After Friday’s lackluster and disappointing jobs report, and the ensuing stock market plunge, you’ve likely seen the resurgence of discussions regarding a potential recession on the horizon for the United States.
The unexpectedly weak employment situation has activated the “Sahm Rule,” a historically reliable predictor of recessions.
The term “recession” is one of those ominous and foreboding words used by economists and Wall Street professionals that evoke 1970s-style fears of long lines at the gas station, along with a declining economy, inflation, job losses and a general business malaise.
They are part of the economic cycle that keeps repeating from upward growth and then coming back down again—like Nvidia’s recent stock price trajectory that zoomed up into the stratosphere and then fell back down to earth.
Although the jobs report and current market volatility are unsettling to investors, business leaders and workers, the U.S. economy has not quite reached crisis level.
“We are not in a recession now—contrary the historical signal from the Sahm rule—but the momentum is in that direction,” Claudia Sahm, the former U.S. Federal Reserve economist who coined the rule, told CNBC. “A recession is not inevitable and there is substantial scope to reduce interest rates.”
What Is A Recession?
Historically, a recession has been defined as a decline in gross domestic product for two or more consecutive quarters. This rule of thumb was proposed by economist Julius Shiskin in 1974, and has become a popular standard over the years.
However, the National Bureau of Economic Research, a private, non-profit, non-partisan research organization, relies upon a more flexible definition that takes into account the severity or “depth” of the downturn in economic activity—not just its length. The NBER defines a recession as a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production and wholesale-retail sales.
Unfortunately, recessions are part of the capitalistic business cycle. History continues to repeat itself with the regular pattern of expansion and contraction that occurs in the U.S. economic cycle.
What Workers Should Anticipate For A Potential Recession
A recession can be detrimental to job seekers and those currently employed. Workers have to factor in a more challenging job market with fewer opportunities and heightened competition. In a recessionary environment, employers generally execute hiring freezes, layoffs and reductions in work hours to save money.
As the eroding confidence in the economic and financial system grows, demand for goods and services declines. There could come a time in the business cycle that rising inflation, the loss of faith, joblessness and plunging stock market and housing prices, followed by a fear of further losses, make the economy worsen.
What Should You Do In A Recession
During a recession, you need to take action. Despite challenges, you must seek to improve your financial stability by being thrifty. Keep an eye open for potential job openings, and focus on learning new skills to stay relevant and ahead of the crowd.
If you have a safe job, ignore all the talk about the Great Resignation and quiet quitting. Find ways to ensure that you’re seen as a valuable employee who is indispensable.
If your job is not secure, start reaching out to recruiters to help you find employment opportunities. Get in touch with career coaches and résumé writers to help you jumpstart your job search. Turn to people within your network and ask them for job leads and introductions to opportunities.
Research the financials of your organization to see if the company is in a tough spot. Request a meeting with your boss. Ask them to share what is going on, and whether you should worry about losing your job.
If the talk leaves you feeling that you’re not going to be a long-term fit within the company, act immediately by polishing your résumé and updating your LinkedIn profile.
While it may be uncomfortable asking for favors, put aside your pride. Push yourself to connect with your network by phone, video conferencing or email. Invite a well-connected person for a coffee, drinks or dinner, and be honest and direct about your intentions.
Build a list of friends, family, neighbors, professionals from groups and organizations you’re affiliated with, colleagues, former co-workers, college alumni and others who could potentially help you. Let them know the type of job you desire. Share a target list of companies you want to work with, along with the compensation and corporate title you desire.
Job seekers should remain adaptable in their search by exploring opportunities in various industries and being willing to consider positions they may have previously overlooked.
