If you’ve been looking for a job lately, you may be a little confused by the economy.
Economists are increasingly predicting a recession in the coming year thanks to a range of economic signals, including falling gross domestic product, falling stock markets and cooling consumer spending. And the Federal Reserve has deliberately raised interest rates to fight inflation, a move designed to further dampen consumer demand. In addition, there have been a series of high-profile layoffs and hiring freezes at some of the nation’s most valuable companies.
But the job market — usually a leading indicator of a recession — remains incredibly strong, according to data across the country. There are 11.3 million job vacancies, which is almost two jobs for every job seeker.
In May, 4.3 million people quit their jobs. This number is close to the record set at the end of last year, according to data from the Bureau of Labor Statistics that go back over 20 years. That’s not the kind of behavior you’d expect in a recession, when companies typically freeze hiring and cut their workforces while workers stay put. Employers also did their best to retain their existing workers, raising wages, adding benefits and keeping layoffs around historic lows. If there’s a recession coming, it’s very strange that it doesn’t seem to affect employment.
Of course, if you’re thinking about joining the Big Resignation, all of these mixed signals might give you pause. We asked a number of industry experts and economists about 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?
Currently, economists predict that the chances of a recession in the next year will be about one in three. The committee of economists that officially declares a recession, the National Bureau of Economic Research (NBER), has not done so, but they often don’t until a recession is well underway. They define a recession as “a significant decline in economic activity that spreads throughout the economy and lasts for more than a few months.”
Many consider two consecutive quarters of negative gross domestic product to be a sign of recession. So far, GDP has declined in the first quarter of 2022, but estimates for Q2 don’t come out until later this month — so even if those numbers look bad, that doesn’t necessarily mean a recession is in the works.
As Vox’s Madeleine Ngo wrote earlier this month,
But even if the next GDP report this month shows a contraction in the second quarter, many economists may not count it as a recession because the labor market remains strong. And while most recessions identified by the NBER meet this criterion, some do not: in 2001, for example, GDP fell in the first quarter, rose in the next quarter, and then fell again in the third quarter.
Perhaps most importantly, a rapid slowdown in hiring has yet to materialize, raising serious doubts about whether a recession is indeed coming. 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 is no recession in hiring,” Marc Cenedella, CEO of resume writing service Leet Resumes, told Recode.
“Economists say, ‘All our instruments are telling us there’s a ghostly ghost recession coming, but nobody in the real economy can see that yet,'” he said. “We had a once-in-a-century event, and it’s going to mess up your instruments.”
Okay, but if there is a threat of recession, why are there so many job openings?
Vacancies remain in large part because companies struggled to stay fully staffed during the Great Resignation. In the last year, it has been very difficult to recruit and retain employees, in different industries, age groups and ranks. Employers also don’t want to repeat what happened at the start of the pandemic: laying off droves of workers only to struggle to rehire them soon after.
“There’s a tendency to not want to overcorrect, especially given the challenges organizations have had around hiring in the last year alone,” said Lexi Clarke, head of people at compensation data company Payscale. “This is the time to be proactive and think about the long-term impact of talent decisions.”
Structural problems like an aging and departing workforce, unstable and expensive childcare and low birth rates mean there are fewer people in the workforce to begin with – something that can’t be fixed quickly. There has also been a cultural shift that has kept layoff levels above what would be expected from a labor shortage, as people look for less tangible things from their jobs, like balance and meaning between work and life.
Meanwhile, while consumer spending growth has slowed due to inflation, it remains high, thanks in part to lagging demand and savings. That means companies are still seeing demand for their goods — demand they can’t meet without enough employees. This labor shortage, along with supply chain issues and material shortages, mean that many companies have never been able to meet existing needs.
“They produce goods where there is known demand for goods, they provide services where there is known demand for services,” says Jim McCoy, senior vice president of staffing firm ManpowerGroup. “Hiring is much less speculative.”
Can I use my lack of employment to get more money or better benefits?
Not only are employers still hiring, they also offer higher wages, signing and retention bonuses, and benefits.
ManpowerGroup’s clients, which include Fortune 500 companies, offer things like tuition reimbursement, telecommuting, gas subsidies and four-day work weeks. McCoy said these benefits are not limited to one industry and include everything from healthcare to hospitality, from technology to retail. “The opportunity cost of not filling those jobs is so high that they’re willing to put more money on the table for applicants,” he said.
A recent employee benefits survey by the Society for Human Resource Management found that employers this year said 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 businesses have returned to more normal conditions following the introduction of the COVID-19 vaccine, suggests that these benefits may become permanent settings available in the future,” the report said.
Now is as good a time as ever to try to get better pay and benefits from your current employer — or a new one.
So is it ok for me to quit 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 plenty of open jobs and companies ready to hire, and research shows that the situation will remain that way, at least for the foreseeable future.
Half of US employers plan to increase employment in the third quarter, while only 12 percent expect to shrink their workforce, according to a ManpowerGroup survey. This is an even stronger hiring advantage than last year. Business-focused think tank The Conference Board found that while most company executives predict a recession by the end of 2023, they also say attracting and retaining talent is part of their main long-term growth strategies.
High-profile layoffs, hiring freezes, and hiring slowdowns at tech companies — Coinbase, Meta, Netflix, and Tesla are just a few of those dealing with these slowdowns — aren’t necessarily cause for concern because they account for only a small portion of the economy’s jobs, even if make a lot of headlines.
“There’s a dichotomy in the labor market between high-risk, high-growth technology jobs … versus the majority of workers in the economy being these other firms and small businesses and nonprofits,” said Sean R. Gallagher, executive director of the Center for the Future of Higher Education and Strategy of talent from Northeastern University. “There are sectors that just keep growing and will structurally need more workers.”
When will we be back to normal?
What is normal anymore?
A lot of what’s been strange about the current situation isn’t so much that the economy is collapsing, but that it’s not growing as fast as it was.
“For a lot of people, this slowdown or return to normal may be more painful than the data suggests, just because we’ve been at this breakneck speed of economic growth in 2021,” said Luke Pardue, payroll economist, HR and use software company Gusto .
Continued recession fears will largely depend on whether the Fed is able to negotiate a so-called soft landing: raising interest rates enough to dampen demand and counter inflation, but not so much that companies have to lay off workers. The problem will come if demand is so reduced that companies no longer sell enough to keep hiring people.
For now, that’s not really happening.