OSWEGO, N.Y— In an economy that seems to become increasingly unstable by the day, students are starting to rethink their finances in reaction to the change.
Many economists believe that recent changes in the economy are all signs pointing to a recession, defined as an overall downturn in economic activity.
Annabelle Rothmann is a freshman at SUNY Oswego and a member of Oswego’s Investment Club, helping to decide what stocks the club invests in. She has seen the effects the threat of a recession has had on the club’s buying habits firsthand.
“Currently with the U.S. potentially heading towards a recession, the club is looking to sell stocks and even out our portfolio to brace for a drop in stocks,” Rothmann said. “We’ve been trying to put our money into sectors we believe will stay strong through this like medical or consumer staples.”
Emily Lussier is a sophomore and business administration major at SUNY Oswego. She’s among the crowd who believes a recession is inevitable.
“It’s not shocking considering the current state of everything going on right now with inflation,” Lussier said. “It happened in 2008 and again when COVID hit, so who’s to say it can’t happen again?”
Elizabeth Schmitt is an economics professor at SUNY Oswego and the faculty chair for the economics department. Schmitt was hesitant to give the current economic status the moniker of a recession.
“I think we’re getting close to a recession,” Schmitt said, “The economy could be growing 0.2% and it would look the same as if it were shrinking -0.2%, or close to zero.”
One oddity of the current economic cycle, according to Schmitt, is that the job market is not tightening up. “Unemployment is under 4% right now, which is considered a pretty healthy number in the United States.”
“If we are in a recession, it’s going to be a weird recession that doesn’t reach the job market,” Schmitt said, “Which pretty much violates every macroeconomics model, which is really fun when you’re teaching it. The job market issue is making it very sticky to figure out whether or not we’re in a recession.”
According to Schmitt, the main thing to watch out for when looking at the current state of the economy is the matter of inflation.
“If the Federal Reserve keeps raising interest rates, I don’t think we can avoid a recession, I think it’s 50/50 whether or not we go into a recession,” Schmitt said. “But if it looks like inflation is going down I think the recession will be short and I don’t think it will be particularly severe.”
Schmitt also believes these potential fluctuations in the economy and the looming recession could have consequences for the stock market.
“One of the things that drive stock prices are corporate prices,” Schmitt said. “As a stockholder, you get equity in the company and you own a share of its profits, and in a recession, as corporate profits begin to fall, we expect the stock market to fall.”
The current economy appears to also be an after-effect of the pandemic. “Since the pandemic, the Federal Reserve has been pushing all sorts of liquidity, expanding the money supply like nobody’s business, like a helicopter throwing out free money,” Schmitt said. “The idea is that it was easy money. It was a party and now we have a hangover, the economy is in a hangover right now.”
The apparent silver lining to all this is that if past economic downturns were any indication, this looks to be a temporary problem.
“People who are close to retirement come down the hall to the economist’s office panicking about their retirement funds going down and whether or not they’ll have to work until they’re eighty,” Schmitt said. “I tell them they’ve gotta chill. You’ve gotta just hold a diversified portfolio and trust that the stock market will rebound.”