With the past few months of economic slowdown and last week’s terrorist attacks, some experts believe the country could be heading for recession.
A recession or decrease in spending would affect not only the economy but also job security.
“You could almost say that falling job security is driving the economy,” UW-Madison economics professor Steven Deller said. “A number of firms are having trouble meeting investors’ expectations. To many, this is a signal that something is wrong.”
Consumer confidence plays a large role in the country’s economic standing.
“Consumer confidence has been driving the economy, but when job security becomes an issue, people aren’t willing to buy the new washer and dryer or to take the weekend trip,” Deller said. “Then the economy goes into a recession.”
Job security has already affected some industries and many dot-com and high-tech employees have been laid off. In Wisconsin, where the economy is dependent on the manufacturing industry, delaying the purchase of big-ticket items could hurt local workers.
UW economics professor Jean-Paul Chavas said that although the national economy has been slowing, local businesses have not been affected.
“We are lucky; the economy in Madison has been strong compared to other places in the U.S. But if the economy goes into recession, unemployment will go up everywhere,” Chavas said. “The impact of recession might not be very strong here because we have the state government and the university, which both generate an economy that is resistant to the business cycle.”
Despite Madison’s resistant economy, consumer confidence can still make a difference.
“The biggest question is what the impact of the terrorist attack is on consumer confidence,” Chavas said. “If households decide that it is time to cut back, that is something that we need to watch very carefully. The terrorist attacks will impact the economy, but how consumers respond will be the deciding factor.”
“Of course a big shadow in this is going to be the nation’s response to terrorist attacks,” Deller said. “If the nation goes to war, all bets are off.”
Deller said these changes could affect students in a couple different ways.
First, graduating students who are going into the job market could find that some companies are not hiring. Furthermore, if a recession continues through the year, summer employment opportunities could decrease and pay less.
With a dismal outlook on Wall Street and many companies not expecting big profits, Deller said the best stimulus for the economy would be for a handful of big companies to come out and say they aren’t doing poorly.
“That could be a real turn-around,” he said.
However, not everyone agrees the country is heading for long-term recession.
Terry Ludeman, chief of local workforce planning at the Department of Workforce Development, said he believes the recession is only temporary.
“Any time the economy slows, it has an effect on people, particularly people with fairly low skills working in marginal jobs,” Ludeman said. “But this is from the initial shock of last Tuesdays attacks. When everyone pulled back and looked at things that seemed important, like a new blouse, it seemed trivial.”
Ludeman said this could mean less spending in the coming weeks, but it will not affect overall spending habits.
In addition, the deputy director for the Dane County Regional Airport said the airport has no immediate plans to lay off workers, noting that some airlines are laying off employees. A representative from Oscar Mayer/Kraft also said the company has no plans to lay off employees.