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The Daily Tar HeelWednesday, March 24, 19915
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Unemployment Rates
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By Ginger Meek
Assistant Features Editor
J-' Times are hard.
"The whole economy is in disarray,"
said Larry Sarsoun, the chief executive
f Officer of Wren Financial Services of
Hammond, Ind.
r-' "Recession is inevitable, but so is
'economic expansion when in a reces
sion," said Bill Staton, a nationally rec
ognized expert on the economy and
investing.
Staton compared an economic cycle
to a menstrual cycle. "A woman usually
has a period every 28 days or so, but her
" Cycle can be irregular. The economy
' goes through waves of optimism in the
"'same way."
The economy follows a cycle that
tanges from expansion to contraction.
' A human tendency to become compla
Cent and over-confident during expan
sion causes people to make mistakes
'and triggers contraction that leads to
precession, Staton said.
The economic pendulum swings in-
' ' dependently and even though situational
factors may push or pull, the motion of
f the pendulum can not be stopped, said
Barbara Keating-Edh, president of Con-
1 sumer Alert, a nationwide membership
" organization for consumers."
"We Americans are intolerant and
"demand instant fixing. There is no in-
Siaill llAlllg, ollC odlkl.
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-By West Lockhart
'Staff Writer
vi.' "It is definitely a tight job market,"
Vsaid Marcia Harris, director of Univer
rsity Career Planning and Placement at
UNC. Last spring there were fewer stu
, dents getting jobs by graduation, and
' "this year that number may be even lower,
she said.
As a result of this constricted job
market, the number of students who
"have opted for graduate schools has
, increased. Normally, about 15 percent
of the graduating class goes on to gradu
ate school. Last year 18 percent of the
1, students enrolled, and this year should
be higher, Harris said.
: Leslie Bell, a senior from Supply,
' 'said he initially planned to go to gradu
ate school, and the job market situation
definitely reinforced his decision.
l ' "The number of recruiters (this year)
' was not down in any major way," Harris
"said. The major difference is that they
y7are not hiring the same numbers they
used to. The total number of positions
available may be down as much as 30
percent.
- The students who have tended to
have the easiest time getting jobs are
those who are interested and qualified
'jn computers, business, finance, ac
counting, sales and chemistry, Harris
(fsaid.
' lmiiiiw 1 1 iiiiw .i.ii I mn- niiiiijiu m " 1'iinilJ. i1lU. jiiiiimiiiom
M , . 1
The pendulum swings through infla
tion and deflation, Sarsoun said. During
an inflation, such as during the 1970s,
prices increase because of an expansion
in the money supply. Higher prices re
sult in increased interest rates.
During this time, consumers tend to
buy hedge products necessities as
opposed to vacations and new cars, he
said. Not financing large purchases takes
money out of the credit market.
At some point, interest rates decrease,
making the credit market more attrac
tive. This sparks deflation and prices
decrease. "It snowballs both ways,"
Sarsoun said.
Staton said prior to the 1930s, every
downturn in the nation's economy was
referred to as a "depression." But be
cause the state of the economy was
severely oppressed during those years
with one-third of the work force unem
ployed, that era became known as "The
Depression." Since then, every other
downturn has been a "recession."
There are a number of factors con
tributing economically and psychologi
cally to the severity of an economic
recession.
Jim Wilde, an associate professor of
economics at UNC, said a decline in the
amount of consumer investment in the
economy sparked the reversal of the
economic pendulum last August with
the birth of this recession.
"Credit is relatively expensive, real
t dim f
This year everybody will be hit across
the board. In particular, those students
in advertising, publishing, journalism,
humanities, arts, RTVMP and speech
communications will feel the punch.
Generally, about 50 percent of the
students have jobs lined up by gradua
tion, Harris said. This year will prob
ably be more like 35 percent.
Peter Topping, director of graduate
placement at the business school said
graduates were doing quite well despite
the tough job environment.
The graduate business school has
done particularly well placing gradu
ates in consulting, operations fields,
marketing consumer products and fi
nancial positions, Topping said.
The areas that have been the most
difficult to get jobs in have been bank
ing and real estate. Both have been
particularly hard hit by the recession.
Normally about 25 percent of the
students go into banking, but not this
year, Topping said. Students have had
to broaden their searches to make up for
this, he said.
UNC's graduate business program is
doing much better than many other pro
grams. About 75 percent of the students
already have jobs, and by graduation,
about 85 percent will, Topping said.
"We are far ahead," he said. At some
schools, only 35 percent of the students
have found jobs.
" There is no instant
fixing."
Barbara Keating-Edh
Consumer Alert President
estate is very soft and the (American)
auto industry is soft people are buy
ing fewer domestically produced cars,"
he said.
Increased business regulation after
several years of de-regulation recessed
the economy, according to Scott
Patterson, director of Consumer Alert's
Washington, D.C., office. "(The gov
ernment) clamped down on banking,
decreasing the amount of capital avail
able. "Also, the inability of Congress to do
something about the budget deficit low
ered consumer confidence," Patterson
said.
But, according to Wilde, this effect is
no longer evident. "We are long past the
point where the budget deficit affects
spending the deficit doesn't affect
people psychologically when they're
wearing their consumer hat," he said.
"Things like the (Persian Gulf) war,
what Congress is doing, what the Presi
dent is doing, the weather, these are
things that have psychological effects
or UNC graduating seniors
" The number of
recruiters was not down
in any major way. The
major difference is that
they are not hiring the
same, numbers they
used to."
Marcia Harris
UCPPS director
Even the legal profession, which
witnessed an incredible expansion in
the number of law firms and young
lawyers during the 1980s, has been af
fected by the crunch, said Amanda
Harding, director of career develop
ment and services at the UNC School of
Law.
"All employers are being cautious ...
and that applies to the legal profession
also," Harding said.
The stock market crash last October
and the dismal real estate market has
hurt many law firms, and they are not
hiring as much as they were, she said.
Hiring is down nationally, but
Harding said that being in the Southeast
on consumers and the economy," Wilde
said.
Increased taxation would be abso
lutely the wrong direction to take when
trying to combat recession, Keating
Edh said.
Patterson agreed. "A lot of states are
looking at the recession in the wrong
way. They are taking money out of the
consumers by raising taxes when the
economy is run by consumer spend
ing." Since two-thirds of the country's
gross national product (GNP) comes
from consumer spending, damaging
consumer spending is harmful to the
economy, Staton said.
According to Keating-Edh, higher
taxes don't counteract the budget defi
cit. "Any increase in taxes sends a sig
nal to Congress that there is more money
to spend."
Consumer Alert recently conducted
research suggesting that the average
family of four gives nearly half of its
yearly income to the government.
With a median annual income of
$34,700 for such a family, 22 percent is
spent on obvious taxes federal, state,
local and social security taxes. Another
22 percent is spent on "invisible taxes"
such as occupation and consumer
safety regulations, environmental regu
lations and import tariffs.
Total government cost to this family
is over $ 1 5,000, leav ing 1 ittle more than
$19,000 in remaining disposable in
come. "The family is in its own little
depression caused by government ac
tion," she said.
'The economy is a pendulum with
natural ebbs and flows that gets an extra
boost when the government goes too
far. The best thing that could happen to
the economy would be for the govern
ment to stay out of it," Keating-Edh
said.
She said: "The best thing the govern
ment could do would be a tax break and
to cut back in spending across the board.
It could happen, but politically, it's not
going to."
Wilde said, "If the recession is short ;
and not very deep, there probably won't
lie any lasting effects."
Pulling the economy out of a reces
sion hinges on the stability of the
country's banking structure, Wilde said.
"If we can keep more banks from going
bad, the economy will pick up. If the
financial structure starts to crumble, it
could snowball us if it isn't stopped."
Decreased interest rates are an indi
cation of a near end to this recession,
Patterson said. He estimated the reces
sion would last another 10 months and
recover slowly.
Consumer confidence is increasing,
he said. "At least in the Washington
area, there is much more optimism than
there was in October, especially in the
world of real estate. Interestingly, the
economy is the same."
Wilde and Sarsoun agreed that even
though light may be visible at the end of
the tunnel, it is difficult to forecast the
end of a recession because of the unpre
dictable nature of any economic cycle.
Staton said there were indicators as
to the direction of the economic pendu
lum. "Housing and auto sales have been
in a slump for a number of years. Those
industries might get worse, but once
they get better, the economy will turn
around."
So when will times get better?
"Who knows?" Sarsoun said.
had helped because it had not been as
hard hit as other regions.
"Students are being forced to think
about what they want to do with their
law degree," Harding said. Some stu
dents at Carolina are thinking about
alternatives like public interest groups
and non-profit groups, she said.
It is too early to tell just how many
education majors will have jobs since
most schools do not hire until the sum
mer, said Gary Johnson, placement
counselor for education.
"The response (so far) indicates it is
going to be a good market, certainly
stronger than the employment market
as a whole," he said.
Although state budget cuts may re
duce the number of teaching positions
available, nearly 80 percent of the edu
cation majors are projected to have jobs,
Johnson said. Most of these jobs will
come from within North Carolina.
"Most of the action will take place
this summer," said Melanie Lewis, a
senior education major from
Mooresville. Schools will do their in
terviewing in May and June, Lewis said.
She expected to find out in July about
her situation.
Billie Nagelschmidt, placement di
rector at the UNC School of Journalism
and Mass Communication, said fewer
jobs had been posted than in the last ten
years.
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Q
uick Persian Gulf War
worsens economic woes
ByBethTatum
Staff Writer
War (wor) n. open armed conflict as
between nations. Recession (ri sesh'en)
n. 1 . a going back; withdrawal 2. tempo
rary falling off of business activity.
War and recession. Does one auto
matically follow the other?
"It's clear that the impact of the (Per
sian Gulf) war has been detrimental (to
the economy)," said Jim Wilde, a UNC
associate economics professor. "But
there are pretty strong indications the
economy was turning down before Au
gust 2. The war just increased the turn
down."
UNC economics professor Stanley
B lack agreed. At the end of the summer,
the economy was beginning to show
signs of financial strain, he said.
"The S&L crisis was fully on us,
banks were having troubles, real estate
construction was already declining, and
car sales had begun to decline," he said.
'This indicates the economy was ready
to fall."
The war brought the final shock that
dropped consumer spending and led to
recession. "The war contributed to the
recession in two ways," said Marvin
Kosters, director of Economic Policy
Studies for American Enterprise. "The
first being the big increase in oil prices
that tipped the economy into reces
sion. The second uncertainties," he
said.
But all three said the recession was
probably unavoidable, with or without
the war. The war simply hurried up the
slowdown.
The link between war and economy
hasn't always been negative. World War
U helped bring the economy out of
depression, but the length of the war
made the difference.
World War II lasted for a six-year
period and in that time a large amount of
equipment and supplies were produced,
Kosters said. In the Persian Gulf War,
the conflict flared up so quickly that the
military relied almost completely on
stockpiles of equipment and did not
need to produce any more, he said.
Black said the war would have had
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more of an effect on the economy if it
had gone on longer. "It was too short,"
he said. "It didn't cost all that much, and
most of that was spent overseas." Money
was spent on textiles and shoes, but that
didn't make up for the towns around the
military bases that lost business.
The war was good news for long
term defense industries which had been
looking at a negative future. Before the
war, people had been down on defense
spending, Black said. "Now it's bad
news for peaceniks."
Overall, the war had a minimal effect
on the economy except in consumer
attitudes, Black said. "It knocked
people's confidence, and I'm not sure
when that confidence will be restored,"
he said.
Because the war pushed the nation
into a time of uncertainty, the question
of what will happen now that the war is
over and the uncertainty has been re
moved remains.
"If the war was the straw that broke
the camel's back, when the war is over,
does the camel get back up? Not neces
sarily," Black said. "All the other (prob
lems in the economy) are still there.
When consumer spending picks up, the
economy will."
Wilde agreed. "The great uncertainty
has been removed. However, there is no
strong sector to lead us up," he said.
"We're back to where we were and
that's still a weak position."
The stock market is up and has con
tinued to go up, following the victori
ous air war. "But that is only a small
segment of the population," Black said.
"Joe six-pack is still worried."
Kosters predicts economic recovery
by mid-year. He said the monetary
policy was expanding at a reasonable
rate, and the trend of inflation was com
ing down. "The slowdown was a gradual
reduction in the rate at which money
growth occurred," he said. "Lower in
flation will give room for growth."
Kosters said many critics had an af
finity for thinking a market economy
and war go together. 'That's erroneous
in my opinion," he said. "Everybody
does better in the absence of war and not
the presence."