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Here’s what you need to do now

In a direct 10-minute speech at the annual Jackson Hole Economic Symposium on Friday, Federal Reserve Chairman Jerome Powell said he was keeping his promise to raise interest rates and do whatever it takes to cool the economy.

Powell didn’t throw a punch saying that higher interest rates will bring inflation down to the Fed’s 2% target level. As a result, the United States will experience slower growth and a weak labor market. He freely acknowledges that many Americans will feel the “pain” and lose their jobs.

How we got into this difficult situation

Going back to the financial crisis, before Powell, the Federal Reserve Bank used its financial tools to support the economy and the stock market. Fed policies have remained essentially unchanged so far.

During the pandemic, Powell and the federal government flooded the economy with trillions of dollars to provide much-needed funds for families and businesses. One of the results brought together has been the creation of a bubble of everything from stock market and cryptocurrency runs, and venture-backed startups that have created multi-billion dollar unicorn companies. dollars.

Powell is in an unenviable position to make the economy worse before it can improve. It’s frustrating to have to trust Powell, who, along with Treasury Secretary Janet Yallen, missed the damaging effects of inflation early on, saying it was only “transient” and that it was getting worse. would subside after a while. This has not been the case and inflation has reached record levels in 40 years.

Americans are now paying the price for the bursting of the bubble. Massive Fed and government spending programs have led to record levels of runaway inflation, creating a new tax on people and businesses.

How does Powell’s program work?

To rein in the economy, Powell raises interest rates and withdraws all quantitative easing policies that were in place. In a more tax-restrictive environment, businesses will suffer.

They will no longer have access to cheap financing and their costs will increase considerably. One of the expected results is that companies will carry out massive layoffs to cut costs. Almost daily, companies announce layoffs, hiring freezes, allow attrition without replacement, and rescind job offers.

Powell told the country he would cause pain by raising interest rates and quantitative tightening. The problem is that Wall Street and others haven’t taken it seriously enough. They bet he was bluffing and would eventually calm down.

After an initial shock from Powell’s policies, stocks plunged but then rebounded as investors believed they were out of the woods. Their misplaced optimism may have been the source of Powell’s direct, no-frills message.

His thesis is that as the economy shrinks, people lose their jobs. As more and more people lose their livelihoods, they will stop spending money to buy goods and services. When this happens on a large scale, the economy contracts, causing a downward spiral.

For example, interest rates on the purchase of a house have almost doubled recently. The housing market has shifted from people bidding on asking price to families moving away because they can’t afford the higher monthly mortgage rates. Housing is one of the most important sectors. If people can’t buy homes, they will need less architects, real estate agents, contractors, electricians, carpenters, plumbers and other blue-collar professionals.

Wall Street’s Backlash to Powell’s Speech

The Dow Jones Industrial Average, a flagship stock market index, fell more than 1,000 points on the news. Other major indexes also plunged. According to Bloomberg, Powell’s rudimentary speech resulted in a massive loss of an estimated $78 billion to the fortunes of some of the world’s richest people. To be clear, unless a person sells their securities, it’s just a loss on paper. If the stock market turns in their favor, values ​​may rise again.

  • Jeff Bezos, founder and former CEO of Amazon, lost $6.8 billion.
  • High-profile Tesla CEO and possible Twitter boss Elon Musk has lost $5.5 billion.
  • Microsoft co-founder Bill Gates saw his $2.2 billion loss
  • Grandpa Warren Buffett’s net worth plummeted by $2.7 billion.

What workers need to do now

In these difficult times, you cannot be complacent. Take steps to protect your job or make efforts to find a secure position elsewhere. You may have to make some sacrifices. For example, maybe you prefer to work remotely, but plan to come to the office to be seen. Once key managers and executives notice your work ethic and productivity, they will see you as indispensable.

Connect with members of your network. Ask around to see if anyone has any good job leads or can introduce you to a target company you’d like to work for. If you decide to change jobs, make sure the new company is financially sound and has no plans to lay off employees.

Update your resume and LinkedIn profile. Find recruiters who specialize in your space and can keep an eye out for opportunities. Do not take too much risk with your investments in stocks or cryptos.

During your interview, don’t be afraid to ask tough questions. You want to make sure the position is right for you and that you don’t just jump on the first offer. Avoid disparaging your former boss, your company and your colleagues, as this discourages interviewers. They’ll assume you’ll speak badly of them too when you leave.

If you want to stay in your company, ask for a meeting with your boss. Tell them you like the place, think they’re a great manager, and believe in the company’s mission. Share with them your goals and aspirations. The best outcome would be for your supervisor to be relieved the conversation isn’t about resigning and to be thrilled that you’re committed to the company and want to advance. You can collaborate on a path to achieve the desired role within the company.

Pay special attention to your finances. Pay off credit cards and other debts, as the interest rate will increase. Reigns in unnecessary spending. Put some money aside, in case you are out of work for a while. Find ways to earn additional sources of income. This could include gig work, starting a side hustle, or an online business.

Use this time to learn new skills that will make you more employable. There are many online courses such as Flatiron School, Goodwill, Coursera, and Codecademy. You can sign up for in-demand skills. Classes can be taken whenever you want. At the end of the program, you will receive a certificate, badge or credential which could help you to progress within your organization or when you are looking for a new job.

Try to stay positive

It’s easy and understandable to get discouraged during tough times. You can’t let people take it away. Work on your mindset, because you need to be mentally tough in tough times.

Hiring managers and interviewers want positive, confident and charismatic winners. Put aside all negative thoughts and learn to be friendly and charming. When a company makes layoffs, management is more likely to retain people they like and are comfortable working with, even if the choice is between a more experienced colleague.

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