As graduation season comes to an end and more and more students cross that stage, the threat of a recession looms over new graduates as they venture out into the “real world.”
A recession is a significant, pervasive, and persistent decline in economic activity. According to economics experts, a U.S. recession is coming in the second half of 2023.
Contributing factors to the impending recession include inflation, high-interest rates, and tightening credit.
According to CNN, last year inflation hit a 40-year peak, gas prices were elevated, consumer sentiment plunged and markets fell by 20%. Although the US was able to avoid a recession, the Federal Reserve has raised rates higher and more quickly than they have in decades.
Additionally, the US is experiencing a banking crisis that could make borrowing harder, which can curb spending and weigh on economic activity. According to a recent Fed survey, lenders are stiffening their standards following the banking collapses.
“The bottom line for markets is that with inflation still at 5%, well above the [Fed’s] 2% inflation target, and the Fed not cutting rates anytime soon, credit conditions will continue to tighten and, as a result, a recession is coming that could be deeper or longer than the consensus currently expects,” said Torsten Slok, chief economist at Apollo Global Management.
However, 2023 won’t see a thunderous crash like the 2008 recession, according to Moody’s and Goldman Sachs. Instead, they anticipate a “slowcession,” a sluggish economy that doesn’t quite tip over into a downturn or recession.
Nevertheless, if there is a recession, unemployment will certainly rise.
Recently mass tech layoffs have made headlines. According to layoffs.fy, in 2023 there have been 201,776 laid-off employees in the tech sector so far, while 740 tech companies have announced layoffs this year. Big tech companies such as Meta, Microsoft, Apple, LinkedIn, and Amazon have all recently majorly downsized their workforces.
Other industries face layoff risks as well. A new “job loss risk index” from The Conference Board, a think tank and business membership organization, says that the three sectors facing the highest layoff risks in the coming months include: information services, transportation and warehousing, and construction
To determine their findings, the board considered the six following factors: its exposure to labor shortages; sensitivity to monetary policy; job function and education levels required; the state of its pandemic recovery; longer-term trends in labor demand; and the age composition and experience levels of its workforce.
As for the industries with the lowest risk of layoffs, this includes the federal government, private educational services, healthcare and social assistance, accommodation and food services, state and local government, retail trade, arts, entertainment, and recreation services.
According to Fortune.com, although the job market may seem strong overall, layoffs tend to begin early in the recession phase of the business cycle, and then accelerate significantly as companies realize they must cut expenses to deal with the new economic reality of tight money and slowing demand.
For new graduates just coming into the workforce, navigating a potential recession may sound scary, but there are steps they can take to prepare.
Keep Your Job: With a possible recession looming it’s important to stay employed if you can. If the downturn comes early, you could be stuck looking for work in a shrinking job market. Moreover, even after acquiring a new job before the downturn, as the “new guy” at work, you may be the most vulnerable to layoffs. If you do plan on leaving your job, make sure you have a plan — consider taking up a side hustle, start saving your money, and stay on top of your student loans.
Networking: If you’re searching for a job after graduation, then it’s time to seek like-minded professionals and network. Networking can help you advance your career, build confidence, and strengthen business connections.
Build Your Skills: Whether you have a job or are still looking, it’s a good idea to build your skills to make yourself a more marketable candidate. Review job descriptions for your industry of choice and brush up on the skills that you may be lacking.
Andy Kalmon, CEO of employee stock purchase plan platform Benny, stresses the importance of paying off student loan debt in preparation for a recession. “To recession-proof your finances, consider paying off expensive debt as quickly as possible,” he said. “Something that is also incredibly important to consider when heading into a recession is your credit score. An individual’s credit score is more important when entering a recession because a recession puts people in more situations where they must take on credit or debt. One of the key ways of maintaining a good credit score is consistently making payments. Do not stress yourself with paying off the full amount at once, but instead always have the money available to put towards monthly payments.”
Whatever happens with the economy, it’s important to remain proactive and not lose hope. Navigating through uncertain times is always daunting, but remembering these tips and truly believing that your next job is right around the corner can help you on your journey.
