Misconceptions as to what affects the economy can leave people confused on how to deal with economics and the workforce.
Economics professor Joshua Lewer gave a lecture about the prospects and obstacles facing the U.S. economy in Baker Hall Tuesday.
According to Lewer, much of the pessimism directed at the economy is unfounded.
“Many of the economic indicators point towards a health economy,” Lewer said. “Our loss of jobs is the lowest it has ever been since the ‘70s, which is incredible. Incomes are going up for the first time since 2007, and unemployment duration is going down.”
Lewer said these positive indicators might be difficult to see because humans have a stronger psychological reaction to bad news rather than good.
“There’s this concept called “negative bias,” which states that bad things effect us more than good things,” Lewer said. “For example, say you’re a stockpicker and you’re up 100 percent in one of your stocks but down 15 percent in another. You’ll be affected more by that 10 percent decline than that 100 percent gain.”
This negativity not only affects workplace productivity, but also the economy as a whole.
“If everybody believes the economy will do well, then it’ll do well, but if everyone believes it will do poorly, then it’ll do poorly,” Lewer said. “Economists call this ‘animal spirits,’ and it essentially means that economic activity is not entirely rational and is often spontaneously generated by optimism and positive thinking.”
Lewer said although he is optimistic about the immediate future, it is important to remember the economy is always unpredictable.
“Volatility is normal,” Lewer said. “Every year is a rollercoaster, and even though our economy is constantly growing in the long term, there are a lot of peaks and troughs within that general trend.”
But Lewer said he is concerned people may not be prepared for these troughs or recessions.
“You have got to save up in case you become unemployed or if you need to move to Chicago or Austin or wherever for a job,” Lewer said. “Think of your saving account as shock absorbers for the next time the economy hits a big pothole.”
Building up skillsets through education is also vital, according to Lewer.
“It’s not enough to have an associate degree or high school degree,” Lewer said. “With regards to the median income, the only group that’s benefitted since 1999 is college graduates. So is college worth it? Heck yeah, because since 2010 all the job growth is occurring in areas that require skillsets.”
Lewer’s audience consisted mainly of local business professionals. Bob Miller, president of Investment Strategists at Better Banks, said the lecture left him hopeful, although he still has concerns about inequality.
“I think there’s going to continue to be a huge divergence between the haves and haves not,” Miller said. “You truly have to be skilled to earn a decent living, and a lot of people don’t have the ability or gumption to sacrifice and educate themselves.”
The event was sponsored by the Executive Development Center, which will host its next program called “Leveraging Influence” Oct. 26 in Baker Hall.