Economic Meltdown Impact on Admissions

<p>This article should be of interest to those who are watching the impact of the economic meltdown on prep school admissions SSAT</a> MEMBERS WEBSITE</p>

<p>It is too early to say, but we could be on the cusp, if not in the midst, of the third great tragedy in the history of these United States: The War Between the States; the Great Depression; and whatever this economic mess we're in now turns out to be. I hope I'm wrong, but I have seen anything yet that convinces me I'm not. I sure hope I see soon some positive developments that can give us the promise of a bright future. Right now, I see only dark clouds and feel pelting rain.</p>

<p>Interesting article and a lot of useful information for people applying next year. I bet the increases were in schools with big endowments.</p>

<p>Wall Street Journal
* JULY 14, 2009 <a href="http://online.wsj.com/article/SB124753066246235811.html%5B/url%5D"&gt;http://online.wsj.com/article/SB124753066246235811.html&lt;/a&gt;&lt;/p>

<p>The Economy Is Even Worse Than You Think
The average length of unemployment is higher than it's been since government began tracking the data in 1948.</p>

<p>By MORTIMER ZUCKERMAN</p>

<p>The recent unemployment numbers have undermined confidence that we might be nearing the bottom of the recession. What we can see on the surface is disconcerting enough, but the inside numbers are just as bad.</p>

<p>The Bureau of Labor Statistics preliminary estimate for job losses for June is 467,000, which means 7.2 million people have lost their jobs since the start of the recession. The cumulative job losses over the last six months have been greater than for any other half year period since World War II, including the military demobilization after the war. The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.</p>

<p>Here are 10 reasons we are in even more trouble than the 9.5% unemployment rate indicates:
[Commentary] David Klein</p>

<ul>
<li><p>June's total assumed 185,000 people at work who probably were not. The government could not identify them; it made an assumption about trends. But many of the mythical jobs are in industries that have absolutely no job creation, e.g., finance. When the official numbers are adjusted over the next several months, June will look worse.</p></li>
<li><p>More companies are asking employees to take unpaid leave. These people don't count on the unemployment roll.</p></li>
<li><p>No fewer than 1.4 million people wanted or were available for work in the last 12 months but were not counted. Why? Because they hadn't searched for work in the four weeks preceding the survey.</p></li>
<li><p>The number of workers taking part-time jobs due to the slack economy, a kind of stealth underemployment, has doubled in this recession to about nine million, or 5.8% of the work force. Add those whose hours have been cut to those who cannot find a full-time job and the total unemployed rises to 16.5%, putting the number of involuntarily idle in the range of 25 million.</p></li>
<li><p>The average work week for rank-and-file employees in the private sector, roughly 80% of the work force, slipped to 33 hours. That's 48 minutes a week less than before the recession began, the lowest level since the government began tracking such data 45 years ago. Full-time workers are being downgraded to part time as businesses slash labor costs to remain above water, and factories are operating at only 65% of capacity. If Americans were still clocking those extra 48 minutes a week now, the same aggregate amount of work would get done with 3.3 million fewer employees, which means that if it were not for the shorter work week the jobless rate would be 11.7%, not 9.5% (which far exceeds the 8% rate projected by the Obama administration).</p></li>
<li><p>The average length of official unemployment increased to 24.5 weeks, the longest since government began tracking this data in 1948. The number of long-term unemployed (i.e., for 27 weeks or more) has now jumped to 4.4 million, an all-time high.</p></li>
<li><p>The average worker saw no wage gains in June, with average compensation running flat at $18.53 an hour.</p></li>
<li><p>The goods producing sector is losing the most jobs -- 223,000 in the last report alone.</p></li>
<li><p>The prospects for job creation are equally distressing. The likelihood is that when economic activity picks up, employers will first choose to increase hours for existing workers and bring part-time workers back to full time. Many unemployed workers looking for jobs once the recovery begins will discover that jobs as good as the ones they lost are almost impossible to find because many layoffs have been permanent. Instead of shrinking operations, companies have shut down whole business units or made sweeping structural changes in the way they conduct business. General Motors and Chrysler, closed hundreds of dealerships and reduced brands. Citigroup and Bank of America cut tens of thousands of positions and exited many parts of the world of finance.</p></li>
</ul>

<p>Job losses may last well into 2010 to hit an unemployment peak close to 11%. That unemployment rate may be sustained for an extended period.</p>

<p>Can we find comfort in the fact that employment has long been considered a lagging indicator? It is conventionally seen as having limited predictive power since employment reflects decisions taken earlier in the business cycle. But today is different. Unemployment has doubled to 9.5% from 4.8% in only 16 months, a rate so fast it may influence future economic behavior and outlook.</p>

<p>How could this happen when Washington has thrown trillions of dollars into the pot, including the famous $787 billion in stimulus spending that was supposed to yield $1.50 in growth for every dollar spent? For a start, too much of the money went to transfer payments such as Medicaid, jobless benefits and the like that do nothing for jobs and growth. The spending that creates new jobs is new spending, particularly on infrastructure. It amounts to less than 10% of the stimulus package today.</p>

<p>About 40% of U.S. workers believe the recession will continue for another full year, and their pessimism is justified. As paychecks shrink and disappear, consumers are more hesitant to spend and won't lead the economy out of the doldrums quickly enough.</p>

<p>It may have made him unpopular in parts of the Obama administration, but Vice President Joe Biden was right when he said a week ago that the administration misread how bad the economy was and how effective the stimulus would be. It was supposed to be about jobs but it wasn't. The Recovery Act was a single piece of legislation but it included thousands of funding schemes for tens of thousands of projects, and those programs are stuck in the bureaucracy as the government releases the funds with typical inefficiency.</p>

<p>Another $150 billion, which was allocated to state coffers to continue programs like Medicaid, did not add new jobs; hundreds of billions were set aside for tax cuts and for new benefits for the poor and the unemployed, and they did not add new jobs. Now state budgets are drowning in red ink as jobless claims and Medicaid bills climb.</p>

<p>Next year state budgets will have depleted their initial rescue dollars. Absent another rescue plan, they will have no choice but to slash spending, raise taxes, or both. State and local governments, representing about 15% of the economy, are beginning the worst contraction in postwar history amid a deficit of $166 billion for fiscal 2010, according to the Center on Budget and Policy Priorities, and a gap of $350 billion in fiscal 2011.</p>

<p>Households overburdened with historic levels of debt will also be saving more. The savings rate has already jumped to almost 7% of after-tax income from 0% in 2007, and it is still going up. Every dollar of saving comes out of consumption. Since consumer spending is the economy's main driver, we are going to have a weak consumer sector and many businesses simply won't have the means or the need to hire employees. After the 1990-91 recessions, consumers went out and bought houses, cars and other expensive goods. This time, the combination of a weak job picture and a severe credit crunch means that people won't be able to get the financing for big expenditures, and those who can borrow will be reluctant to do so. The paycheck has returned as the primary source of spending.</p>

<p>This process is nowhere near complete and, until it is, the economy will barely grow if it does at all, and it may well oscillate between sluggish growth and modest decline for the next several years until the rebalancing of excessive debt has been completed. Until then, the economy will be deprived of adequate profits and cash flow, and businesses will not start to hire nor race to make capital expenditures when they have vast idle capacity.</p>

<p>No wonder poll after poll shows a steady erosion of confidence in the stimulus. So what kind of second-act stimulus should we look for? Something that might have a real multiplier effect, not a congressional wish list of pet programs. It is critical that the Obama administration not play politics with the issue. The time to get ready for a serious infrastructure program is now. It's a shame Washington didn't get it right the first time.</p>

<p>Mr. Zuckerman is chairman and editor in chief of U.S. News & World Report.</p>

<p>Zuckerman is too optimistic. The true jobless rate is about 17% and this recession (depression?) will not be over in one year; instead, 10 years is closer to target, especially if the US government contiues to follow the Japanese model of throwing fresh money at banks that, in turn, refuse to loan. Buy farm land, grow your food and prepare for the Big Chill.</p>

<p>"Buy farm land, grow your food and prepare for the Big Chill. "</p>

<p>You are not literally doing that are you? What is everyone here actually doing to prepare for the "big chill"? Other than being scared by the posts in this thread and everywhere else, I have no idea what to do.</p>

<p>Well, I'm lucky enough to have already some farm land. Right now, I'm growing hay for sale in the local market. I plan, however, to start growing vegetables for personal consumption. Also, I have been buying gold and saving money. Still, I'm spending big bucks for the good of my son by sending him to a top BS. I think that such spending is also a good investment against the Big Chill.</p>

<p>NoDrama the best thing to do is hold onto your hard assets. Land, Cars, Houses etc.
Minimize your tax exposure.
Next time vote for a moderate. This government/administration is not Private school 'friendly'. Their policies are driving down philanthropy (which paid for BO's education btw).</p>

<p>I thought we voted out the "fear" guy who made us all "scared"?</p>

<p>Well public school kids out number private school kids by a good bit. We wouldn't need so many private school if public schools improve.</p>

<p>Why would public schools improve with the current and future national and state budget cuts in education? School</a> budget cuts threaten gains - Washington Times
The recipe we have here now is for cutbacks across the board..private schools and public.
It's grim for public education.</p>

<p>Not-so-fun-facts:
* Most families have lost 20 - 40% of their net worth
* Annual college costs are at all-time high ($20-$50K/yr)
* College graduation rates are lousy (less than 40% graduate in four years)
* Most of the focus is on how to get into colleges vs. how to get out with a degree that leads to meaningful career opportunities.</p>

<p>"Other than that Mrs. Lincloln, how was the play?"</p>

<p>Just to add to 3seven's "Not-so-fun-facts":
No rush to get out of school these days other than to stop paying the tuition bills. There are not alot of jobs in the USA for recent college graduates.</p>

<p>Recent</a> college grads step into an uncertain future - NJ.com</p>

<p>So right...my poor son and his huge loans...he is only able to find part-time employment at 10.50/hr. We are trying to talk him into moving home, but to him that is a sign of failure.</p>

<p>I have a college freshman starting this year, and am encouraging him to do the five year program, and not to rush through as we did in my day.</p>

<p>Sarum, does that mean you need to pay tuition for him for an additional year? Would it make more sense for him to stay home (if he has to) for a year, or would that look bad to potential employers?</p>

<p>What potential employers??? Only 20% of this year's Northwestern graduating class had a job this June. Verified and witnessed by me by a show of hands of graduates during graduation. I am not going to post another link on this thread to verify how wretched it is for these recent college graduates.
There is no need to rush getting out of college. If you are on the five year plan, and you are in my family and can walk, you are going to get a part time job while at school to help you pay for food, gas, and 'ass'.
Staying at home for a year looking for work after four years in college is not an option, because there is already an male "Alpha" wolf at our place. This son might as well hang out at school an extra year...not a bad gig if you can get it.</p>

<p>Let's hope that we are out of this hell in five years. Remember: the DOW didn't return to its 1929 high until Nov. 1954, i.e., 25 years later,... and the US economy had more promise industrially in the '30's and the '40's than we do now.</p>

<p>Hope for the best, but please prepare for the worse.</p>

<p>The Yale Alumni Magazine recently interviewed David Swenson, who has managed Yale's endowment for many years, with great success. </p>

<p>"Yale interviewer: Many young people today believe they will never be as prosperous as their parents. Should young adults have hope?</p>

<p>Swenson: I'm an incredible optimist. We should be careful not to underestimate the resilience of this economy. I think we could have, in the next couple of years, a very hard slog. Looking five or ten years down the road, I'm very optimistic that we will come out of this strong and better. "</p>

<p>Link to article: Yale</a> Alumni Magazine</p>

<p>Interesting quote considering how much Yale grads had to do with the condition of the current economy.</p>

<p>Touche, Sarum! 20 years of Yale grads in the Oval Office are over (for a while it seemed it might be 24 with Hil), but plenty of Elis are still around, hopefully making less mischief :)</p>