Should American Workers Be Worried About Brexit?
Brexit, British voters’ decision to leave the European Union, had an immediate effect on the stock market in the U.K. and abroad on Friday, and may lead to a “mild recession” in Great Britain in 2017, according to Goldman Sachs. It could also have devastating impacts on British trade, job opportunity, and even the rights of British citizens to travel to European countries.
If you’re reading this from outside the U.K., no doubt your sympathy is with the Britons, but some part of you is wondering how all this might affect your life and career. For Americans, these are the potential problems that could emerge from Brexit:
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It could affect the job market in the U.S.
Some economists are predicting negative impact on American jobs, especially in industries that depend on export.
“The strong dollar and the slump in eurozone business investment will further slow exports and continue the downward pressure on U.S. manufacturing employment,” AFL-CIO chief economist William Spriggs tells Bankrate.com.
Brexit probably will not lead to another recession in the U.S.
The financial news has been pretty grim for the past few days, globally as well as in the U.K. The Dow dropped over 600 points on Friday, and closed today down 260 points. More than $2 trillion dollars’ worth of stock value evaporated on Friday, making it the worst day in history for global markets, according to Quartz – worse even Sept. 29, 2008, post-bailout.
But even with all that, we’re not necessarily looking at a recession in this country.
“The U.K. is an important trading partner for the U.S. and a major source of investment,” writes Ben Casselman at FiveThirtyEight. “But even a severe recession in Britain — or even in the rest of Europe — will have only a modest impact on the U.S. economy. Much more significant, at least in the short-term, are the ripple effects that the Brexit could have on financial markets. A full-blown financial crisis is unlikely; there is no equivalent to the U.S. housing bubble waiting to pop.”
Your retirement might take a hit … at least temporarily.
While Britain leaving the EU might not directly affect your 401k, the market turmoil surrounding it could. The Washington Post reports that companies on the S&P 500 derive only 2.9 percent of sales from the U.K., so the immediate fallout is unlikely to be significant. On the other hand, if Brexit signals the beginning of longer lasting instability in global markets, that upheaval might trickle down to your retirement.
Even so, there might be no reason to panic.
“Retirement plans are long-haul investments, so most financial advisers don’t recommend making significant changes to your portfolio when faced with turbulence,” writes Ylan Q. Mui at WaPo. “Still, you may not want to look at your quarterly statement until after the dust settles.”
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