Are we in a recession? Because if we are, it’s a very strange one.
Of course, we’ve had two quarters of negative economic growth. The demand for the manufacturing industry is shrinking. Activity in the construction and housing market has slowed down. Tech companies are joining. Financial service providers and real estate companies are firing people. Inflation and energy costs remain stubbornly high, interest rates are rising and the stock market is 18% lower from the start of the year. Google ‘recession’ and you will see that the housing market is in one, major banks and investors warn of one and Europe is heading for one. More than 80 financial advisors say a recession is “coming” and one major investor believes it will be a “smash hit”.
But wait a minute.
We may be in a recession. Or maybe it will. But when there are recessions – or even the strong prospect of a recession – companies fire people. That’s not happening, right? Hiring has continued to increase. Unemployment remains historically low. The number of vacancies is close to a record high. And here’s the real shock: The majority of small businesses in the United States — which employ more than half of the nation’s workforce — are not only looking for employees, but are also struggling to find employees, according to recent survey responses released by the National Federation of Independent Businesses and employment data from HR firm Paychex.
“Small businesses are still not showing strong recession signals,” Paychex’s CEO told TNZT last week.
So why are companies – especially small businesses – looking for employees instead of firing them?
First, it is becoming increasingly difficult to generalize about the economy of the United States. There are 350 million people and 30 million small businesses in this country. Our economy is still 60% bigger than China’s and bigger than Japan, Germany, UK, France and Italy combined. California’s economy is bigger than India’s. New York’s economy is larger than Canada’s.
You can’t just say “we are in a recession”.
At any given time in the US, some industries and regions are doing better than others. Construction, financial services and manufacturing are struggling. So is the energy sector. but given job gain since the pandemic, business services, retail, transportation and warehousing have been in jeopardy. The leisure and hospitality sector has lost the most jobs of all industries since the pandemic, but seems to be making its way back. For example, Alaska, New Mexico, New York and Pennsylvania had unemployment rates higher than the national average, while states like Minnesota, Florida and North Dakota recorded very low unemployment rates. A city where the biggest employer is struggling will struggle with her. But the opposite is also true.
So is the United States in a “recession”? Seen from above, the answer depends on who you ask.
The other reason most small businesses want to hire someone is because most small business owners aren’t stupid. The Democrats will tell us that historic jobs have been won in the past two years, but we know this is because the bar has been set to zero due to the pandemic. Republicans will warn of recessions and high inflation, but we know these things are caused by a myriad of factors – European wars, Asian supply chains, and fiscal and monetary policies here in the US – and that these factors will eventually resolve themselves, though perhaps not. as fast or as far as we would like. We are not duped by politicians or rhetoric. We live this reality every day. And our reality is that – for most – demand remains relatively strong.
And if there’s one thing I’ve learned, it’s that my brightest clients, the entrepreneurs who’ve been doing what they’re doing for decades, even generations, are always looking ahead. They’re not thinking so much about 2022 now or even the first half of 2023. They’re planning and investing for 2024 and beyond. They know they have people – customers, partners, employees (and their families) – who depend on them for their livelihood. They, like me, don’t see huge bubbles and economic disasters on the horizon. We could of course be wrong. But we are placing our bets now for the future.
And we still know that people are our most valuable asset. Certainly, many companies are replacing lower-skilled workers with robots and automation. But nothing can replace a skilled worker who is good at his job. Find me someone like that and I’m going to hire that person whether we’re in a recession or not. I know that, if treated right, that person will make a long-term profit for my business, regardless of the short-term investment.
So no, we are not in a recession. And yes, we are in a recession. And no, we don’t hire people. But yes we are. You can make the case anyway. That’s what people do. They are right. They’re wrong. Discuss away. In the meantime, small businesses in strong industries or growing geographic regions will continue to hire. And even those who aren’t won’t pass up the opportunity to invest in good people for when things eventually change.