Labor Markets Likely to Stay Tight Despite Recession: Study

A "Now Hiring" sign at a Home Depot store in San Rafael, Calif., on Aug. 5, 2022. (Justin Sullivan/Getty Images)

Even if an economic downturn were to materialize, labor markets will likely remain tight and companies will find it harder to hire and retain employees, according to a new joint report by Indeed and Glassdoor.

“The economies of many countries could slow or even fall into recession as central banks work to lower inflation. But even if employers’ hiring appetites fade, the supply of workers seems likely to remain tight in the long run,” the Hiring and Workplace Trends Report 2023 said. “Not only will hiring be more difficult, but workers will have more power to demand changes.”

“The principal reason for this can be summed up in one word: demographics. Over the next decade, the number of people of working age (between 15 and 65) will decline in a variety of countries, according to World Bank projections.”

The projections estimate the population of 15- to 65-year-olds in the United States to fall by 3.2 percent between 2026 and 2036.

Other Western nations like Germany, the United Kingdom, Canada, and France are also projected to see a decline in this demographic. In the United States, population growth is expected to be “driven solely” by net migration.

The fact that hiring will remain a difficult challenge is expected to affect every aspect of the labor market and is the “driver” behind other trends predicted in the report.

Such trends include the continuation of remote work, employers distinguishing themselves by the type of benefits they offer, company culture promoting wellness and happiness, and the push for diversity and inclusion policies.

Job Cuts, Wage Loss

Even though the U.S. job market has remained strong in 2022, October saw the largest amount of monthly job cuts since February 2021. According to a Nov. 3 report by job placement agency Challenger, Gray & Christmas, U.S.-based companies terminated 33,843 jobs in October.

This is up from 29,989 job cuts in September and 22,822 layoffs in October 2021. This was also the sixth time in 2022 that monthly job cuts were higher this year than in the same month last year.

“We are beginning to see more job cut activity in the fourth quarter, historically when the bulk of cuts occur, as companies finalize budgets and plans,” said Andrew Challenger, senior vice president of Challenger.

“Many companies are anticipating a downturn, and with a still-tight labor market and the Federal Reserve’s rate hikes, more cuts will be on the way as we enter 2023.”

Meanwhile, American working families are suffering from wage loss due to elevated inflation rates. According to data from the U.S. Bureau of Labor Statistics, real average annual earnings (inflation-adjusted wages) have fallen by an annualized rate of 2.8 percent. Such wages have fallen for 19 straight months.

Calculations by EJ Antoni, a research fellow in regional economics with The Heritage Foundation’s Center for Data Analysis, show that the average family has lost $6,100 in annual income while also paying $1,300 per year extra due to higher interest charges. This brings the total income loss of families to $7,400.