Tuesday and Wednesday were really bad days on Wall Street. Yesterday was a good day. Today looks great. It has been like that since the beginning of 2016. The stock market has been gyrating wildly. Economists cite a number of reasons for the volatility – fear and uncertainty mostly. Most analysts will tell you the “fundamentals are strong.” But the slowing economy in China, a glut of oil on the market driving down prices at the pump, and a very strong dollar reducing demand for American products abroad are among the reasons for the stock market decline.
It is so much easier to plan when you know what will happen next. California Governor Jerry Brown pointed to an “uncertainty world” in presenting an austerity budget in his January 21st, State of the State address: “A slowdown in China or turmoil in Iraq or Syria or virtually anywhere can send the stock market reeling and put California jobs and state revenues in jeopardy.”
When China catches the flu it is silly to think that the US won’t eventually catch it also …
The American economy reacts to what is happening in the world. Sometimes things change the economy slowly, like with the global oil glut. The slowdown is gradual. Other times, catastrophic events crush the economy instantly - wars, major terrorist attacks... In the blink of an eye everything collapses.
When things are good and the hiring is brisk, it seems it will last forever. It never does. I would like to think that the party will go on forever and companies will hire continuously for the foreseeable future. When the music stops – just like in musical chairs, you had better be seated in a chair or have really solid cash reserves to cushion the fall.
It is hard to predict when, but what I know, after watching the labor market for 40 years, is that what goes up must come down. Slow downs are inescapable. The oil industry reported 200,000 layoffs by October of 2015 and by November the number had climbed to 250,000. The oil producing states – North Dakota, Utah, Oklahoma, Texas, Louisiana, and California are all shedding oil industry workers in all categories.
The price drop in oil forced Chevron to lay off 6000 to 7000 workers last fall in their San Ramon, California business operation alone. Look for that to ripple across all oil producing companies and across the companies tied to the industry.
What should you be doing to protect yourself for the inevitable slow down?
Pay attention! Read the news. Look at what is happening on the front page of the newspaper or on your newsfeed, and think about how it might affect the job market. Social, political, economic, and technological changes can wreak havoc or expand opportunities.
Assess your situation and make a plan. How secure are you in your job? Do you have a Plan B in case the unthinkable happens? You need a back up employment plan or way of generating money - short of robbing a bank - in case you lose your job.
If you are looking for work now, look harder and get in before the broader economy slows. If you have a job think twice about letting go until you have something solid to move to.
Spend less than you earn and put money away in a survival nest egg. Trillions were lost in the stock market over the past 3 weeks. Do a budget and put some money in secure savings to cover 6 months to 2 years of expenses before a crisis. The last recession demonstrated how important spending less than you earn is.
Follow Governor Brown’s lead - A ave for a rainy day and have a backup plan. Even if you think the rainy day will never come… It will.