Are we headed for a recession? Who knows (the experts certainly don’t agree). So how can you prepare for a recession that may or may not come? Do you hire? Freeze? Layoff? All great questions, and we wish we could give you a definitive answer. What we can do is offer up some recent research and tips from experts that may help you formulate a contingency plan.
The Tough…and Confusing…News
If we don’t hit traditional recession numbers, some experts believe we’ll at least be in a “growth recession” soon. A growth recession is, quite simply, economic growth that is so low and slow that it feels like a recession.
As Christopher Decker, Professor of Economics at the University of Nebraska Omaha, puts it, “The good news is Federal Reserve policy on inflation appears to be working. The bad news is Fed policy on inflation appears to be working.” In other words, the action by the Feds to slow inflation is succeeding. But, unfortunately, that means that some are losing their jobs as a result.
“Where this leaves the economy as the year progresses, only time – and more data – will tell,” Decker adds. “But from where I stand, the economy looks to be heading toward a downturn by the fall. The question is whether it will take the form of a mild recession – which will include periods of economic shrinkage – or whether, as I suspect, it will be a low-growth recession. Either way, it will involve some pain.”
But here’s the rub: If a recession hits, it may be the most anticipated one in history. After all, we’ve all been bracing for it and have been for some time. Some experts feel that psychological phenomena may be what hastens the recession, not more expected economic factors.
“I’m concerned that business leaders are looking around and seeing that everyone else is taking preventative measures, and so they’re taking preventative measures too,” Elizabeth Crofoot, senior economist at Lightcast, told Time Magazine. “There’s a risk of us talking ourselves into a recession as everyone pulls back just a little bit.”
“Across the U.S., it’s worth noting, employers are still hiring. Payrolls rose by 230,000 in March, while the number of unemployed workers is near historic lows,” CBS News Money Watch’s Irina Ivanova points out. However, high-profile layoffs may give the appearance that the entire job market is suffering and that a recession is already here. Indeed (which went through its own round of layoffs) reports that, in April, “listings for technology roles are down 55% from a year ago, while banking industry vacancies are down more than 40% and insurance listings have fallen 18%,” Ivanova writes, adding that other industries, however, are doing quite well.
As Decker pointed out earlier, the bottom line is that a cooldown was the Fed’s goal. “However, ‘cooling’ doesn’t mean ‘crashing,’” analysts at Vital Knowledge note. “Indeed, a cooldown without a crash would be the very definition of the ‘soft landing’ the Federal Reserve has tried to achieve,” Ivanova adds.
Weathering the Storm
Yes, the headlines are scary. And if you feel confused about what to do and how to do it, you’re not alone. For instance, when talent acquisition leaders were asked about the impact a recession would have on hiring in 2023, nearly three-quarters indicated a negative effect. However, the HRO Today Research Flash Report found that, despite ongoing headlines about layoffs, 57% of those same leaders surveyed said their organizations were increasing headcounts in 2023 (compared to only 8% who said they were decreasing). Over 91% consider their organization’s recruiting flexibility important during these times, although only half would rate their organization’s flexibility as excellent or even good.
Many experts say that the high-tech layoffs happening now are a result of the overhiring frenzy during the pandemic. Before you’re guilty of reactionary hiring and firing, consider whether tools like temporary staffing can regulate your approach. And remember the added bonus: Not long ago, we told you how temporary staffing can supplement the great workforce you have but also help you retain your best employees, even during a recession. How? Backfilling is one way.
“An IBM study found employees who feel they cannot develop in the company and fulfill their career goals are 12 times more likely to leave the company. Take the opportunity to uncover how you might be able to upskill or promote these loyal employees while backfilling their previous roles. Backfilling is a great solution if money is tight (a poor hire can cost 30% of an employee’s salary). If the economy is a top concern, backfilling these roles with temporary workers can hold even more value,” we wrote.
And here’s more good retention news: An Emory University study that collected data over 40 years reminds us that job satisfaction increases during economic downturns. It seems to be a phenomenon of workers choosing the job that chooses them at a time when they might suspect there are fewer job prospects out there waiting for them.
Now, that being said, employers still need to make other efforts to keep workers happy. Sure, money can help, but if you’re an employer being asked to tighten the wallet due to recession fears, there’s hope. An Oracle survey found “despite current economic uncertainty and the soaring cost of living, 55% of workers care more about having the right job than the right salary,” Fortune states. “What’s more, 88% would still walk away from a job that doesn’t meet their expectations, even during a recession.”
Other opportunities to fill executive positions emerge during times of uncertainty as well. Interim and fractional executives can be great resources until the market heats up again. It can also be a good time to use executive search to find great candidates who seemed out of reach before.
For help in navigating the uncertainty and preparing for the best and the worst, drop us a line.