Add this to the list of things COVID-19 has changed: recessions. The National Bureau of Economic Research officially says the US economy has been in one since February. Here’s how recessions usually affect your wallet...and how things are playing out now.
The job market won’t be very friendly. Earlier this year, unemployment was at 50-year lows, and companies had to work hard to impress new talent. The opposite is typically true in a weakened economy because people spend less money. That’s bad for businesses. Unemployment is high now because the pandemic put a LOT on hold – events, shopping, traveling, going to the gym – leading to a sudden spike in layoffs and furloughs. Even if you’re still working, a high unemployment rate (and more competitive job market) could make it harder to get a raise or new job.
Related: The 411 on Unemployment
Your investments might be feeling blue. Recessions and bear markets (when stock prices fall at least 20% from a recent high) often go together...at least for a while. Back in March, the S&P 500 index hit bear-market territory – but didn’t stay down long. As of early June, it had recovered all its pandemic losses and was positive for the year. That’s fast. Consider this your friendly reminder not to make money moves based on where you think stock prices are going next.
It may be a good time to buy a home. When times are tough for an extended time, fewer people may be able to afford to take out a new mortgage. That could lead to less competition for homebuyers and lower prices. These days, a lot of people are still in the market for new homes...thanks, at least in part, to low interest rates. And since pre-pandemic home inventory was already low (and some would-be sellers have decided to stay put until life gets back to “normal”) there aren’t as many deals out there – yet.
theSkimm: This recession looks different than others in history. But the best ways to protect your money are the same. Give your emergency savings some TLC by trimming your budget and negotiating where you can. If you can afford it, pay down your high-interest debt. That way, if money's tight, you won’t be forced to rack up more debt or sell your investments before you’re ready.
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COVID-19 has the economy feeling, well, like sh*t. Which is why you keep hearing the word recession.
We’re living in scary times. Here's how to weather the financial storm.
Besides just making things more expensive.