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67% of US adults anticipate a recession at the end of the year

US Adults Brace for Economic Recession

According to the recently released “Planning & Progress Study” by Northwestern Mutual, approximately two-thirds of US adults, accounting for 67% of the population, hold the expectation that the economy will slip into a recession later this year.

Among those who foresee a recession, 33% believe it will be a short-lived downturn lasting a year or less, while 19% anticipate a more prolonged period of economic decline extending beyond two years. The study also revealed that three out of four individuals who anticipate a recession expect it to significantly or moderately impact both their immediate and long-term financial situations, with figures standing at 78% and 75%, respectively.

In response to the economic uncertainty, the study highlights the top three actions being taken by individuals to address the situation. These include implementing cost-cutting measures (64%), building up savings (50%), and deferring major expenses until the economy stabilizes (41%).

Christian Mitchell, the Chief Customer Officer at Northwestern Mutual, emphasized the importance of using uncertain times to evaluate and test financial strategies. He stated, “Consumers want assurance that their plans for wealth accumulation and lifestyles will remain intact even if the economy experiences a setback. Many are proactively preparing for any potential economic challenges that may arise.”

Furthermore, the report’s survey indicates that 60% of Americans are postponing their plans and purchases due to economic uncertainty. Additionally, 36% are delaying everyday expenditures such as dining out, buying new clothes, and attending events. The study also found that 29% are putting off significant purchases or projects such as home renovations or buying a new vehicle.

The survey involved 2,740 US adults aged 18 or older and was conducted online by The Harris Poll between February 13 and March 2.

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US leading economic index falls to lowest level since November 2020

US economic index signals forthcoming downturn

According to a recent report by The Conference Board, the Leading Economic Index for the US experienced a decline in March, dropping by 1.2% to a reading of 108.4 (2016=100). This is the lowest level the index has seen since November 2020, following a 0.5% decrease in February. The decline is higher than the 0.7% drop that was expected by economists polled by The Wall Street Journal. The report suggests that this is an indication of a forthcoming economic downturn, as the index has been declining every month for the last year, with the last time the series was this negative for this long being from 2007 to 2009.

The Leading Economic Index has shown an overall decrease of 4.5% over the six-month period between September 2022 and March 2023, which is a steeper rate of decline than the previous six months’ contraction of 3.5%. The weaknesses in the index’s components have been widespread in March and have been so over the past six months, pushing the growth rate of the LEI deeper into negative territory. Only stock prices and manufacturers’ new orders for consumer goods and materials have contributed positively over the last six months.

Justyna Zabinska-La Monica, senior manager of business cycle indicators at The Conference Board, stated that the US LEI’s decline to its lowest level since November of 2020 is consistent with worsening economic conditions ahead. She also noted that the Conference Board predicts that economic weakness will intensify and spread more widely throughout the US economy over the coming months, leading to a recession starting in mid-2023.

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Accenture to layoff 19,000 employees

Fears of an upcoming recession have led to 17,456 job cuts

Amid a worsening global economic outlook, Accenture is set to lay off 19,000 workers, with more than half of the job losses affecting non-billable corporate functions. CEO Julie Sweet noted that companies are prioritizing compressed transformations and cost-cutting measures while investing in future growth opportunities. Other companies like Google, Meta, and Twitter have also announced mass layoffs in recent months. Meanwhile, Walmart is cutting hundreds of workers at e-commerce facilities across five US locations due to reduced evening and weekend shifts. Fear of an upcoming recession has already resulted in a surge of job cuts in the retail sector. Amazon.com is also planning to lay off an additional 9,000 employees soon. Last year, US furniture company United Furniture Industries fired all of its 2,700 workers via text or email two days before Thanksgiving. Google employees have recently sent a letter to CEO Sundar Pichai asking for various commitments during the layoff process, including a freeze on new hires.

Fears of an upcoming recession have already led retailers to announce 17,456 job cuts so far in 2023, compared with 761 in the same period last year, Reuters reported, citing a March report by executive placement firm Challenger, Gray and Christmas.

An alternative to layoffs

Instead of laying off staff, companies can ask employees if they would be willing to reduce their hours or take a temporary pay cut to help the company weather the tough times.

Vikas Agrawal, Co-founder of Infographic Design Agency Infobrandz in India commented: “It’s crucial for the company to communicate openly and transparently with employees about the situation and to be fair and equitable in any reductions that are implemented. It is also helpful to offer support services such as counseling or financial planning resources to help employees through the transition. This can help preserve jobs and maintain morale. Overall, it’s important for companies to be proactive and consider all options when faced with tough times.”

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Job seekers remain optimistic despite looming recession

Job seeker confidence higher than during the Financial Crash

There is a recession looming, and the tough economic environment is impacting pay and macroeconomic confidence. Yet, despite this, employees and job seekers remain surprisingly optimistic about their job security and career prospects. This is according to the newly released Robert Half Jobs Confidence Index (JCI).

The new index was created in association with the Centre for Economics and Business Research and revealed that while the JCI fell in Q4 2022 to stand at 19.9 – down 7.5 points from Q3 2022 (27.4) – it is up 58.1 points from Q2 2009 during the global financial crisis.

With confidence increasing significantly compared to the last pre-pandemic recession, UK employers are facing a far more challenging talent landscape this year.

The report also suggests that despite consumer confidence and macroeconomic business confidence being affected by the government instability in the third and fourth quarters of last year, employees and job seekers remained optimistic about their job security, job search, and career progression prospects. This confidence likely originates from the tight labour market, with many companies struggling to hire workers with the right skills.

The data revealed that the job security confidence pillar of the index is up by 159.4 points compared to the final quarter during the recession of 2009.

Despite worries around the cost-of-living crisis and the downturn in real wages since 2009, the index points to remuneration optimism, with pay confidence increasing during the last quarter – a jump of 28.4 points, even though the pay confidence pillar of the index was in in the negative in Q4 of 2022.

Confidence surrounding job search, career progression, and remuneration is on an upward trajectory – an unusual sentiment during economic uncertainty. Despite this, Robert Half has warned that businesses will face an uphill battle for talent. Similarly, companies that decide to cut back on staff will struggle to replace them when necessary.

Matt Weston, Senior Managing Director UK & Ireland, at Robert Half, commented: “There’s no shying away from the fact that whilst the UK economy is facing challenges ahead, however our Job Confidence Index doesn’t paint the picture of labour confidence doom and gloom that one may expect as we head towards a recession. The fact that our data reveals that employees are confident about both their job security and job search and progression prospects suggests that we are going to experience an atypical downturn.

“However, with the complex macroeconomic environment impacting business confidence in recent months, we have already begun to see changes to talent strategies that we predict will continue. Employers have had to be more innovative than ever before when planning and managing human capital, and we expect companies to lean on more agile flexible staffing models, as well as developing permanent employees through upskilling and reskilling programmes.

“One thing is for sure, though, investment in existing workforces, and developing compelling attraction strategies will be crucial to ensure that employers have access to the skills they require in what will continue to be a tight labour market.”

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UK workers want to upskill ahead of looming recession

Employers seem to be standing in their way

New research by Talent.com has revealed that 46% of UK employees are keen to undertake training to upskill in preparation for a potential recession, and 52% are willing to fund this themselves in their own time.

The survey, among over 1000 UK workers, also found that 1 in 10 believe their employer is not offering the chance to learn new skills. A further 76% said they would be willing to undertake training outside of working hours if funded by somebody else (e.g., their employer).

Thirty-four percent of this those who do not wish to upskill said this is for the following reasons:

  • employers don’t offer training
  • they don’t know how to access it, or
  • don’t know what kinds of skills they will need for the future world of work.

The survey found generational differences in terms of those who wish to upskill versus those who don’t, with 61% of workers over 45 saying that they are not looking to reskill. Of these:

  • 47% said they believe their current skillset will be enough to get them through.
  • 18% said that they do not have time.
  • 13% cannot afford to pay for it themselves.
  • 1 in 10 said that their company is not allowing them to develop new skills at work.

Two-thirds of the under-35 age group are keen to diversify their skillset or have already done so to prepare for a potential recession. Of the under 35s not looking to upskill:

  • 24% said they don’t know which skill areas to focus on.
  • 26% said they don’t have time.
  • 26% said they don’t have the funds (26%).

The research also looked at what actions workers are planning to take over the next six months in response to the increasing cost of living:

  • 45% said they do not plan to do anything related to their jobs in response to the crisis.
  • 18% are considering developing a side hustle.
  • 8% are planning to take on one or more additional jobs.
  • 4% are planning on freelancing.
  • 19% are planning to ask their employer for a raise.
  • 8% are looking at taking on more hours.

The participants who said that they plan to take action over the next six months were asked to identify their main reasons:

  • 43% said they required more income for everyday expenses, which suggests that managing daily expenses such as bills and groceries is a main concern for the workforce.
  • 30% said they needed more income for discretionary spending such as holidays.
  • 25% want to be able to contribute more of their income toward savings.

Noura Dadzie, Senior VP of Sales at Talent.com, says: “For the UK workforce the threat of a recession is real. Half of UK employees feel that a looming recession is a threat to their job security and would be prepared to switch industries if their current one was threatened.”

 “In today’s competitive job market, where candidates hold the power, it is clear that employers who offer training to their employees will not only be a more attractive choice to potential candidates, but will also amass and retain a more skilled workforce with workers keen to take up training that is on offer.

 “Offering career development paths improves the employer value proposition and make organizations more attractive not only to Gen Z and Millennial employees but also to older workers looking to return to the workplace.

 “In a previous Talent.com study on salary transparency, it was found that 20% of the UK workforce considered access to training and development plans as one of the most important factors when searching for a job.”

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Job seekers remain optimistic despite looming recession

Job seeker confidence higher than during the Financial Crash

There is a recession looming, and the tough economic environment is impacting pay and macroeconomic confidence. Yet, despite this, employees and job seekers remain surprisingly optimistic about their job security and career prospects. This is according to the newly released Robert Half Jobs Confidence Index (JCI).

The new index was created in association with the Centre for Economics and Business Research and revealed that while the JCI fell in Q4 2022 to stand at 19.9 – down 7.5 points from Q3 2022 (27.4) – it is up 58.1 points from Q2 2009 during the global financial crisis.

With confidence increasing significantly compared to the last pre-pandemic recession, UK employers are facing a far more challenging talent landscape this year.

The report also suggests that despite consumer confidence and macroeconomic business confidence being affected by the government instability in the third and fourth quarters of last year, employees and job seekers remained optimistic about their job security, job search, and career progression prospects. This confidence likely originates from the tight labour market, with many companies struggling to hire workers with the right skills.

The data revealed that the job security confidence pillar of the index is up by 159.4 points compared to the final quarter during the recession of 2009.

Despite worries around the cost-of-living crisis and the downturn in real wages since 2009, the index points to remuneration optimism, with pay confidence increasing during the last quarter – a jump of 28.4 points, even though the pay confidence pillar of the index was in in the negative in Q4 of 2022.

Confidence surrounding job search, career progression, and remuneration is on an upward trajectory – an unusual sentiment during economic uncertainty. Despite this, Robert Half has warned that businesses will face an uphill battle for talent. Similarly, companies that decide to cut back on staff will struggle to replace them when necessary.

Matt Weston, Senior Managing Director UK & Ireland, at Robert Half, commented: “There’s no shying away from the fact that whilst the UK economy is facing challenges ahead, however our Job Confidence Index doesn’t paint the picture of labour confidence doom and gloom that one may expect as we head towards a recession. The fact that our data reveals that employees are confident about both their job security and job search and progression prospects suggests that we are going to experience an atypical downturn.

“However, with the complex macroeconomic environment impacting business confidence in recent months, we have already begun to see changes to talent strategies that we predict will continue. Employers have had to be more innovative than ever before when planning and managing human capital, and we expect companies to lean on more agile flexible staffing models, as well as developing permanent employees through upskilling and reskilling programmes.

 “One thing is for sure, though, investment in existing workforces, and developing compelling attraction strategies will be crucial to ensure that employers have access to the skills they require in what will continue to be a tight labour market.”

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Nearly 78% of employers gave pay raises in the past six months

Compensation top of mind despite recession concerns

According to a survey by iHire, 77.9% of US employers gave pay raises in the past six months, despite economic downturn concerns. The pay raises were given due to merit, performance, pay compression or the rising cost of living.

Lisa Shuster, Chief People Officer at iHire commented: “Compensation is top of mind for employers and their workforces. Now is the time for organizations to ensure they are compensating employees fairly while avoiding pay compression. The good news is that most employers do not appear overly worried about a recession and continue to invest in their most valuable business asset: their people.”

Of the 436 employers surveyed, just 22.1% had not given raises recently. Of that 22.1% that did not give a raise, 69.6% said they couldn’t afford to give raises, and 32.6% said they were preparing for an economic downturn or tightening their 2023 budgets. In addition, 13.0% reported poor or stagnant employee performance, and 13.0% were unsure how to determine fair compensation.

iHire also surveyed 305 workers and found that 23.9% of respondents had asked for a raise in the past six months, and 60.3% got a raise upon asking, according to the report. Of the 76.1% of workers who had not asked for a raise, 50.0% already received a raise recently and 25.6% did not know how to negotiate their salary. In addition, 23.2% were afraid to ask or approach their supervisor for a raise and 11.0% did not think their performance was deserving of a raise.

For the report, iHire surveyed 436 employers and 305 workers in 57 industries across the US in February.

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Recession still forecast despite labor market strength

Leading economic index falls in January

The Conference Board Leading Economic Index for the US fell by 0.3% in January to a reading of 110.3 (2016=100). The decrease follows a decline of 0.8% in December, and the US economy is still expected to tip into a recession this year despite strength in the labor market. 

Over the last six months, the Leading Economic Index is now down 3.6%, between July 2022 and January 2023 — a steeper rate of decline than its 2.4% contraction over the previous six-month period between January and July 2022. 

Ataman Ozyildirim, Senior Director of Economics at The Conference Board commented: “The US [Leading Economic Index] remained on a downward trajectory, but its rate of decline moderated slightly in January. Among the leading indicators, deteriorating manufacturing new orders, consumers’ expectations of business conditions and credit conditions more than offset strengths in labor markets and stock prices to drive the index lower in the month.” 

Ozyildirim noted that while the index continues to signal a recession in the near term, indicators related to the labor market — including employment and personal income — remain robust. 

“The Conference Board still expects high inflation, rising interest rates and contracting consumer spending to tip the US economy into recession in 2023,” he added. 

Meanwhile, the annual growth rate of the index rose slightly in January.

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Here’s where the jobs will be during the rolling recessions

The Wall Street Journal sees about a 61% chance of a economic contraction 

Recession-like conditions rolling through the US economy are likely to cause more ripples through an otherwise strong jobs market. 

“Rolling recessions” has become a popular term these days for what the US has faced since a slowdown that started in early 2022. The term connotes that while the economy may not meet an official recession definition, there will be sectors that will feel very much like they are in contraction. 

According to data from popular networking site LinkedIn, that will be true as well for the jobs market, which overall has been strong but has seen weakness in sectors that could intensify this year.  

Economists at LinkedIn have identified multiple sectors that will show varying degrees of tightness this year. 

Rand Ghayad, Head of Economics and Global Labor Markets at LinkedIn said: “Labor markets remain tighter compared to pre-pandemic levels. They’re still resilient. They’re still stronger than what we’ve seen in the pre-pandemic period, but they’ve been slowing down gradually and will likely continue to slow down over the next few months.” 

Other sectors could follow as economists broadly expect that the US will see — at best — slow to moderate growth this year. 

LinkedIn data, which comes from job postings and other data from the site’s more than 900 million members worldwide, is markedly different from government data in an interesting way. 

Whereas the more widely following data from Bureau of Labor Statistics finds an extremely tight labor market, with nearly two open jobs for every available worker, LinkedIn’s ‘labor market tightness’ metric has shown about a 1-to-1 ratio that even looks to be loosening a bit more. 

The implications are important. 

The Federal Reserve has cited the historic tightness of the labor market as motivation for its series of interest rate hikes aimed at taming inflation. If the market trends are unfolding the way LinkedIn data indicates, it could provide impetus for the central bank to ease up on its own tightening measures. 

“Everything depends on what the Fed will be doing over the next couple of months,” Ghayad said. 

Where the jobs will be 

For job seekers, the phrase “rolling recessions” means that it will be easier to get employment in some industries, while others will be tougher. 

LinkedIn identifies certain industries as having slack, meaning that employers are having an easier time filling jobs and don’t need to use as many enticements to find workers. Those industries are government administration, education and consumer services, where applicants outnumber job openings. 

Moderately tight markets include, tech, entertainment, information and media, professional services, retail estate, retail and financial services. In these industries, job applicants are having an easier time finding opportunities while employers are having to step up recruitment efforts. 

Extremely tight labor markets include accommodation, oil and gas, hospice and health care. LinkedIn says that in those fields “employers cannot fill vacancies fast enough.” 

Though hospitality consistently has been the leader in expanding payrolls, the industry is still about half a million below its pre-pandemic level, according to BLS data. That is true even though hotels, restaurants, bars and the like have collectively raised hourly wages by about 23%. 

Ghayad made further comment: “This industry is actually still looking to hire a lot of people. It’s the tightest industry in the United States,” “There’s a lot of demand. They’re looking for people. There’s a lot of shortages. They can’t find people so these industries, services, industries, accommodation and anything that has to do with food or entertainment are booming.” 

Recession fears loom 

From a business standpoint, Ghayad said there have been four industries that have been recession-proof: government, utilities, education and consumer services. He does not expect to see any significant slowdown in hiring there. 

Despite the seeming healthiness of the labor market, many economists think a broader recession is still ahead. 

A recession survey from The Wall Street Journal sees about a 61% chance of a contraction, and the New York Fed’s recession indicator, which tracks the spread between 10-year and 3-month Treasury yields as an indicator, is pointing toward a 57% chance of a recession in the next year. That’s the highest level since 1982. 

Still, Ghayad said he expects hiring to remain strong, even though LinkedIn posts mentioning words such as ‘layoffs,’ ‘recession’ and ‘open to work’ have been on the rise in recent months. 

“We don’t expect sort of any potential downturn to significantly impact the labor markets,” he said. “We’re in a very good position right now. There’s some cooling, but … the labor market continues to be the brightest spot in the U.S. economy.” 

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Number of payrolled employees up by 102, 000 according to ONS

UK narrowly avoids recession again

According to the ONS latest labour market report, the UK employment rate was estimated at 75.6% in October to December 2022. That equates to increase in employment of 0.2%. The increase in employment over the latest three-month period is said to have been driven by part-time workers.

The report has revealed that the number of payrolled employees for January 2023 has also increased. It’s up 102,000 on the revised December 2022 figures, to 30 million.

The unemployment rate for October to December 2022 has however, increased by 0.1% on the quarter, to 3.7%. This figure is driven by people aged 16 to 24 years. Those unemployed for over six, and up to 12, months also increased, while those unemployed for over 12 months decreased in the recent period.

Talk of a recession has dominated the news but the latest figures show that the economic inactivity rate decreased by 0.3% on the quarter, to 21.4% in October to December 2022.

The ONS has stated that flows estimates between July to September 2022 and October to December 2022 show that there was a record-high net flow out of economic inactivity, driven by people moving from economic inactivity to employment. This is great news for the labour market as job posts, although decreasing online, remain at record highs.

In November 2022 to January 2023, the estimated number of vacancies fell by 76,000 on the quarter to 1,134,000, the seventh consecutive quarterly fall since May to July 2022. The fall in the number of vacancies reflects uncertainty across industries, as survey respondents continue to cite economic pressures as a factor in holding back on recruitment.

Growth in average total pay (including bonuses) was 5.9% and growth in regular pay (excluding bonuses) was 6.7% among employees in October to December 2022. For regular pay, this is the strongest growth rate seen outside of the coronavirus (COVID-19) pandemic period. Average regular pay growth for the private sector was 7.3% in October to December 2022, and 4.2% for the public sector; outside of the height of the coronavirus pandemic period, this is the largest growth rate seen for the private sector.

In real terms (adjusted for inflation), growth in total and regular pay fell on the year in October to December 2022, by 3.1% for total pay and by 2.5 for regular pay. This is smaller than the record fall in real total pay seen in February to April 2009 (4.5%), but remains among the largest falls in growth since comparable records began in 2001.

James Reed, Chairman, Reed.co.uk, commented: “The job market remains healthy despite talk of Britain only narrowly avoiding a recession. A key factor driving the boost in job applications that we are seeing is the cost-of-living crisis. People are recognising that one way in which they can secure a pay rise is to move jobs.

“Interestingly, while wage growth remains stable across the jobs market, it is blue-collar roles; jobs that cannot afford such flexibility with remote working, that are seeing the biggest growth in pay. This January, comparing year-on-year, it is customer service and engineering roles that have experienced the most significant pay hikes – up 9.8% and 7.8%, respectively.

“This trend suggests an ‘in-person premium’ when it comes to pay – with organisations having to boost salaries to attract people to roles that cannot provide the flexibility now associated with the white-collar market.”

 Chris Gray, ManpowerGroup UK Director, said: “The UK labour market continues to be very tight and also very resilient. Employers are for now shrugging off the concerns of an economic slowdown but for those looking to hire it remains very tough. Job vacancy levels remain high at around 1.1 million although having reduced a little over the month which points to a slight cooling in demand.

“Pressures on household spending show little sign of easing up – regular pay has fallen by 2.5% when taking inflation into account returning a wage growth average of 6.7% and will be front of mind for both employers and workers alike.

“We’ve heard The Chancellor already outline plans to encourage more over 50s back into the workforce. Money and costs may be a motivator for some over 50s but social stigma also presents a challenge for many within this age group. We have to create the right working environment to overcome some of these issues with more flexibility offered and ensure that employers are listened to, and better accommodate, the needs of this demographic in the workplace. It’s a particularly complex area and there is no silver bullet, but employers and government must work closely together to find the best solutions.”

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