Beware the Second Wave of the Recession

Lately there seems to be a sense that perhaps the worst of the recession is behind us. Consumer sentiment is up and the jobless rate is falling in many places. People are relaxing a bit and thinking that we might soon be back to business as usual. They’re heading out to the malls and taking vacations again. I don’t want to be a gloom and doomer, but I would advise you to beware of the second wave.

Many people who recently heaved a sigh of relief that they had made it through the recession unscathed are now losing their jobs. Many who thought that their job was recession-proof are finding out otherwise. The problem is that while many employers are beginning to recover, many are just now starting to feel (or admit) the effects of the last couple of years. Take governments, for example. Despite the fact that the overall economy might be improving, many governments are still losing money. Tax revenues have been down for a couple of years and are still below “normal.” Any cushion of money that they had has been burned through. As budgets are set for the coming year, many are cutting even more jobs and closing down more services. Governments are having to make tough choices because all of the easy cuts have already been made. People like policemen, firefighters, teachers, nurses in public clinics, and other “essential” personnel whose jobs seemed recession-proof are finding that they are, indeed, expendable. Or, if not expendable, subject to pay cuts and freezes.

Many private companies that have tried to hold out through the recession without layoffs or cutbacks are finding that they must now make some cuts. Profits have not recovered sufficiently to keep going at present levels and any extra cash is likely gone. Money might have been mishandled or misspent during the worst of the recession, leaving little for current expenses. This means that some layoffs might yet be coming. Even those that had layoffs earlier in the recession may find that things are not recovering quickly enough to prevent further cuts. Certainly not all companies are about to lay off employees, but there are many who are just now making adjustments to their overhead. If you’re already out of work, don’t bet on jobs suddenly becoming easier to find, either. Since many companies are still trying to stay afloat they don’t have much extra money to hire new employees.

Even if you’re lucky enough to keep your job, you may find that you lose money saving services in your area such as libraries, medical clinics, before and after school programs, or recreation opportunities. You may also lose the wide selection of retailers in your area that makes cost comparison and sale shopping easy. As the recession drags on, more retailers have to shut their doors. The many things you take for granted that help you save money on a daily basis might not be there for long.

This isn’t to say that you should live in total fear of a job loss or that all of your precious services are about to be cut. I’m only trying to point out that I don’t think we can relax back into our wild-spending ways just yet. While you might be able to begin to enjoy the high life again to an extent, stay vigilant and make sure you have an emergency fund in place and a plan for what you will do if you lose your job. Despite the fact that some things are improving in our economy, there are still some areas that are struggling and more cuts to be made. The people most likely to be affected by this second wave are those who thought they were the safest. So don’t get complacent and think that if nothing bad has happened to you yet that you’ve survived the great recession. There are still some adjustments to be made and you should stay prepared for the worst.

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9 Responses to Beware the Second Wave of the Recession

  1. Stephan says:

    great post, and i think this is something that people should remember even if the economy is heading towards a recovery without another dip. people should never think that their jobs are safe, that the economy is great, and that they can start taking on new debt. this is what led us into this mess in the first place, so i hope everyone has learned a lesson about PF.

  2. Elisabeth says:

    Alot of public workers who have put in 15, 30 or even 40 yrs are about to see their public pensions changed. Ages will rise 5-20 years depending on the state and their age requirements now. I think Social Security will be increasing their age requirements and raising the age of qualifying for Medicare. Almost all the programs are in trouble. Working in the public schools in Maryland I can tell you that teacher layoffs are already here and have been for 1-2 years. A friend in Florida talks about major layoffs that have leveled off enough for some teachers to be called back to work. She thinks its because they over reacted not because things are truly better.

  3. Isela says:

    I believe you are right!

    I have seen some of my friends suddenly relax, and then get totally freak out when a new sign of the recession “suddenly” appears.

    Great post!

  4. Rick says:

    Good Article.
    We have been putting money away in an emergency fund so we can survive the next downturn.

  5. rob62521 says:

    I can say this is certainly true in my city. I’m a teacher and big cuts came this year and we were “saved” this year because we had almost 100 employees retire — most were at the top of the salary schedule. However, with the state of Illinois not giving the school districts the money they promised, I’m sure more cuts will be coming next year and possibly deeper. Our city is losing different businesses because people aren’t spending because they have either been let go or are afraid they will be.

  6. FinanceFreak says:

    Unfortunately, the oil spill will quash further drilling thus driving up prices at the pump thus further exacerbating a possible double dip recession.

  7. Anthony says:

    Well put, as I also fear that the after shocks of the greatest recession will make their ways deep into 2011. Hang tight people!

  8. sewingirl says:

    My son was laid off for an entire year, has been back to work for about 6 weeks, and it looks like hes going to be laid off again! That doesn’t sound like a recovery to me!

  9. Phil Peterson says:

    What we’re experiencing now is the new “normal”. And to add to more sadness, most of the jobs that were added were in the government sector. Don’t even expect things to greatly improve for at least 5 years. Until then, we’ll see good signs followed by more set backs, then a few more good signs, then set backs…it will be a zig zag of this sort for a very long time. Our youth as a group are disillusioned and don’t have the drive to succeed that prior generations had. This is important because it is this up and coming generation whose work will energize to social security coffers for us older set…spooky, to be sure.

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