Recession 2023: The Basics & Survival Guide

Whether you hear the word ‘Recession’ from a stone-faced news reporter or a worried business owner, it is evident that the onset of a Recession is a worrying thing for everyone. Because this phenomenon is rarely completely understood by the layperson, here is everything you need to know about Recessions and how you can protect your interests during the upcoming Recession. 

So What is a Recession?

According to Investopedia, a Recession is ‘A significant, widespread and prolonged downturn in economic activity’. Economically, two consecutive quarters of negative GDP are considered a general indicator of a Recession, although more sensitive measures exist. While a Recession may not last beyond a few months, its impact on the economy can seep into oncoming years. During a Recession, the following consequences are common:

• Incomes dwindle as employers slash working hours 
• Unemployment rates go up
• Businesses, owing to inflated courses of resources, minimise manufacturing - leading to lower economic activity & growth
• Consumers spend less money, putting businesses in a bad financial position

What can cause a Recession?

While Economists debate on the main cause, a few theories have been proposed to explain the occurrence of Recessions using economic, financial, and psychological factors. 

• Quick and sharp industrial shifts can trigger a Recession. For instance, a rapid uptick in oil prices can send plenty of industries into oil shortages, leading to a Recession as manufacturing is negatively affected.
   
• Financially, poor spending decisions during good economic times, or inadequate growth in money supply can also trigger a Recession. Some other causes are Stock Market crashes, increasing interest rates and lowered confidence among customers. 
   
• Consumer behaviours like excessive spending during economic peaks and pessimistic spending during economic downturns can keep a nation within the Recessive stage. Another noted factor is the overexcited investing that occurs during economic peaks, called Irrational Exuberance, which inflates asset value past actual worth and leads to a bubble formation. When this bubble bursts, panic sets in and markets crash. 
   
• Sometimes, unexpected international events can also lead to economic recessions. The COVID-19 Pandemic and Russia’s invasion of Ukraine are two recent global events that preceded a recession in affected countries. 

How do Business Owners respond to the predicted upcoming Recession of 2023? 

According to Forbes, mid-sized and small-sized businesses are focusing on Employee retention by increasing their wages, and benefits and investing in their training. While mid-sized businesses are not as optimistic about the state of the global economy in the upcoming year, both businesses are optimistic about their venture’s performance in the upcoming year. Lastly, as inflation sends the prices of raw materials skyrocketing, businesses have been compelled to raise their own prices in order to pass these growing costs onto consumers. 

Major tech companies like Meta (Facebook, Instagram, WhatsApp), Google, and Apple have been on a lay-off spree since 2022. This has been attributed to the predicted upcoming recession, which affects advertising budgets and therefore, these companies revenues. This response may also be due to the losses suffered by these tech giants in the past few months. As a result, cutting the workforce can be a way of cutting costs. 

How can you protect yourself in a Recession?

• Prepare for Lay-Off Season

As mentioned, one of the ways businesses try to stay afloat during a recession is by cutting down on the workforce, as Meta & Google have been aggressively doing so these past few months. Look into other opportunities - consider diversifying your income sources, brush up on your resume and look out for warning signs of a company-wide cutdown. 

• Build Yourself up.

In these uncertain times, one way to up your chances of employment is to upskill. Since spending power is low before, during and after a Recession, you will need to consider cost-effective forms of upskilling. Lucky for you, UniAthena’s Short courses offer over three hundred free-learning short courses in a variety of domains so you can keep at the top of your game. 

• Cut down on unnecessary costs

Consider that perhaps now might not be the time to go on a blowout trip to Hawaii. Look at your financial transactions and see areas where you can replace expenditures with affordable alternatives (for instance, making your own coffee instead of buying it from a bespoke brewery every morning) or consider suspending non-essential expenditures (for instance, cut down on eating out, impulse buying on Amazon and so on). Remember - recessions are temporary, and you can return to your luxuries when resources permit. 

This year, don’t let financial worries beat you down. Stay informed, remain prudent and remember - recessions do not last forever.

Sources:

https://www.forbes.com/advisor/investing/what-happens-during-a-recession/

https://www.investopedia.com/terms/r/recession.asp#toc-what-is-a-recession

https://www.forbes.com/sites/roberthart/2023/01/05/most-small-businesses-expect-a-recession-this-year-heres-how-theyre-getting-ready-for-it/?sh=14837d504253

https://www.forbes.com/sites/qai/2022/09/18/how-to-survive-a-recession-without-burning-through-savings-and-selling-off-investments/?sh=66f718412a15

https://www.investopedia.com/terms/i/irrationalexuberance.asp

https://www.thebalancemoney.com/causes-of-economic-recession-330601