Dubai: Khansa Al-Zubair
The picture of the global economy is faltering and big companies are laying off thousands of employees, however there is good news, which is that this time around, employees have a better chance of keeping their jobs in the event of a recession.
For almost 3 years since the pandemic erupted, companies around the world continue to complain that they can’t get the talent they need and worry about a staffing shortage that will likely last beyond the next recession and beyond the pandemic.
What all this means is that even though demand for goods and services from these companies is weak, many are looking to keep existing staff or hire more, not let them go, stockpiling the manpower they will need once the economy kicks in. to take off once again. That would make the next economic slowdown very different, and in some ways less painful, than the slowdown the world has become accustomed to.
Recently, there have already been many announcements of layoffs from large companies, such as Amazon, Goldman Sachs and others, but it could turn out to be different cases.
Bloomberg Economics expects unemployment to rise by about 3.3 million in advanced economies by 2024, during which time most are expected to experience a recession, and while this represents a large number of job losses, it is less than 5.1 million in the relatively mild one that began in 2001, and is dwarfed by the scale of the last two global recessions.
Furthermore, the starting point for employment is historically strong; Where we find the unemployment rate in major advanced economies is at 4.4% in September, the lowest since the early 1980s, according to the Organization for Economic Co-operation and Development.
This time around, areas of employment, including business services, technology, banking and real estate, may be more vulnerable to job cuts. These are areas where employee numbers are well above pre-Covid levels and layoffs have already begun.
As for recruiting companies’ views on the matter, Jonas Prissing, CEO of global recruiting agency Manpower Group, expects companies to look to keep employees on their rolls even if their business slows down.
And Loretta Mester, president of the Federal Reserve Bank of Cleveland, said Nov. 10, “Business contacts tell us they plan to keep their people even as the economy slows because it’s been very difficult to attract and retain them over the past few years,” noting which would be a good thing, in the sense that the unemployment rate will not increase by the same amount.
The Fed will receive the latest snapshot of its progress on Friday when the government releases its November payroll report.
Economists polled by Bloomberg predict an increase of 200,000 jobs. In the UK, which is already in a recession according to most economists and the government, more than half a million jobs are expected to be created in the next two years, but this will only push the unemployment rate up to 4.9%.
And although the government’s financial watchdog issued its cautionary outlook on Nov. 16, industry leaders have been grappling with staffing shortages in sectors such as hospitality and retail.
As for the Eurozone, unemployment has reached an all-time low in the history of the single currency.
Even with a probable recession, official EU forecasts released in late October show continued growth in employment through 2024, albeit with a significant slowdown in 2023, and the unemployment rate rising moderately.
Officials attribute this to government support measures for job retention, as well as an aging population, and perhaps greater protections for European employees could also limit layoffs by companies.
The effects of the pandemic
To be sure, a health crisis the world hasn’t seen in a century has hampered the flows of expats leaving countries like Australia seeking to ramp up immigration, it has also led to the downsizing of the workforce and market participation Labor in the US and UK remains below pre-pandemic levels. .
New Zealand is among the economies hit and its central bank governor, Adrian Orr, said a shortage of workers meant it was all about jobs.
“It’s an incredibly competitive market,” he told reporters Nov. 23, after raising interest rates by 75 basis points.
In addition to the fact that the pandemic has claimed the lives of more than 6 million people, it has also left millions more burdened with “Covid” for long periods or other disabilities that make them unable to work.
Many people have chosen to leave their jobs to retire early, take care of their families or study full-time.
According to a recent study of labor markets in the United States, Canada, France, United Kingdom, Germany, Australia, Japan and China conducted by Glassdoor and Indeed, without measures such as continued immigration, an aging population will reduce the workforce in many countries and this is prompting some companies and governments to think long-term.
Indeed, Australia has reset its strategy, easing immigration requirements to allow up to 35,000 more workers to enter the country each year.
“We need to make sure we manage the downside so that we are well positioned to face the upside,” Cynthia M. Sanborn, chief operating officer of Norfolk Southern Corp., recommended to Wall Street analysts on Oct. 26.
areas of shortage
There is a severe labor shortage in some of the areas hardest hit by the pandemic. Payrolls in the US entertainment and hospitality industries are over a million times lower than they were before the pandemic, and the number of people working in restaurants is also lower.
This has led some economists, such as Betsy Stevenson of the University of Michigan, to believe that layoffs in these industries will not be as large as in previous recessions.
And it may not seem that way in the corporate jobs sectors, as Elon Musk, the new CEO of “Twitter” has made a significant reduction in the number of employees, and the CEO of Meta platforms, Mark Zuckerberg, has laid off some 11,000 employees.
Amazon will lay off a similar number in 2023, while HP will cut up to 6,000 jobs over the next three years. The tech sector announced 9,587 U.S. job cuts in October, the highest monthly total since November 2020.
In the banking sector, a sharp drop in revenue from deal-making and debt issuance put investment bankers on alert.
Goldman Sachs embarked on its largest round of layoffs since the start of the pandemic, with plans to cut several hundred positions. Citigroup cut dozens of positions in early November, with expectations of around 200 at Barclays in London, according to people familiar with the moves.
Benefits for smaller companies
While job cuts in tech and finance are massive, no one expects a massive wave of layoffs like they did in 2008. Plus, tech accounts for only about 2 percent of all US jobs.
Another scenario is that former IT workers who have been laid off by large companies may be hired by smaller companies who have had a hard time attracting such talent and are now getting it at lower wages.
The fallout from the pandemic has also made it difficult for companies to keep their employees, as employees seem more willing than in the past to seek better opportunities elsewhere.
According to the latest data from Morning Consult, one in five American employees, ages 25 to 54, applied for a new job last month.
US Federal Reserve shares
Although Fed officials appear ready to start easing the pace of rate hikes, all bets are off if inflation persists. This is especially true if skilled workers seek higher wages, which leads to higher prices in the markets.
Interest rate hikes by the Federal Reserve and other central banks could push their economies into a deep recession, forcing companies to resort to massive layoffs as their profits dwindle.
But as in the US, jobs have held steady in many other economies which have hiked interest rates sharply; New Zealand’s unemployment rate remains near a record low, while wages have risen to the fastest since the series of rate hikes began.