Home values nationally are falling, and U.S. stock markets have suffered their worst start on record this year over fears of an economic recession.
“It is more likely that we are heading to recession,” said Scott Sprinkle, a CPA and financial planner with Sprinkle & Associates in Littleton.
On Wednesday, preliminary fourth-quarter gross domestic product numbers will come out, detailing whether the economy has slowed.
Federal Reserve officials also are meeting that day and are expected to announce additional interest-rate cuts to cushion the economy against a slump.
If both point to a slowdown, those who haven’t done so may want to review their financial situation and job security.
Job losses follow rather than lead recessions, notes Challenger, Gray & Christmas Inc., the global outplacement consultancy that tracks job cuts.
Of the seven recessions since 1960, jobs continued to increase at the start of five of them. The last two, in 1991 and 2001, saw job losses coincide with the recession’s start.
“While job-cut announcements have yet to surge, the mere threat of recession could provide companies with the motivation for cost-cutting measures,” according to John Challenger, the company’s chief executive.
Rule one for surviving a recession: Hang on to your job.
“The best way to protect job security, regardless of the economic conditions, is to build a castle and place a moat around it. This involves demonstrating to your employer that you are indispensable,” Challenger advises.
Be visible and take on longer-term core projects that will likely be carried through into a downturn. Telecommuters may want to spend more face-time in the office.
Workers should strive for a better relationship with higher-ups and mend fences if needed. An unexplained falling out could be an early sign that your days may be numbered. They should also try to get to know their boss’ supervisor and peers, in case he or she is the one to get the ax.
Showing loyalty is important, but Challenger also recommends workers broaden their social and professional networks.
“Consider hedging your position by taking on part-time freelance, contract or consulting work with other companies,” he said.
“Don’t get caught acting adolescent, and don’t take part in office gossip,” advises career coach Richard Bayer with The Five O’Clock Club in New York.
Given the skyrocketing mortgage defaults behind the current malaise, borrowers with adjustable-rate mortgages need to understand what payments they face, Sprinkle said.
Borrowers with adjustable-rate loans should study switching to a 30-year or 15-year mortgage.
Investors fled from stocks into bonds, pushing 30-year mortgage rates down to the 5.45 percent range last week, the lowest levels since March 2004.
It was a brief respite. Long-term mortgage rates shot higher as stocks recovered.
Given the market volatility, other declines could emerge, and borrowers should be prepared to move quickly.
One caveat: Home values last year fell nationally for the first time since the Great Depression, making it harder to sell or refinance, especially for recent buyers who have no equity.
The American Institute of Certified Public Accountants advises consumers to build up cash in an emergency fund of three to six months of living expenses by limiting spending to the basics and eliminating splurges.
An emergency fund can prevent having to tap retirement funds in the event of a job loss or having to desperately take the first job offer that comes along.
“If we are headed into a recession, this one looks like it will be short-lived,” Sprinkle predicts.
Pay down credit-card debt and pay bills on time to improve your credit rating.
Those who feel they might be on shaky employment ground should take out a home-equity line of credit if they don’t have one, Sprinkle said.
The time to apply for credit is when you’re employed, not when you’re desperate, he said.
Aldo Svaldi: 303-954-1410 or asvaldi@
