How Do Recession Predictions Impact Pennsylvanians?
Over 10 years later, the 2008 Great Recession is still remembered as a major financial event across the world. But, with the economy in the midst of an upswing, it’s hard to believe that there might be another such event in the near future.
In response to market volatility in 2018, many economists are predicting that the next recession will take place in 2020. The economy has been on a growth trend for a decade now, causing many to feel it’s long overdue. Market downturns are an inevitable part of this cycle, and it is important to be prepared. Successfully navigating this potential economic turn starts with an understanding of how the Keystone state has been impacted in the past.
How Pennsylvania Has Fared
The Great Recession of 2008 was a financial crash that primarily affected North America and Europe, and the leading cause was the subprime mortgage loan crisis in the U.S. The 2008 recession caused a massive dip in the markets—which saw people who had their savings and retirement plans tied in stocks lose large portions of their funds—and ultimately led to mass job losses across the U.S.
In Pennsylvania alone, the annual unemployment rate went as high as 8.5% in 2010, its highest since 1984. Reflecting the recovery experienced across the country, the state has managed to halve its unemployment rate since that time and is now the sixth largest economy in the country.
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What Would Another Recession Mean?
Recession is a scary term. But what does it actually look like? Regardless of the cause—whether it’s a massive market correction or a housing crisis—the results are often the same. In the midst of a recession, you’ll often see widespread job losses that also result in reduced consumer spending, which is a significant part of the country’s economy. Other businesses also experience reduced revenue and profits, which in turn slows down how much they put into the economy. In short, it’s a cyclical issue that affects citizens from all walks of life.
For new graduates, a recession could mean difficulty finding a job with a strong career path, making it harder to pay off student debts in a timely manner. For families, if the primary provider loses their job, they might have to dip into savings earmarked for milestones like a house or their child’s university tuition. And for retirees that have the majority of their funds tied into the stock market, a recession and parallel market crash could prompt uncertainty as to their future.
What Can You Do to Protect Yourself?
Knowing what you do now about the risk of a recession, there are a number of ways you can prepare yourself and your finances.
- Don’t put all your eggs in one basket. If you have short-term financial goals like paying off student loans or buying a car, make sure you are not just relying on the stock market. A high-yield savings account can give you guaranteed returns without risking your funds.
- Build an emergency fund. By setting aside between three to six months of expenses, you can guarantee that you and your family have funds to turn to during a period of recession.
- Don’t panic. Remember that recessions are part of the economic cycle. A downturn will always be followed by an upswing. If you have money invested for the long term—for retirement, for instance—leave it alone until it recovers its value.
At Citadel, we’ve helped our clients weather economic downturns for decades. We offer a number of savings and investment services to help you prepare for both the short and long term. To learn more about how you can make investment decisions that can outlive a recession, read our Timeless Investment Tips or contact us today.