How Will A Recession Affect Me & What Can I Do To Prepare For It?

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To hear cable TV networks tell it, a recession is just around the corner, and even worse, it's a recession that will "destroy millennials," according to one terrifying headline from The Atlantic. In reality, we don't actually know when the next recession will be, although economists predict it'll happen by 2021. A recession could impact millennials in a number of ways, but experts say that scenario isn't as doom-and-gloom as it may seem — and there are ways you can prepare.

The more specific definition of a recession, according to Forbes, is "a period of time in which the gross domestic product growth rate — the amount of stuff we produce and sell — is negative for two or more consecutive quarters." Recessions are an inevitable part of a capitalist economy, so most people don't have much power over when or how it will affect them.

"Here's who's gonna get hurt if there's a recession: the people who lose their jobs, the people who have a lot of debt," Jill Schlesinger, a business analyst for CBS News, tells Bustle.

There are people within all generations who could check those two boxes, but some argue that millennials could be more hurt during a recession, since they have the highest debt of any generation and some of them are early in their careers or just entering the workforce.

But don't freak out just yet. Much of the worry for millennials ahead of a potential recession is due to the way the Great Recession impacted older millennials, who entered the job market when unemployment was near 10% (that's very high). According to Schlesinger, the Great Recession was pretty extreme — it was the worst downturn the U.S. economy has seen since the Great Depression — and the next one is unlikely to be as bad.

Schlesigner adds that millennials have just as much of a chance of being affected by a recession as other generations — it just depends on whether they have or lose a job, and how much debt they have. Here are five effects a recession could potentially have on millennials, and how to best prepare yourself for an economic downturn.

Getting Or Keeping A Job May Not Be Easy

A lot of young people were unemployed during the Great Recession. In the fall of 2009, the unemployment rate reached a high of 19% among those aged 16 to 24; those people would be between the ages of 26-34 now.

Even if the next recession isn't as bad as the last, as Schlesinger predicts, it could still result in some job losses. She says that, if a recession did hit the job market, employers would likely lay off either those employees who haven't been with the company as long, or those who are in temporary positions.

"Recessions usually hit the people who are already most vulnerable in the economy or most kind of on the fringes," Kenan Fikri, the director for research and policy development at Economic Innovation Group, tells Bustle. "So millennials, especially younger ones who are still early in their careers, relatively new to their jobs, could be some of the first to be let go."

Women might actually come out ahead economically during a recession, though. Heidi Shierholz, director of policy at the Economic Policy Institute and former chief economist at the U.S. Department of Labor, says that while women are generally at a disadvantage in the labor market, they might be more insulated from the effects of a recession because they tend to be concentrated in industries like education and health care.

"People still go to school during a recession," she explains. "If you have a heart attack, you go to the hospital during a recession, and so the employment in education and health care is much less 'cyclical.' ... It doesn't go down as much in recession, if at all."

Wages Could Drop

Wages have slowly risen over the last year, though not nearly fast enough to keep up with rising costs of living and what Fikri calls the "unprecedentedly high debt burden" millennials were saddled with upon graduating from college and entering the job market.

Fikri says that wage growth could be set back in a potential recession, which could affect millennials who are already strapped for cash, burdened with student loan debt, and asset poor, meaning they often don't make enough to meet their basic needs for three straight months.

"If their wages proceed to take a hit, and that's the one thing that's maybe sustained them or has finally seen some decent growth over the past couple of years, it could ... set millennial living standards back even further," he says.

Paying Down Debt And Saving Could Get Harder

One lawyer told CNBC that he couldn't get a higher-paying job in the private sector during the Great Recession, which delayed his ability to pay off his student loans from law school. That problem has persisted after the Great Recession: The Atlantic noted that wages have been mostly stagnant for decades, while the cost of college tuition has increased by 213% over the last 30 years after accounting for inflation.

The combination of these two things have hit millennials particularly hard. But having a college degree will help you during a potential recession, according to the Brookings Institute, which found that “college raises average lifetime earnings, and it also helps insulate workers from economic downturns, providing economic security in the times they need it most."

The debt left by attending college, or the impact of having mostly-stagnant wages while cost of living continues to rise, means many millennials also don't invest and don't save, which could both become even more difficult during a recession if they lose their jobs or have their hours cut.

Buying A Home Could Get Easier, Depending On Who You Ask

A decade after the Great Recession, millennials still aren't buying homes at the same rates as the generations that came before them. There are a number of reasons for this, according to Curbed: Millennials like living in expensive cities where they can't afford to buy homes, and they're waiting longer to get married and have kids. Plus, their student loan debt and credit makes owning a home virtually impossible, according to a 2018 Urban Institute report.

Fikri says older millennials or millennials who didn't go to a four-year college were just entering the workforce when property got cheap during the Great Recession, so they didn't have any time to save and acquire property. But if the next recession impacts the housing market, millennials could have more luck in that arena.

"Now the generation has been working long enough that if home prices started falling and became more attainable, then millennials may have a window to acquire property that right now they don't have just because the prices are so out of reach," he says.

Of course, it would be those who are able to hold onto their jobs and save enough who would be able to take advantage of a drop in prices during a recession. Still, Jeff Andrews reported for Curbed that millennials shouldn't start scoping out their dream house anytime soon. The 2008 recession was an anomaly, he wrote, in that "the housing market going into freefall caused the recession." The next recession, by contrast, is likely to be fairly standard and have "nothing to do with mortgages or the housing market," according to Andrews.

Having Kids Could Get More Challenging

A 2010 Pew Research analysis of 25 states found that a decline in the birth rate was linked to the Great Recession. The analysis found that "the falloff in fertility coincides with deteriorating economic conditions," and "there is a strong association between the magnitude of fertility change in 2008 across states and key economic indicators including changes in per capita income, housing prices and share of the working-age population that is employed across states."

And in 2019, a decade after the last recession ended, the birth rate in the United States dropped to its lowest point in 32 years. Forbes' Joseph Coughlin wrote that though the economy has picked back up, the last recession may have created "lasting economic insecurity that is causing young would-be parents to think twice before procreating."

Again, there is no evidence that the next recession would be as bad as the last one, so while the risk of losing your job is likely nowhere near as high, job insecurity could still affect your savings and potentially family planning. People who already have kids could also be impacted, regardless of what generation they belong to, as money invested for a child's future college fund could also be negatively impacted by a recession.

What You Can Do To Prepare

Schlesinger says a recession will inevitably happen, regardless of when it comes or how severe it will be. That's why she encourages people to do a few things to prepare "when times are good."

"While you still have a job, while you still have cash flow, you try to pay down your debt as aggressively as you possibly can," she says. Schlesinger also recommends trying to get six months of living expenses in the bank. If you have a retirement account, she suggests automating it so that you're taking advantage of any matching your employer offers, or at least putting in as much as you can afford.

If you're unable to take those three steps at the same time, Schlesinger recommends first paying off your debt while simultaneously establishing an emergency reserve fund. You could put money away for retirement once you've already established that fund, though if your employer matches your retirement contributions, she suggests trying to make contributions to that account up to what your employer will match.

As for what not to do to prepare for a recession, Schlesinger says people should not "go bananas about buying a house" or worry about how they're going to pay for their kids' college education. If you can accomplish paying down debt, saving an emergency fund, and investing money in a retirement account, she says "you are in much better shape if or when the next recession comes."