1 Organizational Behavior Exam 1 Exam 1 Spring 2014 MAN3240 What are the basic ideas presented in the “Ripple Effect” video? What industries were mentioned as 1.affected, both directly and indirectly. • Industries effected: Restaurants, Dog Handler, Butcher, • Domino effect when one person loses their job • 800 people losing their jobs every hour in the US • Summary: When one person or set of persons loses his or her job, they have less money to spend in the economy which will in turn result in other workers in other industries losing their jobs as well. Understand the recession’s causes “in a nut shell”. You don’t need to know everything in detail, but 2.you need to be able to discuss it. • Irrational exuberance in the housing market led many people to buy houses they couldn't afford. • In 2006, the bubble burst as housing prices started to decline. This caught many homeowners off guard, who had taken loans with little money down. • As they realized they would lose money by selling the house for less than their mortgage, they foreclosed. • Escalating foreclosure rates panicked banks and hedge funds (secondary markets) - now realized they were facing huge losses. • By August 2007, banks became afraid to lend to each other because they didn't want these toxic loans as collateral. • This led to the $700,000,000,000 bailout and bankruptcies or government nationalization of Bear Stearns, AIG. Fannie Mae, Freddie Mac, IndyMac Bank, and Washington Mutual. • By December 2008, employment was declining (badly). • Once the layoffs started, more people couldn’t pay for their mortgage causing more defaults and foreclosures. And the consumer stopped buying. Construction halted on the building of new homes. Describe the data related to “Where are Home Loans Under Water – Late 2013.” Not every state, but 3.be able to describe the trends as related to each region. To summarize (Areas with high percentages of underwater loans) • The southeast (namely FL) • West Coast • Parts of the Northeast (Washington DC) • Parts of Central North (Ohio & Michigan) It is important to note that Texas and other central US states did not have a high percentage of underwater loans.2 Be able to describe trends related to college costs as related to median family income and student 4.loan burdens. To Summarize: • As the costs of colleges have risen since 1982, Median family income has remained steady. • Private nonprofit four-year college costs are increasing most drastically of all college costs. • Median family income has actually started to decline since 2012 Know the specifics of the “Flat Paycheck Recovery”. 5.To summarize: • Although jobs are being created, they are low-wage sector jobs that are not of the same quality as the middle-income jobs that were lost during the recession. Higher paying jobs are important to increase consumer spending. From the slides Unemployment figures are creeping down, reaching their lowest rates since 2009. Third-quarter 2013 GDP figures were revised up to a whopping 4.1%, which means job growth will likely continue. But the jobs being created aren't like those we've lost. While two-thirds of the jobs lost during the recession were middle-income jobs, about half of those created since have been in low-wage sectors like tourism, hospitality and retail sales. What's more, a greater proportion of them are temp positions than in recoveries past. The result is that although wage growth has begun to pick up a little bit, it's far below what most economists would expect at this stage of a recovery. In an economy that's 70% based on consumer spending, that matters a great deal. If people don't get paid more, they won't spend more, and that will hold back private-sector growth. Government shutdowns, partisan politics and a global slowdown haven't helped much either. A number of reasons have been given for companies failing to hire more workers even though it 6.may seem that they are in a position to do so. What were the factors discussed? Know the specifics as outlined. 1. Seem to be doing okay with what we have • No need to add additional personnel 2. Trimmed a lot of fat in the past few years and got better at things • Now that we don’t have workers, we don’t need them 3. Earnings may sound good, but everything is relative • Do we really want to expand 4. Uncertainty with a double dip recession • Possibility of re-entering a recession 5. Uncertainty regarding the government • What will congress do? 6. Uncertainty about consumer spending3 • Our country relies on consumer spending. How will consumers behave? 7. Can I get it cheaper elsewhere? • Should I outsource? 8. Don’t want to go through that stuff again! • Don’t way to hire and then need to re-fire again 9. Fiscal “Who Knows…”? • Uncertainty stunts growth Understand the factors in the housing market that have adversely affected the economic recovery. 7.Summary of the Article • New construction and home sales are still below prerecession levels • Mortgages are still hard to get • Low mortgage rates have begun moving higher • Home prices are still low which results in the “wealth effect” from lost home equity From the Text “While the housing market has perked up in the past two years, for example, new construction and existing home sales are still below prerecession levels. Credit has begun easing, but mortgages are still hard to get. And ultra-low mortgage rates have begun moving higher this year.” “Home prices, meanwhile, are still well below 2006 peak levels in many parts of the country, leaving more than 10 million owners who bought at the peak owing more than their home is worth.” “That lost home equity helps explain why the "wealth effect" of rising housing and stock markets, which typically spurs further economic growth, has been so muted in the recovery.” “This recovery has further concentrated that dual wealth boost among the richest Americans. Because those at the top of the wealth ladder typically spend a smaller share of their income than those in middle- and lower- income households, the concentration has further dampened overall consumer spending.” Have an understanding of the “3 symptoms of our sick job market” 8.1. Labor force
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