How Will a Recession Affect my Career?

What is a recession? 

The global and US economy post-covid has proven to be volatile and ever-changing, and the current state is no exception. The most recent recession in the US ended in April 2020, and though it was short-lived, there are concerns that a possible recession could be around the corner over the next year in the US. Before examining what current factors are pointing to a possible recession and how it could affect your career, it’s essential to identify the factors that might tip off this next recession.  

Where is the economy right now?

Heightened gas prices have become a major concern and one of the biggest factors affecting the current state of the economy. Increasing gas prices are adding to existing inflationary pressure in the economy, also evidenced by increasing food and consumer goods prices more generally, because of supply chain shortages, reduced shipping capacity and cost, and global supply chain instability. 

Enduring supply chain disruptions have become a huge source of concern for Americans. On the one hand, shortages of various products ranging from everyday products like tampons and baby powder to industrial inputs like computer chips and lumber have amplified inflation. On the other hand, US consumers have about $2.7 trillion more in savings – yes that’s how much money we pumped into the economy during the pandemic and its aftermath – than if the pandemic had not happened. As a result, many more households are likely to “absorb rising prices,” as evidenced by the rush of American tourists back to Europe this summer despite significantly higher travel, hotel, and food costs.  

A sign of current economic strength is the plentiful jobs available, but the current labor pool is not necessarily eagerly searching for jobs. In a tight labor market, negotiating power is currently tilted towards employees – the shortage of workers has negatively affected businesses’ ability to hire enough staff.  Businesses have been forced to absorb not only rising prices but also been forced to shorten their hours due to the lack of available workers. 

What are economists saying about a possible recession?

There are varied expert opinions on where our economy is headed in terms of a possible recession. Bruce Kasman, the chief economist at JPMorgan Chase, has placed the probability of a recession occurring in the next twelve months at 35 percent. Similarly, global economist Ethan Harris at Bank of America predicts a 40 percent chance of recession, with economic growth halting almost completely in the second half of 2023. Alternatively, the head of the U.S. economic forecasting team at Deloitte, Daniel Bachman, estimates the chances of a recession at about 15%.  While there isn’t a clear consensus on where the economy is headed, being aware of what a recession could do to your career is the first step towards proactively safeguarding your future. 

How can a recession affect career opportunities?

Wage levels are affected greatly during a recession.  In this current labor market in which employees are hard to find and hire, companies have upped wages to increase hiring and retention. The opposite happens during a recession; companies need fewer people which results in layoffs, and a lack of job opportunities means businesses and employers are back in the driver’s seat and can lower wages because their jobs are in high demand. Wages are based less on an employee’s performance, due to the lower overall productivity during recessions. As the power dynamic shifts in favor of employers, they can keep wages low, and with a reduced set of job options, upward mobility is suppressed for workers. 

With a reduced number of jobs during a recession, labor mobility also diminishes. Labor mobility is the “ease with which laborers are able to move around within an economy and between different economies:” increased labor mobility is then a sign of economic good health, and good for employees’ wages and upward mobility. Right now, labor in the US is spoiled for choice with the number of jobs available that employers are struggling to fill. Recessions increase instability, causing companies to hunker down in the face of increased uncertainty. Recent hiring freezes and layoffs at technology companies – huge beneficiaries of both pandemic-fueled business growth and stock market ebullience – are initial signs of increased company nervousness in anticipation of a recession. 

Recent business behavior and the decrease in stock market valuations seem to indicate anxiety among investors and businesses about what lies ahead. For individual careers, the implications are twofold: savings will grow at a lower rate or devalue with further stock market corrections and inflation, and fewer job options will mean lower compensation and mobility. Medium-term career planning and how you position yourself in these changing conditions becomes even more important. ideamix coaches act as a resource for a wide variety of clients – men and women; young, mid-career, and older professionals; working and non-working individuals – to help them craft a viable career path and achieve their career goals. Explore working with an ideamix coach for yourself today.