Entering into 2023 might be one of the most uncertain years in the last several decades. The receding of Covid, China just coming out of their lockdown means a new force playing on top of the strained relationships of world powers through an ongoing Ukrainian war, ever-increasing inflation, and the 800-pound gorilla in the room, an impending recession that experts swear by.
With the number of unknowns playing on the minds of talent leaders, it's a natural struggle to plan for the coming year, with mounting pressure from management.
Yet there are always a few reliable trends to lean on, with a strong understanding of the market and the forces playing on it. That’s what we’re discussing today.
Recessions mean layoffs, absolutely. Studying past recessions tells us unemployment rates rise by a factor of ~20%, and recruitment rates drop by ~30% during the peak of a recession. But that isn’t the full story. In fact, these numbers vary significantly between different industries, each affected to a different degree by the economic downturn, if one occurs. E.g. F&B and Retail tends to suffer the least (statically actually growing during the downturn as displaced workers now need somewhere to work). I quote Lee lacocca, an industrial idol of mine from his famous words “And when times are tough, be in the food business, because no matter how bad things get, people still have to eat.”
But that’s about a more generic downturn.
This one’s special, we’re just recovering from a global pandemic, a market reset is ongoing in so many industries. A prime example, the travel industry. Hit so hard by the pandemic, the resumption of global travel, leaves the industry with so much making up to do. Simply to get back to its default state, it needs to grow multifold. This overpowering market correction shadows even a recession. Look at the jobs on Expedia and Booking.com, an industry slated to grow right through the any impending recession.
Even for those affected, the correction from a downturn lasts no more than a year, before which hiring must scale up to resume usual bull markets and growing economies. Hiring must rise to meet the challenge, and those that laid off too heavily during the downturn have the lower hand when it comes to restaffing.
Pays for industries like tech, shot up in the last few years. We first saw it hit tech talent, people I personally knew were moving between roles for no less than 150% to 200% raises within a short period of time. We then saw this exact thing happen for recruiters who could find this talent.
Why? Bull markets and well performing indices pumped more capital into the market, with low-interest rates, and financing readily available. Everyone knows this. As we go into a bear market, and indices perform worse, we’re already seeing a tightening of the capital markets, meaning less money to spend for companies. With no other factors, it would be safe to assume this means the end of pay hikes.
But with the increasing amount of turnover around the world and in South East Asia specifically, coupled with the rising inflation causing a rise in cost of living, companies are forced to address these challenges through compensation measures. So much so, in fact indicating that pay hikes are actually likely to rise in the coming year.
Doomsday is upon us, we must all return to the office. Twitter’s called everyone back, Google’s called people back, and Tesla’s needed employee’s back in the office pronto.
Don’t be so easily swayed by the loudest people in the room. Big tech in the US accounts for only 0.3% of total employment. For the rest of us, remote work is likely to stay. Why? Qualitative aside, it just makes fiscal sense for companies. Lowered fixed costs of rental expenses, being able to hire talent equally qualified at less than half the price, sitting across the world, and being able to hire from non-tier 1 cities, with lower costs of living, are all very attractive propositions.
Especially so in a time of cost-cutting and prudence in spending. Justifying coming back to office, with all the negatives it brings, just doesn’t seem viable, in fact, we’re likely to see an increase in the number of remote roles made available in the coming year.
While it’s not all gloom, I’d be remiss to not point out some glaring opportunities for companies in the coming years
What’s next for 2023?
The above trends give us an alternate look at what lies ahead. Each opens up a set of opportunities. While layoffs may not be seen across the board, it’s important for those industries typically hit harder to brace for it, and those that typically aren’t to prepare for the talent coming their way. Studies have shown time and time again that during an economic downturn the priorities of talent change. Preferring stability over enhanced career progression. This could come from a move between industries, or to a company that isn’t laying off during the downturn.
Quality over quantity
Yes, there will be pressure to hire less, hiring freezes instituted, and a downward crunch on the recruitment budget. This makes it that much more critical to change focus from what it’s been the last few years, beyond just getting the best readily available people into roles, to the proactive engagement of top talent, and needle-moving hires. Freed up time from scale-hiring moves to a stronger focus on the quality of hires. Organization-person fit becomes as much as important as person-job fit.
Downturns could be the best opportunity to look inside, with strained recruitment budgets, being able to effectively redeploy your internal talent to opportunities and meet business needs might be the turning force the business needs to make it through a tough time.
As the amount of uncertainty rises, people begin to think twice about their decisions to change jobs. Studies show that during recessions, job seeker preferences change. With a preference for stability, employees are likely to be more receptive than usual to internal moves, opening up lateral positions and horizontal growth opportunities.
Historically, contract work tends to increase during economic downturns. This is a great opportunity for both skilled talents to showcase their trade, and companies to find the top talent that they might otherwise overlook. I dug deeper into the benefits of contract workers in an article a few months ago, they all still hold true.
From a company's point of view, it makes perfect sense too, management might not be able to commit to hiring permanent employees, but business needs still persist, contract staff are a great way to fill the gap temporarily, and convert these to permanent as required.
Invest in the right tools
Adopting a Software as a Service (SaaS) solution for recruitment can bring a number of benefits. One of the main advantages is cost efficiency. Instead of purchasing and maintaining operationally expensive process, or on-premises software, companies can subscribe to a SaaS solution on a pay-as-you-go basis. This means that they only pay for the services they actually use, rather than having to make a large upfront investment.
In addition to cost savings, they are also highly scalable. As a company's hiring needs change and grow, SaaS can easily adapt and provide the necessary resources. This is especially useful for companies that experience frequent fluctuations in their hiring volume.
Revisiting your past applicants
An overlooked gold mine, accelerated heavily by remote work trends. With everyone going remote overnight, companies suddenly realised they no longer need to just look at their local job boards. Instead, they could now target a global talent pool. We saw this reflect with LinkedIn Ad revenues tripling in the last few years and Employer of Record companies like Deel, Multiplier, Remote.com scaling unimaginably.
But something often overlooked, for every few hundred applicants, only 1 gets the role. This leaves 99 others who didn’t get the role, for reasons ranging from salary mismatch, they possibly took up another offer, or they weren’t the most qualified for that position at that point. This pool grew larger than ever before accelerated by remote work and global talent pools applying for jobs. We’ve seen upwards of 30% of these talent pools are perfectly reusable to current and future positions open at companies. Warm, qualified talent, waiting to be activated. Revisiting these not only cuts your cost per hire down by a factor of 3x, but improves candidates engagement scores and satisfaction.
This is what Vita specialises in, check us out at vitaverify.me, and get in touch to learn more.