The Recession for Our Generation

Over this past summer there has been quite a lot of talk about an impending recession. With television news being what it is these days, the conversations around economic downturn can often seem like fear-mongering rather than fact. However, there are some key signs within the economy that point quite evidently to a recession in the coming years. Prices for basic goods have been on the rise while wages have been entirely stagnate. Socio-political circumstances have created doubt and uncertainty for consumers and investors who are behaving more conservatively within the economy. The stock market downturn has sustained this slow but significant decline since 2017, especially in comparison to the historic highs of the market in the summer of 2016. The most important sign of an impending recession is the US bond yield curve which as of this past quarter has shown an inverted yield curve. Essentially, the US government sells bonds and then people can sell them back either at 2 years or at 10 years in the belief that in that time the value of the bond will go up since the economy will be doing better. So most of the time the value of a bond for 2 years from now is lower than the value of a bond for 10 years from now. When the economic forecast is not good, consumer confidence often drops and therefore the value of a bond for 10 years from now drops below the value of a bond for 2 years from now, that is called an inverted yield curve.

 

Consumers are telling the market that they believe the US economy will not be better 10 years from now. The reason why this is such an important sign is because every single time the yield curve inverts a recession shortly follows, it did in the 1980s and in 2008, and every other recession in the past half-century. In August of 2019 the yield curve inverted and everyone freaked out. It is important to note that just because something has happened the same way in the past there is no certainty that it will happen in the future, meaning this inversion could be just a blip but it also could be much more than that. You see recessions tend to be self fulfilling prophecies, whenever we start talking about a recession happening it pushes consumers to act as though a recession is happening, they spend less the invest less and this in turn causes a feedback-loop which pushes us deeper and deeper into a recession until the government is forced to intervene.

 

Jobs are going to be few and far between, the majority of which will not lead to long and secure careers for us. Most likely you will not be able to find a job in the exact field that you got your degree in and that is okay. Look for jobs that will last even through economic troubles so that you don’t find yourself hung out to dry when companies go under and the lay-offs begin.

 

Budgeting: Prices on most everything are going to skyrocket, plain and simple. Be careful about your purchases, now is not the time to be buying all of your furniture for your first apartment from Urban Outfitters. Buy used and save the difference, make sure you hunt around for the very best price and don’t just settle on what you like first, and wait, be patient until you are in a stronger economic position to make big ticket purchases. This also goes for the basics like groceries, don’t just shop at the closest or easiest store, as fun as they may be stores like Costco and Target are not always the best options for our budgets. Another good tip is to actually make a physical budget, not just an estimate in your head, figure out exactly what you can spend on then keep to it. (If you take out the exact amount for rent, groceries, entertainment, etc. in cash it can help you keep to a budget better)

 

Stocks: I for one am invested in the stock market. It is only just a little bit but I think it is important to be involved in the more nuanced parts of our economy, especially when you are financially able. I have a highly diverse portfolio which means that it is less likely that I will lose out in the long term when it comes to my investments. Those of us who are invested heavily in only a few stocks should take into consideration what a risky gamble that will be when the stock market does eventually bottom out. It will of course recover but specifically which companies will recover and which will simply cut their losses is far too difficult to tell at this point. But do not feed into the panic and sell everything immediately because that will just snowball and end up hurting you and the economy even more.

 

Credit: It is very important at our age to begin building up a credit score so that when we get a little older we will enjoy the privileges of the higher levels of economic freedom which good credit allows. You cannot rent a home or buy a car without good credit. The key to credit is that you have to spend money and pay it off regularly to improve your score. But having a credit card does not mean that you are free to spend whatever you want, it is important to spend money on a credit card but never more than you are comfortably capable of paying off.

 

It is also important to remember that the effects of a recession will be compounded by the ever increasing climate crisis and could create a feedback loop inhibiting the development of climate saving developments. The strain of the immediate effects of an economic recession will inhibit world governments from supporting the necessary social and economic changes that will be required to make headway in slowing down the climate crisis. The crisis itself will cause major economic losses in regards to food production, infrastructure, business and land investments, and many other areas.

 

All this to say, whatever does happen it is best to be prepared for the worst. Many of us college students were too young to really remember the 2008 recession. Well it was really bad and this one could be much worse. In the next few years we will be leaving school and probably heading into the workforce. We will probably have loads of student loan debt hanging over our heads which will only make our lives harder as we seek our security and stability in a failing global economy. It is important to educate ourselves about the situation and stay hopeful because no matter how bad they get, recessions always end.