While record inflation and interest rates point to a possible economic downturn, employers are still questioning if they will see a recession in 2023 — but the answer is not a simple yes or no.
In an effort to combat inflation, the Federal Reserve has brought interest rates to a 15-year high, raising the target range between 4.25% and 4.5%. There likely will be no reductions until 2024. Meanwhile, it will be more expensive for businesses to borrow money through loans and lines of credit, while credit card debt, car payments and mortgages will become harder to pay off for everyday consumers. The Fed hopes this lowers overall demand and spending, reducing the supply of money in circulation, which in turn usually lowers inflation rates.
But this forced drop in growth and spending will not necessarily equate to a traditional recession; the U.S. economy is still experiencing historically low unemployment and has over 10 million job openings at the end of the year. Growth is not completely off the table, even if employers are debating scaling back hiring plans in 2023, says Allie Kelly, chief marketing officer at Employ, a talent acquisition resource for employers.
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"Businesses today are experiencing one of the most challenging labor markets of our time," says Kelly. "For companies of all sizes, navigating the current hiring environment requires nothing less than resilience, determination and adaptability."
An Employ survey found that 46% of HR decision-makers feel their company's hiring trajectory is being impacted by a
Yet, the same survey found that 67% of employers are adjusting salaries for inflation, and 63% of recruiters are seeing salaries increase for new hires. In other words, while company growth may be slowing down in 2023, employers still want to attract and retain talent with competitive pay — which is a not typical feature of a recession.
EBN spoke with Kelly to get further insight into today's uncertain economic landscape, and how employers can respond.
How does this recession differ from previous recessions?
The Fed is hiking up interest rates in an effort to ultimately curb inflation. However, the labor market will continue to be tight no matter the impact of the hike in interest rates. While we don't know the long-term impact of interest rate hikes on the labor market, it is ultimately a supply-and-demand challenge for qualified talent.
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Job seekers today are still being selective, with recruiters reporting that 40% or fewer job offers are accepted. However, if we do see a recession, combined with a tight labor market, that may change as workers will not have as much leverage to demand what they want. We may see job seekers willing to trade workplace happiness (like working remotely, DEI and advancement opportunities) for economic security and stability.
Does this officially mark the end of the Great Resignation?
According to Employ's latest report, the top motivation for employees leaving a job is pursuing a higher salary or seeking a more flexible work arrangement. Unemployment or fear of becoming unemployed was rated by only 10% of employees as motivation to switch jobs. As talks of the recession continue to dominate the hiring landscape, it remains to be seen whether the Great Resignation will continue and more employees leave their positions in search of something more stable, or stay put in their roles longer than they would have based on economic headwinds.
How should employers approach 2023?
Navigating the paradox of a softening hiring environment and a historically tight labor market makes it difficult for companies to prepare for the coming year. Looking ahead, employers should emphasize three recession-proof priorities: quality candidates, compliance, and automation and workload reduction — doing more with less.
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Today, 61% of HR decision-makers indicate their top priority in the coming year is improving candidate quality, per Employ's latest report. In the face of economic turbulence, employers must double down on their investments in applicant tracking and candidate relationship management systems to automate tasks, increase efficiencies and more effectively connect with job seekers.
Preparing for turbulence of this magnitude requires companies to create a more scalable recruiting function and to be more agile and flexible within their talent acquisition efforts. With current levels of inflation, some companies may look for ways to save, but they must also focus on filling high-impact roles that continue to grow their top line.
