Is job hugging a smart financial bet? An RIA advisor weighs in

As inflation continues to take a toll on households and the labor market continues to soften, a new trend is starting to take hold across the US job market.

While there's no data yet to show how prevalent it is, "job hugging" has become the new buzzword to watch for HR professionals and managers.

Consulting firms and experts say the phenomenon is on the rise as workers across the board see increasing risks of being let go in the next year or so. Apart from headlines of mass layoffs from some of the largest firms – including ConocoPhillips, Microsoft, and Salesforce – the Bureau of Labor Statistics has also issued a string of discouraging readings and revisions pointing to a softening job market over the summer.

Read more: BLS revises jobs growth data downward by 911,000, raising more question marks around labor market

Abigail Gunderson, senior wealth advisor at Tanglewood Total Wealth Management in Texas, says that while her clients have not come to her with worries about job security, she knows several people who have concerns. One of those, a 69-year-old woman in the aerospace industry, recently shared doubts about her future in the face of employees and contractors being let go en masse at NASA this year.

"She never married, doesn't have kids ... You would think she'd be retired. But she wants to keep working," Gunderson told InvestmentNews. "She's always been recognized for doing good work, being very diligent, and being a kind person who helps others."

Her reputation as a helpful and good worker paid off, Gunderson says, as she was able to get a lead for a job next year with another contractor company with better benefits. But on the other end of the spectrum, she's also seeing members of the younger generation struggling to find stable jobs.

"A lot of kids that are between 23 to 30 years old are having a hard time finding stable jobs," Gunderson says. "There's not a whole lot [of opportunity] out there."

The Wall Street Journal looked at two reports from the Federal Reserve Bank of New York and the Conference Board, which both painted a gray picture for US workers.

Respondents to the Fed survey found the perceived probability of finding a new job in the next three months collapsed by 5.8 percentage points to hit 44.9%, an all-time low for that polling. The decline in optimism cut across all income, age, and educational groups, with the most pronounced effects showing up among those with a high school education.

Separately, a monthly index by the Conference Board showed payrolls continued to slide across the US in August, reaching its lowest point since early 2021.

"Tariff pressures are expected to intensify, raising inflation and reducing consumption, which could restrain activity and dampen future hiring," said Mitchell Barnes, an economist at the Conference Board.

In line with many extreme anecdotal cases floating around the internet, Gunderson says the boyfriend of one of her younger coworkers, who's in his 20s, has sent out his resume to roughly 100 companies. She says he hasn't received a single callback, despite his having an electrical engineering degree.

"I feel like more than anything, a lot of the younger kids are the ones having trouble looking for work," Gunderson says. "Some of them have student loans. But because of all the uncertainty around tariffs [and] interest rates, I think a lot of companies are not hiring as much as they want to."

While many workers today may be justified in joining the job-hugging trend, Gunderson says it's still worth looking around for other better opportunites. From a financial perspective, she says it's best to go for an up-and-out trajectory by looking for an offer with better compensation and benefits.

"The grass is not always greener on the other side," she says. "[You have to know] that the compensation and benefits can keep up with your lifestyle [during] inflation, and you can keep saving for your short-term goals and retirement."

Some middle-aged workers in their 50s may feel more comfortable taking the leap, though it may take some time before they land on their feet with another employer. In those cases, Gunderson says it's important to have a healthy cushion of savings.

"Do you have enough savings to fund your current lifestyle? Are you going to start spending your retirement savings, or do you have enough emergency funds if, let's say, you're unemployed for six months?" she says. "I think those questions are important to ask."

From an planning perspective, Gunderson encourages workers to pay themselves first. That means after paying utilities, mortgages, car payments, and other essentials, they should take the opportunity to contribute to 401(k) plans, especially if they include matching contributions.

"If you can set aside five to 10% of your income and put it in a brokerage account, assuming your company's not offering a 401(k) plan, think about it as a non-discretionary expense," she says.

For many cash-strapped young Americans, it might also feel tempting to make ends meet by investing. That's essentially the Plan B suggested by Robinhood CEO Vlad Tenev as the short-term impacts of AI on the labor market threatens entry-level jobseekers.

"I think it’s going to become more important to invest, because if you can’t rely on labor to generate money to make a living, capital becomes more important," Tenev said in a recent podcast interview with Fortune. "And so we’re going to have to make it easier for people to learn about investing."

While there's no stopping kids today from getting investment ideas from YouTube or TikTok, Gunderson maintains it's important to have someone to act as a sounding board.

"Hopefully they have someone in their life they can sound off on, like their mom, or their brother, or sister," she says. "I think they should consult someone professionally just to see if it makes sense ... The last thing you want is for your money to disappear because of a bad investment."