Only 63% of Americans Are Equipped to Handle a Layoff, Data Shows

That's not the best of news.

Will a recession batter the U.S. economy in 2023? Many experts think that's likely.

The Federal Reserve has been aggressively raising interest rates in an effort to slow the pace of inflation and give cash-strapped consumers some relief. By making it more expensive to borrow, the Fed is effectively trying to discourage consumers from spending. If spending declines, it could narrow the gap between supply and demand that caused inflation to soar in the first place.

But the Fed needs to strike a fine balance. If it makes borrowing too expensive, consumer spending could decline in a significant manner. And that could be enough to fuel a recession in the new year.

Meanwhile, recessions and unemployment tend to go hand-in-hand. Right now, the U.S. labor market is strong. But things could change in 2023, so workers should gear up for the possibility of layoffs.

Unfortunately, though, a lot of workers feel they're ill-equipped to handle a layoff. In a recent survey by Clarify Capital, only 63% of respondents said they'd be able to manage if they were to lose their jobs. By contrast, 21% say they wouldn't be able to handle a layoff financially, while 9% say they wouldn't be able to deal with it financially or emotionally.

Now without a crystal ball, we can't say with certainty that unemployment levels will rise in 2023. But if you're worried about your inability to cope with that scenario, there's one important move you need to make.

It's time to shore up your savings

If you're a salaried employee who's laid off through no fault of your own, you're generally entitled to unemployment benefits. But those benefits usually won't come close to replacing your paycheck in full.

That's why it's so important to make sure you have an emergency fund -- money you can use to pay bills until you find a new job. At a minimum, you should aim to have enough cash in your savings account to cover three full months of essential bills -- things like rent, food, and transportation. But for better protection, you may want to aim higher and sock away enough cash to cover more like six months' worth of bills.

Furthermore, if you're self-employed, you're generally not eligible for unemployment benefits (an exception was made back in 2020 when the pandemic fueled an unprecedented joblessness crisis). And so it's extremely important to boost your savings if you're worried about your workload drying up during a recession.

It pays to prepare emotionally, too

Being laid off can impact you financially as well as emotionally. A solid emergency fund can help with the former, but the latter is a different story.

There's really no hard and fast advice in that regard. But the best you can do for now is practice self-care and try not to let fears of joblessness consume your thoughts.

Also, some people find that imagining the worst-case scenario helps them get through a crisis. So odd as this may sound, it might actually help you to picture yourself out of work so you can see what that looks like.

If you don't want to go there, though, don't. There's no guarantee that you'll lose your job even if a recession does strike, so you may be better off focusing on doing your best work and filling your mind with happier thoughts than those surrounding layoffs.