It’s never easy to make HR predictions for the coming year but the crystal ball is particularly cloudy in 2023 due to the chances of the U.S. economy entering into a recession between now and December.
“The U.S. economy has a 64 percent chance of contracting in 2023, according to the average forecast among economists,” reported Bankrate. “Just two experts (or 15 percent) said the financial system could avoid a downturn, putting the odds of a recession at 40 percent. Meanwhile, one economist arrived at 100 percent odds — signifying he was absolutely certain of a recession.”
Bloomberg put the chances even higher – at 70 percent – in a poll conducted of 38 economists in December.
“The US economy is facing big headwinds from surging interest rates, high inflation, the end of fiscal stimulus, and weak export markets abroad,” Bill Adams, chief economist at Comerica Bank, told Bloomberg. “Businesses have turned cautious about adding to inventories and hiring, and will likely delay construction and other capex plans with credit more expensive and order books shrinking.”
Tech Layoffs, Slowing Growth Boost Recession Fears
Tech layoffs at companies such as Twitter, Meta, Lyft, Microsoft, and Amazon along with slowing growth have boosted recession fears in the first month of 2023.
PBS reported that concern over the R-word (recession!) has companies and HR acting accordingly.
Some will argue that we are already in a recession and others will argue that one will not come, but decisions are being made with the threat of a looming recession on the horizon.
“I think if you pass by the Treasury Department, I don’t know if there are several chimneys, but it’s not like they — they send up white smoke when there’s an official recession,” Roben Farzad told PBS. “Point is, recession can be a big function of self-fulfilling prophecy. If companies see order pullbacks, if everybody’s nervous, they can go ahead and start pruning payrolls accordingly. They don’t have to wait for the official capital-R declaration from Washington. And, certainly, we’re not there yet. It might well happen in 2023 or 2024. It might not happen at all.”
7 HR Predictions that CEOs See Coming in 2023
The R-word, in fact, dominates the discussion in the Society for Human Resource Management’s “CEO Outlook for 2023: 7 Predictions—and How to Prepare” article.
From controlling costs to putting more focus on retaining existing customers vs. new acquisitions to extracting cost savings from digital transformation to tamping down spiraling labor costs, upper management is digging in to weather a possible recession.
Brian O’Connell culled the following seven HR predictions after SHRM’s Executive Network surveyed a group of senior executives:
- Tighten the Belts: What does the average household have in common with Fortune 500 companies? They both tighten the belts when the economic waters get choppy. Keeping spending in check is one of the first boxes everyone checks when a recession hits. Executives also noted that companies need to keep an eye on their employees and understand any economic pains they are going through as well.
- Focus on Existing Customers: Growth is more difficult during a recession, so executives expect their companies to focus more on maintaining relationships with existing customers in 2023 vs. spending resources on new acquisitions. Look for marketing budgets to follow suit. A recession can be a true test of brand loyalty and companies are preparing for that coming exam.
- Digital Transformation (Still!): If you had an HR bingo card, then “digital transformation” might be the free square because it seems to make the list every year, and for good reason as change continually accelerates. In 2023, companies are looking to use digital transformation to help with cost savings and ride out any economic storms.
- Reskilling, Upskilling to Meet Skilled Worker Needs: While there may be daily reports of layoffs in the tech industry, many sectors of the economy, especially those that rely on skilled workers, are still in a tight labor market. Expect companies in 2023 to rely on reskilling and upskilling their employees to meet skilled labor shortages.
- Prepare Your Company Culture for Tough Times: Some companies are leaning toward building a collaborative team mentality that can help their organization be resilient in tough times. Much as in 2020 when the pandemic hit, companies in 2023 need to be prepared to pivot and focus on customers’ needs and expectations if a recession hits.
- Balance of Power in Job Hiring Swings Toward Employers: 2022 was the year of the Great Resignation, a job-switching culture, and employers trying to keep up with rising worker wage demands in the face of inflation. In 2023, with inflation cooling, and layoffs a reality in tech, and other sectors, if a recession arrives, expect the balance of power in job hiring to swing back toward employers. Teams can be built around hires that can expect to be around for more than a few months.
- Labor Costs and Inflation Juggling Act: Most businesses understood that constantly raising employee salaries was a practice that could not be carried out indefinitely. With a looming recession, companies will now look for other ways to attract and retain top talent, such as focusing on their benefits, rather than pay bumps.
Talk on the Street: Recession Tactics Already in Play
Talk on the street is that many companies are already taking some of the measures mentioned above.
“Many employees are also starting to worry about their job security, the survey found, as 62 percent of respondents noted seeing cost-cutting measures at their workplaces or that they have received internal communications from management regarding potential recession measures. Of these workers, 32 percent with annual household incomes of less than $50,000 have already experienced or heard about reductions in hours at their company,” Tom Starner wrote in HR Executive.
And many of “the bosses” are preparing for the worst.
“A new survey of more than 300 U.S. CEOs conducted by EY, for instance, found a staggering 99 percent of respondents are expecting a recession. Nearly 60 percent predict it could be worse than the last financial crisis of 2007-09 and a similar amount are concerned about the new factors that could be at play in a potential recession, including ongoing talent shortages and the pandemic,” wrote Starner.
Contact Employer Flexible today to discover the right HR moves your small business should make right now to weather the possibility of a recession in 2023.
