Let’s start with the facts. The US is in the worst recession since World War II with the unemployment rate rising for the 10th month in a row and to the highest level in 26 years. Current unemployment rate is 9.6 percent, up from 9.5 percent in June. The good news is job losses slowed in July to a pace of 320,000 – the slowest since August 2008. The government reported last week that the economy shrank at a pace of just 1 percent from April-to-June, the strongest signal yet that the recession may be ending.
According to JEANNINE AVERSA, AP Economics Writer, “Many analysts predict the economy could start growing again in the current quarter. And, the Fed recently observed that the economy is finally showing signs of stabilizing in some regions of the country – especially in parts of the Northeast and Midwest – bolstering hopes of a broader-based recovery this year.
The deepest job cuts of the recession came in January, when 741,000 jobs disappeared, the most in any month since 1949. The economy lost an average of 691,000 jobs each month during the first quarter. That slowed to an average of 436,000 a month in the second quarter. Analysts predict that companies will continue to ax jobs through this year, but they hope that the pace of those reductions will ebb.
Even if that happens, the unemployment rate is likely to top 10 percent this year. Some Federal Reserve officials think it could rise as high as 10.6 percent in 2010. The post-World War II high was 10.8 percent at the end of 1982, when the country suffered through a severe recession.
When the economy is healthy, employers add a net total of around 125,000 jobs a month just to keep the unemployment rate stable. To get the jobless rate down to a more normal 5 percent range, it would take stronger job growth – of at least 200,000 jobs a month. Economists say it might take until 2013 to drive down the unemployment rate to 5 percent.”
“Although the economy seems to be at a turning point, we’re not at a turning point for the labor market. That is some way off,” said Brian Bethune, economist at IHS Global Insight.
The scarcity of job openings means nearly 15 million unemployed Americans are still looking for jobs, and their ranks are likely to keep growing into 2010. Layoffs, like bullets, are nondiscriminatory. Prepare yourself for the plausibility of losing your income source. Some of you have already been laid off and many of you are living each day fearing you are next. You may be the end-all employee and still be headed for the chopping block as companies try to survive the remainder of this year. It’s not personal, so get over feeling angry and take care of yourself and your family starting now!
Here are a few tips for you:
- Build a savings account that is equal to 8 months of your necessary expenses. Why 8 months you ask? This is the average amount of time it is taking in this economy to find a job! I cannot emphasis how important this is. Don’t say its too late or there is no way to cut back. There is and you have to find it!
- If you do not have 8 months of savings, you need to be making changes in your spending. Lower your cable service (a few months without HBO won’t kill you), hold your gym membership (jogging around your neighborhood is free), rideshare (saves money and relieves a little stress), trade in expensive car payments for something more affordable (not Cash for Clunkers, taking on more debt is just stupid), and make your coffee instead of buying a daily latte (that’s a $150 savings per month, sorry Starbucks).
- Look at your debt differently. I am and always have been against debt. Simply put, it is living outside your means. And normally I tell folks to pay it down as quickly and aggressively as possible. NOT NOW! Pay minimum amounts on student loans, mortgages, and even credit cards. All extra money should go into the 8 months savings including any severance pay if you do get laid off.
Tough times call for tough measures and there is no room for excuses! You can begin today building up that 8 months of savings ensuring your expenses are covered. The government may be trying to stimulate the economy by lowering interest rates and offering incentives for buying cars but you as an individual and for the sake of your family need to be smarter than the average bear. We are at a turning point, if not now then in the months to come. So hang on, be smart and I’ll see you on the other side!