The U.S. economy is already hurting, but it’s about to get much more painful.
That’s what Jerome Powell, chair of the Federal Reserve, said last week after the Fed raised its key interest rate by 75 basis points. The country’s central bank plans to keep hiking the benchmark rate until it hits 4.4% by the end of the year — even if it causes a recession and a rise in unemployment.
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“There will very likely be some softening of labor market conditions,” Powell said last week. “We will keep at it until we are confident the job is done.”
The Fed anticipates the unemployment rate will rise to 4.4% next year, from 3.7% today — a statistic that implies an additional 1.2 million people losing their jobs, according to Omair Sharif, the founder of research firm Inflation Insights. In recent months, major companies have announced layoffs and cutbacks, including Robinhood, Peloton, and Shopify.
But those figures don’t tell the whole story: While it’s impossible to predict just how many people will lose their jobs, the most vulnerable workers will be hit the hardest, according to Andrew Stettner, an unemployment researcher at The Century Foundation. Lower-income, Black, and Latinx workers are usually the first to lose their jobs during a recession.
“I’m very concerned about racial impacts in this type of situation. Across educational levels, you’ve seen in the past Black workers be the first to fire and last to rehire,” Stettner told me. “Right now, things are fine, but it will slow down.”
That may have you wondering whether your job is at risk. The possibility of a layoff is scary. While the job market appears to be holding for now, it doesn’t hurt to be informed and prepared if the worst does happen. Here are a few things you can do preemptively:
1. Understand your state’s unemployment benefits
Go to your state’s unemployment office website and read up on the qualifications for unemployment. Each state has its own requirements, application, and benefit amounts. Start gathering some basic personal and work history information — like your Social Security number, driver’s license or state ID, and detailed employment history from the past 18 months — in case you need to apply for unemployment. It’ll help make your claims go more smoothly.
2. Revisit your budget and cut back on nonessential spending
Reassess your budget and consider making it as lean as possible by cutting back on nonessential spending and other potential expenses. If you don’t have a budget, start one by following these tips.
3. Build your emergency fund
You should always have an emergency fund, but that financial buffer will be especially important after a layoff. If you don’t have one, try to start saving enough to cover at least three months to six months of expenses – even if it’s just $10 a week. Little by little, your savings will build up over time. If you already have a well-stocked emergency fund, consider beefing it up even more – it may not go as far as it used to due to high inflation.
4. Keep your resume updated
When recession-proofing your career, it’s better to be proactive, not reactive. Begin preparing your resume, LinkedIn profile, and growing your professional network now. Work on developing your professional skills and experience because certain industries or companies can do well, even in a shaky job market.
5. Expand your income sources
Address budget constraints or boost your savings by finding creative ways to make extra money, if you can. Building a side hustle, freelancing, or working a part-time job could all add extra security to your budget. How you can get started.
More recession-proof money moves
- ‘Recession’ Sounds Scary. What You Actually Need to Worry About and How to Prepare
- 3 Money Questions to Ask Yourself in a Recession, According to Financial Expert Farnoosh Torabi
- I’m a Millennial Who Started My Career During the Last Big Recession. Here’s What I’m Doing to Be Prepared Now
- How a Recession Could Change the Housing Market, and What It Means for Homebuyers
- Are We In a Recession? Maybe. These Strategies Can Help No Matter What the Economists and Politicians Say]
The Bottom Line
You can’t control what’s happening in the economy or the job, but you can secure your finances now and prepare for the worst. Start by focusing on your budget, understanding your state’s unemployment benefits, and building your emergency fund.