Opinion: Why Recession Doesn’t Mean Massive Unemployment

salaries are still rising

Labor shortage likely to continue

Labor shortages still persist, and likely will continue even if the US were to slip into a temporary and potentially mild recession. Companies are starting to shrink in terms of production, but they know they need to find more workers.

How Companies Cope

The Conference Board expects the U.S. to experience a recession this year that could last well into next year, but likely far less severe than the recession during the worst of the pandemic or the Great Recession. This recession will likely be triggered by the Fed raising interest rates above 3% this year, which will make borrowing more expensive and help reduce domestic demand to help keep inflation in check.

A slowdown in domestic demand usually means companies first cut hiring plans and then lay off workers. This time, the company pulls back its job ads, cutting unnecessary costs while trying to retain the many top workers it has struggled to attract and retain over the past two years.

Many service companies have not been able to fully recover all the workers lost during the pandemic shutdown. may promise to make up lost wages later. We may also defer merit raises, promotions and future discretionary compensation, and encourage voluntary early retirement and turnover. Employers can also introduce job-sharing, where two people do one job for her, to ensure top talent amid sluggish demand.

The bottom line is that it doesn’t look like major layoffs are imminent. If the impending recession is shallow and likely to last several quarters or a year at worst, firms are likely to retain their hard-earned workers as the working-age population declines. The U.S. economy could be spared a surge in unemployment that will hurt millions of households, especially low- and middle-income households.