If you’ve been looking for a job lately, you might be a little confused about the economy.
Economists are increasingly predicting a recession next year due to a variety of economic signals, including falling gross domestic product, plunging stock markets and cooling consumer spending. The Federal Reserve intends to raise interest rates to fight inflation, a move aimed at further slowing consumer demand. In addition, there has been a spate of high-profile layoffs and hiring freezes at some of the country’s most valuable companies.
But the job market — often the leading indicator of a recession — remains very strong, according to national data. There are 11.3 million job openings, which equates to nearly two positions for every job seeker.
In May, 4.3 million people quit their jobs. That number is close to the record set late last year, according to data from the U.S. Bureau of Labor Statistics more than 20 years ago. This isn’t behavior you’d expect in a recession, when companies typically freeze hiring and cut workforces while workers stay put. Employers have also been doing their best to retain existing staff by raising wages, increasing allowances and keeping layoffs near historic lows. If a recession is imminent, it’s very odd that jobs don’t seem to be affected.
Naturally, if you’re thinking about joining the big resignation, all these mixed signals might give you pause. We asked some recruiting industry experts and economists what’s going on so you can try to make an informed decision about the next step in you and your career.
Is a recession really coming?
Economists currently forecast a roughly one-in-three chance of a recession next year. The National Bureau of Economic Research (NBER), the committee of economists that officially declares a recession, hasn’t done so, but they usually don’t before a recession begins. They define a recession as “a significant decline in economic activity that spreads across the economy and persists for more than a few months.”
Two consecutive quarters of negative GDP are seen by many as a sign of a recession. GDP has so far declined in the first quarter of 2022, but estimates for the second quarter won’t come out until later this month — and even if the numbers look bad, they don’t necessarily point to a recession.
As Vox’s Madeleine Ngo wrote earlier this month,
But even if the next GDP report this month shows a dip in the second quarter, many economists may not see it as a recession because the labor market remains strong. While most recessions identified by the NBER do meet this benchmark, some do not: For example, in 2001, GDP fell in the first quarter, grew in the next quarter, and then fell again in the third quarter.
Perhaps most importantly, the rapid slowdown in hiring has yet to materialize, casting serious doubts about whether a recession is really here. It’s also been a very strange few years, with a global pandemic, a sharp but rapid recession in 2020, and then a rapid recovery.
“There’s no recession in hiring,” Marc Cenedella, CEO of resume writing service Leet Resumes, told Recode.
“Economists say, ‘All our tools are telling us that a terrible ghost recession is coming, but no one in the real economy can see it,'” he said. “We have a once-in-a-hundred-year event that messes up your instruments.”
OK, but if there is a threat of a recession, why are there so many job openings?
Job openings remain high, in part because the company has struggled to keep staff well-staffed during the big resignation. Recruiting and retaining employees across industries, age groups and levels was difficult last year. Employers also don’t want to repeat what happened at the start of the pandemic: laying off hordes of workers only to be rehired shortly after.
“People tend not to want to overcorrect, especially given the challenges organizations faced with hiring last year,” said Lexi Clarke, principal at compensation data firm Payscale. “Now is the time to be proactive and consider the long-term impact of talent-related decisions. already.”
Structural issues such as an ageing and retirement workforce, precarious and expensive childcare, and low birth rates mean fewer people are in the workforce — something that cannot be corrected quickly. There’s also a cultural shift that keeps turnover rates outside expectations of labor scarcity, as people look for less tangible things at work, Such as work-life balance and meaning.
At the same time, consumer spending growth, while slowing amid inflation, remains high, in part because of pent-up demand and savings. That means companies still see demand for their goods — and they can’t keep up with demand without enough employees. These labor shortages, combined with supply chain issues and material shortages, mean many companies will never be able to meet existing demand.
“They produce goods where there is known demand and provide services where there is known demand,” said Jim McCoy, senior vice president at recruitment firm ManpowerGroup. “Hiring is much less speculative.”
Can I use the hiring gap to get more money or better benefits?
Not only are employers still hiring, they are also offering higher wages, signing and retention bonuses, and perks.
ManpowerGroup’s clients, including Fortune 500 companies, offer services such as tuition reimbursement, remote work, gas subsidies, and a four-day workweek. McCoy said the benefits are not limited to a single industry and include everything from health care to hospitality, from tech to retail. “The opportunity cost of not filling these positions is so high that they are willing to put more money into candidates,” he said.
The Society for Human Resource Management’s recent employee benefits survey found that this year, employers say every benefit offered today — health benefits, retirement savings, time off, flexibility — is more important than before the Covid-19 pandemic . “Even after businesses have returned to more normal conditions following the introduction of a COVID-19 vaccine, the general prevalence of these benefits suggests that these benefit products may become permanent fixtures in the future,” the report said.
Now is a good time to try to get better pay and benefits from your current or new employer.
So can I quit now?
It depends on your industry, your seniority, your savings and your tolerance for uncertainty. But generally speaking, it’s not a bad time to look for something new.
There are many open positions and companies willing to hire out there, and surveys suggest that will remain the case, at least in the short term.
According to a survey by ManpowerGroup, half of U.S. employers plan to increase employment in the third quarter, while only 12% expect their workforce to shrink. This is a stronger recruiting advantage compared to last year. While most company executives predict a recession by the end of 2023, they also say attracting and retaining talent is part of their most important long-term growth strategy, the business-focused think tank Conference Board found.
High-profile layoffs, hiring freezes, and hiring slowdowns at tech companies — Coinbase, Meta, Netflix, and Tesla are some of the prominent companies responding to these setbacks — are not necessarily cause for concern, as these represent only a tiny fraction of the economy jobs, even if they grab a lot of headlines.
“There’s a dichotomy in the job market between high-growth, high-risk tech jobs…and the bulk of employment in the economy is in these other companies, small businesses, and nonprofits,” said Sean R. Gallagher, the firm’s executive Director, Northeastern University Higher Education Future and Talent Strategy Center. “Some industries are continuing to grow and will structurally require more workers.”
When will we be back to normal?
What is normal now?
A lot of what’s so strange about the current situation isn’t that the economy is in recession, because it’s not growing as fast as it used to.
“For many, this sense of slowing or returning to normality may be more painful than the data suggest, as we have been in this staggering rate of economic growth in 2021,” said the Economics Department of Payroll, Human Resources and Human Resources. said Luke Pardue. Benefiting software company Gusto.
Allaying recession fears will largely depend on whether the Fed can negotiate a so-called soft landing: raising interest rates enough to weaken demand and fight inflation, but not so much that businesses have to lay off workers. If demand is so sluggish that the company’s sales are no longer enough to keep hiring, trouble can arise.
So far, this hasn’t quite happened.