The Strength of the Labor Market in the Face of US Recession

In the face of rising inflation, many companies and individuals have been warned of an impending recession in the US.

However, this seems to be in conflict with the current situation of the US labor market, which is booming, with more and more jobs being created and the unemployment rate decreasing.

While many factors affect these trends, one key difference is that inflation tends to hurt workers while a strong labor market helps them. So, what are these contrasts between the current state of the labor market and the imminent recession due to?

In this blog post, we’ll explain the reasons behind these contrasts and how small and medium-sized businesses can react during a recessionary period.

Here’s Why the Labor Market is Booming While Many Fear a Recession

The current state of the US economy is a mixed bag. On the one hand, the number of jobs being created is on the rise, and the unemployment rate is decreasing. For instance, Paul Wiseman explained that, by July 2022, 528 new jobs had been added, and the unemployment rate fell from 3.6% to 3.5%.

By watching this video, you can learn more about these trends in the US labor market.

On the other hand, inflation has peaked in the US without precedents. Recently, Asian business leaders said that “consumers should be prepared for prices to remain high for longer,” according to journalist Su-Lin Tan.

Shankar, chief executive of emerging markets in Gateway Partners, also affirmed that “inflation is here to stay come hell or high water, irrespective of what the central banks do because there is some structure, intractable problems that have led to higher prices.”

What are those problems? Rising interest rates, deglobalization, and decarbonization. These circumstances will add more numbers to the price of goods and salaries.

Inflation tends to hurt workers, no matter how earned, since it increases prices and reduces their purchasing power. In this case, a strong job market can help workers by forcing companies to raise wages to compete.

Nonetheless, this can produce a “boomerang effect” for them since companies can always pass the increased costs related to salaries to customers through the commercialization of goods and services.

Therefore, while a strong labor market may be good news for workers, it may also signify that a recession is inevitable.  

What Can Be Done to Protect Small and Medium-Sized Businesses Amid a Recession?

The labor market in the US has been under immense pressure since the onset of the COVID-19 pandemic.

The pandemic has forced many businesses to close their doors and also caused the great resignation of millions of workers due to wage stagnation, rising cost of living, limited job and professional career development opportunities, burnout, and mental health conditions.

When facing a recession, there are some steps that small and medium-sized businesses can take to protect themselves and their remote employees.

First, it’s important to clearly understand the labor market to establish what industries would be hardest hit by the recession and make necessary adjustments to your business model.

Second, it’s crucial to keep your overhead costs low. This can be achieved by trimming unnecessary expenses and using technology to reduce labor costs.

For instance, you can contact a staffing agency to outsource workers and fill essential positions in your company while saving expenses.

Finally, it is crucial to be prepared for the possibility of a great resignation. This means having a solid plan in place for how your business will continue to operate if you lose key employees.

In this case, you may want to transition to remote work via outsourcing to create new jobs. Also, we recommend you watch this fantastic video to deepen your understanding of how to protect your business during a recessionary period. 

By taking these steps, small and medium-sized businesses can weather the storm during a recessionary period.

Our company is a full-service staffing agency specializes in outsourcing remote employees based in Mexico. A business model designed for US companies.