What does a recession mean for me?
What does a recession mean for me?
In today's article, I'm going to cover what a recession means for you, me, and just the common person in terms of finances. This is going to be a very important and special article so before we even begin I just want to state that it's important that you read the whole article to get a sense of what you need to do. I believe everyone can benefit from reading this article as we are currently in a recession. I describe how and why we are in one of my previous articles you can read to learn more. But with that all being said we can get into the rest of the article.
The Labor market
Now a recession can mean a lot of things for the economy but if there is one factor that always gets hit by a recession the job market. As people save money and companies and corporations make less profit the job market will begin to tighten. This is due to employers not having the money and resources to hire or keep current workers. Now, this might not be felt immediately as it takes time for consumer spending to go down and not to mention the great resignation we saw happen throughout the pandemic. But as more people are forced to go back to work and are forced to work more hours and save more money we will see the job market tighten.
The Price of goods and services
As the job market tightens in order for companies to gain profit the price of goods is likely to go up. This isn't out of the selfishness of the companies but due to several factors. One of the biggest ones is the labor market as we discussed before. Many companies don't want to cut down too much on labor as that's what increases productivity so in order to stay operational and profitable most companies are going to increase the price of goods and services. Another reason for price increases might be the increased cost of materials needed to make the goods. Then one last big factor at play would be the increased cost of transportation due to the labor market and supply chain issues. All of these factors are likely to dramatically increase the cost of goods and services.
Investment markets
Now depending on the market, you are investing in your either for a good ride or a bad ride. If you are currently invested in any risk on assets so cryptocurrency (For the time being it is a risk on asset), Real estate (which to a degree is risk on depending on what type of real estate you are getting into right now), Then finally any stocks or mutual funds. Now a good investment during the recession would be risk-off assets. The most common of which are commodities but also include bonds and to a degree starting or investing in a business you know will benefit during the recession and after. Recessions are some of the best times to start buying risk on assets especially if we hit a bottom during the recession as this is the time when most people who invest make their money and start buying.
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