As February winds down, the economic and employment outlook for 2023 continues to give us whiplash. On one hand, you have the “stunningly strong” January jobs report, which showed an increase of 517,000 positions, crushing market estimates of 187,000 and December’s gain of 260,000. Meanwhile, unemployment rates continued to decrease from 3.6% to 3.4% — the lowest levels on record since May 1969.
On the other hand, you have major corporate layoffs that don’t seem to be letting up, first hitting the tech sector, but now spreading to more traditional industries such as entertainment (Disney), accounting (KPMG), consulting (McKinsey), and publishing (HarperCollins).
As confounding as these conflicting headlines can be, we’re here to dispel some of the myths that surround our current employment landscape.
How the Jobs Market Has Stayed Robust
Despite aforementioned high-profile layoffs, the labor market remains tight as companies continue to regroup after the global pandemic. January saw industries such as professional and business services, leisure and hospitality, and healthcare bring in new workers. Job growth last month was also widespread, with increases in construction, government, manufacturing, and transportation and warehousing.
Other clear indicators of a healthy employment forecast — wage growth and labor force participation (the number of people working or actively looking for work) — are also both on the upswing, suggesting that companies that can afford to invest in their employees will be able to source and keep the best talent.
How then to square these stats with the headlines announcing staff cuts at household name companies?
It seems that in the wake of the Great Resignation and quiet quitting, we now have entered the era of loud layoffs. It’s hard to ignore the news when major companies like Amazon, Meta, and the Elon Musk-led Twitter announce staff cuts.
However, to be clear, overall layoffs remain historically low. Throughout 2022, the monthly layoff rate hovered around 1% of the workforce, or approximately 1.4 million people, which is even lower than pre-pandemic numbers.
Many experts believe that these so-called loud layoffs have caused a ripple effect amongst CEOs and a knee-jerk response to the recalibration that is still taking place after the global economy abruptly shut down in 2020. The tech industry in particular is righting the collective ship after a hiring spree that began in 2009 and only intensified during our years-long shutdown that saw an exponential rise in how people use technology. As human resources expert Josh Bersin calls it: hiring ahead of revenue, the concept that hiring leads to growth.
A smarter solution? Taking a strategic approach to recruiting, retention, reskilling, and job redesign that encompasses a full 360-degree view of the employee experience at your organization. By building in supportive processes along the way rather than taking a “more is more” hiring standpoint, you can avoid the missteps of these companies and be able to build and retain solid teams that sustain enterprise growth.
How a Hot Labor Market Affects Inflation
January’s blockbuster hiring figures underscored the challenges currently facing the Federal Reserve, which sees a cooler labor market as a way to tame inflation and avoid a recession. By raising interest rates — which Fed officials did so for the eighth time in a year earlier this month — policymakers hope to force businesses to pull back on their spending, including hiring.
However, it seems that the demand for workers remains too urgent, at least for now, putting the Federal Reserve in a decidedly uncertain position. More economists and investors now hold a sunnier view on the economy, pointing to the resilient jobs landscape, the stabilizing housing market, and consumer spending confidence as markers that we may be headed for that much-heralded and hoped for soft landing.
We’ll continue to track these developments and how they relate to the recruitment industry throughout Q1 and the rest of the year.
Seeking the Great Stabilization
We believe that what employers should be aiming for now is to build more balance within their organizations to offset the ups and downs of the economic and employment outlook. This is achieved through strategic planning, careful and continuous assessment of your company goals, and a smart plan of action for recruiting the right people.
With a trusted recruitment partner on your side, your C-suite can be its strongest, giving your company the competitive edge it needs in today’s volatile economy. With the recruitment industry’s deepest databases, advanced technological resources, a proven comprehensive process, and a team of executive search and industry experts, 20/20 Foresight is here to help future-proof your organization.