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50% of Companies Expect Layoffs. Here's What Workers Should Do to Prepare

The Ascent 9/26/2022 Maurie Backman
a person sitting at a table in front of a window: A middle-age woman sitting in an office looking thoughtful. © Getty Images A middle-age woman sitting in an office looking thoughtful.

The U.S. labor market is in a pretty good place right now. Unemployment is still low and jobs are plentiful. But things could change if a recession hits. And that's something many experts are predicting.

The Federal Reserve is trying to slow the pace of inflation by implementing interest rate hikes. That should make borrowing more expensive for consumers, which should lead to a decline in spending. That decline is necessary to bridge the gap between supply and demand that caused prices to soar in the first place.

But if consumer spending declines a lot, it could lead to an economic downturn. And if companies see their revenue decline, they may have no choice but to lay off staff.

In a recent PwC survey, 50% of companies are reducing their overall headcount due to economic concerns. And roughly the same number are instituting hiring freezes.

While we can't say with certainty that a full-blown recession will hit in the near term, it's important for workers to prepare for one -- and the layoffs that might come with one. Here's how.

1. Shore up your savings

One of the best ways to gear up for a layoff is to boost your emergency fund. That way, you'll have more money in savings to tap should you lose your job and need a way to pay your bills.

Remember, unemployment benefits won't replace your missing paycheck in full. And if you're a higher earner, you may find that your weekly benefit only replaces a small fraction of your total paycheck due to state-imposed caps. So having cash reserves during a layoff is crucial.

2. Start networking

You may be happy at your job, and things may be relatively stable. But if you're worried about a layoff, now's a good time to start talking to people at different companies and cultivating relationships. That way, if your job ends up on the chopping block, you'll have people to turn to who can put your resume out there and offer up leads.

3. Boost your job skills

Sometimes, even the most talented workers get laid off when economic conditions sour. But a good way to potentially secure your job is to grow your skills and make yourself too valuable an employee to let go. Better yet, focus your efforts on building skills that no one else on your team or at your company has so you become truly indispensable.

4. Line up a side job

If you're gainfully employed, you may not feel the need to pick up a second job right now. But that second income stream could end up being a lifeline during a layoff, so it pays to make that effort, even if you don't need the money so badly at present. Plus, if you're hoping to beef up your emergency savings, your second job could make it possible to do so without having to drastically cut your spending.

The idea of getting laid off can be frightening, especially within the context of a recession. The more you do to prepare in advance, the better positioned you'll be to get through a layoff and come out financially unscathed.

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