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Economy calls for caution: Stretching it to the limits
By Michael Navarro
"A recession is defined as two successive quarters of negative growth ingross domestic product," said Dr. Dale
Cloninger, UH-Clear Lake economics professor.
GDP is the Bureau of Economic Research's measurement of the total production and consumption in the United States.
GDP is measured quarterly from January to March, April to June, July to September, and October to December.
An economic slowdown refers to a decline in the rate of increase of production. Therefore, aneconomy can continue
to grow and still be experiencing a slowdown.
"We have not yet had one quarter of negative growth, although it could happen as early as the current quarter," said
Cloninger. He added that we will not know until late October or early November whether the current quarter shows negative
growth, and then we will not know until late winter or early spring if the government has declared an official recession.
As a result, the recession may be over before it has been declared.
"In recessions, business owners find it more profitable to have workers produce fewer goods and services," said
College of the Mainland government professor David Smith. "As a result, the amount of goods and services produced falls,
some businesses lay off workers, and unemployment rises." Poverty and economic insecurity increase as a result of the
increase inunemployment.
During recessions, the federal government reduces interest rates to encourage consumers to spend money and investors
to invest inthe stock market in an effort to jump start the economy and create more jobs.
In a recession, "employment opportunities for those with few skills, little education and no experience will be
limited," Cloninger said. He added that some workers with skills, education and experience also may face periods of
unemployment.
Recessions and depressions are an "inherent feature" of capitalism, Smith said. They do not occur because of
particular politicians or policies; they are unavoidable.
Because capitalism is a system in which the wages of the working class is a small fraction of the wealth they produce,
there is over consumption, and over productioninevitably occurs, Smith said.
For this and several other reasons, every five to eight years business owners have their workers produce fewer goods.
Smith added that this decline inproduction leads to a recession.
The terrorist attacks on America also have had an impact on the condition of the economy.
"Because the Sept. 11 tragedy came relatively close to the end of the quarter, its full impact may not be seen until the
fourth quarter," Cloninger said. A large flow of unemployment claims across the nation followed the tragedy. Many of
these claims came from New York, which accounts for 6 percent of the GDP.
The airline and tourism industries have been the most obvious industries hurt by the attacks. American and United
airlines have announced thousands of layoffs, and tourism-heavy states, such as Florida and Nevada, have lost more than
half their visitors.
According to Cloninger, the Texas and Clear Lake economy will probably be less affected by a recession than the national
economy because the space and petro-chemical industries are less affected thanother industries.
Cloninger added that enrollment at UH-Clear Lake and all universities will increase during a recession because the
cost of borrowing money for school loans will be lower.
Cloninger advises people who are afraid of losing their jobs to be careful of what they purchase and to hone their
skills to enhance their resumés.
For people who are not infear of losing their jobs, Cloninger said a recession is a good time to buy new cars or
houses because interest rates are lower.
Cloninger adds that people should not abandon their long-term goals in fear of a recession.
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