Why Unemployment is going to go UP towards the second half of 2022 and into 2023!!!!

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By: Michael Anthony Incorvaia

Many investors and economists are seeing our current economic state as unique because it could be a recession where both GDP and unemployment are down at the same time, but that is far from right, unemployment just hasn’t hit big yet again.

During Covid, (unemployment quickly increased by 10 % in the United States. Due to the rise in unemployment, the job market recovered by 3.6% in June. However, the after-effects of the pandemic left both the United States and the global economy in shambles. This includes the word that people have heard a lot lately which is inflation. In June of 2022, the BLS (Bureau of Labor Statistics) report shows inflation up over 9%, the Fed had been trying to combat this by continuing to raise rates. Therefore, the Fed raised rates by another 75 points on Wednesday, July 27th making the dollar more expensive as they attempt to combat inflation.

It’s clear that the Fed is simply trying to prevent a recession while trying to combat inflation. However, the problem has been building over time with the rise of prices across many industries such as real estate, energy, and food. This results in an overall decrease in consumer confidence. This decrease in consumer confidence is coming from uncertainty for the future and is leaving many companies to see reduced consumer activity. This is becoming more prevalent with this quarter’s earnings season where large companies such as Walmart, Amazon, and Google, as well as many others, are seeing slower growth.

In the second quarter, the US economy shrank by .9%, showing how the slowdown is continuing for another quarter in a row. So…. With a shrinking economy combined with high inflation that isn’t going to go down, combined with higher rates, this results in money being more expensive to borrow. Looks like a disaster is unfolding before our eyes. As I’ve stated earlier, recessions usually consist of decreasing GDP combined with high unemployment. It is apparent that layoffs are increasing as many companies are completely stopping all hiring to reduce expenses in this economic downturn.

The fall has historically been a time for layoffs, but also if you consider the fact that some companies that did well during the booming market that wasn’t too long ago. For example, companies such as Shopify are already beginning layoffs by cutting 10% of their workers. This shows the start of some companies that didn’t have the best balance sheets feeling the early detriments of the substantial number of layoffs that are going to happen.

What now? While this article identifies some less than favorable topics there are things you can do in order to put yourself in a healthy financial position. My best recommendation would be to try to maintain a solid base of cash in this climate, air on the side of caution safer when making certain investments and look for solid deals in this market. A positive outcome in a market turn means that a lot of stocks are becoming cheaper. So, if you buy good companies at a favorable price, in the long run, you should be in a good situation.