Coming into 2022, the majority of those who follow U.S. macroeconomic data were aware that economic growth and labor market improvements would probably decline. The Fed was anticipated to raise rates as the government’s fiscal stimulus was being reduced. But when it actually happened, we were all very alarmed. Recession-related news headlines increased, and discussions about it on LinkedIn’s feed increased ten times over the previous year.
That level of concern was not and is still not justified by the economic indicators. Some of it—in particular, nonfarm employment—indicates a healthy labor market. Other information suggested the expansion had slowed, including the JOLTS survey, the unemployment rate, applications for jobless benefits, and the LinkedIn hiring rate. However, none of those data points demonstrated the sudden and drastic decline that U.S. recessions are known for. In the first 10 months of a typical American recession, the unemployment rate increases by 1.9 percentage points; in the first 10 months of 2022, it has decreased!
If anything, the near-term picture has gotten a little better during the last few months. Since June, the tightening of financial conditions has slowed. Instead of abruptly turning off the taps, that gives businesses plenty of time to adjust employment and spending decisions. LinkedIn’s Workforce Confidence Index has remained constant since declining in the spring. The spring saw a fall in the LinkedIn Hiring Rate, while the summer saw a stabilization. Despite the fact that hiring has started to decline, it is still not at alarmingly high levels. The number of applications for unemployment insurance is down from a few months ago, and just 31% of respondents to a recent LinkedIn Workforce Confidence survey said they were worried that their employer or company would be considering budget cuts or layoffs.
Is the shore open then? Not exactly. The inflation issue continues to worry the Federal Reserve. They predict relatively slow (but positive) economic growth and a significant increase in unemployment over the next 12 to 15 months in their estimates under “appropriate monetary policy.” And that’s the upbeat interpretation. Some well-known economists contend that a full-blown recession is necessary for the Fed to achieve their inflation goal before the economy contracts and unemployment rates significantly rise.
Both of the most recent recessions—the ones brought on by the financial crisis (2008–09) and Covid (2020)—were unusually bad. There is no specific reason to think that the next recession’s potential severity will be comparable to either.
However, even slight downturns or recessions can be quite painful. For instance, during the comparatively mild labor market downturns of 1990–1992 and 2001–2003, the unemployment rate rose from peak to trough by around 2.5 percentage points. Today, a slowdown of such magnitude would result in a 4 million person increase in unemployment. That rise in unemployment would be accompanied by increased layoffs, protracted unemployment, severe emotional pain, and loss of financial security. The Fed’s not quite recessionary anticipated increase in the unemployment rate would likely result in an additional 1.5 million unemployed people, which is still a significant number.
This may appear rather worrisome if you’re looking for work. Less than half of those polled by LinkedIn’s Workforce Confidence Index said they felt prepared for an economic downturn, and 85% indicated they were concerned about price rises and inflation, so we know that economic worries are on everyone’s minds. Business-related financial issues are also on everyone’s mind. According to a recent study conducted by YouGov on behalf of LinkedIn, U.S. CEOs believe boosting employee retention to reduce the cost of new hires as well as financially planning for challenging times ahead are their top company goals over the next six months.
Thus, this is my advise. Don’t worry first. Every month, millions of people were able to start new jobs, even in the depths of the 2008–2009 and 2020 recessions. The second piece of advise is to diversify your possible opportunities and invest in your professional network. If you do lose your work or if your industry is going through a difficult time, there can be better chances in other areas or in jobs that are connected but not the same. During the epidemic, we observed a record number of career changes on LinkedIn. You should also invest in your human capital in addition to your social capital (people you know) (what you know). You will become more resilient and adaptive by investing in your knowledge and skills. Our data at LinkedIn shows that since 2015, the required skill sets for occupations have shifted by almost 25%. This number is projected to double by 2027. Last but not least, if you are fortunate enough to have a variety of employment options, you might choose to explore more stable positions now than you did last year.
I also have some recommendations for you, employer. Economic downturns are transient. Recessions following World War II often lasted shorter than a year. Maintain your adaptability. You must be able to adjust rapidly in unpredictable times, and you can only do that if you are aware of your surroundings and exposure. Therefore, educate yourself. Utilize the information you have available. Finally, make a decision. Rarely do we get the complete picture or fully see how everything fits together during times of turmoil, but don’t allow that stop you from making choices and acting. Double down on your plan; avoid becoming paralyzed.
In a perfect world, the Fed’s prediction would be inaccurate. Perhaps the supply-chain constraints that are contributing to the inflation will loosen up just enough to allay the Fed’s concerns about the dangers to its mandate for price stability. Or maybe all it will take is a hard but relatively moderate press on the monetary-policy brakes to bring inflation back under control. If so, we might have a situation similar to that of Goldilocks, with plenty of employment possibilities, low inflation, and strong inflation-adjusted income increases for Americans. Hope we make it there. But even if the worst case scenario materializes, there are steps we can all do right away to protect our careers.