Labor Experts on What’s Going on in the Economy and Job Market in 2023
- The US labor market looks strong, and yet news about mass layoffs dominates the headlines.
- Nearly 40% of US workers said they “are nervous about being laid off,” per a LinkedIn survey.
- Insider spoke with experts about the potential for layoffs to spread. Spoiler: They probably won’t.
The US labor market looks stunningly strong, and yet it’s hard to scan the headlines without feeling a tinge of worry about your job security.
Big Tech companies including Impossible Foods, which produces plant-based meat, trimmed 700.
To be clear: Labor Department data shows that historically low and the latest jobs report shows growth is rock solid.
But if the fear of losing your job hovers over you like a dark cloud, you’re not alone. a LinkedIn survey of more than 2,000 US employees conducted in December found.
What are the real chances of that happening? To find out, Insider spoke with three experts: Nick Bunker, the head of economic research at Indeed Hiring Lab; Wayne Cascio, an industrial-organizational psychologist at the University of Colorado; and Andrew Flowers, a labor economist at Appcast, the recruitment-advertising technology company. Highlights of what they had to say might help you sleep a little more soundly.
How worried should we be about layoff contagion?
Flowers: Recessions are psychological phenomena. They’re about a loss of confidence in the future.
In the tech sector, there was a collective awareness that companies were operating with a different outlook than they had been previously. Before, growth was the priority and there was lots of optimism — let’s take advantage of low interest rates and hire a bunch of people. That sentiment flipped as the unit economics came under more pressure, along with higher interest rates and more consumer spending on services.
As for whether these layoffs spread into other sectors, the risk is not that business leaders will see what’s happening in tech, get spooked, and say, “We need to batten down the hatches and lay off our people, too!” That’s not the channel through which layoff contagion happens.
The risk is if consumers get spooked.
You’re scaring me a little. What happens when consumers get jittery?
Flowers: Over the last year, we’ve seen a disconnect between hard and soft data. The hard data, including GDP, has been relatively strong. But the soft data, including consumer sentiment, which is based on surveys, has been weaker. The fundamentals are good, but the vibes feel off.
That’s why some talk about a “vibe-session?”
Flowers: There’s potential for a recession to become a self-fulfilling prophecy. That could happen if consumers get nervous about the layoffs news. They’ll think, “Maybe I won’t go out to eat. Maybe I won’t buy a new refrigerator.” If their spending falls, the effect on the economy could cause contagion.
Why is there such a disconnect between what the data says about the economy and how we feel about it?
Bunker: I get why people are voicing discontent — inflation is a lot higher than it’s been in the recent past.
But there’s what people say and what they do. They say it’s not great and they complain about it. But they’re still quitting their jobs and going out to dinner. What people are doing is indicative of a strong economy.
And by “people,” do you mean CEOs, too? Are they operating in a way that’s indicative of a strong economy?
Bunker: Unfortunately, I can’t read the mind of the CEOs. Economic growth is slowing down, but there’s still growth.
We could see a rise in layoffs if that takes a hit moving forward. But that would be based on economic growth, not based on what other CEOs are doing.
That’s encouraging. As long as fundamentals stay solid, we’re not all in danger of getting pink slips, right?
Cascio: You don’t need to hit the panic button. In this tight labor market, the demand for talent is high and supply is limited. The last thing enlightened CEOs want to do is cut people when things look like they’re turning south.
So I guess we all should hope we work for an enlightened CEO then?
Cascio: One of the things you want to look at is what your employer did in past downturns. Did they turn to layoffs during the financial crisis? What about in the tech wreck of 2001? Research shows that’s the best predictor of future behavior. If they’ve done it once, they’re going to do it again.
I’ve been doing research on downsizing since the ’90s and one thing is clear: Companies that move quickly to lay off their workers never outperform their competitors in the same field. If companies are doing layoffs to cut costs, there are better ways than cutting people.