2008 Woodie Awards
From Wall Street to Main Street
The national economic crisis may have college repercussions
by Matt Sauer
Issue date: 10/9/08
Section: National and World News
The ongoing economic crisis in the U.S. and much of the world has been a concern in recent months
It wasn't until last month, however, when some of the biggest banks on Wall Street began filing for bankruptcy over problems with mortgage finances and real-estate investments that the average American had serious reason for concern.
With the recent passing of Congress' $700 billion Emergency Economic Stabilization Act the situation has become even more complicated.
Much of this concern has been quelled through reassurances of company stake, with several bills being passed over the last year that guarantee backing to stockholders. But one question that remains to be clearly answered is how this ongoing crisis will affect the job security, well being and financial stability of the country's universities and students.
The answer, unfortunately, is not clear.
With credit markets as the engine of America's economy, the effects of the newly passed Emergency Economic Stabilization Act will begin, with home loan offices and credit companies being affected most.
Since the problem began with bad credit and loan application, students looking to put a mortgage on a home or secure loans of any type will certainly encounter resistance.
"Private student loans are going to become harder to find," said Dr. Richard Schiming, an MSU economics professor. "With the credit markets seized up the way they are, some people are also going to have a more difficult time trying to find a job."
This loss of job availability occurs as a result of the so-called "trickle down" effect. According to an article by Alan Kreuger in the New York Times, people working in the banking, finance, construction and real estate industries will have the most immediate concern for job security.
Since the problem began with bad deals in the real estate sector, all those industries closely related will likely suffer as well.
"But the damage is likely to spread to other sectors," Kreuger wrote "Industries that rely on customers who use credit to buy their goods are especially vulnerable. Thus jobs in durable goods manufacturing - such as autos, heavy household appliances and business equipment - are likely to be hit hard."
More relevant to college students, however, are figures indicating employment rates for college graduates have fallen over the past year. According to Kreuger, as funds for investment become more and more scarce - a result of the current credit crisis - companies are beginning to rely on hiring fewer skilled workers, who generally are given larger salaries.
Indeed, recent statistics cited in Kreuger's article indicate seasonally-adjusted employment rates for college graduates fell by 1.6 percent between March and August of 2008, while those workers with high school diplomas or less saw an increase of employment by one percent.
Nonetheless, Dr. Schiming sees no reason for immediate concern.
"Unemployment is not as bad as it has been in previous recessions. Although [private] student loans will certainly be harder to come by, I wouldn't be worried about the job market availability for college students," Schiming said. "The stock markets [and world economy] are constantly changing. They may look bad one day, but the markets always seem to rebound in the long run."
The effect the current economic situation will have on state universities and local businesses is yet to be determined. The possibility of government funding being cut or tuition rates increasing has many worried.
"[An ongoing economic recession] will cause the state's budget to become unbalanced," said MSU economics professor Donald Renner, "and unless there is relief from the federal government, the state will be forced to cut many state budgets, including school funding. Students will be hurt as a result."
Students are also expressing concern over the possibility of tuition and university-related increases.
"I think we're all a little on edge," said one MSU senior who wished to remain anonymous. "I know the last thing I want to do is pay more for books and school."
Local businesses will also be affected by the current economic situation, if they haven't already. With unemployment increasing and the price of daily living following suit, the average American will spend less time going out to eat or spending money on entertainment services, which will result in some of these venues losing income. People are even driving less, with falling oil prices reflecting this trend.
So what does this all say about the state of America's economy?
"Nobody really knows what's going to happen yet," said Schiming. "All anybody can really do is look at the long term and ride this out. As far as job security goes, I'm not particularly worried. It's not like I'm going to take out all of my retirement money and walk away. We'll all just have to wait and see what happens."
Matt Sauer is a Reporter staff writer
It wasn't until last month, however, when some of the biggest banks on Wall Street began filing for bankruptcy over problems with mortgage finances and real-estate investments that the average American had serious reason for concern.
With the recent passing of Congress' $700 billion Emergency Economic Stabilization Act the situation has become even more complicated.
Much of this concern has been quelled through reassurances of company stake, with several bills being passed over the last year that guarantee backing to stockholders. But one question that remains to be clearly answered is how this ongoing crisis will affect the job security, well being and financial stability of the country's universities and students.
The answer, unfortunately, is not clear.
With credit markets as the engine of America's economy, the effects of the newly passed Emergency Economic Stabilization Act will begin, with home loan offices and credit companies being affected most.
Since the problem began with bad credit and loan application, students looking to put a mortgage on a home or secure loans of any type will certainly encounter resistance.
"Private student loans are going to become harder to find," said Dr. Richard Schiming, an MSU economics professor. "With the credit markets seized up the way they are, some people are also going to have a more difficult time trying to find a job."
This loss of job availability occurs as a result of the so-called "trickle down" effect. According to an article by Alan Kreuger in the New York Times, people working in the banking, finance, construction and real estate industries will have the most immediate concern for job security.
Since the problem began with bad deals in the real estate sector, all those industries closely related will likely suffer as well.
"But the damage is likely to spread to other sectors," Kreuger wrote "Industries that rely on customers who use credit to buy their goods are especially vulnerable. Thus jobs in durable goods manufacturing - such as autos, heavy household appliances and business equipment - are likely to be hit hard."
More relevant to college students, however, are figures indicating employment rates for college graduates have fallen over the past year. According to Kreuger, as funds for investment become more and more scarce - a result of the current credit crisis - companies are beginning to rely on hiring fewer skilled workers, who generally are given larger salaries.
Indeed, recent statistics cited in Kreuger's article indicate seasonally-adjusted employment rates for college graduates fell by 1.6 percent between March and August of 2008, while those workers with high school diplomas or less saw an increase of employment by one percent.
Nonetheless, Dr. Schiming sees no reason for immediate concern.
"Unemployment is not as bad as it has been in previous recessions. Although [private] student loans will certainly be harder to come by, I wouldn't be worried about the job market availability for college students," Schiming said. "The stock markets [and world economy] are constantly changing. They may look bad one day, but the markets always seem to rebound in the long run."
The effect the current economic situation will have on state universities and local businesses is yet to be determined. The possibility of government funding being cut or tuition rates increasing has many worried.
"[An ongoing economic recession] will cause the state's budget to become unbalanced," said MSU economics professor Donald Renner, "and unless there is relief from the federal government, the state will be forced to cut many state budgets, including school funding. Students will be hurt as a result."
Students are also expressing concern over the possibility of tuition and university-related increases.
"I think we're all a little on edge," said one MSU senior who wished to remain anonymous. "I know the last thing I want to do is pay more for books and school."
Local businesses will also be affected by the current economic situation, if they haven't already. With unemployment increasing and the price of daily living following suit, the average American will spend less time going out to eat or spending money on entertainment services, which will result in some of these venues losing income. People are even driving less, with falling oil prices reflecting this trend.
So what does this all say about the state of America's economy?
"Nobody really knows what's going to happen yet," said Schiming. "All anybody can really do is look at the long term and ride this out. As far as job security goes, I'm not particularly worried. It's not like I'm going to take out all of my retirement money and walk away. We'll all just have to wait and see what happens."
Matt Sauer is a Reporter staff writer
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