The “R” word is slowly creeping into the American consciousness.
However, Charles Colgan, professor of public policy and management with the Muskie School of Public Service and chair of the Maine Economic Forecasting Commission believes it’s too early to talk of a recession. Colgan supplies economic forecasts for the entire state of Maine which are currently available through 2020. The forecasts on his Web site include employment and population forecasts from 1990-2020.
Knowing for sure whether the economy is or will slip into a recession is difficult, according to Colgan.
“Looking at economic policy is like looking in the mirror, you can only measure what’s gone on in the past,” says Colgan. “Among the things to look for are a lack of consumer confidence, and increases in oil prices.”
At a recent breakfast meeting of the USM Corporate Partners Program, Colgan predicted a slower yet healthy economy.
The media has a big effect on people during periods of economic decline, says Colgan, but their news is often misleading. People hear about layoffs and failing businesses and so they panic. Instead of buying products that aren’t necessities, like new cars, consumers try to ensure a safe future by spending on real needs, like home maintenance. Consumer confidence, as it begins to fade, ultimately sends the economy into a recession.
Layoffs have already received more attention. Chrysler recently laid off 2,500 production workers and the Internet’s Amazon laid off 1,500 people. Colgan says that news about these layoffs will have a more negative impact on consumer confidence than the actual job cuts.
“What people don’t understand is that a lot of the layoffs for Chrysler occurred in South America,” says Colgan. “Others were simply early retirements, not so much layoffs.”
In addition, Colgan says the failures of some Internet companies like Amazon don’t have much to do with a supposed recession.
“A lot of people invested a lot of money in these Internet companies which dumped all their profits back into the business,” says Colgan. “At the same time investors were buying new homes and new cars because they thought they were going to be rich but in many cases it didn’t happen.”
Despite these new layoff figures, Colgan believes the country is not at the point of recession yet and the economy will continue to grow, but at a much slower pace. He says there are no foolproof methods to predict an on coming recession, only signs that may or may not indicate trouble for the economy.
Among those most baffled by recession are students who were young and unable to understand terms used by their parents when describing the recession in 1992 like unemployment and inflation.
“I’m not really sure what a recession is,” says Lindsey Lokken, a freshman social work major. “I know it may mean losing my job, which would be difficult because I waitress and my schedule is flexible to go along with school.”
However, not all students believe that a recession is harmful for the economy.
“Recession is like trimming a bush, it clears away dying unproductive businesses while stimulating growth for other businesses that survive,” says Daniel Thompson, a freshman engineering major.
Like many other life-altering events, recessions cause great problems for some and create new opportunities for others. Colgan says those who remain out of work for long periods of time are negatively effected while others find more satisfying, higher paying jobs that may have otherwise slipped past them.
Staff writer Ryan Milliken can be contacted at [email protected].