Will 2023 Be the Year of the 'Rolling Recession'?

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KEY POINTS

  • Last year, many financial experts warned of a 2023 recession.
  • While the economy is still strong on a whole, pockets of it are already weakening.
  • To protect yourself from a rolling recession, boost your savings, add to your job skills, and consider selling your home sooner rather than later, if that's on your radar for 2023.

Things may not implode completely, but that doesn't mean the situation is good.

In 2022, as inflation surged and the Federal Reserve attempted to address it via seven different interest rate hikes, many financial experts were quick to warn consumers to gear up for a recession in 2023. The logic was that the Fed's interest rate policies were driving up the cost of borrowing, and that was expected to lead to a major pullback in consumer spending.

But that hasn't happened thus far to such an extreme. Not only that, but the national unemployment rate is low, jobs are abundant, and recent GDP (gross domestic product) figures indicate that the economy is growing.

Still, there are already pockets of trouble within the broad economy. Home sales ticked upward in February, but that may be a byproduct of a temporary drop in mortgage rates. Prior to then, sales were on a steady decline.

Meanwhile, the banking sector is having a meltdown, prompting consumers to wonder whether their savings account balances are really safe. And the tech sector has been actively laying off staff left and right.

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It's these circumstances that are leading to what some economists call a rolling recession. And that's something that could be with us for all of 2023.

Some sectors are feeling the pain

When a typical recession hits, the broad economy tends to feel it. With a rolling recession, sectors tend to take a hit one by one, and independently of the broad economy.

But a rolling recession is hardly a picnic -- especially for those impacted by it. Layoffs, for example, aren't abundant these days, which is helping to keep the national jobless rate nice and low. But many tech sector employees may be losing sleep over the idea of getting the ax. And some may be forced to put off big financial decisions, like buying a home, until things settle down.

How to cope with a rolling recession

The advice for coping with a regular recession is similar to a rolling recession. First, know your weak points. If you work in an industry that's been hit hard this year, boost your savings. If you have enough money in the bank right now to cover three months of essential living expenses, aim for four or five months' worth of expenses.

Also, boost your job skills. Being great at what you do won't guarantee that you won't be laid off, but it might lessen your chances.

Meanwhile, if you've been on the fence about selling your home, consider acting sooner rather than later. The housing market has been cooling, and February's uptick in home sales is the first month in the past 12 where there's been an increase instead of a decline. It's pretty clear that higher mortgage rates are here to stay for a while, so it could pay to list your home before they rise even more and push additional buyers out of the market.

In some ways, a rolling recession can be trickier to navigate than a full-blown recession. But since we may be in for months of upheaval across different sectors, be mindful of what's going on and do your best to prepare and protect yourself. Doing so could make 2023 a much easier year to cope with.

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