Posts Tagged ‘recession’

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The Educated, Unemployed Generation

Wednesday, October 21st, 2009

It’s normal to be unemployed right after college, but being young and unemployed for a long time is bad for everyone.

  • Young people are being disproportionately affected by the recession because they’re missing out on entry-level employment opportunities, even when they’re highly qualified. Employers lose, too: young employees bring freshness and ambition to the job.
  • Being unemployed in one’s youth can lead to lower lifetime earnings due to missed opportunities, experiences, and sometimes a stigma. On a large scale, this will adversely affect tomorrow’s retirees, who will depend on this generation’s earnings to fund their Social Security benefits.
  • Some call for government action in the form of a more flexible minimum wage (employers that must pay the increased minimum wage are increasing their education and experience requirements commensurately), or increased training and apprenticeship programs. But the budget deficit makes these options unlikely.

Facts & Figures

  • The unemployment rate for 16- to 24-year-olds is more than 18% in the U.S., 39% in Spain, 24% in France, and 19% in Britain.
  • 46% percent of 16- to 24-year-old Americans were employed in September 2009.
  • A study showed that 15 years out of school, workers began their careers in a recession earned 2.5% less than workers who began in a better economic climate.

Best Quote

“Every morning I wake up thinking today’s going to be the day I get a job. I’ve not had a job for months, and it’s getting really frustrating.” – Dan Schmitz, recent college graduate

Ultrahigh-Net-Worth Families Reflect On The Recession

Monday, October 5th, 2009

A gathering of advisors to high-net-worth families reveals ongoing insecurity about more than just the market…

  • Reeling from the losses of the recession, wealthy families are expressing concern about what their changing financial positions will do to their family dynamics.
  • The success of family dynasties depends largely on each member managing the shared assets with a similar set of values and goals. But the sudden stock market crash brought to light hidden frictions and diverging interests in many families.
  • One particular point of anxiety is in commercial real estate. With the market so volatile and typical investors suddenly going through kind of financial-existential crisis, the old practice of buying up cheap real estate during down times just isn’t happening. What that means for the rest of the world remains to be seen.

Facts & Figures

  • According to a survey of 108 “ultrahigh-net-worth families,” 45% said their first concern these days is the economy and financial markets.
  • Other top concerns included government intervention in the markets and a commercial real estate crash.

Best Quote

“These families have recognized that autopilot is not a good strategy.” – Amelia Renkert-Thomas, Lawyer

Plunging Prices Follow The Crash

Monday, October 5th, 2009

Times are good for bargain-hunters, but a price-slashing culture could be disastrous for retailers and their employees.

  • Prices around the country are dropping in a retail campaign to win back buyers who put their wallets away when the stock market crashed and thriftiness became the norm.
  • Shoppers are staying away primarily because they’re broke, but also because the consumer culture has changed since 2007: conspicuous consumption just isn’t as okay as it used to be.
  • Because consumers are now holding out for the discounts they know desperate retailers will offer, companies are forced to cut prices even as their profit margins shrink. Lower prices mean lower profits, which often translates to hiring freezes and layoffs. This is the same cycle that affects the Japanese economy, which has been battling deflation for decades.

Facts & Figures

  • 70% of the U.S. economy is made up of consumer spending, but following the stock market crash in 2008, total household wealth decreased by 11% in less than six months.
  • On average, prices have decreased by about 20% in the hotel industry and more than 30% in the real estate market.
  • The Consumer Price Index dropped 1.5% between September 2008 and September 2009 – the largest decrease since 1950.

Best Quote

“This is the new normal. We aren’t going back.” – Donald Keprta, President of Dominick’s (a supermarket chain in the Midwest)

Will Cheaper iPhones Create Converts?

Friday, September 25th, 2009

Even a company as glitzy and popular as Apple needs to cut prices to compete in this economy – nobody can escape basic economic relationships between price and demand.

  • Hoping to sustain the momentum for its trendy smart phone in the middle of the recession and among increasingly prominent competitors, Apple decreased the price of its entry-level iPhone 3G from $199 to $99.
  • Main competitors include Palm Inc. and Research in Motion Ltd. (creator of the BlackBerry line of devices).
  • Apple also decreased the price of some of its other products, including the MacBook Pro, the MacBook Air, and the Mac OS X Snow Leopard operating system.

Facts & Figures

  • Apple has sold more than 20 million iPhones so far.
  • The new $99 iPhone 3G could increase iPhone demand by as much as 50%.

Best Quote

“These are very aggressive prices.” — Richard Doherty, Analyst with Envisioneering Group (a technology consultancy)

VIPs Can’t Afford The Gala… Should The Party Go On?

Friday, September 25th, 2009

Everyone is feeling the recession – even the rich – and that’s making it difficult for nonprofits to find honorees for their glitzy gala fundraising events.

  • The spring benefit season in New York (usually heavily funded by Wall Street) has been hurt by the struggling financial sector.
  • Potential honorees are opting out, not wanting the responsibility of asking friends and family for money in such lean times.
  • Some organizations, like Carnegie Hall, have canceled their galas, while others have gone ahead with their events without an honoree.

Facts & Figures

  • Groups earn anywhere from a few percentage points of the annual budget to the majority of a year’s expenses.
  • Nonprofit endowments are down 25 to 30%.

Best Quote

“This idea of getting on the phone and saying, ‘Wouldn’t you like to be honored at our gala?’ – that’s more difficult, more challenging now than in my 30 years of experience at this.” – Will Maitland Weiss, Executive Director of the Arts and Business Council of New York

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Battered Bonuses, Dropping Donations

Friday, September 25th, 2009

You may find it interesting which type of charities see the most decline during bad economic times. Just like certain industries might be hurting more than others, charities see uneven declines as well – this piece might help you when thinking about different donation strategies.

  • In 2008, charitable donations fell drastically as the effects of the recession were being fully realized.
  • Even with such a decline, total giving was still at at an historic level – higher than every previous year except 2007.
  • Charities are uncertain how the recession will continue to affect donations, but they are pretty sure that giving will keep declining for a while longer.

Facts & Figures

  • In 2008, gifts and pledges decreased 5.7% to $307.65 billion.
  • Charities that provide basic services (food banks and shelters) saw an estimated 15.95% decline in donations for 2008.

Best Quote

“We saw corporations begin rethinking their giving in greatly different ways, and we saw individuals begin to revisit their philanthropic priorities.” – Del Martin, Chairman of the Giving USA Foundation

Condé Nast Won’t Cut The Car Service

Thursday, September 24th, 2009
To keep up its image, Condé Nast might choose to cut a few salaries rather than cancel a party or let executives go without their town-cars.
  • McKinsey & Co. recently finished a project assessing the ways publishing powerhouse Condé Nast must cut costs, a touchy subject for a company known for its culture of lavish spending.
  • Condé Nast does not take to cost-cutting tactics as do other publishers – it seems it would rather cut or renegotiate contracts with consultants such as photographers, writers, and stylists than get rid of employee perks like car services and parties.
  • Some believe the company released information about McKinsey’s report in order to shift the blame for budget cuts onto the consultants.

Facts & Figures

  • McKinsey advised that Condé Nast cut about 25% from several magazines’ budgets.
  • Typical perks at the company include: on-call drivers for top editors and publishers, staff reimbursements for $15 a day lunches they order in, and hotel stays at places like the W for freelance writers on assignment.
  • The publisher’s newsstands sales brought in $2 million less in the first six months of this year than they did a year ago.

U.S. Poverty Rate Rises As Incomes Drop

Thursday, September 24th, 2009

Poverty isn’t just an international problem. The recent economic downturn has highlighted a deepening domestic struggle to stay afloat.

  • The U.S. Census Bureau revealed statistics showing that the blight of poverty is spreading throughout the country, especially in the Western and Midwestern states.
  • Many of the newly impoverished Americans are children, even as two-worker households are increasingly seeking assistance in the form of food stamps.
  • Areas with the greatest increase in poverty rate are the same areas that have seen many jobs and wages disappear in the recession.

Facts & Figures

  • For 2008 data collection purposes, a family of four with two children is considered to be below the poverty line when they earn less than a total of $22,000 a year.
  • In 2008, the poverty rate increased in 31 states; 2007 saw an increase in only 10 states. Only Michigan saw its poverty rate increase in both 2007 and 2008.
  • The national rate of poverty is 13.2%, but the highest rate in the country can be found in Mississippi (21.2%), followed by Kentucky, West Virginia, and Arkansas (at about 17% each).

Best Quote

“There are lots of people who are using food stamps for the first time, because they don’t have any other options.” – Mark Mather, Demographer at the Population Reference Bureau

Latest Labor Stats Show Six Applicants For Every U.S. Job

Thursday, September 24th, 2009

These days, simply shining up your resume or strategically name-dropping in an interview may not be enough to land a paying gig…

  • Though it is widely believed the recession is at an end in the U.S., the unemployment problem is still sobering, and the ratio of unemployed Americans to available jobs is at a record high.
  • During the economic crisis, many companies laid off employees and took conservative financial stances to prevent losses. That added up to a large pool of jobseekers but increasingly fewer job openings.
  • Companies are afraid to resume hiring or try to expand now because they aren’t certain what the economic future will bring. Plus, any increase in overall workload can easily be shifted onto existing employees.

Facts & Figures

  • According to July data, there are currently more than six jobseekers for every job opening. In the 2001 recession, there were just over two jobseekers for every job.
  • The nationwide unemployment rate is up to 9.7%.
  • Job losses have hit hard in every sector of the economy, even in typically high-growth industries like healthcare and education.

Best Quote

“There’s too much uncertainty out there. There’s not going to be an upsurge in job openings for quite a while, not until employers feel confident the economy is really growing.” – Thomas A. Kochan, Labor Economist at M.I.T.’s Sloan School of Management.

The Recession Is Probably Over, But It’s Still No Party

Thursday, September 24th, 2009

Just because a recession is ending doesn’t mean huge growth right away. It’s interesting to see what the future may hold after such a terrible economic spell.

  • On Tuesday, Ben Bernanke – the Federal Reserve chairman – said that it was “very likely” that the recession has already ended, though the problems it caused will still linger for a while.
  • Forecasters predict that we will only experience moderate growth for the rest of 2009 through 2010 – the problems affecting credit markets, consumer confidence, and the housing crisis still need time to be fully solved.
  • One of the most important problems that needs to be addressed is how the government is going to carefully dismantle the spending, lending, and guarantee programs it put in place to stabilize the economy – too quickly and we could be back to more problems, but too slowly and significant inflation could set in.

Facts & Figures

  • Retail sales in August surged by 2.7% in July – the largest increase since January of 2006.
  • Growth in 2010 is predicted to be moderate, not much faster than the basic growth rate of the economy.

Best Quote

“Without these speedy and forceful actions, last October’s panic would likely have continued to intensify, more major financial firms would have failed, and the entire global financial system would have been at serious risk.” – Ben S. Bernanke, Chairman of the Federal Reserve

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