It's official: we are in a recession.
Pundits and politicians danced around the word for months, not wanting to declare such bad news, but last week's decision by the National Bureau of Economic Research (NBER) made it unavoidable. Not only are we in a recession, but we have been for the last year.
"Big surprise," many of you are saying. It's true: whether it was officially labeled a recession or not, the last year's economy has been tough on most of us. Many have adjusted their lives to make their dollars work, from small changes like eating out less often, to big ones like undergoing a loan modification to save money on home mortgages.
So, while in reality, the official recession news probably won't change your day to day too much, here are some things to keep in mind as we face the beginning of a new year:
- historically, by the time the NBER gets around to officially declaring a recession, we're usually within a few months of the end of it.
- in the years since WWII, the US has experienced 11 recessions (this one included), the average length of which is 10 months. We're officially in month 11, which means that statistically the end is in sight.
- many firms are aware of the recession and are more willing than ever to work with consumers financially, whether through a loan modification on your mortgage or a restoration of credit. Now is the time to start negotiating!
- although the stock market is taking a beating right now, time heals all wounds. Historically, 100% of all the 10-year rolling averages of market returns since these things started being recorded have ended in the black. Try not to panic about your 401(k) and instead, give it time to recover.
The main thing to keep in mind while living through a recession is to stay optimistic. Things could most certainly be worse, and there's never been a recession that we haven't come out of!
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