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The U.S. job market felt like a party coming out of the pandemic — for workers, at least. Record quits and job openings coupled with the biggest labor shortage in almost a century gave employees the bargaining power to job hop and advocate for higher pay and remote work.
But volatile markets, souring sentiment, the highest borrowing costs in more than a decade and a slowing economy all risk coming to crash it. The question now: Whether the workers who took advantage of the hot job market could head into a possible recession better off.
A recent Bankrate survey suggests the ones who partook in the so-called “Great Resignation” of workers might be the ones feeling the most anxiety about their future employment status. More than half (or 56 percent) of those who found a new, better-paying job say they’re worried about their job security, with 19 percent saying they’re “very worried.” Fears about facing a future bout of unemployment are twice as high as those who stayed put at their company and got a pay raise (28 percent). About 2 in 5 working Americans (or 39 percent) are worried about their job security, regardless of whether they switched companies, according to Bankrate’s survey.
Finding a better-paying job or getting a pay bump were workers’ main options for limiting inflation’s wrath on their wallet this year. The booming job market helped over 6 in 10 workers (or 61 percent) receive at least one of those over the past 12 months — up sharply from 44 percent in 2021, 50 percent in 2019 and 38 percent in 2018, according to a recent Bankrate poll.
Data suggests job-switchers tend to see the biggest pay gains, but Bankrate’s poll highlights how it might be a double-edged sword, drawing on fears of a “last-one hired, first-one fired” situation for those who found a new job over the past year.
“Sometimes the last hires are less qualified; they’re more junior, they’re younger and have less experience,” says Julia Pollak, chief economist at ZipRecruiter, an online employment marketplace. “Employees do often become more valuable the longer they stay at the company, and if you’re going to cut someone, you’d rather cut someone who hasn’t accumulated all the firm-specific knowledge.”
If you joined the Great Resignation, should you be worried about your job security in a recession? It depends, experts say
Companies often do let newer employees go first. Workforce analytics firm Revelio Labs found the average length of service for 17,000 laid-off employees to be 1.2 years, half as long as the average tenure of all company employees, according to a September analysis.
Yet, every company finds different ways to cut costs, and others might choose to slash by function rather than by seniority, Pollak says. Marketing budgets, for example, are often the first to go, as are contract workers. The advertising and related services sector — often a first resort for cuts — lost 4,700 jobs in September, according to the Department of Labor.
“Some companies do take the last-one, first-out approach, but it’s definitely not the rule across the economy,” Pollak says.
Signs are suggesting the labor market is losing steam, potentially cooling the “Great Resignation.” Since the Federal Reserve’s first rate hike, new applications for unemployment benefits have climbed almost 37 percent. Employers, meanwhile, slashed 1.1 million job openings in August alone, the biggest cut on record after excluding the pandemic, according to the Department of Labor.
“Bargaining power is built on the state of the economic cycle, and that can change,” says Nick Bunker, economic research director at the Indeed Hiring Lab. “If we get into a situation where there’s less competition for workers or demand for workers goes down, that’s going to reduce the bargaining power workers have.”
Employers announced almost 30,000 job cuts in September, up nearly 68 percent from the same month last year and the fifth time this year that cuts eclipsed those in the corresponding month a year earlier, according to jobs data firm Challenger, Gray and Christmas. Layoffs in the technology sector are up almost 85 percent from last year and have accounted for nearly 9 percent of all total layoffs in 2022, the agency also found. It highlights how the shakiness of an individual’s employment status also depends on the industry in which they work.
Performance also matters, both individually and within the company, Bunker says. The strength of a business’s balance sheet and its resilience to economic swings could influence whether a company ultimately has to turn to layoffs.
Some of the risks in switching jobs are hard for the jobseeker to know. You could imagine a move that looks really good in the short term and a few months later doesn’t look as positive — just because you’ve got the gain of a higher wage, but you find out the company that you now work for is exposed to a potential economic downturn.
— Nick BunkerEconomic Research Director, Indeed Hiring Lab
Even with signs of slowing, the job market is still strong
One good sign is that layoffs aren’t widespread yet. Employers discharged 1 percent of the workforce from their positions in August, while the number of layoffs has held below pre-pandemic levels for 18 straight months, according to the Labor Department.
Employers hired three times as many people as they let go in the month, while businesses in September created jobs at double the pre-pandemic speed. Every industry also has a higher rate of job openings than 2019’s average, though all have slowed from their peak.
Continuing applications for unemployment benefits have also been below 2019’s average for 34 straight weeks, a sign that workers who did lose their jobs are finding new positions quickly, according to the Labor Department.
Employment and jobless claims data suggest the job market remains firm. Even with some companies announcing layoffs or plans to cut jobs, it appears that many individuals have been able to transition to new employment opportunities in quick order.
— Mark HamrickBankrate senior economic analyst
What’s next for the Great Resignation? Experts say employers pulling back on benefits during recessions is nothing new
Experts say companies pulling back on what they offer employees during recessions isn’t new. Businesses have historically cut benefits and non-cash compensation to reduce costs during downturns. In today’s world, flexible work arrangements could be part of that, including remote work, Bunker says. Some companies might think employees work better or are easier to monitor when they’re in the office, he adds.
Some of the sharpest declines in job postings on Indeed, a job search site, have been in remote work-friendly sectors, such as software development, information design and media and communications.
“If you’re a business and your overarching concern is trying to hire workers at the lowest possible cost or to just be able have a little more power over the workers you do have, then a recession is relatively positive,” Bunker says. “If you can get through a recession, there’s an advantage to a weaker labor market.”
Workers form fewer unions during recessions, another indication that worker bargaining power dips. Case in point: The Great Recession. Unionization rates hit all-time lows, while public approval of unions also sank, according to research from labor sociologist Ruth Milkman at City University of New York.
“If I am worried that it might be hard for me to find a job and a lot of other people around me are losing their jobs, I’m less interested in rocking the boat,” says Phillip Wilson, president and general counsel of the Labor Relations Institute. “The demands workers are making on companies and their businesses recently are related to how this is the first time that they’ve really been in an economy and a labor market where they had the leverage.”
Other experts say flexible work arrangements are too entrenched in workers’ expectations to be cut. The pandemic has accelerated how workers prioritize work-life balance and what they want out of their careers, especially among younger generations. Bankrate’s February poll found that 50 percent of Generation Z were now looking for flexible working hours in their roles coming out of the pandemic, compared with 44 percent of millennials, 36 percent of Gen X and 43 percent of boomers.
Considering how many older workers retired during the pandemic (2.6 million more than normal, according to the St. Louis Fed), organizations might have to appeal to those workers more interested in flexibility by maintaining the qualities of work they desire. To be sure, the U.S. economy has also never gone through a recession with this many people working remotely.
“It’s become a norm people expect — I don’t see that going away even if we do enter a recession or have mass layoffs,” says Jessica Kriegel, chief scientist of workplace culture at Culture Partners. “We’ve seen a shift in the way people think about work, and we can’t undo that shift.”
A slowing economy made this worker a “boomerang employee”
The cooling job market is part of the reason why Meg Grazian, 26, was willing to go back to the job she originally quit, becoming a “boomerang employee,” what economists are now describing as the Great Resignation’s next phase.
A Boston-area resident working in journalism, Grazian felt burnt out from having to stay plugged into current events during the height of the pandemic. Her team getting slashed from seven to four also didn’t help. To protect her mental health, she ultimately decided in July 2021 to leave, despite not having another job lined up.
“All those articles about all these people leaving their jobs was me,” she says.
She worked at a local coffee shop for nine months and eventually found her way back into the news industry again, until that job was cut in a bout of layoffs after two months. Just five days later, her previous company came knocking again, first offering her a freelance position and then an interview for a job on staff. She was ultimately offered the position — along with a better title and a 25 percent raise. She was back nearly a year and three months after quitting.
“I had never been super scared of getting laid off, and then suddenly, I got laid off. It felt so much more real,” Grazian says. “Knowing the people, knowing the team, knowing the job totally helped in my decision to come back too, with the economy looking so uncertain. Having that little bit of certainty feels really reassuring.”
But she says she was also encouraged by culture changes within the company that addressed the reasons that originally led her to quit. She expects the Great Resignation and coronavirus pandemic have led to lasting changes in how workers view work that will outlive even the next recession. She says she has no regrets and feels better off today than in 2019 when she first started at her company.
“Work has come to mean something different to me,” she says. “I am recognizing that I am too young, and what I do right now doesn’t necessarily dictate what I do for the rest of my life. As long as I’m happy enough doing this to enjoy other parts of my life, then that’s all I really need.”
What should you do if you’re worried about your job security — or loss of bargaining power
1. If you still want a new job, now’s the time
With the job market still on stable footing, experts agree it’s still a good time to switch jobs, though you might want to think a little more cautiously about where you decide to end up. When taking a leap to a new job, it’s important to research the company, whether it’s profitable or overinvested and how it might plan to weather a downturn are also important factors to consider. Meanwhile, check professional sites such as LinkedIn or news articles to see whether a company you’re looking at recently paused any major investments or expansions — often the earliest sign of trouble — or went through a round of layoffs.
“There are clouds on the horizon, but the seas are pretty tranquil right now,” Bunker says. “Unlike say a year ago if it’s a bad fit or it doesn’t work out, there might not be as many opportunities to jump quickly away in the future as there were in the recent past.”
2. Layoffs may be making headlines, but your industry might be doing better
The current economic environment feels different depending on the industry, so workers still considering taking a new opportunity might want to look at how their respective fields are performing.
While jobs in technology have taken a hit, other sectors still have an elevated number of job openings. For example, nearly 8 percent of all jobs in leisure and hospitality are vacant, according to the Department of Labor. That’s down from a peak of 11.7 percent in December 2021, but still 2.5 percentage points above 2019’s average.
While there are still a near-record number of 10 million job openings, what matters is whether those openings match your skills, experiences and qualifications.
3. Try to work things out with your company first
While companies could pull back on remote work or other flexible arrangements in a slowing labor market, it doesn’t mean you can’t approach your employer about setting up a work environment that suits you, says Tara Perman, career and leadership coach at Ama La Vida. That’s an especially important conversation to have before deciding to leave for another company, she adds.
Come to the table with demonstrated ideas of what you need to succeed in your job and why it’s important. But some give-and-take might also be necessary.
“As long as the asker — the employee — is going in as a collaborative conversation and not a demand, they’re going to be surprised at what their employer can do,” she says. “The word ‘flexible’ really has to go both ways, to see what your employer can do for you but how flexible you can be on your ask. There is no perfect world where someone is going to get everything they want in terms of optimal way of working and volume of work.”
4. When job-switching, look for more than just higher pay but a workplace that aligns with your goals
Another clear benefit of a tight labor market is workers likely have options, and companies are in competition for talent. That gives you the opportunity to vet your potential employers just as much as they’re vetting you. Consider picking a company that fits your career goals and values to help you feel your work is meaningful.
“Work-life balance is only hard if the organization’s culture doesn’t allow that,” Culture Partner’s Kriegel says.
Peruse the potential company’s website to familiarize yourself with its mission and check out workplace reviews on online sites such as Glassdoor. Better yet, talk to someone who works at the company, Perman says. Her clients often choose not to leave their current positions out of fear that it could be just as undesirable somewhere else.
“It’s the fear of, ‘What if I take that new job and I don’t like it,’’’ she says. “Here I am, going to ruffle things up for myself and there’s no guarantee I’m moving myself to a better situation. For those who are truly dissatisfied, who truly have been unfulfilled and burnt out, it’s a good time for them to leave regardless of the economic situation.”
5. Know how to demonstrate your worth
Your success at a company might come down to knowing how to speak its language. That means knowing how to demonstrate the value you bring to your organization and focusing on what makes you an impactful employee.
Think about what you bring to the table and measure how your contributions bring value to the company’s bottom line. Workers might also want to use the time to strengthen the skills that set them apart or work on crafting their niche within their organization. Often, the employees who are hard to replace maintain their job security or have negotiating power, even in tough economic times.
“Employees ask for a raise or a promotion and their justification is, ‘I’ve been here a long time. My colleague makes more than me,’” Kriegel says. “The conversation should revolve more around, ‘Here’s how I have impacted the business, here’s the particular outcome my contributions have helped this organization achieve and how that has affected our future. That’s why I deserve what I’m asking for.’”
6. Keep an eye on your company’s strategic plans
Part of knowing whether a potential new company aligns with your goals — or making sure you’re a valuable employee at the firm where you’re already employed — comes down to understanding what’s important to their business. That’s where hunting down its strategic plans comes in.
“Don’t just ask what your manager is worried about and what you can do for them; ask what your manager’s manager is worried about,” Kriegel says. “Then you really start to uplevel the strategic nature of your understanding of the business and also start to get a clue into what your future career development will look like.”
7. Having better control over your finances can give you more freedom — tough times or not
How secure you feel in your job depends on the strength of the job market and the strength of your personal finances. Just 44 percent of Americans in a June Bankrate poll said they could cover a $1,000 emergency expense with their savings.
Building up a cushion of cash you can use in emergencies doesn’t just help you make ends meet during a bout of joblessness. It can also allow you to be picky about the position you choose.
“It’s the concept of, ‘I have enough money and finances that you can say, yep I’m out, I’ll find something else,” Zigmont says. “The challenge is people let their finances drive their decision making. If you figure out what life you want, you can figure out the finances to fit with it.”
8. Even in a recession, job loss this time might not be as severe
Workers have more bargaining power when they have myriad companies and jobs to choose from — not the other way around. But the robust job market right now could give workers a stronger starting point, if a recession were to occur, and it might be what prevents joblessness from surging the way it did in previous downturns.
Economists in Bankrate’s Third-Quarter Economic Indicator poll are bracing for a 0.7 percentage point increase in the unemployment rate a year from now, with joblessness predicted to rise to 4.4 percent. That corresponds with what Fed officials are expecting, with the median estimate in officials’ September projections also calling for a 4.4 percent unemployment rate in 2023.
The expected surge is nowhere near as grave as recessions before it. Unemployment surged 11.2 percentage points during the coronavirus pandemic, 5.3 points during the Great Recession and 3.6 points amid the “Great Inflation” of 1981.
It doesn’t keep joblessness from being painful, but a lower unemployment rate than in previous recessions might mean workers still have options to choose from, preventing them from staying out of work for longer periods. Even so, a cooler job market contributing to elevated levels of inflation might help keep Americans’ purchasing power more in line with their earnings, the Labor Relations Institute’s Wilson says.
“Even if the labor market cools off, workers are going to have a fair amount of leverage,” he says. “The younger generation, they are demanding work-life balance in a way I don’t think anyone else has. That is a shift that I don’t think, even if the economy is in a recession, fully changes.”