Friday, September 29, 2023

How inflation affects the labor market

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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.

Lauren Winans is CEO of Next Level Benefitsan HR consulting practice that provides access to HR experts for short-term projects.

Inflation has been a hot topic all year and that doesn’t seem to be changing anytime soon. A variety of conditions, including faster wage growth, increased savings, higher consumer spending, shortages of goods, price hikes and pressures in the service sector as consumers shift spending from products to post-pandemic experiences are creating a perfect storm that leads to inflation.

In response to rising inflation, the Fed raised interest rates to slow demand and dampen wage and price growth. In an ideal world, higher interest rates will force companies to lower their prices and shrink their profits as supply and demand rebalance. Uncertainty plays a role in how much action from the Fed will be needed to bring inflation under control without slowing the labor market too much and triggering a recession.

The effects of the events of 2020 and 2021 have added a level of unpredictability to economists’ forecasts, making it more difficult to determine how long it will take to curb inflation. The longer inflation negatively affects the economy, the more likely a recession will occur, leading to changes such as slower hiring, more layoffs, slower industrial production and a stalemate housing market.

What does this mean for the labor market?

If inflation can’t be contained within the next six months, I think the labor market will suffer – think layoffs, higher unemployment, slower hiring, fewer job openings and even more work for those currently overworked, stressed and burned out. to be.

It is important to note that the unemployment rate currently remains relatively low and job growth remains robust based on lagging government statistics. However, continued unpredictability around inflation, a looming recession and general economic uncertainty will undoubtedly affect unemployment and job growth.

What should employers do?

Employers need to find ways to work as efficiently as possible. Focus on controlling operating costs and managing workforce through attrition. When employees leave, employers must evaluate whether the position should be replaced, reused, or outsourced.

Employers also need to become realistic about the workload. Workers facing these difficult times are spread far too thinly. Making adjustments to performance expectations and organizational goals can alleviate some of the stress and pressure that many employees currently struggle with. Training leaders to actually be better leaders in stressful times will also help reduce tension.

Is this a good time to look for a new job?

If you’re considering changing jobs and actively conducting interviews, you’ll need to do a lot of research into a company’s health before accepting a new position. This will hopefully prevent you from haphazardly changing jobs and avoid the dreaded “last hired, first fired” situation that can arise during a recession.

If you’re comfortable or at least reasonably happy with your current position and company, it’s wise to stay put until the economic uncertainty subsides. However, if you are a risk taker, now could be a great time to land that dream job as your competition among your risk averse peers may diminish. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?

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