For a long time, it seems businesses couldn’t stay fully staffed no matter how hard they tried. Now, many companies are slowing down hiring, ceasing hiring altogether or laying off workers in preparation of an economic recession. As a result, unemployment claims have reached an 8 month high. Let’s take a look at what brought us to this point.
Economic Uncertainty
The economy is in a weird place right now. Inflation has skyrocketed. Interest rates have followed. As a result, unemployment is on the rise. An article written for aljazeera.com states, “Unemployment claims are rising as more companies announce job cuts amid increasing fears of a recession. The trend may continue as the Federal Reserve ratchets up its fight against rampant inflation with some of the largest interest-rate hikes in decades, which could ultimately curb demand for workers.” The instability has forced companies to reevaluate their financial situation and prepare for a worst case scenario type situation.
The Labor Market
What was once a hungry labor market with an excess of job openings is slowly becoming the opposite. Many companies are preparing for a recession by decreasing the number of job opportunities within their company. Some have even been forced to lay workers off.
The above mentioned article goes on to say, “In recent weeks, a slew of tech companies — including giants like Alphabet Inc.’s Google, Apple Inc., Meta Platforms Inc. and Microsoft Corp. — have said they’ll slow hiring in a time of global economic uncertainty. Firms in other industries like crypto, housing and autos have also said they’re letting workers go.”
A Quick Change
Despite a global pandemic, the labor market has remained extremely resilient throughout the last couple years. However, things are quickly changing. The Federal Reserve is expected to raise interest rates for the fourth time this year. Their hope is to slow down the economy enough to control inflation without leading to a recession and widespread job loss. However, this is a difficult balance to achieve and the economy could still easily spiral into a recession.
Self-Fulfilling Prophecy
Fears of a recession can be self-fulfilling. When companies and families start preparing for the worst, it can be enough to trigger an economic downturn. Americans have continued to consistently spend money despite price increases. It’s what has kept the economy going. However, if job losses continue to pick up because of recession fears, the heavy spending will slow and the economy will start to weaken. This will also happen if families start to slow their spending because they’re worried about losing their jobs. Again, it’s a delicate balance.
The fact is, the labor market is completely different than it was even a couple months ago. Companies are listing open positions on their websites when they’ve implemented hiring freezes. While mass layoffs aren’t currently happening, they could be on the horizon. Keep an eye on the economy and watch for new developments. It will help you prepare yourself and your family for the future.