According to PwC pulse survey results released in early November, 81% of CHROs said they will use at least one tactic to greatly reduce their workforce in light of a possible recession. This includes layoffs, voluntary retirement, performance-based cuts, natural attrition and hiring freezes. But, most are reporting that their recruiting funnels are still active and have yet to move forward on a hiring freeze; in fact, nearly half of respondents are still hiring in specific areas.
There have been layoff announcements in a handful of sectors – particularly technology – with job cuts have been announced at large companies like Meta, Amazon and Twitter. But, the most recent jobs report from the U.S. Bureau of Labor Statistics shows that total nonfarm payroll employment increased by 263,000 in November. The unemployment rate remained unchanged at 3.7% and notable gains occurred in leisure, hospitality, health care, and government. Additionally, employment declined in retail trade, transportation, and warehousing.
Last year, the economy added a record 6.7 million jobs and tacked on an average of 457,000 a month more from January through July this year. Since then, hiring has cooled, to a monthly average of 277,000 from August through November. Yet it’s still consistently beating forecasters’ expectations. With nearly two job openings for every unemployed American, companies are struggling to find workers and retain the ones they have. A tight job market tends to keep upward pressure on wages and feeds into inflation.
Recruiting Through a Hiring Freeze
It doesn’t take a recession for companies to implement hiring freezes. During the first year of the COVID 19 pandemic, unemployment outpaced the Great Recession, reaching 14% and higher. When the economy shrinks, hiring is often the first thing companies will pause so they can reevaluate headcount and forecasting. During downturns, it might be tempting to stop hiring and focus on retention instead (the cost of a new hire is much higher than keeping a current employee); however, a halt on hiring puts a lot of pressure on your workforce. As people leave and are not replaced, your current employees take on more responsibilities for the same salary, become resentful, and start looking elsewhere.
The Wall Street Journal reported in August that “People losing their jobs are rapidly landing interviews, multiple offers and higher pay, a dynamic of the tight labor market that is holding down unemployment totals.” (The Surprise in a Faltering Economy: Laid-Off Workers Quickly Find Jobs – WSJ)
Play the Long Game
Companies that can pivot to focus on recruiting core competencies (those needed for multiple roles rather than specific skills) find that they have a much larger talent pool and an opportunity to reach candidates who might otherwise be off the market.
If we look at recessions in history, companies that have continued to hire during a recession have been able to take advantage of the market. Experts at Harvard Business Review identified a common thread among companies that were able to adjust their recruiting processes during tough economic times. An analysis of 4,700 companies across the last three recessions found that 9% came out of the crises by employing a “progressive focus.” These companies did cut back — but did so selectively.
Hire While Top Talent Is Available
Talent acquisition at these companies focused on long-term strategic goals. Rather than thinking in “either/or” terms (hiring or downsizing), these companies did both. They were able to retain employees in key positions, while also taking advantage of top talent willing to change their current jobs to gain security. Focusing on recruiting during turbulent economic times carves space for the talent needed to grow your company in the long run.
Considering the reality of an economic downturn, increasing hiring, or sticking to business as usual isn’t always financially viable. But, where you make budget cuts matters. Salaries are rising as short labor markets drive up wages. So, putting a cap on salaries may ensure that your best performers leave. While your company may want to cut back on recruitment advertising, you know where your applicants come from and how quickly you can lose them. Consider looking at source of hire in addition to candidate personas. Now, instead of scraping budget, you’ll likely find ways to scale back while still targeting candidates that exhibit the traits and skills as your highest performing employees.