Are you ready?

24 May Are you ready?

Photo by Francesco De Tommaso on Unsplash

On Friday, we hit a bear market and then dipped out of it… barely. (No pun intended.) As an INFJ, I must admit: there are times when I really relish being right. This is not one of them. I was hoping my bearish predictions would be proven wrong but I don’t think so.

First let’s look at what this means in general and then we’ll explore what it means for the job market.

From CNBC:

“The S&P 500 Index fell into a so-called bear market on Friday. But just what does that mean? ‘Bear market’ is a term used by investors to describe a steep and sustained market downturn. Technically, it’s a drop of 20% or more from recent highs. Investors commonly apply the phrase to a broad stock index like the S&P 500 or Dow Jones Industrial Average, but it also works for individual stocks.” –https://www.cnbc.com/2022/05/20/what-it-means-when-a-bear-market-happens.html

Everyone reading this has probably heard the phrase “buy low, sell high” in reference to the stock market. Well, if you’re so inclined, this could be buying time because plenty of stocks are in the dumper.

Also from the same CNBC article:

“By comparison, a ‘bull market’ is a period when stocks are surging, which has largely been the case since the Great Recession. Bear markets are a regular feature of the stock market. Since World War II, there have been nine declines of 20% to 40% in the S&P 500, and three others over 40%, according to Guggenheim Investments. (The analysis doesn’t include 2022.) On average, stocks took 14 months and 58 months to recover, respectively, after those declines. The last bear market occurred in February and March 2020, when the S&P 500 slid 34%. However, stocks rebounded by mid-August. It’s impossible to say how long the current downturn will last…”

From an HR perspective, we’re already seeing a ripple effect in the job market. Several prominent companies have had layoffs and/or hiring freezes. My LinkedIn feed is now full of workers who have been part of those layoffs or who have had offers rescinded before even starting a job. As mentioned in the CNBC article, there’s no way to be sure exactly how long a downturn will last or how deep it will go. A 14 month recovery looks a helluva lot different than a 58 month one.

My standard boilerplate here: I am not a financial planner or advisor, an economist, an all-seeing oracle, etc. These are just my best guesses and nothing more.

*Slides on Carnac the Magnificent hat*

My predictions for the job market:

-If we go into a full-tilt recession, The Great Resignation will come to a halt almost immediately.
This is what it is. I’ve referenced George Carlin’s bit about “it’s one big club and you and I are not in it” before. And that’s what we will see play out. I have a theory here and I’ll catch some hell for saying this, but here we go: I think Corporate America sort of sat back uncomfortably and thought, “OK. We’ll tolerate this whole ‘power to the people, workers in charge’ movement. But as soon as it ends, woo-boy. It’s our time again.” And if you don’t think they won’t take advantage of that if unemployment gets high, well, I don’t know what to tell you. 🤷🏻‍♀️

-Unemployment ramps up fast and is slow to resolve.
It may sound like a weird, interconnected web and it in a way, it is. High unemployment + bear market + recession = a 💩storm for the average person. “While unemployment is one of the indicators used to assess whether a recession has begun, joblessness tends to peak later and to persist well into a recovery. That’s because the end of the recession marks the trough of the economic contraction and the start of a rebound rather than its completion… Since a recession denotes a decline in economic activity and labor is a key economic input alongside capital, it stands to reason that employment must decline as output drops. The direct causal relationship between employment and output growth has been consistent enough to enter economics canon as Okun’s Law, named after the economist who first documented it, Arthur Okun. A related rule of thumb suggests that the economy must grow two percentage points faster than its potential growth rate to reduce the unemployment rate by one percentage point in a year.” –https://www.investopedia.com/ask/answers/032515/why-does-unemployment-tend-rise-during-recession.asp

-If you thought you could job hop forever and get a huge salary bump each time, you had an unrealistic expectation.
If we see a scenario of more people who want/need jobs versus fewer open jobs available to them, the competition per position will become higher. This is just basic supply and demand. We’ve seen it in the housing market: buyers with FOMO willing to waive inspections, grossly overpay for poo-poo houses, etc. But what happens when there are more houses for sale than buyers who want them? The pendulum swings and you have a buyers’ market instead of the insane-o sellers’ market we’ve seen lately. In some parts of the country, the housing market slowdown is already happening. I believe the same contraction will occur in the job market and the fact that we’re seeing layoffs, hiring freezes, and rescinded offers is like a giant early warning sign. If you have a stable job and job hop just to job hop and you get a pink slip 30 days in, was it worth it? This is a good time to start considering the long game, not the short game IMO.

-If you can do better than The Great Recession, you owe it to yourself to try.
In one of Orlando Miner’s recent videos, he shows a graphic of the 2007 overpriced housing market in relation to the housing market in March of this year. Here it is:

From Orlando’s video at: https://www.youtube.com/watch?v=nOK2E70aXCM

Notice anything? Like how VIRTUALLY IDENTICAL these charts are. Good grief. When I looked at them, I sat back and thought, “Have we learned nothing?!”

If you went into The Great Recession and had to hang on by the skin of your teeth (like I did) but you can sit a little safer this time around, you owe it to yourself to try. Just to be clear: I have no way of knowing if we’re headed into the same kind of deep global economic crisis again. I hope and pray we are not. That said, it never hurts to not panic but to be prepared. Do you have a little nest egg in savings or an emergency fund? Do you have a weekly budget you generally stick to? Some of the people who overpaid for a house last summer in the throes of FOMO will be up sh*ts creek without a paddle if they face a layoff this year. If you can avoid being one of those people, is that a bad idea? I don’t think so!

Stay alert out there. Keep an eye on the markets. Find a good balance, i.e., don’t walk in a spirit of fear but also don’t throw caution to the wind.