There has been a lot of hue and cry, discussions, debates, confusion, dilemma over the u.s economy and its prospects not just among the number centric wall street analysts but the anxiety and fear has spread to all quarters. I never thought I would Google for the words US ECONOMY+RECESSION. It all started a few days back when I started contemplating over my decision to pursue my masters in U.S. If you happen to read my previous posts(though not many) you would know me more as a person with entrepreneurship interests rather than a techie guy. I really wanted to challenge my own career decision which was taken more in haste rather than say passion for that. I always knew that managerial education was my real calling. Now I need to find odds to challenge my master’s decision. So I started dwelling on the scenario of the us economy its impact on my career prospects and what’s in store for me if I stay back and pursue my dreams.
It was almost a month back in the early February I was watching CNN-IBN (of course my fav channel) and the stock markets were melting after a bull run of nearly 3 years and almost all the regional channels were reporting about these crashes. The crashes weren’t normal each and every other day the stock markets were reporting biggest losses in the stock market history. It was like wtf is happening…?.The Indian GDP growth was increasing on the predicted lines between 8 and 9.the third quarter results of most companies were on the expected lines. To get a clear picture of what’s happening to the stock market I switched over to NDTV profit where Nikunj Dalmiya the reporter was attributing the crash to three main reasons
1. Concern over the US recession
2. Withdrawl of investments by FII’S (Foreign Institutional Investors)
3. Liquidity crunch in the Indian economy due to huge investments in the Reliance power IPO touted as the god of IPO’s
That was the first time that the recession fear stuck the Indian chord.
What’s a recession….?
Some economists define recession to be a period of two successive quarters of negative GDP growth. But this is not universally accepted. The US National Bureau of Economic Research defines a recession as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession, it says, may involve simultaneous declines in measures of overall economic activity like employment, investment, and corporate profits.(source :TOI)
Economists joke that a recession is when your neighbor loses his job; a depression is when you lose your job too.
Is the U.S economy in recession…?
No one has a proper answer for this question. Even if there is one there is no hard and fast rule to find out when it started, ended etc., The answer depend on whom you really put this question to. One thing everyone agrees — the economy is slowing down. But as for chances of a recession, analysts put it anywhere from 30% to 65%. The safest ones say Americans won't even know they're in a recession till they're in the middle of it, and it'll be over by the time they realize.
Is this the first time that us is facing the threat of recession…?
Absolutely no. The biggest recessions in us in terms of GDP fall are
1973-1975 during this period the GDP fell by 3.1%
1981-1982 during this period the GDP fell by 2.9%
1990-1991 during this period the GDP fell by 1.3%
In 2001 GDP fell by a mare 0.3% and the recession lasted for just 8 months.
Howz it going to be this time…..?
Economics is a quite complicate and intricate web that it is quite difficult for the most intellectual analyst to predict the intensity of recession if there is one.there has been various views in this regard.
Wyss's baseline forecast calls for the 2008 downturn to trim US GDP by just 0.5% and last for nine months, from last November until August.
Warren buffet the investment guru and the CEO of Berkshire hatchway said that us is in recession but its not as severe as the previous ones.
The former Federal Reserve chairman, Mr Alan greenspan warned of the worst financial crisis since World War II.
The us treasury secretary, Mr Henry Paulson referred to a sharp economic downturn.
Amid a hailstorm of such dire forecasts, the fast growing economies of Asia and still dynamic European area represent the best hope of avoiding a severe global slowdown or, in the worst case scenario, a global recession.
Amid these uncertainties and the bleak us economy how bad are the prospects of a student planning to pursue his masters in the U.S…?
First let me make it clear that this part is my own analysis. It may be 100 percent crap of merely 5-10% correct and any decision taken based on this crap without applying self conscience will take you nowhere.
Previously post recession every tom dick and harry used to get jobs in the us companies even after graduating from some of the worst, newbie schools in us.
No matter how big or small the recession phase is gonna be this scenario Is gonna change and the current 2008-09 batch will be the first one to face the transient phase. The recruiting companies are gonna be more specific while recruiting and all those who are gonna attend second tier and third tier graduate schools have to think twice before regretting their decision as it is not going to be a bed of roses this time.
However I personally feel that people with real zeal and interest in the major they are going to pursue rather than an attraction for the us lifestyle and brand tag are at the safer shore. People with work experience as a full time employee prior graduation can also be categorized into recession trouble free zone. These two will find no trouble in finding a job.
Excerpt from a forecast says, unemployment, which hit a low in this expansion of 4.4% and now stands at 4.8%, will rise to around 6%, meaning 1.5 million Americans will lose their jobs. Under the worst-case forecast, unemployment jumps to 7.5%, meaning 3 million people would be tossed out of work.
Because of rising population and immigration, the US needs to create on average 120,000 additional jobs per month to keep the employment rate stable. But in August the US actually lost 4,000 jobs. This looks more a trend than a blip: the new-jobs data for June have been revised down from 126,000 to 69,000, and for July from 92,000 to 68,000.
In August, jobs in construction fell by 22,000, and in manufacturing by 46,000. This suggests that the slowdown has spread from housing to other sectors
It started with the slump in retail sales in the us markets in early November even during the festive season.then came the sub prime crisis(it is the scenario in which the individual who have taken mortgages fail to pay back the money and banks fail to recover the money the lent to those individuals).the sub prime crisis came because the people were not able to pay back there loans.they were not able to pay back their loans because they were loosing their jobs or the source of income.employees were being fired because there was slump in the consumption patterns and the manufacturing sector was in downtrend. Because of the sub prime crisis the banks and the financial institutions were deprived of liquidity and the initiation of panic in the Indian stock markets saw the downfall of sensex which led to huge losses for the FII’s such as bear sterns which eventually led to the collapse of the Americas fifth largest investment bank.
Students who are planning to take up branches such as engineering management, financial engineering, areas related to production and manufacturing have to think twice if they are getting into second tire universities.
The Indian reaction to the us recession and opportunities back here will be posted in the subsequent post very soon…
plz post ur comments regarding this issue. Lets make it a dialog instead of a monologue
the oil prices keep soring contrary to the pacifying summer torrid and its quite hard to restrain oneself from having a haughty laugh looking at the agitating opposition party politicians with brains less than that of sameera reddy (at least in AP).
