The global economy is stuttering, and some of the world’s biggest names are already laying off thousands of employees. But there’s a glimmer of good news: This time around, workers have a better-than-usual shot at holding onto their jobs if recession arrives.
Almost three years after Covid-19 hit, companies around the world still complain that they can’t get the talent they need. They worry about labor shortages that will likely last beyond not just the pandemic, but the next downturn too. Deeper forces, such as changes in population and immigration, are shrinking the pool of workers they can hire from.
All of this means that despite weakening demand for their goods and services, many businesses are looking to retain or even add staff, rather than let them go — hoarding labor that they know they’ll need once the economy starts accelerating again.
There have been plenty of high-profile layoff announcements lately, from the likes of Amazon.com Inc. and Goldman Sachs Group Inc. But they may prove to be outliers. That would make the coming economic slowdown very different, and in some ways less painful, than the ones the world has gotten used to.
Bloomberg Economics projects that unemployment will rise by about 3.3 million across developed economies by 2024, a period in which most are expected to suffer recessions. While that’s a lot of lost jobs, it’s fewer than the 5.1 million shed in the relatively mild downturn that began in 2001, and is dwarfed by the scale of the past two global slumps.
What’s more, the starting point for employment is historically strong. The jobless rate in major developed economies, at 4.4% in September, is the lowest since the early 1980s, according to the Organisation for Economic Cooperation and Development.
This time around, white-collar industries including business services, tech, banking, and real estate, where staffing numbers are far above pre-Covid levels and layoffs have already begun, may be more vulnerable to job cuts.
From his perch as chief executive officer of ManpowerGroup Inc., a global staffing agency, Jonas Prising expects to see companies trying to keep employees on their books even as business slows down.
“They’ll absorb a drop in demand for their products and services but maintain their workforces,” he says. “They’re not going to be hiring. But I think we can expect payrolls to stay healthy.”
In the US, at least, that’s the message central bankers are hearing as they try to bring down sky-high inflation and reduce demand in the economy and the labor market without causing a recession.
“Business contacts are telling us that they plan to keep workers even as the economy slows because it was just so difficult to attract them and retain them over the last few years,” Cleveland Federal Reserve Bank President Loretta Mester said on Nov. 10. “That would be a good thing in the sense that the unemployment rate would not have to go up as much.”
The Fed will get the latest snapshot of how much progress its making on Friday when the government releases its payrolls report for November. Economists surveyed by Bloomberg predict an increase of 200,000 jobs.
In the UK — which is already in recession, according to most economists and the government — more than half a million jobs are forecast to go in the next two years. However, that would merely raise the unemployment rate to 4.9%.
Even as the government’s fiscal watchdog issued its warning forecast on Nov. 16, industry leaders were grappling with staff shortages in sectors such as hospitality and retail.
“We all know that every business is facing additional costs because labor is so much tighter,” said Sharon White, chair of the John Lewis Partnership. “I think there’s a much bigger conversation about the labor market and jobs and how we attract people back into work.”
As for the euro area, joblessness is at an all-time low in the history of the single currency. Even with a recession probably underway, official European Union forecasts released at the end of October show employment growth continuing through 2024 — albeit with a significant 2023 slowdown — and joblessness rising only moderately.
Officials attribute that to government measures supporting job retention, along with aging populations. Plausibly, greater protection for European employees constraining staff cuts by companies might also help.
The world’s worst public health crisis in a century certainly disrupted labor flows, leaving countries like Australia seeking to boost immigration. And it shrunk the workforce, with labor market participation in the US and UK still below pre-pandemic levels.
New Zealand is among the economies feeling a hit. Central bank Governor Adrian Orr said the shortage of workers means it’s all about “labor labor labor.”
“It’s an incredibly competitive market,” Orr told reporters Nov. 23 after raising interest rates by a record 75 basis points. “The churn in the labor market is incredibly high. There’s huge competition in the market.”
The global pandemic not only claimed more than six million lives, it has left millions more saddled with long Covid or other disabilities that make them unable to work. Many people also opted to take early retirement, tend to their families or get better educated.