This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.
You may not need to lose sleep over an impending downturn after all.
Image source: Getty Images
“Gear up for a recession before it’s too late.” Such were the warnings many financial experts were sounding constantly during the latter part of 2022.
Now to be fair, those sounding recession warnings weren’t doing so to cause needless panic. Rather, economists wanted — and still want — consumers to be prepared for a broad decline.
But today’s job market isn’t one that looks to be on the verge of collapse. And that’s something you might be able to take comfort in.
Job openings are still plentiful
In December, there were 11 million job openings, according to new data from the Bureau of Labor Statistics. The largest increases in job openings were in accommodation and food services, which added 409,000 open positions, retail trade, which added 134,000 positions, and construction, which added 82,000 positions.
Of course, a lack of job openings isn’t what will necessarily fuel a recession. Rather, it’s a decline in consumer confidence and spending.
The Federal Reserve has been aggressively raising interest rates since last year, and in doing so, it’s driven up the cost of borrowing. The concern is that consumers will balk at higher credit card interest rates and loan rates, and cut back on spending drastically to compensate. Once that happens, a recession could hit — and from there, job openings could decline as unemployment levels pick up.
But still, it’s hard to overlook the fact that right now, we’re dealing with a very healthy labor market. And so if you’ve been losing precious sleep at night over the idea of a recession, you may want to take a step back and remind yourself that we’re clearly not on the verge of an economic collapse.
It still pays to prepare for a downturn
A recession may not be imminent, but preparing for one is a good idea nonetheless. And one of the best ways to do so is to build yourself a solid emergency fund.
At a minimum, you should aim to have enough money in your savings account to cover three full months of essential living expenses — things like rent, food, healthcare costs, transportation, and utilities. This way, if you lose your job and it takes a while to find work again, you’ll have a means of covering your bills until you start collecting a paycheck.
It’s especially important to build yourself a solid emergency fund if you’re self-employed. Those who work for an employer are covered by unemployment insurance and are commonly entitled to jobless benefits that replace a portion of their paycheck when they’re out of work due to no fault of their own. But generally speaking, you can’t collect unemployment benefits if you’re self-employed, so if your workload dries up, you may need to rely on your savings for quite some time.
The fact that there were so many job openings in December is clearly a good thing. It doesn’t guarantee that a near-term recession won’t hit, but it’s certainly a great reason to worry a bit less about one.
Alert: highest cash back card we’ve seen now has 0% intro APR until 2024
If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.
In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.
