What Recession? Unemployment Just Hit a 54-Year Low

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Job growth exploded in January, and the unemployment rate dropped even more. 

For months on end, economists have been warning about a potential recession — either in 2023 or shortly after. And when we hear the word “recession,” we can’t help but associate it with the word “unemployment.”

The good news, though, is that today’s labor market is absolutely thriving. And so if you’ve been losing sleep about the idea of a recession, January’s jobs numbers might help put some of your concerns to rest.

A strong month for job growth

In January, the national unemployment rate fell to 3.4%. That’s the lowest reading on record since 1969. All told, the U.S. economy added 517,000 jobs last month despite the fact that many economists were expecting a slowdown.

If companies are hiring at a rapid clip, it means they not only have money to spend, but also, they may not be so concerned about an impending economic downturn. And if they’re not worried, why should you be?

It pays to prepare nonetheless

At this point, it’s somewhat easy to make the argument that we’re not going to reach recession territory in 2023. But you never know what the next 11 months might have in store. And so either way, it’s a good idea to get yourself recession-ready so you’re prepared for a downturn at all times — even during periods when the economy is booming.

How do you become recession-ready? The first step is making sure you have a solid amount of savings.

Ideally, you’ll want to aim for enough money in your savings account to cover at least three full months of essential bills. That way, if you lose your job, you’ll have cash reserves to tap while you look for work.

Another good way to gear up for a recession is to shed costly debt, like credit card debt. To be clear, you don’t have to rush to pay off your mortgage loan ahead of a recession. Chances are, that loan has a reasonable interest rate attached to it, and you’re probably scheduled to be paying it off for many more years.

But any sort of debt with a variable interest rate, like credit card debt, is debt you’ll want to tackle sooner. Plus, you could be paying five times the amount of interest on your credit card balance than on your mortgage, so shedding that debt could save you money, all the while giving you one less expense to deal with if economic conditions decline.

Finally, make sure you’re up to date on your job skills. If there’s a skill you’re missing to do well at work, learn it. That way, if economic conditions worsen and layoffs hit your company, you may be less likely to end up on the chopping block.

It’s clear that today’s labor market is nice and strong. But that doesn’t mean you shouldn’t try to prepare for a recession anyway. Doing so could give you peace of mind — even if the economy manages to stay strong for the foreseeable future.

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