The global economy is down and some of the biggest names in the world are already laying off thousands of employees. But there is a glimmer of good news: this time around, workers have a better than usual chance of keeping their jobs in the event of a recession.
Nearly three years after the arrival of COVID-19, companies around the world are still complaining that they cannot recruit the talent they need. They worry about labor shortages that will likely last beyond not just the pandemic, but also the next downturn. Deeper forces, such as demographic shifts and immigration, are reducing the pool of workers they can hire from.
All of this means that despite weaker demand for their goods and services, many businesses are looking to retain or even add staff, rather than letting them go – hoarding labor they know is they will need once the economy picks up again.
There have been a lot of high-profile layoff announcements lately, from Amazon and Goldman Sachs. But they can turn out to be outliers. This would make the coming economic downturn very different, and in some ways less painful, than those the world has grown accustomed to.
Bloomberg Economics predicts that unemployment will rise by around 3.3 million in developed economies by 2024, a time when most are expected to experience recessions. While that’s a lot of jobs lost, it’s less than the 5.1 million lost during the relatively mild downturn that began in 2001, and is dwarfed by the scale of the last two global crises.
Moreover, the employment starting point is historically strong. The unemployment rate in major developed economies, at 4.4% in September, is the lowest since the early 1980s, according to the Organization for Economic Co-operation and Development.
This time around, white-collar industries including business services, technology, banking and real estate, where the workforce is well above pre-COVID levels and where layoffs have already begun, could be more vulnerable to job losses.
From his position as managing director of ManpowerGroup, a global recruitment agency, Jonas Prizing expects to see companies trying to keep their employees on their books even as business slows.
“They will absorb a drop in demand for their products and services, but maintain their workforce,” he says. “They are not going to hire. But I think we can expect the payroll to remain healthy.
In the United States, at least, that’s the message central bankers are hearing as they try to bring sky-high inflation down and reduce demand in the economy and labor market without causing a recession.
“Business contacts tell us that they plan to keep workers even if the economy slows because it’s been so hard to attract and retain them for the past few years,” the Cleveland Federal Reserve president said. Bank, Loretta Mester, November 10. “It would be a good thing in the sense that the unemployment rate would not have to increase as much.
The Fed will get the latest glimpse of its progress on Friday when the government releases its payroll report for November. Economists polled by Bloomberg predict an increase of 200,000 jobs.
The global pandemic has not only claimed the lives of more than six million people, it has left millions more with long COVID or other disabilities that render them unable to work. Many people have also chosen to retire early, take care of their families or obtain a better education.
This contraction of the labor pool due to the pandemic has added to a longer-term structural trend towards tighter job markets as the huge baby boom generation retires and leaves. the work market.
Without measures such as sustained immigration, aging populations will shrink the workforce in many countries, according to a recent study of labor markets in the United States, Canada, France, United Kingdom, Germany , in Australia, Japan and China by Glassdoor and Indeed.
This is pushing some companies and governments to think longer term.
“We need to make sure we manage the downturns so that we’re well positioned to handle the upswings,” Cynthia M. Sanborn, Norfolk Southern’s chief operating officer, told Wall Street analysts Oct. 26. “So we have levers like attrition that can help us if we need it, but we also know that we need to be strengthened by having a good hiring pipeline or a line of sight to that hiring pipeline, so that we can manage the improvement.”
Labor shortages are most acute in some of the industries hardest hit by the pandemic.
Payrolls in the US leisure and hospitality industry are more than a million lower than they were before the COVID-19 shock. Restaurant staffing is also lower.
That’s why economists such as Betsey Stevenson of the University of Michigan believe that layoffs in these sectors won’t be as significant as they have been in past recessions.
White-collar workers may not be faring so well, as a string of recent high-profile layoff announcements suggests.
In total, the tech industry announced 9,587 U.S. job cuts in October, the highest monthly total since November 2020, according to Challenger, Gray & Christmas, a consulting firm.
In the banking sector, a sharp decline in revenue from debt trading and issuance has put investment bankers on high alert. Goldman Sachs is embarking on its biggest round of layoffs since the pandemic began, with plans to cut several hundred positions. Citigroup cut dozens of jobs in early November, while cuts that are expected to eventually reach around 200 began at London-based Barclays, according to people familiar with the moves.
Cuts to tech and finance may be dramatic, but no one expects a massive wave of layoffs, as happened in 2008. Tech also only accounts for about 2% of all jobs in the states. United States, according to ADP Research Institute.
Additionally, according to Tom Gimbel, CEO of Chicago-based employment agency LaSalle Network, many information technology workers who get pink slips at big companies could end up being hired by smaller companies. who have struggled to attract such talent.
“The good news for small and medium-sized businesses is that they don’t have to pay the same exorbitant salaries that big businesses used to pay,” he said.
The consequences of the pandemic have also made it harder for companies to retain workers, with employees appearing more willing than in the past to seek better opportunities elsewhere.
One in five American workers between the ages of 25 and 54 said they had actively applied for new positions in the past month, according to the latest high-frequency data from business intelligence firm Morning Consult.
“There’s a big talent shuffle going on around the world,” LinkedIn CEO Ryan Roslansky told Bloomberg Television. “People are trying to find new jobs and opportunities and improve their skills.”
Although Federal Reserve officials appear poised to begin easing the pace of interest rate hikes, all bets will be off if inflation persists. This is especially the case if confident workers seek higher wages, which fuels higher prices. The resulting rate hikes by the Fed and other central banks could send their economies into a deep slowdown, and companies would likely resort to mass layoffs as their profits shrink.
But like the United States, jobs are holding up in many economies that have raised rates aggressively. New Zealand’s unemployment rate remains near a record high while wages have risen the most since the series began. Australia has been forced to relax migration requirements to allow an additional 35,000 workers to enter the country each year.
“The big ‘reopening’ has fueled demand for workers in the service sector, especially hospitality, while manufacturers are still scrambling for workers to catch up on their order books,” said Frederic Neumann, chief economist for Asia at HSBC.
“Employers who are understaffed over the past year are also likely to be reluctant to aggressively cut payrolls, fearing they will struggle to rehire once growth resumes,” Neumann said.
“In other words, labor markets could prove much more resilient in this cycle than in the past, leaving little room for central bankers to become dovish once growth begins to falter.”
–With help from Tom Metcalf, Myriam Balezou, Andrew Atkinson, Vince Golle, Sabah Meddings and Craig Stirling.
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