Granted, the job market isn’t as fab as it was last spring. Growth in general employment has slowed a bit, so it might take a little longer to find the kind of work you want. The number of factory jobs has been shrinking since April 1998, most likely due to gains in productivity, says economist Leo Troy of Rutgers University. It takes fewer workers to make the goods the market wants.
But the service industries are scarfing up people as fast as they can find them–nurses, teachers, managers, stockbrokers, bankers, real-estate agents, engineers. Plenty of companies hope to recruit the techies fleeing the dot-bombs. Even if unemployment rises to 5 percent, we’d have a better job climate than in any year in the 1980s and most of the ’90s. How bad is that?
No one feels good after being dumped. The loudest boo-hooing seems to be coming from young people who saw their Internet gravy boats sink. But in any life and at any age, jobs will come and go. The wise learn the rules for building a permanent safety net:
Prepare, prepare. Go to trade shows and conventions, collect business cards, make more business friends, do favors for colleagues, improve your skills. Just in case, comb your computer for personal information and take it home. If you’re fired, you might be given just 30 minutes to pack and leave.
Economist Irwin Kellner of Hofstra University in Hempstead, N.Y., is seeing new interest in M.B.A. degrees. “Students aren’t so sure they’ll start companies and become instant millionaires,” he says. “They’re thinking more about marketable skills.”
Don’t dawdle. People who lose their jobs often make only token job-hunting efforts until their severance pay runs out, says John Challenger of the New York outplacement firm Challenger, Gray & Christmas. But the longer you’re out of work, the more potential employers will wonder why.
A midlife career change usually isn’t realistic, Challenger says. You can change industries but cannot easily change your function or expertise. So get on the phone to your usual connections. In the 1990-91 recession, people dreaded incoming calls from their job-hunting friends. But now their firms might be looking for employees with exactly your skills.
Save money. Remember that quick-cash cushion you’re supposed to hold for emergencies? It should be large enough to get you through three months without pay. Six months would be better. Nine months if you’re self-employed. If you, er, forgot about building cash, that should be your first priority–even before making faster payments on your credit card, says planner Irving Holzberg of Menlo Park, Calif.
Americans are generally thought to be lousy savers. In last year’s third quarter, the savings rate turned negative–meaning we spent more than we earned. But believe me, that underestimates our native common sense. The so-called savings data don’t include the money we make in stocks and bonds, the gain in the value of our homes or the Social Security tax that comes back in the form of retirement income. All things considered, U.S. savings are pretty high. Our net worth is steadily moving up.
Manage your debt. When you leave a job, don’t use your savings or severance to get out of debt. Make only minimum payments until you’re back on a payroll again.
You might be able to lower your mortgage payments by refinancing the loan. Fixed rates have dropped by as much as 1.5 percentage points since May. It’s a go if your savings will exceed the loan’s closing costs over a reasonable period of time.
Whether you’re buying or refinancing, consider an adjustable-rate mortgage (ARM), whose interest rate changes each year. Over most of the past two years, ARM rates went up–but even so, the adjustable would have cost you less than a comparable fixed-rate loan. Today ARM rates are falling automatically. That gives users the benefit of refinancing, and without paying closing costs.
Manage your health benefits. COBRA rules let you keep your group health plan for 18 months, at your expense, if your company employs 20 people or more. You have to apply within 60 days of termination. Working couples, however, will probably find it cheaper to buy family coverage under the spouse’s plan.
Some companies offer “medical expense” plans. You contribute pretax money from every paycheck and use the plan to cover certain medical bills. If you’re leaving your job, be sure to submit every one of those bills, says planner Peg Downey of Silver Spring, Md. You’re covered up to the full amount you intended to put in the plan all year. It doesn’t matter that your actual contributions were cut short. You can receive more than you put in (although some employers may take the excess payment out of your final check).
Leave your retirement funds alone. When you end a job, don’t take any cash out of your 401(k)–even if the amount is small. Either keep the money in your ex-employer’s plan, roll it into your new employer’s plan or roll it into an IRA. Withdrawals cost you taxes and maybe a 10 percent penalty. You also lose the valuable tax deferral. If your layoff lasts too long, you might need some of your retirement money to help pay bills. But draw only the minimum every month. As soon as you’re working again, put this account back under lock and key.
Most people who lose jobs will find new positions soon. We’re not facing an era of general displacement and fear. Employers need hands. You just need cash while you look around.
