4 in 5 Economists Expect a Recession in 2023 or 2024. Do These Things to Get Ready

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  • Many people are worried about a near-term economic downturn.
  • Unfortunately, most economists seem to agree that things will take a turn for the worse in the next 24 months.
  • Boosting your savings and adding to your job skills are good ways to prepare for a recession.

That's not exactly a comforting thought.

If you were to do an analysis of the U.S. economy, you'd probably think it's in a pretty good place. Unemployment levels are low and job growth was strong in November, and initial holiday spending reports indicate that consumers didn't cut back on purchases due to inflation or other financial concerns.

But in a recent Bloomberg News survey of economists between Dec. 2 and Dec. 7, 81% said they expect a recession to strike the U.S. economy over the next 24 months. And that's certainly discouraging, to say the least.

Why all the pessimism?

Although economic conditions may be stable right now, it's easy to see why the experts feel the situation is only temporary. The Federal Reserve has been raising interest rates in an effort to slow the pace of inflation. The logic is that if it becomes more expensive for consumers to borrow, whether in the form of a credit card balance, personal loan, or home equity line of credit, they'll begin to reduce their spending. And that could help bridge the gap between supply and demand that's been causing inflation to surge.

Now, if consumer spending shrinks modestly, it could do the trick of slowing inflation to a nice degree without harming the economy. But if consumer spending declines substantially, and within a short period of time, it could be enough to fuel a recession.

Clearly, it's the latter scenario economists are worried about, and apparently, it's also the scenario they feel is most likely to occur. Let's not forget that a healthy level of holiday spending among consumers could be a result of leftover stimulus funds people still have in the bank. Once that money runs out, spending could start to shrink in a very big way across the board, leading to a recession in the next two-year period.

How to prepare for an economic downturn

Recessions can play out very differently from one to the next. So it's hard to say whether a 2023/2024 recession is likely to be a quick and mild one or a long, painful one.

Either way, one of the best things you can do to prepare for an economic decline is to boost your savings balance. The more money you have in your emergency fund, the better prepared you'll be in case a recession drives unemployment levels upward and you're forced out of a job.

At a minimum, you should aim for enough cash reserves to cover a full three months of essential living expenses. For even better protection, try for six to 12 months' worth of bills in savings.

It's also a good idea to boost your job skills so you're more marketable in case you do get laid off. And also, the more skills you have, the more you might manage to avoid ending up on the chopping block if your company is forced to downsize its staff.

We can't say with certainty that a recession will hit within the next 24 months. But the fact that a majority of experts feel that way is a key indication that now's the time to start growing your savings and skills so you're able to get through a period of economic instability.

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