Move over, Great Resignation. There’s a new buzzword on everyone’s minds that’s occupying all the headlines these days: Recession.
A recent survey cited in Bloomberg revealed that a whopping 78% of Americans are worried about losing their jobs when the next recession hits. And rightfully so, when more than half of workers don’t feel financially prepared for a layoff — especially when record high inflation is already impacting wallets in just about every spending scenario.
While no job, employer, or industry is recession-proof, there are some actions employers can take to ease their employee’s minds as the prospect of a recession lives rent-free in everyone’s heads.
Here, we talk about if we’re even in a recession, how it affects your employees (and may affect your company), and provide three tips for what to do next.
Are We Even In A Recession?
It depends on who you ask, though one thing’s for sure: it’s ambiguous.
A recession happens when there’s a consistent decline in economic activity (due to declining consumer confidence) over a prolonged period, ranging from two months to six months (again, depending on who you ask). And while a recession is technically always inevitable, some economists are suggesting that we’ll see the next event as early as 2023.
Officially, recessions are declared by the National Bureau of Economic Research (NBER). Comprised of eight economics experts, the NBER studies three criteria: depth, diffusion, and duration. Each criteria needs to be met (to some degree) before declaring a recession, and by their standards, America isn’t there yet.
Indicators To Watch
That said, there are several clues economists watch out for that tie into NBER’s recession criteria, including:
- Decreased spending
- Flat wages
- Low consumer confidence
- Rising unemployment rate
Despite low and steady unemployment reported in June (and almost back to pre-pandemic levels), with other economic indicators being met, it’s no wonder workers are anxiously waiting for the other shoe to drop.
Employees Are Nervous: What This Means For You
American workers know that when a recession hits, one of the first things companies do is layoff staff. Nine out of ten managers even agree that would likely happen in the next recession. While you can’t control the economy, you can control how you respond to the rumblings and address your teams’ concerns. Here are three actions to take.
1. Communication And Open Dialogue
As with any kind of relationship, communication is key. Bloomberg’s report found that 47% of employees don’t fully trust that their employer would fully communicate their company’s plans. Commit to not being part of that statistic! Teams look to their leaders for guidance when times are hard, and strong leaders possess strong communication.
Be forthcoming and ask your teams how they’re feeling about all the recession buzz and acknowledge their concerns. For the sake of transparency, let them know what to expect from the company in a full-blown recession. Consider any and all suggestions they may have to keep the company operationally efficient.
It’s important to note that transparency does not equal over-promising or outright lying. You may have some hard conversations that are difficult to swallow, but employees will appreciate the honesty now so they can prepare for “later”.
2. Plan For Future Recessions
Most will agree that — pandemic or not — no company is recession proof and exempt from the financial struggles that go with it. But that doesn’t mean companies should just sit back and wait for the inevitable.
Consider making layoffs the last resort. What are some other ways your company can go lean? Bloomberg notes that 54% of American workers would be willing to take a pay cut to avoid being laid off — would your executives do the same?
Think about a temporary pause in 401(k) contributions and quarterly bonus programs to help save money. Try to keep health benefits off the table; in times of uncertainty, workers need to know their medical needs will still be available to them.
Staffing and recruitment agencies might also be able to help in a pinch, especially if your company implements a hiring freeze. An agency could help provide the professional temporary labor you need for a fraction of the cost of hiring new employees, saving your HR team time and money.
3. Utilize An Employee Assistance Program
Does your company have an employee assistance program (EAP)? Many EAPs assist employees with personal and work-related issues that may impact their job performance and health (including physical, mental, and financial).
With more than half of workers not financially prepared for a recession or subsequent layoff, an EAP may be able to help them strengthen their finances in a variety of ways. Whether it’s a plan to pay off debt, build up savings, or budget like a boss, a financial plan can help your employees’ peace of mind.
EAPs can also help with mental health, offering resources to help deal with anxiety, stress, and overall emotional well-being. The pandemic certainly helped thrust mental health into the light, and as a manager you have the opportunity to point them in the right direction. Encouraging your anxious team members to use the resources available to them shows that you care.
If an Employee Assistance Program isn’t part of your company’s benefits package, strongly consider making the investment.
When, Not If
When it comes to recessions, it’s always a matter of when, not if. Economic highs and lows are an expected part of a free market economy, and we always land on our feet. If we’re lucky, we learn a few things along the way that help us become better employers.
For recessions, pandemics, or any general hardship that causes uncertainty, companies can (and should) address their employees’ fears as best they can. Plan ahead for the scenario and communicate it to your teams. Talk through concerns, and do it often. When everyone is on the same page and working toward the same goal — in this case, avoiding a complete layoff — you may just find it increases employee loyalty and morale, and that’s something everyone can benefit from.