Are We Heading Towards The Great Recession Again?
It's been more than a decade since the Great Recession of 2008-2009. Today, analysts and economists worldwide are pondering if we're on the verge of another recession. While there is no way to know for sure what lies ahead in the future, some signs can help us assess our current economic situation and make informed predictions about what may be coming.
How Is Recession Defined?
More often than not, the argument around recession also boils down to how we define it in the first place. By definition, two consecutive quarters of negative economic growth signal an economic recession. And as confirmed by Forbes, the US has already entered a recession in the summer of 2022.
However, the signs of a looming recession might be more nuanced than just two-quarters of negative growth. Other indicators such as rising unemployment, yield curve inversions, declining consumer confidence and stock market performance can also signal a weakened economy.
Current World Economic Signs Of A Downturn
With that being said, the current global economic climate is pointing to a potential downturn. Several indicators in global markets are flashing red. According to a probability model run by the research firm Ned Davis Research, there is now a 98.1% chance of a global recession. As reported by CNN, there have been only two more instances when the probability rating has been this high - the economic crisis of 2008 and the pandemic of 2020.
Key global indicators that are pointing towards reduced consumer confidence and economic decline include:
1. Global PMI At 49.4
An indicator from IHS Markit and JPMorgan Chase that indicates the health of the manufacturing sector around the world, the Global PMI currently sits at 49.4. Anything below 50 indicates a contraction in the manufacturing sector, confirming that the world economy is indeed slowing down.
2. Euro-Area Inflation
This figure is the highest it has ever been in the euro area since 2008, clocking at 10.6% currently. The indicator reflects the inflation in the euro area. It is also the primary indicator referred to by the European Central Bank regarding monetary policies. For reference, the highest Euro-Area inflation that was reported in 2008 was 4.1%.
3. Us Inflation
Inflation in the US reached a record high of 9.06% in June of 2022 and currently sits at 7.75% in Oct 2022. This is significantly higher than the long-term average of 3.27% and has risen at the fastest rate since 1981. As a result, the Federal Reserve is trying to slow the economy down and announced its biggest interest rate increase since 1994.
Layoffs in Big Tech Companies
Many tech firms are facing a decline in consumer demand and have been forced to lay off thousands of employees. In response, some analysts have tagged it as the onset of what is being called 'White Collar Recession'. The layoff cycle that began with comparatively smaller tech startups such as Shopify has now spread to tech giants such as Amazon and Meta.
- More than 73,000 white-collar employees in the US lost their jobs in 2022.
- Twitter recently laid off 3700 employees, totalling about 50% of their workforce.
- Meta recently told its employees that they will be extending the hiring freeze till Q1 of 2023 and laying off 13% of its workforce. This amounts to about 11,000 employees.
- In May, Carvana laid off about 2500 employees (12% of its workforce).
This is indeed a worrying trend for the technology sector and confirms that economic decline is not limited to certain parts of the economy - it is a macro phenomenon.
How US Staffing Industry Responds to Recession and Rising Inflation?
It is possible that the USA staffing industry will be hit hard by recessionary trends and rising inflation. The reason is simple - companies facing a decline in demand for their products and services will cut costs wherever they can, including cutting down on staff, as we have witnessed so far in 2022. This means that the demand for temp and contract workers will also decline as companies try to reduce their payroll costs.
This is exactly what happened in the economic downturn of 2008 when the staffing industry in the US witnessed a 28% decline in revenues and a 30% increase in unemployment.
Nonetheless, there are a few strategies that a USA staffing organization can apply to remain successful even in a recessionary climate:
1.Adapt to the Changing Market: As mentioned before, companies will be cutting costs wherever they can and seeking more cost-effective solutions. This means that staffing companies must be willing to change how they do business. For example, they may want to consider offering more flexible pricing models while also exploring emerging markets like freelancing.
2.Focus on Special Niches: Companies in the staffing industry may also want to focus on special niches to offer more value to their customers. For example, they may focus on offering recruitment services for specialized roles that are difficult to fill or even offer specialized training for certain skills. Additionally, they can also provide support for H1B Visa applications to help their clients hire skilled foreign workers.
3.Utilize Data to Make Informed Decisions: Finally, staffing companies should use data to make informed decisions. This means that they should have an up-to-date view of the current market conditions, what their competitors are doing, and what kind of skills are in demand. This way, they can make decisions that will help them remain competitive despite a recession.
4.Staff Augmentation: Finally, staffing companies can also provide staff augmentation services to help their clients manage their projects more efficiently and cost-effectively. This involves providing experienced professionals with specialized skills to supplement the existing staff, allowing companies to focus on core activities while outsourcing non-core activities.
The Bottom Line
Overall, it is difficult to predict what lies ahead in the future. However, looking at various global economic indicators, it is becoming increasingly clear that we may be heading towards a recession. It is important to monitor these signs and make informed decisions accordingly. It is also crucial that governments around the world come up with stimulus packages to help cushion the blow of a potential recession
It is important for businesses and consumers alike to be aware of the signs that can indicate an approaching recession. This includes monitoring unemployment rates, stock market performance, consumer confidence and yield curve inversion. By preparing for the worst, we can all try to mitigate any potential economic damage that may arise from a possible recession.
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