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New economic data looks good, but Americans are still skeptical. Here’s how to prepare for your finances no matter what happens.
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The most recent jobs data was a good indicator that the U.S. economy may be able to pull off a so-called soft landing. Generally speaking, a soft landing would mean inflation is cooling down, job growth is steady (but not too high), and the unemployment rate is still low.
And there are some good reasons to think that the U.S. economy may end up with a soft landing and avoid a recession.
The latest jobs and inflation data look good
The Labor Department said recently that the economy added a seasonally adjusted 199,000 jobs in November, which is similar to pre-pandemic levels of growth and falls within the moderate gains range economists are looking for.
Additionally, the federal agency said the unemployment rate fell slightly to 3.7%, which marked 22 consecutive months of the unemployment rate below 4%. So that’s two boxes checked for a soft landing.
The third box, cooling inflation, may have also been checked off. Inflation rose by just 3.1% in November. That’s much slower inflation growth than in the recent past and getting closer to the Federal Reserve’s 2% target. Following the latest inflation data, Treasury Secretary Janet Yellen said she saw no reason why inflation wouldn’t continue to cool and said she believes the U.S. is on the “path” to a soft landing.
But not everyone is convinced that the U.S. will avoid a recession in 2024. And if one is around the corner, there are a few things you can do to prepare your personal finances.
How to get financially prepared for harder times
Despite the positive economic data, most Americans aren’t exactly optimistic right now. A recent CBS News poll found that 76% of Americans say their income isn’t keeping pace with inflation, and 62% say the state of the economy is “bad.”
If you’re concerned about where the economy is now or where it may be headed, here are three steps to take to get your personal finances in order:
Save what you can: This can be difficult if you’re already strapped for cash, but look for ways to reduce spending. You might be able to cancel one video streaming service or cut out one or two nights of eating out per month. Everyone’s monthly budget is different, but the main idea is to find one or two expenses you can cut to build up some emergency savings.Pay off high-interest debt: Ideally, you want all your debts paid off, but start with high-interest debt like credit cards. Consider using the debt snowball method to chip away at your credit card debt. The more aggressive you can be toward paying off your debt, the better off your finances will be if an economic slowdown happens.Find ways to boost your income: There are many ways to make extra money, including using your existing skills for gig work. I made additional income this year by picking up extra freelancing work, and many gig work platforms make it easy to get started.
Following the steps above will put you in the best financial position possible if a recession occurs. And if the economy ends up pulling off a soft landing and inflation continues to subside, you’ll still be glad you put in the effort toward reducing your debt and adding some extra cash to your emergency fund.
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