Friday, September 22, 2023

Economists predict a recession, but companies are still hiring

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

If you’ve been looking for a job lately, you might be a little confused by the economy.

Economists are increasingly predicting a recession in the coming year thanks to a variety of economic signals, including a decline in gross domestic product, a stock market tanking and consumer spending slowing. And the Federal Reserve has purposefully raised interest rates to fight inflation, a measure designed to slow consumer demand even further. In addition, there is a wave of high-profile layoffs and hiring freeze at some of the country’s most valuable companies.

But the job market — typically a key indicator of a recession — remains incredibly strong, according to national data. There are 11.3 million job openings, which equates to almost two jobs for every job seeker.

In May, 4.3 million people quit their jobs† This number is close to the record set late last year, according to Bureau of Labor Statistics data going back more than 20 years. That’s not the behavior you’d expect in a recession, when companies typically cut their workforces and downsize while employees stay put. Employers have also tried their best to retain their existing employees by raising wages, adding perks and keeping layoffs around historic lows. When a recession is approaching, it is a very strange in which employment does not appear to be affected.

Of course, if you’re considering taking part in the Great Resignation, all these mixed signals may give you a break. We’ve asked some industry experts and economists what’s going on so you can try to make an informed decision about what’s next for you and your career.

Is a recession really coming?

Who knows!

Currently, economists predict the probability of a recession in the coming year at about one in three† The commission of economists that officially declares a recession, the National Bureau of Economic Research (NBER), has not done so, but often does not do so until a recession is in full swing. She define a recession as a “significant decline in economic activity that spreads across the economy and lasts for more than a few months.”

Many consider two consecutive quarters of negative gross domestic product a sign of recession. So far, GDP has fallen in the first quarter of 2022, but second-quarter estimates won’t come out until later this month — and even if those numbers look bad, it doesn’t necessarily mean there’s a recession.

As Madeleine Ngo of cafemadrid wrote earlier this month:

But even if this month’s next GDP report shows a decline in the second quarter, many economists might not consider that a recession, as the job market remains strong. And while most recessions have identified the NBER meet this benchmarksome don’t: in 2001, for example, GDP decreased in the first quartergrew in the next quarter and then fell again in the third quarter.

Perhaps most importantly, there has not yet been a rapid delay in hiring, raising serious doubts as to whether a recession is really coming. They have also been very strange years, with a global pandemic, a sharp but rapid recession in 2020 and a rapid recovery after that.

“There is no recession in hiring,” Marc Cenedella, CEO of resume writing service Leet Resumes, told Recode.

“Economists say, ‘All our instruments are telling us that a ghostly ghost recession is coming, but no one in the real economy can see it yet,'” he said. “We had an event that only happens once in a century, and that’s going to ruin your instruments.”

Okay, but if a recession is looming, why are there so many job openings?

Vacancies remain high, in part because companies struggled to remain fully staffed during the Great Layoff. In the past year, it has been very difficult to hire and retain employees, across all industries, age groups and ranks. Also employers don’t want to repeat what happened at the start of the pandemic: masses of workers lay off, only to struggle to rehire shortly after.

“There’s a tendency not to want to correct too much, especially given the challenges organizations have had around hiring in the past year,” said Lexi Clarke, chief of people at Payscale, a compensation data company. “This is a time to be proactive and think about the long-term impact of talent decisions.”

Structural issues such as an aging and retiring workforce, unstable and expensive childcare, and low birth rates mean there are fewer people on the workforce to begin with – something that cannot be corrected quickly. There has also been a cultural shift that has kept the number of shutdowns steady beyond what is expected from a scarcity of workerswhile people search for less tangible things outside of work, such as work-life balance and meaning.

Meanwhile, even though consumer spending growth has slowed amid inflation, it is still high, thanks in part to pent-up demand and savings. That means companies still see demand for their goods — a demand they can’t meet without enough workers. These labor shortages, in addition to supply chain problems and material shortages, mean that many companies have never been able to meet existing demand.

“They produce goods where there is a known demand for goods, and provide services where there is a known demand for services,” said Jim McCoy, senior vice president at recruiting firm ManpowerGroup. “The hiring is much less speculative.”

Can I use the staff shortage to get more money or better benefits?

Not only are employers still hiring, they also offer higher wages, signing and retention bonuses, and perks.

Job seekers speak with John Ramirez, right, a recruiter for BrandsMart USA, at the Mega Job Fair in Sunrise, Florida, on June 23.
Joe Raedle/Getty Images

ManpowerGroup’s customers, including Fortune 500 companies, offer things like tuition reimbursement, remote work, gas subsidies and four-day workweeks. McCoy said these benefits are not limited to a single industry and span everything from healthcare to hospitality, and from technology to retail. “The opportunity cost of not filling those vacancies is so high that they are willing to put more money on the table for candidates,” he said.

The Society for Human Resource Management’s recent Employee Benefits Survey found that employers said this year that every type of benefit — health benefits, retirement savings, time off, flexibility — is more important to offer today than it was before the Covid-19 pandemic. “The strong prevalence of these benefits, even after companies have returned to more normal conditions following the COVID-19 vaccine rollout, indicates that these benefits are likely to become permanently available in the future,” the report said.

Now is a good time to try and get better pay and benefits from your existing employer – or from a new one.

So is it okay to quit my job now?

This depends on your industry, your qualifications, your savings and your tolerance for uncertainty. But in general, it’s not a bad time to look for something new.

There are many open positions and companies willing to hire people, and surveys suggest the situation will remain that way, at least for the short term.

Half of US employers plan to increase employment in the third quarter, while only 12 percent expect a decline in their workforce, according to a survey by ManpowerGroup† That is an even stronger recruitment advantage than last year. Business-oriented think tank The Conference Board found that while a majority of business leaders predict a recession by the end of 2023, they also say attracting and retaining talent is part of their key long-term growth strategies.

The high-profile layoffs, staff freezes and hiring delays at tech companies — Coinbase, Meta, Netflix and Tesla are a few prominent companies facing these setbacks — aren’t necessarily a cause for concern, as that make up only a small fraction of jobs in the economy, even though they make a lot of headlines.

“There’s a dichotomy in the job market between the high-growth, high-risk tech jobs… versus the bulk of employment in the economy is these other businesses and small businesses and nonprofits,” said Sean R. Gallagher, executive director at Northeastern University’s Center for the Future of Higher Education and Talent Strategy. “There are sectors that simply continue to grow and will structurally need more workers.”

When do we go back to normal?

What is still normal?

Much of what has felt so weird about the current situation isn’t so much that the economy is tanking, because it’s not growing as fast as it was.

“For many people, this slowdown or return to normal may feel more painful than the data suggests, just because we were in this blazing economic growth in 2021,” said Luke Pardue, an economist at payroll, HR, and benefits software company Gusto.

Allaying recession fears will largely depend on the Fed’s ability to negotiate a so-called soft landing: raise interest rates enough to dampen demand and curb inflation, but not so much that companies to lay off employees. Problems arise when demand falls to such an extent that companies no longer sell enough to keep people employed.

So far, that hasn’t quite happened yet.


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