Although inflation has fallen a bit and mortgage rates are starting to recede, economic headwinds have been indicating that the U.S. financial system may be headed toward the dreaded “r” word: recession.
Now before you get alarmed, money expert Clark Howard wants you to know that this recession may not be what you envision, but nonetheless, he does project a “mild” one pretty soon.
“Odds are very, very strong that we’re going to have a recession late this year or the first half of 2024,” Clark says.
Not Your Father’s Recession
Clark says when many people think about recession, they envision the Great Recession that began around 2007 and took until around 2015 to fully recover from. “Massive unemployment, massive waves of foreclosures, repossessions — it was awful,” Clark says.
To a lesser degree, Clark says what the U.S. economy went through a few years ago — crippled supply lines and mass layoffs — was more of a technical recession brought about by the COVID-19 pandemic.
“Nobody wants a recession,” Clark says, “but of recessions, this one will be pretty benign and nothing terrible. The key reason is that we’re starting from an ultra, ultra-low employment rate right now and even if it bumps up some, it will still be a very favorable market for job holders and job seekers.”
What Happens in a Mild Recession
Clark says with a mild recession you can expect different sectors of the U.S. economy to show the effects of a downturn at one time or another. One economic strategist is even calling it a “rolling recession.”
Here’s how Clark characterizes a mild recession:
The Good
“The positive side of the ledger: You’re going to see mortgage rates decline,” Clark says. “‘So interest rates will be lower than they are now, and dare I say, will end up somewhere probably in the upper 4% range. And that will make house payments much more affordable and will be a positive for the housing market.”
The Bad
- Unemployment ticks up a little bit.
- A lot of businesses find it harder to sell discretionary goods, things we don’t have to have.
- Business owners’ profits decline, not necessarily precipitously, but noticeably.
The Ugly
As for the ugly, Clark doesn’t foresee much or any at all.
“This recession, barring [Russian President Vladimir] Putin flying nukes in the air, is going to be extremely mild by historical measures. And a very large number of recessions are very mild.”
How To Prepare for a Recession Right Now
Clark says despite a looming economic downturn, there are some steps you can take to mitigate the damage to your wallet.
How To Reduce Your Debt
If you can’t get out of debt altogether, perhaps you can make it a goal to reduce as much of the amount that you owe as you possibly can.
Perhaps you can get out of credit card debt by using:
Also, you can look for ways to reduce expenses by managing your subscriptions or saving on gas.
Read our guide on how to get out of debt.
Build Your Savings
Once you’ve cleared your debt, see if you can create a financial cushion by setting aside a small amount each paycheck for an emergency fund.
To do so, you’ll need to create a budget, if you don’t have one already.
Final Thoughts
Clark says a recession down the road is very possible and it likely be a mild one, according to the economic signs he’s seeing.
“Recession in capitalism is a normal part of a free market. And it usually makes an economy stronger in its next phase. Because what a recession does is it clears out excesses in an economy. What’s our excess? Our excess has been inflation.”
This is Clark’s recession prediction. What’s yours? Join the conversation in our Clark.com Community!
