Recession Ahead: What it Means and What Will It Take?

Aug 07, 2019

Recession is just a word until it hits home. And when it does so, it is a full-on financial and psychological war with slapdash casualties. A broken leg bleeding pay-cut here, a bludgeoned benefit-cut on the side or a lay-off slay there. It’s bloody and it is disturbing. No less than an actual war. We won’t go into the psychological coping mechanisms of the predicament. For that, perhaps Victor Frankl’s Man’s Search for Meaning might assist. But, in this article, we outline the indicators and the extent of damage a recession might bring and what an ace soldier, aka you, can do to survive the hazard.

A Trip Down Memory Lane - Revisiting the 2008 Recession Haunting:

One word for the extent of damage the 2008 recession brought - Catastrophe!

Many of us still hear its echo in the jobs that we lost and the business we ended. 43,500 businesses filed for bankruptcy. The number of firms filing for public offering declined to 21 from an average of 163. Non-residential investment plunged by 20%. The trickle-down effect led to reduced production capacity for years that followed and businesses became reluctant to adopt innovations. A generation was stunted with malnourished kids, deteriorated and discontinued education. 13 million US households, with 12.7 million children, suffered food insecurity. A study by Greenberg and Keating 2009 says 20% of students between 18 to 29 years of age discontinued their education. This lag in education had a lasting effect not only for the individuals but their entire families. Stalled credit markets and lessened consumer spending nipped many budding businesses. Bigger companies reduced their spending on R&D and few new products were discovered and fewer existing ones were improved.

But, then unemployment has always been insidious. Kahn (2009) says “taken as a whole, the results suggest that the labor market consequences of graduating from college in a bad economy are large, negative, and persistent”. She has indicated a wage loss of 6%-7% for every 1% increase in unemployment. Impact on non-college graduates is greater with more unemployment at lower income levels. Farber (2005), in his survey of Displaced Workers found that “In the most recent period (2001-03), about 35% of job losers are not employed at the subsequent survey date; about 13% re-employed full-time job losers are holding part-time jobs; full-time job losers who find new full-time jobs earn about 13% less on average on their new jobs than on the lost job.”

Forecast 2020 - Impending Ordeal:

The last recession was around 10 years back. This has been the longest period without an economic downturn in the US history. Forecasters predict a recession on the horizon. Morgan Stanley’s Lisa Shalett, Chief Investment Officer - Wealth Management, says the recession signals are “flashing yellow” and 60% of economists are already calling Mayday. Why:

  • “Trade protectionism” is perpetually increasing.
  • In July, the recession probability index reached a peak of 32.9%. This number was the highest after 2009.
  • The yield curve is inverted. The three-month treasury bill has more yield than former 10-year Treasury notes.
  • Business and consumer confidence is dropping. William O'Neil & Co's opined that corporate managers are “nervous about making a corporate capital allocation mistake.” Morgan Stanley says this is already impacting economic growth.
  • Manufacturing is weak. Morgan Stanley’s Lisa Shalett says recent economic reports show “slowing that is far worse than the 2015-2016 mini-recession.”

Bracing for The Storm:

Jobs like educators, health professionals, and law enforcement have always been recession-proof. However, with the changing nature of businesses and jobs, coupled with the increasing use of disruptive technologies, this isn’t certain anymore. Preparation is the key:

If you are on the demand side of the curve:

Job applicants can root themselves better by:

Assess the organization’s standing:
The organization that you work in or the industry that you are in might not be recession prone - and that’s good news.

Analyze your role:
Assess the importance of your role for the organization. How important is your work for the organization? Are you working on a pilot project that may not be in the long term plans of the organization? Try to align your work role with the organization’s priority.

Establish value as an individual:
A positive attitude will help in building a lasting relationship with the employer.

Be aware of happenings around:
Keep an eye on the behavior of your colleagues. Are people leaving suddenly? Not everyone is outspoken about the layoffs. Ask them outright.

Build a footing:
Update your LinkedIn profile, work on your portfolio, polish your CV. Learn that new skill, get certified. Keep adding value.

Stay connected with recruiters:
Get to know the recruiters who called you. Call them back. You may not need a job right away but you can build a relationship you might need in the future.

Reconnect with old mates:
Reconnect with your college mates, former bosses and colleagues.

If you are on the supply side of the curve:

Formalize your game plan. If you are a recruiter, then:

  • Brace your processes for more applications.
  • Keep a backup of skilled and certified top profiles.
  • Be ready to hire contractors.
  • Diversify your current clientele (preferably in recession-proof industries like healthcare, education, etc.).
  • Improve on deliverables so you remain the top choice for your employers.
  • Consider advisory roles.
  • Parting words:

    Don’t wait for the recession to hit and to begin with your damage control barricade operations alongside the great wave of the “recently unemployed.” That big wave will sweep all that is sloppy. Getting yourself braced while you are still employed will give you emotional, mental and financial leverage to better deal with any unpleasant situation that may arise in the future. Plan your career. Now is the time to learn a new skill and get certified.

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