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A Silver Lining For Staffing: As Recessionary Clouds Loom, Recruitment And Retention Could Get Easier

When, not if. The consensus among economists is that the risk of the UK heading for another recession has risen. While the economy grew in two out of the first three quarters of 2019, and many forecasts show marginal expansion in 2020, slow growth means the economy is in a vulnerable spot. As a result, the contraction seen in the second quarter is unlikely to be the last.

Naturally the ‘r-word’ strikes fear into business leaders, especially those involved in future planning and staffing strategy.

Part of the problem is that no two recessions are alike, making it hard to predict when the next downturn may start, which sectors will be the harbinger of the next downturn, and what a general economic slowdown might mean in specific terms for customer demand, business profitability and recruitment.

But we can look at the patterns in previous recessions to give an indication of what the next one may look like when it arrives.


Jobs market still providing a strong foundation

As Britain’s economic growth has fizzled, the labour market barely skipped a beat for much of 2019.

During the third quarter, the employment rate stood at 76%, a whisker below the all-time record set earlier in the year. Average salaries were 3.6% higher than at the same time a year before, putting extra money in workers’ pockets as pay is now growing at more than double the rate of inflation.

At the same time the unemployment rate fell to 3.8%, its lowest level for four and a half decades.

In recent months, however, the pace of job creation has slowed, and the employment rate has plateaued. So while much of the labour market remains in rude health, we seem to have hit the peak and are starting to move past it.

‘Slow puncture’ economy

Thus far the economy as a whole has dodged recession, rebounding to grow by 0.3% in the third quarter of the year. But the annual pace of growth has slumped to just 1%, its lowest level in nine years, leading some to describe this as a ‘slow puncture’ economy – with the air being let slowly out of the tyres. 

It is tempting to think that the healthy labour market might provide some protection against the threat of recession. Sadly this is unlikely to be the case.

Directing the economic cycle is above the labour market’s pay grade. The jobs market tends to be shaped by the cycle of boom and bust, rather than vice versa. The reality is that economies do not simply plateau and employment rates cannot grow forever. Once something triggers a fall in spending by consumers and businesses, a vicious cycle begins that leads to a drop in hiring and to job losses.



Entering a recession from a strong position

If there is to be a recession, the labour market is well prepared for it. The first pain point of a recession is often the unemployment rate, which rises as employers shed staff to save costs. With the unemployment rate currently at such a low level, the market should take a gradual increase in its stride. 

After the threat of redundancy, the greatest worry from the worker’s point of view is the impact on the number of vacancies – which tends to shrink as employers pause recruitment.

There has already been a fall in the number of available vacancies. While the year started out strongly, the latest vacancy count is the lowest in two years, down from 892,000 in October 2017 to 869,000 in 2019. Yet the decline is modest, and it has been driven largely by small businesses. And in any case, the shift may have as much to do with employers’ concerns over the possibility of a ‘no deal’ Brexit as with rumblings about a recession. 

Workers and jobseekers don’t have the monopoly on fears about the impact of a recession on the labour market. Many managers are worried about what the effect might be on their sector and business, and a series of risk factors – each of which is damaging in its own right – has emerged that suggest a recession is on its way. Besides Brexit, these include trade wars, slowing demand in the Eurozone and volatile energy prices.


While not a foolproof guide, we can look to previous recessions for an indication of what a future one might look like. For example, we know certain sectors tends to be much more resilient than others. Sectors that provide local, necessary services like health, social care and education tend to be stable or continue to grow even in economic downturns. In contrast, goods-heavy sectors like construction and manufacturing tend to shed the most jobs.

Unemployment rates tend to peak long after recessions, which typically last from six to 18 months. In other words, jobseekers and employers in many sectors won’t feel the full impact of a recession until some time after it ends. 

And now the good news – hiring and staff retention is easier

From an employers’ point of view, recessions can actually improve hiring conditions. For those who are still hiring, finding and recruiting good people can become easier.


There is a caveat to this, however, as some sectors may still find hiring experienced candidates challenging in a downturn, even when overall unemployment is high. 

In 2012, for example, when the unemployment rate hit its last peak, the ratio of unemployed people with experience in IT, professional services, health and social care to vacancies in those sectors was far lower than the average for the whole economy. Employers and recruiters in these sectors need to think hard about attracting qualified candidates even in a recession, for example by continuing to invest in their brand or targeting people currently working in less recession-proof sectors.

However, there is also some good news, in that fewer people quit their jobs during a recession so there is much less staff turnover.

Prior to the last recession, up to 300,000 workers a quarter quit their jobs and moved to another employer. This churn rate fell to around 150,000 during the depths of the last downturn, meaning staff retention was easier. 

Clearly a recession can pose serious challenges to business, not least the fact that no-one knows quite how it will pan out, where demand might fall and how long the impact will last. 

Yet the recessionary clouds currently darkening the business horizon have a notable silver lining when it comes to recruitment and retention. Far from being a cause for alarm, a recession may even make it easier for some employers to find and keep good staff.

The UK’s prolonged jobs boom has been fantastic for jobseekers. For years the rising number of vacancies has gradually driven up wages and attracted more people to the workforce as employers competed to attract the best candidates.

A recession could slowly turn the tables – leading to a time where there are fewer vacancies on offer and more workers available. This could ease wage pressure and make it easier for employers to find the right people to fill the roles they do have open.

Equally, staff will be less inclined to move from job to job, making staff retention that little bit easier, just as businesses need them the most.

For all its capacity to instil fear, the ‘r-word’ may even be more of an opportunity than a threat for those planning a recruitment strategy for the coming years.

By Pawel Adrjan, UK economist at the global job site Indeed

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