What Could a Recession Mean for the Job Market?

The National Bureau of Economic Research (NBER), which tracks the average length of U.S. recessions, declared the shortest U.S. recession in history. It began in February 2020 as the result of COVID 19 and lasted two months.

Read the news about recession today and, in some cases, you’ll see economists like Claudia Sahm say, “We are not in a recession, nor is one inevitable. There are actions that could be taken over the next six months to the next year that will be decisive in whether we go into a recession or don’t — or whether we go into a mild recession or a severe one.”

Wells Fargo & Company Chief Executive Charlie Scharf believes, “It’s going to be hard to avoid some kind of recession.” However, at The Wall Street Journal’s Future of Everything Festival, he predicted that a potential downturn won’t be severe, given the current strength of consumer demand and business activity.

According to The Economic Times, “The clearest sign that a recession might be nearing … would be a steady rise in job losses and a surge in unemployment. As a rule of thumb, an increase in the unemployment rate of three-tenths of a percentage point, on average over the previous three months, has meant that a recession will eventually follow.”

In June 2022, CNBC posted that April 2022 saw hiring in the leisure and hospitality sector decline by 77,000, or a half percentage point fall to 7.2%. Compared to a year ago when the sector’s hire rate was 9%. In addition, in the “Leisure and Hospitality Employment Update,” the U.S. Travel Association reported that between February 2020 and May 2022 the leisure and hospitality sector was suffering from the second-highest share of jobs lost.

With all this in mind, what would a recession mean for the job market?

In his Forbes.com article titled “What Is a Recession?” and responding to the question, “How does a recession affect me?”, contributor David Rodeck wrote, “You may lose your job during a recession, as unemployment levels rise. Not only are you more likely to lose your current job, it becomes much harder to find a job replacement since more people are out of work.”

On a more positive note, Richard Wahlquist, president and CEO of the American Staffing Association said, “The nation’s employers were dealing with skills shortages before COVID triggered the last recession. Workers with skills in high demand today will likely be in high demand even when the economy tips back into a recession.”

In the aforementioned CNBC article, career expert William Chamberlain said, “job seekers will likely receive fewer offers in the coming weeks and months as companies tighten their belts and become more scrupulous in bringing on new talent.” However, he doesn’t believe workers will lose the footing they’ve gained over the past two years.

With the exception of COVID 19, there are usually warning signs of a recession. Therefore, you can do your best to prepare for one if it’s on the horizon, but keep in mind that history has revealed recessions don’t last forever.