Whose recession is this, anyway?

Whose recession is this, anyway?
For some people, bargain prices and new workplace advantages make the economic downturn a time to profit.
By Catherine Holahan, MSN Money

Stephen Lasher reads all the dire economic forecasts declaring this recession the most worrisome since the Great Depression. But life doesn't seem so bad to Lasher. In fact, his horizons have never looked brighter.

Last year, the 33-year-old Columbia Business School grad landed a great job at media company NBC Universal. Now his spending money stretches further than before, thanks to retail store sales. Last month, he closed on his first home: a one-bedroom waterfront condo in a complex with a gym, pool and doorman.

"I am feeling good," Lasher says. "The housing prices were out of control before. . . . Now I was not only able to get a good price, but I was also able to get a mortgage interest rate well below what I thought would have been possible."

Lasher's neighbor James Tortorella agrees that the recession has afforded him some opportunities. He bought his condo in November. "I found a great deal," says Tortorella.

Scoring a bargain condo

So the economic crisis isn't hurting all Americans.

True, the combination of plummeting home prices, steep stock declines and rising unemployment has proved disastrous for many, particularly those new to the job market or nearing retirement. Nationwide, unemployment reached 6.7% in November, according to a Dec. 5 report from the U.S. Bureau of Labor Statistics. The rate jumps to more than 11% when the bureau adds workers who have ceased looking for employment and former full-time employees forced to reduce their hours.

No jobs for grads?

But the same weakness in the economy has helped others, providing many young and midcareer professionals with new purchasing power and giving some a boost up the corporate ladder.
"Middle-career people have the opportunity to do things they were never given exposure to before," says Kathleen Downs, a recruiting manager at Robert Half International, one of the world's largest business staffing and consulting firms. As companies trim their staffs, she explains, midcareer people get an earlier shot at jobs once held by more-expensive, more-experienced workers.

"It's a good time to be positioning themselves," she says of the younger workers.
For people with relatively secure jobs and cash in the bank, it's also a good time to shop. The Consumer Price Index, a measure of the average price of common household goods purchased by urban consumers, fell 4.4% in the past three months, according to the Bureau of Labor Statistics. In that period, transportation costs fell more than 26% because of steep fuel price declines. Apparel dropped prices 2.4%. Year over year, the S&P/Case-Schiller home price index is down 16.6%, according to data released Nov. 25.

Lasher -- and doubtless many like him -- see the price declines as a welcome dose of reality, placing homeownership, vehicle purchases and even blue-chip company stock within reach of a new generation.

"I personally was waiting for a market correction," he says.

Price drop puts homes within reach

Welcome, indeed. A year ago, Lasher was ready to give up on the idea of owning a home near his New York City job. The going rate for one-bedroom condominiums near the city was simply too high.

"I thought I was going to have to move farther away from New York City," Lasher says.
But as the housing market got worse, things got better for Lasher. In recent months, condominiums on the New Jersey side of the river, once prohibitively expensive, began to look affordable. Lasher watched as prices fell about 25% from their peak.

He had been renting an apartment near the New Jersey commuter ferry on the Hudson River, but in November, he pounced on a one-bedroom condo at The Hudson Club, a waterfront complex overlooking Manhattan and just a short walk to the ferry. He locked in a fixed-rate mortgage at 5.875% interest. Lasher isn't discussing precisely what he paid, but here's an idea: a two-bedroom condo in the same complex is now listed for sale at $569,000.

"I don't expect 20, 30 or 40% increases," Lasher says of the condo's value. But he is confident that the purchase price makes his unit a good investment for the future.

Lasher knows he and his peers are not immune to the effects of recession. Some business school buddies who went into the banking business have been laid off.

The national statistics confirm that midcareer professionals have not escaped the downturn unscathed. Unemployment for people ages 25 to 34 rose to a 10-year high of 6.9% in November. That's up from 4.7% a year earlier. Employees ages 35 to 44 also saw record, albeit lower, unemployment rates: 5.4% in November, compared with a 3.5.% rate 12 months earlier. Those figures don't include the more than 33,000 additional job cuts announced this December.

As companies lay off more-senior employees, many midcareer workers are forced to assume additional management responsibilities without receiving pay increases.

"What we are not seeing is the pay increases that would often come in a very strong economy," says Robert Half's Downs.

It may be quite a while before those pay increases return. Consumer spending rose just 2.6% in 2007 from the previous year, according to Bureau of Labor Statistics figures released Nov. 25. Though spending kept pace with inflation, growth was significantly weaker than the 4.3% seen a year earlier. And consumer confidence is still near record lows, though it has risen slightly from its worst levels, according to The Conference Board. A majority of consumers still rate business conditions as "bad" and jobs as "hard to get."

Hard to gain entry at this level

That's how Andy Fisher sees the situation. Fisher is a New York University senior majoring in journalism and history. He thinks his future employment prospects are far less certain thanks to the downturn. Entry-level journalism and publishing jobs seem scarce, he says.

"I am currently in an internship, and, if anything, they are firing, not hiring," Fisher says. "The chances of getting a job at the publishing houses I had hoped to work for seem pretty slim."
In terms of unemployment rates, the recession is hitting recent and soon-to-be college grads hardest. Nearly 11% of 20- to 24-year-olds were unemployed in November, according to the statistics bureau. That's up from 8% a year ago. The increase is due to hiring freezes at major companies and slowdowns at large employers such as Google. It doesn't help to have a glut of older, more-experienced workers in the marketplace willing to downsize careers in return for a steady income.

"It is pretty safe to say that all levels of hiring have slowed," says Michael Erwin, a senior career adviser for online job site CareerBuilder.com.

The recent grads who do land jobs find the process is taking longer. On average, recent college grads are searching an additional six weeks before securing a job, compared with last year, according to a recent CareerBuilder study. Erwin recommends that students set to graduate in the spring begin looking for jobs now. He suggests graduates be prepared to accept positions in fields other than their preferred field, for less pay than they may have targeted previously.
Fisher is weighing whether he should switch to a different career.

"It's pretty troubling," he says. "I basically just have to hope that somebody will pay me for something and keep myself marketable to as many different fields as possible."

'Experienced' translates as 'expensive'

One bright side for younger workers who obtain jobs is they are less likely targets for layoffs. The same can't be said of older workers. In this recession, businesses facing cuts are more likely to buy out or fire expensive, experienced workers whose total compensation, including salaries and health care costs, is more material for the bottom line.

"One way that people try to trim down their work force is by buyouts -- it is usually a first resort for companies trying to shed workers," says Andrew Eschtruth, the communications director at Boston College's Center for Retirement Research.

Buyout offers can present tough decisions for older workers whose retirement savings have been depleted. Many older workers now think they have no choice but to remain on the job and try to rebuild their resources, says Steve Sass, the associate director at the Center for Retirement Research and a co-author of "Working Longer: A Solution to the Retirement Income Challenge."
Sass suggests that even conservative investors -- those who had only 30% of their nest egg in the stock market -- are now contemplating losses of 10% to 15%.

"If you had to save to cover that loss, it is enormous, and it is pretty onerous," Sass says. "If you had to work to overcome that, you're talking another year and a half to two years."

The unemployment rate for workers ages 55 to 64 rose to 4.6% in November. That may sound OK compared with the rates affecting younger workers, but it's a 70% increase for that group from a year ago.

"Previous recessions tended to hit younger workers hard and not so much for older workers," says Richard Johnson, a principal research associate for retirement issues at the Urban Institute, a nonprofit think tank in Washington, D.C. "But what we're seeing this fall is a rather steep increase in the unemployment rate for those 55 and older and those 65 and older."
Employment professionals are all about opportunity, so they try to put a positive spin on all this. They suggest that, for now, employers are in the driver's seat, able to lay off workers and keep salaries down. But their leverage will vanish when the economy turns around, and the leverage will pass to employees who have added responsibility during the downtown with no significant increase in salary. When that happens, it's time to ask for a fat raise, they say.

"There is some light at the end of the tunnel," CareerBuilder's Erwin says.

Produced by Darragh Worland
Published Dec. 5, 2008

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