Recession fears are mounting as economic soft data rolled over, and the stock market took notice of the possibility that growth might slow down. But don’t let jitters in the markets overshadow the fact that most indicators still show the economy is on firm ground and has plenty of strength for the next few quarters.
The jump in unemployment that sparked the latest worries isn’t as ominous as it might seem, especially since the increase is mainly due to temporary layoffs related to hurricane repairs and the hiring of government workers to staff disaster response teams. That reduces the risk that the rise in joblessness will trigger a negative-reinforcing cycle of income loss, spending cuts and more job losses, as it would have to do to cause a recession.
Nevertheless, the broader picture is clear: Economic growth is slowing down, and it may soon turn into a contraction or even a recession. That’s the view of most economists, and it’s backed up by recent data. The Atlanta Fed’s “Recession Tracker,” which isn’t technically a forecast but a running tally of economic data, shifted into contraction territory last week, and JPMorgan Chase puts the odds of a recession at 50-50 this year.
If a downturn does occur, it will require reassessing household budgets and priorities. One way to be ready: Invest in yourself, like going back to school or paying down debt. Those moves will help you ride out a tough period and emerge stronger on the other side.