At the Barney Barnett School of Business & Free Enterprise at Florida Southern College, our 30 full time faculty and approximately 900 students enjoy analyzing the economy and formulating business and professional strategies to help people thrive in all economic conditions. This is a quick snapshot of the current economy and a few suggestions for thriving.
Should we be worried? Is this a recession or not?
Economic projections are typically based on a variety of factors such as Gross Domestic Product (GDP), employment, housing starts, retail sales, stock market performance and more. These projections are usually made by government agencies, international organizations, and private-sector firms. It is important to note that economic projections are subject to change and can be affected by a variety of unpredictable factors such as natural disasters, pandemics, political events, etc. Keep an eye on the official data and projections from reputable organizations such as the Bureau of Economic Analysis, the Bureau of Labor Statistics, the International Monetary Fund (IMF), the World Bank, and the Organization for Economic Cooperation and Development (OECD) for the most up-to-date information on the global and national economic outlook.
It’s important to note that some of these indicators, particularly GDP, may not be immediately visible and may take some time to be confirmed. Also, a recession is a broad term and can manifest differently across different sectors and regions. In Central Florida, we appear to most likely be in an economic slowdown or downturn, rather than a recession.
A glance at some key economic indicators
GDP: GDP is the total monetary or market value of all finished goods and services produced within a country’s borders in a specific time period. A negative GDP across two consecutive quarters is considered a threshold of determining recession. But our GDP increased at an annual rate of 3.2% in the third quarter and 2.9% in the 4th quarter of 2022 (GDPNow), in contrast to a decrease of 0.6% in the second quarter.
Employment: The labor market has been exceptionally tight for the last year, with unemployment rates at historical lows. Unemployment numbers at the end of 2022 were as follows: 2.6% in Florida, 3.2% in Polk County and 3.5% nationally. The tech sector is showing signs of cooling off. Microsoft and Google both laid off 10,000+ employees and Spotify recently laid off 6% of its workforce.
Industrial Production: A decrease in industrial production is another sign of a recession. It reflects the level of economic activity in the manufacturing and mining sectors. The Industrial Production Index was at its highest point since the beginning of the pandemic in July 2022, but has declined slightly each month since.
Retail Sales: Nationally, retail sales were down 1.1% in December compared to November.
Housing market: New housing starts are down 24% nationally and down 9.4% in Florida from the recent highs in the spring of 2022.
Stock Market: In 2022, the Dow Jones Industrial Average was down 8.8%, the S&P 500 was down 19.44%, and the NASDAQ-100 was down 32.4%.
Planning for an Economic Downturn
We can’t always control or accurately predict what happens in the overall economy, but we all can take practical steps to survive and even thrive during the financial headwinds.
Keep your skills up to date: It is important to keep your skills current in order to remain marketable to employers. This could include taking classes or certifications, volunteering, or participating in professional development.
Be prepared for a pay cut: Many companies may be forced to cut costs by reducing employee salaries or benefits. Be prepared for this possibility and have a plan for how to adjust your budget accordingly.
Reduce expenses: Look for ways to cut costs, such as negotiating with service providers for lower rates, cutting back on non-essential expenses and finding ways to save on everyday items.
Create additional income stream: Consider taking on a part-time job or starting a side hustle to boost your income. Look for ways to monetize a hobby or talent.
Network: Connect with other professionals in your industry or field to stay informed about job opportunities and also to bolster your support system during difficult times.
Build an emergency fund: Having a savings cushion can help you weather an economic downturn and avoid going into debt.
Be proactive: Don’t wait for a layoff or job loss to start looking at other job prospects and/or to make sure your resume is polished and up-to-date.
Consider starting your own business: A recession can be a good time to start a business, as there are often fewer competitors and more opportunities to stand out.
Be cautious with debt: Avoid taking on new debt or consolidating existing loans if you are in financial difficulty. This could lead to further financial strain.
Consider a car, but hold off on homes: Inventories are growing again at dealerships and some manufacturers are offering 0% financing on vehicles. As for homes, unless necessary, I would hold off at least another six months. It is expected that by summer we are likely to see interest rates slowly going back down.
Seek help if needed: Don’t hesitate to seek help if you are struggling financially. There are many resources available to help you get back on track, such as financial counseling and government assistance programs.
It’s important to remember that a recession is a cyclical phenomenon and economies tend to recover. While it can be difficult during a recession, it can also be an opportunity to reassess your career goals, develop new skills and explore new opportunities. If a recession does hit close to home, remember that there is always a light at the end of the tunnel, and this might even be an opportunity to take a different tunnel.