The U.S. economy shrank as markets tumbled. Russia’s invasion of Ukraine has kept energy costs high and geopolitical nerves jittery. Inflation puts pressure on households and spurs repeated rate hikes.
It’s definitely starting to feel like a recession for this baby boomer generation.
Are we there yet? Economists who say yes and economists who say no abound. I tend to measure middle-class sentiment to make judgments.
For millennials with only vague memories of the Great Recession, or Gen Z workers too young to remember, it’s worth considering how the next recession will affect you. The last time it happened 15 years ago, the Great Depression was the worst recession since World War II. Recession brings pain and spreads widely.
Many highly educated millennials graduated with a college degree during the Great Recession, which officially began in December 2007 and ended in June 2009, although most of us felt its crippling effects around these dates. Good jobs are hard to come by, and many take refuge in graduate school, gaining new skills and learning while taking on more student debt.
More fortunate young professionals started their careers, found partners, and even saved enough money to buy their first home. A few are even confident enough to start a family.
Yet more millennials and Gen Zers find themselves in lower-paying jobs that they aren’t afraid to dump to new jobs where the pay, benefits, and culture better suit them. Marriage and children are topics they don’t want to hear from their parents. Rescue dogs make more sense now.
Student debt, high rents and staggering utility bills make saving for a down payment on your first home increasingly difficult, if not a pipe dream. The scarcity of affordable housing has caused entry-level home prices to rise beyond the reach of many, even as they struggle to pay more rent.
Last week, the Federal Reserve raised interest rates for the fifth time this year in a bid to continue cooling the economy and slowing inflation. People struggling to understand the positive and negative effects of Fed monetary policy will find this Forbes advisor article a useful tutorial.
President Joe Biden’s administration recently announced a program to forgive up to $20,000 in student debt, but among the young professionals I spoke with, they welcomed it. For many, this is a fraction of the debt they owe. More immediate cash flow challenges are their focus.
How can you best weather a recession? First, stay employed. Companies have already started laying off workers amid sluggish profit expectations, persistent supply chain problems and inflation eroding people’s purchasing power.
Second, spend less. Older Americans who have lived through one or more recessions are already tightening discretionary spending. Those of us who are retiring or about to retire are watching our lifetime savings shrink. We will conserve resources until the market recovers. That could be a long wait.
Spending less is not what everyone wants to hear. The hospitality industry, for example, is just beginning to recover from two years of pandemic chaos. Young people spend a disproportionate percentage of their income on dining out, coffee shops and entertainment. To save money, they will have to stay at home more.
Third, save more money. Many young professionals are saddled with so much student debt and pay such a high percentage of take-home pay on rent and utilities that they can’t save much.
It may seem counterintuitive, but now more than ever you need a savings plan. Despite cyclical recessions, the money stashed now will grow over time. The compounding value of these savings and homeownership have been the two pillars of wealth creation for my generation for decades.
Unfortunately, the next recession isn’t just about the state of the economy. Here in America, Republicans have failed to accept the outcome of the 2020 presidential election, leading to riots in the Capitol on January 6 and the rise of far-right nationalists threatening American democracy. Russian President Vladimir Putin has threatened to use nuclear weapons, raising anxiety levels everywhere. Only the most ardent deniers can ignore the dangers posed by a rapidly changing climate.
If we enter the next recession, my concern is that baby boomers will send our sons and daughters out of a country and a world that is far less safe. Hopefully we can weather this storm too.