Our economy is in a will-they-won’t-they relationship with the next big recession. The stock market is officially in bear market territory (meaning stocks averaged a 20% decline from their high). The Fed hiked the benchmark interest rate by three-quarters of a percent, which is the highest increase since 1994. Inflation is being felt everywhere—even when I get my latte. And there seems to be a wave of mass layoffs.
So “guess who’s back, back again…” with some unsolicited advice for those who weren’t working during the last big downturn. Each recession is unique but tends to strike some fear in our hearts, particularly about job loss. In the Great Recession of 2008-2009, long-term unemployment (defined as 26 weeks or longer) soared from about 20% to 45%, according to the National Bureau of Economic Research. This generally makes it harder for people to pay bills, which leads to consequences such as repossessions of cars, foreclosures on homes or evictions.
Before you panic, let’s talk about what you can do to prepare for a potential recession.
Although we did, technically, experience a recession in 2020, we were fairly distracted by the global pandemic. By the time we emerged from isolation, the stock market stunned us with its recovery, we were ready for revenge spending and even the job market had employees in a position of power.
The economic climate looks very different now.
One thing Gen Z can expect is a lot more uncertainty. This is partly due to the fact that a recession won’t officially be announced until we’ve already been living through one for several months. Historically, a recession was marked by two quarters of economic decline and usually determined by a decline in gross domestic product and a rise in unemployment. However, it’s not a firm requirement.
Other indicators seep into the public consciousness before a recession becomes official. Inflation is one. People beginning to default on loans is another. A noticeable drop in consumer spending is a biggie. Then, of course, there’s layoffs.
Job loss (or even securing a job in the first place) is one of the biggest concerns in a recession. It’s a vulnerable feeling at any age, but it can be particularly brutal for those who are in the early stages of establishing themselves professionally and financially.
When the Great Recession hit, the eldest Millennials were 27, and many were only getting ready to enter the workforce. Some 8.7 million non-farm jobs were lost between early 2008 and 2010, according to the Bureau of Labor Statistics. And the job market didn’t recover until May 2014, even though NBER declared the recession over in the US in June 2009.
Millennials still bear the emotional and financial scars from the struggle to be gainfully employed. Despite being the most educated generation in history, our long-term wealth potential was likely seriously damaged as the recession delayed many careers from getting off the ground. The whole side hustle vibe wasn’t so much a desire as a need to cobble together a living wage.