior David Fehring, an accounting and finance double major, is proof that employment opportunities still exist. He will be starting full-time at Deloitte & Touche in September, a position he was offered after interning at the company. However, while Fehring was searching for jobs before his full-time offer, he noticed that the market was “very scarce for new hires.”

“The first opportunity I was offered is what I took since I wasn’t sure what other opportunities may be presented to me,” he said.

According to Mandel, any graduating student who does not currently have a job offer should worry. She urges students to take advantage of the various tools Career Services offers, such as cover letter and résumé writing workshops and MonsterTrak training sessions.

Senior Lyndsey Potosky is concerned about finding employment after graduation. She has seen individuals close to her recently endure unemployment. As a result, she hopes to “get her foot in the door” the way Fehring did — with an internship.
According to Gishlick, one of the best ways to maximize job opportunities is to be flexible.

“Maybe it’s not going to be what you really thought you were worth [or] the dream job,” he said. “You just have to go with it and keep your eyes open.”

However, a considerable decline in real output could spur a significant increase in unemployment, further affecting students looking for a job, Gishlick said.

“You’ll hear people talk about slow growth, which is where we are at now,” he said. “Or other people will argue that we are currently in a recession, and they may be right. You don’t know until really after the fact.”

Mizrach is more confident that the U.S. will fall into a recession.

If the economy does go into a recession, it would most likely resemble recent downturns and recover fairly quickly, according to Mizrach. He noted that the U.S. has not had a recession that lasted longer than a year in more than 30 years.

“Recessions look like they’ve become shorter and milder, and that makes me not worried that it’s a long-term impact on the economy,” he said. “It’s just something short-term that, hopefully, we’ll quickly recover from.”